The Word 4 Asia blog has often contrasted the differences, as well as the similarities, between American and Chinese culture.  We believe that a better understanding of how each culture perceives the world, and behaves within it, is a successful foundation for lasting partnerships between our nations, and our nations’ businesses.  Of course, the biggest story across the entire world in 2020 is the corona virus and how all peoples and nations have responded.  Our blog this month describes how mainland China and Hong Kong have each been able to successfully ‘flatten the curve’.  For the sake of this article we will use the official numbers reported by both countries. The United States, because of our own traditions and culture, has not fared as well and, as of 9/1/20, six months since the pandemic first shaped our present reality, we continue to struggle.

Our two nations have a fundamental difference in priority.  In general, China strongly values community focus.  The United States has historically honored the importance of the individual.  This cultural difference has led to the development of two very different ways of leading each nation’s people through a threat as serious as Covid-19.  In China, community focus leads to personal refusal of putting anyone else at risk.  The Chinese would rather sacrifice some personal liberties than risk extensive exposure to the masses. High density housing in China makes this all the more a factor in their approach.  In the United States, we still teach Patrick Henry’s famous cry, “Give me liberty or give me death.”

According to data released more than 80% of China’s corona virus related deaths occurred in Wuhan.  After the situation there mushroomed and was understood China moved resolutely to take firm control of the situation.  The central government implemented stringent social controls.  Their example is one of the largest mass mobilization efforts in human history.  Examples:

• All schools were closed
• All people were forced, and kept, in-doors.  One facet of this included the implementation of formal door-passes for people to get into and out of their apartments and homes.  The entire city of Wuhan, at one point, was closed off; no one was let in, or out, of the city.  
• More than a dozen huge, temporary hospitals were assembled and thousands of extra medical staff were deployed to Wuhan.
• Infected people were isolated on an enormous scale, in stadiums, exhibition halls, and anywhere else that could be co-opted for the purpose.
• China’s huge tech industry also focused on the problem; Tencent and Alibaba both developed ‘health code’ apps that helped monitor and control the spread of the virus.  These apps are similar to ones developed by Google and Apple and widely used in South East Asia and Europe.  All of these rely on Bluetooth technology to detect close contact with infected people.  

China’s response was systematic, comprehensive and coordinated.  Their lockdown was more intense than nearly any other place in the world.  

On the other hand, Hong Kong managed to avoid lockdown and there are several important reasons why they could.

First, Hong Kong had already experienced the SARS epidemic.  The people there were able to use their experience in that earlier event and that made them much more alert and diligent.

In addition, Hong Kong instituted strong border control and tight quarantine measures.  Examples:  nine out of twelve border checkpoints were closed in January, and starting in late March the city banned all non-residents from entering Hong Kong.

Also, Hong Kong resurrected its network of ‘Neighborhood Committees’ as part of its defense against the virus.  These largely volunteer staffed committees were led by scientists and medical experts and were directed in contract tracing activities such as daily door-to-door check ins and monitoring of ankle bracelets (worn by anyone who had been infected by the virus and used to track and control patient movement).  Local Neighborhood Committees were empowered to seal homes shut, preventing anyone inside homes suspected of infection from leaving until testing and contract tracing had been conducted.   

As mentioned earlier, America’s approach to the pandemic has been very different.  At this time, Covid-19 continues to spread throughout our nation, but there is no centralized mandated control of the situation.  Policy is left to the States and in some cases the city officials. Many of our citizens continue to resist the instructions, advice and direction provided by the CDC with regard to the use of PPE, social distancing, and rigorous hygiene.  We have seen stay at home guidelines lifted once situations were deemed ‘under control’.   Today, we have over six-million cases, over 24% of global cases.  We’ve had 184-thousand deaths, almost 22% of global corona virus-related deaths (keep in mind that the US population is only 4% of the total world population).  On the other hand, despite the fact that Wuhan was the origin of the virus, reported Chinese deaths related to Covid-19 are only 4,634, approximately .03% of their population.  In the US, Covid-19 related deaths are approximately .06% of our population.  

NOTE: Of course, there is legitimate debate regarding whether all deaths reported were caused by Covid 19 or whether these figures simply report those who died were diagnosed as having Covid 19. We also have chosen here to use officially reported figures to illustrate a cultural differential.

The point of this article is not to debate cultural values.  Our intent is to simply describe how each nation has responded.  In the United States, we have a heritage of protecting the ‘civil liberties’ and ‘human rights of our citizens.  Does the well being of the community supersede the rights of the individual? How a country responds in crisis reflects assumptions of priorities and values. We wish well for both countries and quick resolution to this challenging time. Hopefully COVID 19 is something we look at in the rearview mirror in 2021.  

Word4Asia works hard to help our clients understand the challenging environment in China.  It is a country full of promise where we have spent over two decades helping our clients achieve their goals.  If your path is leading you towards China, we hope you’ll contact us.  You can reach Dr. Gene Wood at gene@word4asia.com

Economic Implications of the One-Child Policy

By 2050, 25% of China’s population will be over 65 years old.  This situation is the number one economic problem that China will face moving forward.  

How did China get here?  During the Maoist period following the famous words “more people more power” the nation became the most populous nation on earth.  The obvious challenges of unchecked population growth resulted in the ‘one child policy’ in 1979.  In 2016, this policy was changed again, allowing for two children per household. If able to pay the requisite tax more children are permitted.  Today, China is at a turning point and staring into what the Chinese Academy of Social Sciences (CASS) has described as ‘unstoppable’ population decline.  The Chinese population is hemmed in from two sides, decades of declining birth rates on the left, and steeply rising life expectancy (improved medical technology, improved nutrition) on the right.

The CASS predicts that China’s population will peak in 2020, at 1.44 billion.  It’s expected that this will usher in a period of ‘negative population growth’; by 2065, the population is expected to have returned to. Mid-1990’s population levels.  A shrinking population may argue a shrinking economy as well.

There are indicators this is already happening.  Look at the last four years of Chinese national birth rates:

2016:  17.9 million births

2017:  17.2 million births

2018:  15.2 million births

2019:  14.6 million births

These national figures, striking as they are, hide some of the most significant changes occurring in the provinces.  Some areas are reporting birth rate declines as steep as -35% per year.

Despite the fact that China increased the official child-per-family policy to two children in 2016, Chinese families have not rapidly moved to increase in actual size.  There are both sociological and economic reasons at play.  Women have found an important place in China’s economy and are reluctant to sacrifice a position they have worked hard to attain. After all “women hold up half the sky.”   Despite the systemic, positive discrimination favoring male students, more women than men attend Chinese universities. Women are responsible for 41% of Chinese GDP–the highest proportion in the world. Some 7 in 10 Chinese mothers work. Eighty percent of all female self-made billionaires, globally, are Chinese.  While Chinese women have earned hard-won economic success, Chinese employers frown on the idea of their female employees taking more time from their jobs to have a second child.

Today, there is a massive in-balance in the number of males versus females in China.  Males outnumber females by 34 million people.  This problem also arose during the official one-child-per-family era.  During this time, male children represented a greater economic advantage than female children.  Faced with the one-child policy, sadly, many families chose to abort female babies despite the fact to do so violated Chinese law.  Today, there is a massive in-balance in the number of males versus females in China.  Males outnumber females by 34 million people.  Presently, there are 24 million single men of marrying age in China who cannot find wives – this is the combined population of Texas and New York state.  China is already paying a heavy social price for this.  Multiple studies implicate gender imbalances in maladies including reduced consumption and real estate bubbles, and correlate with spikes in violent crime, spousal abuse, trafficking and prostitution.

Young Chinese couples are also struggling with economic pressures, including rising education and housing costs.  It’s hard to support one child, let alone two.  Biology also plays a part; the policy change is only several years old.  These young couples grew up during a period when it one child families were the universal rule; larger families represent an uncomfortable change for them.  In addition, many of China’s women have passed their peak fertility age.  Another major economic challenge is China’s pension shortfall amidst an aging population.  Current projections show that China’s pension funds will run dry by 2035.  With no pension funds available, young couples will face the economic pressure of supporting eight grandparents and four parents.  The problem is especially acute because these young men and women have no siblings of their own to help shoulder the costs.  

The future that China is quickly approaching is not one that matches China’s aspirations for global supremacy.  Instead, the picture that Beijing’s National Academy of Economic Strategy. Paints features a society where its younger people are burdened by the care of elderly parents and grandparents, living in an economy that is crippled by unsustainable debts. Again, signs of this economic weakness are already at hand; China’s pension shortfall topped $130 billion in 2019, further adding to the nation’s debt burden which is already estimated at three times its GDP.  As China moves into the future, this situation may become untenable; in 2014, there were 880 million working adults in China.  By 2050, that number is projected to fall to 570 million.  This situation also presents a massive macro-economic question:  how will China create the required demand for housing, consumer goods and so forth?

Staying abreast of what is happening in China is critical for any organization that aspires to operate there.  For over 20 years, Word4Asia has helped our clients legally and successfully navigate in this fascinating and challenging nation.  If your plans include work in China, we’d appreciate an opportunity to learn more about where you’re going.  We may be able to lend you the support you’ll need to achieve the success you’re aspiring to.  Contact Dr. Gene Wood at gene@word4asia.com

Marketing Trends in China During a Pandemic Era

In China’s business world, one of the most important marketing trends in the last several years continues to be ‘personalization’.  Think of target marketing taken to the level of the individual consumer.  

A few examples of companies who are doing this successfully include Nike and Coca-Cola.  NIKEiD is the name given to Nike’s product customization program, aimed at consumers who are buying Nike’s products online.   Their technology enables customers to create their own gear by customizing color, design, and performance features.  Coca-Cola, on its website, has added the feature of creating customized bottles, t-shirts, and other items. The customers can get a whole range of personalized items with extra spending of varying degrees.

A whole suite of technology is at work, allowing marketers to offer unprecedented customization.   On the supply side, AI, robotics, 3-D printing and other emerging technologies are significantly reducing the costs associated with personalizing product design, manufacturing and consumer communications.  On the consumer side, this hyper-personalized marketing approach relies on China’s internet penetration, more than 800 million people have internet access.   98 percent of these consumers own smart phones.  China leads the world in e-commerce sales.  By 2022, over 63% of the entire world’s e-commerce sales will come from China.  

Social media is also a major factor, and, in China, WeChat is the leading social media platform.  This app was originally simply a messaging app.  However, its functionality has grown by leaps and bounds.  Today, it is thought of as the ‘swiss army knife’ of mobile apps.  WeChat draws from its users personal data.  Its users rely on the app for a large amount of their daily functioning – everything they need is contained in a single app.   To get maximum service out of their WeChat accounts, the Chinese provide a lot of their personal information and can opt to let the app access their name, location, spending habits and a great deal of other personal information. 

Consider the times we are living in.  The pandemic has changed the way many people in industrialized nations are shopping.  A review of Amazon’s recent operations revenues tells the story well.  North American sales were up 29% to $46.1 billion, while international sales grew 18% to $19.1 billion.  These are record months for the ecommerce giant.  It’s a far cry from where the traditional brick and mortar retailers are at the moment.  Many of these businesses are considered non-essential, and therefore have been mandatorily closed since mid-March.  The result, we know, is the global recession we are now in the midst of.

Otherwise, the outbreak of Covid-19 has accelerated Chinese marketing trends that were already developing quickly.  These include: 

• investments in e-commerce infrastructure
• gamification and live streaming of content via social media
• Tactical revisions in social media strategies including replacing ‘key opinion leaders’ (KOL’s) with ‘key opinion consumers’ (KOC’s).  This shift emphasizes what actual consumers are doing versus what celebrities think/ say about a brand.   KOCs have the advantage of appearing more trustworthy and relatable than KOLs, while requiring less spending from brands.

We are living in very uncertain times, and walking through uncharted territory in many ways these days.  As always, Word4Asia will continue to keep our friends and colleagues abreast of the many ways that the landscape continues to change in China.  We continue to believe that China is a land of business opportunities for many American organizations.  Our in-depth experience in and knowledge about this fascinating nation makes Word4Asia a natural partner for many organizations.  If your path is leading you east, we would love to talk with you about it.  Feel free to contact Dr. Gene Wood at gene@word4asia.com.

We know many of our readers are keenly interested in the major trends within China’s economy.  As a result, we have frequently turned our attention to the ways it is always evolving.  One of the most interesting trends is the growth of the ‘sharing economy’.  

This trend is not limited only to China.  In fact, examples of the sharing economy can be seen in various countries and continents around the world.  Nowhere, however, has the growth of the sharing economy been as significant, or as highly prioritized by national leaders, as in China.

You might be wondering, “ What is a ‘share economy’ ”?  It is a type of economy that is not monetarized and it is not based in a capitalist system.  In the sharing economy, individuals are said to hire out things like their cars, homes and personal time to other individuals in a peer-to-peer fashion.  Two examples that some Americans have become familiar with include Uber/ Lyft and Airbnb.  To be fair, these are near relatives of the sharing economy because in these examples, there is still a significant transaction fee, not true sharing.  Additionally, Airbnb properties are frequently owned by property management companies, not individuals.

Sharing economies harness new communications technologies that help people share versus own what they have with other people.  These economies produce community, environmental and economic benefits for those who participate in them.   In China, the experimentation in various sharing markets has been extensive.  Everything from bicycles, houses, and cars to umbrellas, basketballs and flower pots have been included in various sharing schemes.  From the different businesses that have been attempted, the Chinese have shown us that success has been the greatest when shared assets are more expensive and less frequently used.  In these cases, participants enjoy significant cost-savings and this tends to drive higher levels of participation.  High participation levels, from both the supply and demand sides of the transaction, is required for these businesses to become sustainable.  

Trust is also a very important element in the success of these businesses.  Those on the ‘demand’ side have to trust that they will find the products / services they need, where and when they need them.  Those on the ‘supply’ side have to trust the other side to return the things that have been shared with them.  There have been examples when trust was violated and companies were put out of business; one firm lost 300,000 umbrellas (it’s entire supply) in a matter of weeks because the small deposits that were left by users was too small to drive return of the umbrellas.  

 In 2017, 600 million people (43% of the nation’s adult population) participated in sharing market transactions, generating an equivalent of $500 billion dollars in revenue.  Comparatively, only 21% of Americans have participated in a ‘sharing’ transaction to date.   The CPC projects an annual growth rate of 40% and have stated that in 2020, the sharing economy will contribute 10% of China’s total GDP.  This will increase to 20% by 2025.

In In an interview, William Chou, head of Deloitte’s telecoms, media and technology practice in China, said that collecting data is the first goal of the sharing economy.   Every time consumers scan the QR code on a bicycle — or basketball, handbag, umbrella — they provide information about habits, locations, behaviors and payment histories.  Therefore, the platform must take measures to establish confidence of both parties. For example, the platform must check participants before allowing them to join, or set up a participant credit evaluation system based on previous transaction records, or provide security or insurance against bad results, or set up a prepayment mechanism, etc. Unlike traditional business models, the credit evaluation system and other trust mechanisms (such as insurance, guarantee, and prior review of participants) of the sharing platforms can effectively reduce concerns caused by information asymmetry on the two-sided market, thus reducing the demand for government regulation.  For this reason, sharing not only means sharing information or practical items between users and third-party service providers, but also often sharing users and data with platforms. Therefore, sensitive data, such as personal addresses, contact information, preferences and habits, and even the lifestyle of participants, are exposed to platforms.

We’re living in an age where the rate of change has never been faster, and it only seems to increase.  We are witnessing new technologies, new human needs, new challenges and new solutions.  Word4Asia is in the business of helping our customers meet new challenges successfully in the endlessly fascinating nation of China.  Keeping abreast of changes such as the burgeoning sharing economy, is an example.  If your growth plans include success in China, our success rate says that we can play an important role for you.  An initial consultation is available for the cost of a cup of coffee (if you happen to be in Southern California).  Contact Dr. Gene Wood to start a conversation you’ll be glad you had.  

Email:  gene@word4asia.com