The Beginning of Chinese Soft Power

Tencent logo

In a turn on global culture, China may have found a way to influence the world with the soft power of culture much in the same way as the US has.  Its vehicle is the mobile game.  Tencent’s purchase of Supercell in June makes it the world’s dominant game publisher with a value in the neighborhood of $100 billion.  And that makes it the one Chinese entertainment company with the potential to affect the world. It can morph its video games into mobile games and characters from those games into movie heroes and the heroes into merchandise champions not to mention theme parks. That’s the Marvel/Disney formula and it could work as well for Tencent.  As to influencing the world, that could take a generation. Kids playing games is a good place to start. Source: Bloomberg

A Preference for International Clothing Brands Persists

Consumer Survey

London-based OC&C Strategy Consultants surveyed 2,600 Chinese consumers from 22 cities to draw insight into clothing purchase behaviors.  The results reveal a preference for quality and a sense among Chinese consumers that foreign labels carry more weight than domestic.  Interestingly, study authors see that while the search for status through brand identification has receded, the desire for quality still drives many Chinese to international brands – a measure of growing sophistication among these consumers. Source: WARC

Online Shopping Near Saturation in Big Chinese Cities

Share of Online Shopping

Beyond the obvious – that people in China’s bigger cities shop more online than those in more rural places – this graph is a key to a marketing strategy.  For one it shows where the easy growth lies.  The further one gets from tier 1 cities, the more people are available to be flipped into online sales.  Meanwhile, in the higher tier cities, where online sales are reaching the saturation point, more manipulative marketing strategies are required to sustain growth – examples: pricing strategies to boost retention rates and/or special offers to increase average purchase value.  Source: McKinsey & Co.

Steady as She Goes

Carrier Data - June 2016

Almost 72% of the 1.3 billion mobile subscriptions in China are now using 3G or 4G devices.  That is three times the size of the entire US population.  It is the largest advertising audience in the world. And for yet another month the shift to these smart devices continues unabated.  Sources: China Mobile, China Telecom and China Unicom

 

Positive Signs for China’s Service Sector

Non-Manufacturing - June 2016

The Non-Manufacturer’s Purchase Index measures the service sector.  And the picture is different from the one painted by the Manufacturing Index we published last week.  Here is Index sits above the 50-mark that divides growth from contraction. Manufacturing sits below the line while non-manufacturing sits above it.  That is a positive reflection of the changing Chinese economy.  Source: Trading Economic; National Bureau of Statistics China

Infrastructure Spending Drives Growth

Infrastructure Spending

McKinsey & Co. identifies an important driver behind China’s rapid growth as infrastructure spending.  The table shows the differential between China’s spending and the West, which has become even more pronounced since the financial crisis. China hasn’t slowed down.

There are things to keep in mind when looking at these numbers.  China started from near zero, which required lots of catch-up spending.  Still, Western bridges, roads, railroads and ports are in decline because of the reduction in spending in recent years.  Source: BBC.com

China is More Super than the US

Most Powerful Computers

In its 47th edition rankings of the most powerful computers in the world, Top500.org not only pegs China’s 93 petaflop, Sunway Taihulight as the fastest computer in the world, but for the first time in the listing’s history, China has more super computers in the list than the US – 167 to 165.

More remarkable is the image adjusting fact that the leader was built using processors designed and fabricated in China by the National Research Center of Parallel Computer Engineering & Technology (NRCPC) and installed at the National Supercomputing Center in Wuxi, China.

Notably, approximately two thirds of the computers on the list of 500 are from either China or the US. Sources: BBC.com; Top500.org

Cross-Border e-Commerce Sales to Almost Double by 2020

Cross-Border eCommerce

In 2016 it is projected that 15% of the Chinese population with make a cross-border e-commerce purchase.  That’s not as impressive as the 25% projection for 2020.  The growth is accredited to the opening of Alibaba’s Tmall Global and JD.com’s Worldwide.  Both online malls verify the legitimacy of foreign sites, which builds trust and gives assurance to the population’s pent-up demand for quality, authentic products.  Source: eMarketer

Doctoroff Sounds Off

JWT logo2

This blog’s reporting in recent months suggests that China’s entertainment industry is in mid-explosion, yet CEO of JWT Asia Pacific, Tom Doctoroff, outlines why the big bang has only just begun.

First is the mere size of the market is something that is hard for Westerners to wrap the mind around.  Doctoroff quotes James Fong of Oriental Dreamworks as saying, “In China, niche is mass.”

Second, because China’s masses crave outlets from the pressure of life, they are totally apolitical – interested in their escapism for the sheer fun of it.

Third, and most liberating, is that through the burgeoning social community there has developed a creativity that will be hard, if not impossible, to stop now that it has been released. These creative sources will naturally evolve to China’s next generation of story tellers.

Fourth, the enormity of China’e-commerce allows for the natural line extensions that come from movies and other media has a direct way to reach the masses.  To now this secondary market for products accociated with media properties has not existed in China. Going forward, Doctoroff suggests the opportunity will open.  Sources: Huffington Post

Moderate Manufacturing Decline Continues

Non-Manufacturing - June 2016

Except for a leap towards 50 in March of this year, the Manufacturing Index has remained fairly steady, in the high 40s, since February of 2015 when it nudged past 50 for that month.  Below 50 indicates contraction in the manufacturing sector.   Notably, this decline is consistent, but not a plunge as news reports have suggested.  Source: Trading Economics; Markit Economics.