British Chamber of Commerce – Kristen Van Nest

The Taxi Standoff: Since January this year, in an effort to gain users for their e-payments services, Alibaba and Tencent have entered heavy competition in the new market for taxi app services

Published in FOCUS magazine in May 2014.

Visitors and residents, expats and locals alike know the heartache of attempting to hail taxis in Chinese cities, while drivers are choking on higher fuel costs and suffocating traffic. Taxi apps are designed to take the agony out of basic transportation. But, as the competition becomes cutthroat, new issues arise. Here’s a look at
what China’s major urban centres have to offer in taxi travel.

On 10 January, Tencent’s taxi app Didi Dache launched an aggressive discount programme, offering users three coupons of RMB 10 each and drivers five commissions of RMB 10 each on top of their regular fare day if passengers book apps through WeChat Payments, which Tencent owns. Ten days later, Alibaba made a deal with Kuaidi Dache and launched the same programme to those who book through Alipay Wallet, Alibaba’s mobile payment service. These two companies control 90 per cent of the taxi app service market. Kuaidi Dache also had a Beijing beer giveaway campaign, handing out to gain users of Tenpay, Tencent’s e-payment service, while Alipay Wallet provides the same service for Alibaba’s e-payment business, Alipay. This competition for taxi services is just one battleground for the greater war over e-payment
market share. Last month, both WeChat and Alipay Wallet also offered online-to-offline movie ticket payment services.

Although Kuaidi Dache has not released any formal data on their user base growth gained through their discount coupon campaign, many in the Chinese media believe Didi Dache came out ahead. According to data released in April, as recently as January of this year, Didi Dache’s bookings logged in 350,000 taxis a day with 400,000 registered drivers and 22 million registered smartphone users in 30 cities. By late March, the numbers had skyrocketed to over five million rides per day with over 900,000 registered drivers and 100 million passenger accounts in 178 cities. However, the voucher pricing war cost Didi Dache RMB 1.4 billion (about US $225 million).

Now that the number of users has increased, the companies are no longer offering frequent discounts in most cities. However, a recent study found 26 per cent of app users still pay via mobile payment. During busy times, riders can offer tips – not customary in China – in RMB 5 increments, to bid for taxi drivers. Apps prompt users if their bid is not high enough. Reporting on China’s social media service Sina Weibo, one driver claimed he made RMB 2,300 (US $374) in tips in one day. Many drivers juggle various apps simultaneously on multiple smartphones all mounted on their dashboard.

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Domestic firm Xiaomi is looking to rival global giant Apple in the technology market

Published in FOCUS magazine.

Designer, developer, and retailer of smartphones, apps and consumer electronics, Xiaomi ranked third in Fast Company’s 2014 list of ‘Most Innovative Companies’ – the only Chinese organisation to make the cut. Now the largest smartphone maker on the Mainla nd and nicknamed the ‘Apple of China’, Xiaomi could be a game changer. The company’s success could prove China is a strong importer and exporter, a producer of low-cost, low-quality goods, and a developer of innovative, high quality products.

Xiaomi was founded in October 2011 and has been growing rapidly since. In the first half of 2013, the company’s revenue reached RMB 13.27 billion, totalling all of its sales in 2012 – when it grew 150 per cent. In August, the organisation received a valuation of US $10 billion after its most recent round of funding. To put this into perspective, it has already matched Lenovo’s market value and doubled that of Blackberry. Xiaomi’s rapid success comes from its strategy of social media-focused flash sales, constant user experience adaptation, and profits based on software instead of hardware. Using flash sales rather than relying on traditional new product rollout methods, Xiaomi increases hype and demand for its products.

The company sells phones in 200,000 to 300,000 limited quantity batches directly to consumers via Sina Weibo, China’s 400 million-member equivalent of Twitter. Most new product releases sell out within an hour, but the Redmi model vanished in 90 seconds, with more than US $7 million in pre-orders. These small quantities allow Xiaomi to better understand consumer interest in products before the company commits to larger production quantities. By year’s end, many believe Xiaomi will be a top-five client of Foxconn, a major high-volume technology manufacturer involved with Apple products as well.

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FEET FIRST: Discarded weekly by millions of farmers in the UK, chicken feet and pig trotters could be worth millions if exported to China

Published in FOCUS magazine in March 2014.

China is one of the top ten biggest food and drink markets for the UK – and its growing fast. In the first half of 2013, exports from the UK to China grew 126 per cent, reaching £102 million. In December, British meat producers accompanied David Cameron as part of his trade visit to China in an effort to promote the sale of various meats, including
chicken feet and pig trotters – both Chinese delicacies.

Chicken feet are fried, seasoned and eaten as a snack, while Chinese eat pig trotters in a stew, braised, or on a stick. Exporting these products is already big business for the US, Brazil and Argentina; for the UK, the market potential is huge. Exporting pig trotters alone could provide UK farmers with an additional £7.5 million a year. This is dependent, however, on whether the relevant permits and regulations will allow such sales in China in the future – an on-going area of discussion.

As the world leader in breeding economical pigs, Britain is in a unique position. Their meat is considered high quality and British pigs eat less, grow faster, and reproduce more quickly than Chinese pigs. These factors make a British pig half the cost of its Chinese cousin.

Other countries have already used their low production costs to compete in the Chinese market. In 2012, China imported 231,700 tons of chicken feet, worth £214 million; in the first three quarters of 2013, 169,000 tons came from the US alone. In the United States, chicken feet are worth around two cents, but the Chinese can sell them for U$S0.42. The UK selling
chicken feet to China could add an extra 15 per cent of revenue, or £1.50, per chicken in profit, to the already £4.4 billion UK poultry industry.

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A TUSK TASK: As the world’s biggest consumer of illegal ivory, the potential future extinction of African elephants may hinge on China

Published in FOCUS magazine in May 2014.

The rise of China’s middle class means people can spend their disposable incomes on cars, electronics, and tragically, ivory. Principles of feng shui state that ivory disperses misfortune and drives out evil spirits, while Chinese culture declares it symbolic of wisdom and nobility. Either way, it makes a great gift. Furthermore, ivory, or xiangya literally translates to ‘elephant’s teeth’; consumers are not often aware that elephants must die to harvest their tusks.

Many see the commodity as a safer investment than the questionable housing market, bringing about its nickname of ‘white gold’. China’s increased involvement in Africa’s infrastructure over the past decade has streamlined the ivory trade supply chain, making it easier to illegally ship between Africa and Asia. In October 2012, authorities confiscated four tons of ivory, valued at US$3.5 million, from two cargo containers in Hong Kong, followed by 1.4 more tons two months later. Since the ships had passed through various ports to disguise their origins, Interpol believes organised crime was responsible.

In 1989, an international treaty banned the trade of ivory, killing the business in China. With ivory shops closing, the initiative was hugely successful. Once again, elephant populations grew. However, a 2008 exception to this treaty allowed Namibia, Zimbabwe, South Africa and Botswana to sell an ivory stockpile to China and Japan for US $15 million. With this new supply, both the Chinese ivory industry and international ivory poaching were reborn. In 2013, 25,000 elephants were killed in Africa, equivalent to three per hour – worse than before the 1989 ban. Today, all ivory sold in China is supposed to have come from the 2008 stockpile or before 1989 – items over 50 grams are required to have a certificate of provenance.

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Diamond Deals

Published in FOCUS magazine in February 2014.

Today, China is the world’s second largest diamond market, tripling in size in the past five years to US$22.8 billion. Sotheby’s in Hong Kong was also recently host to the record-breaking purchase of a US$30.8 million white diamond. As with many luxury trends in China, at first the con- sumer base wants nothing less than what they perceive as ‘best in class’ items, but as the market matures, tastes become more sophisticated. Currently, Chinese are rivalling European and American preferences for mid-range diamonds. Having seen sales increased 31 per cent in the past three years, this range shows dramatic growth. Previous consumers focused on quality, specifically the diamonds’ clarity, but new consumers understand that high and low quality diamonds may not differ greatly in appearance. Last year, SI dia- monds (the rating Slightly Included, meaning with minor internal defects), which have the same level of clarity American consumers favour, accounted for 30 per cent of sales in China.

Domestically, to cash in on the less-than-premium diamond trend, a factory in China also plans to mass-produce synthetic diamonds, potentially manufacturing 480,000 carats of rough a year. Although many synthetics are for industrial purposes, they can expect to fetch 20 to 30 per cent of the price of natural diamonds. Although the factory intends to ensure buyers know the goods are lab-grown, those farther down the supply chain may not get the message.

Consumers and investors are also seeing these gems with more clarity; diamonds are not only a luxury, they are an investment. In the past, many saw gold as the best hedge against inflation, but countries often use gold to impact exchange rates, making diamond values less vulnerable to economic trends.

Many factors make diamonds a solid investment. For example, while high-end diamonds account for a small amount of produc- tion, lower quality diamonds can offer higher revenue. Additionally, experts predict diamond supply will grow at a compound annual rate of 2 per cent versus 5.1 per cent demand globally, which will put further pressure on prices. Investors attribute this to a decline in kimberlite, the host rock for diamonds, and the decrease in legendary miner and trader De Beers’ historic stock. In the past, stored gems have acted as a buffer when global diamond stocks have declined, creating more consistency in supply.

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Singles Market

As published in FOCUS magazine’s December issue.

Just as Western companies use Valentine’s Day to capitalise on budding – or established – relationships, Single’s Day celebrates anoth- er special someone: me, myself, and I. Instead of an evening of flowers, chocolate, and gourmet cuisine, this holiday sees pyjama-clad consum- ers sitting at midnight in front of lit computer screens, hoping to snag deals from top online retailers.

Born in universities during the 1990s, the day has its roots in Chinese culture. The four “ones” in 11 November reminded students of the character for ‘bachelor.’ Translated, the word means ‘bare branches’; in China, the parents are the trunk of a tree that may or may not bear fruit.
Holiday folklore credits four bachelors playing the popular board game mahjong on 11 November from 11am to 11pm with the four columns card (11.11) always winning. However, this quirky coincidence did not become the year’s biggest shopping day until 2009, when e-commerce conglomerate Alibaba decided to cash in. Last year, 10 million shoppers visited Alibaba within the sale’s first minute. The subsidiary Tmall hit RMB 100 million by the end of minute number two.

After the midnight deals, singles kick off the next morning with four youtiao, deep-fried dough sticks, to represent the four ones, with a steamed, stuffed bun as the middle dot. For dinner, [men and women] will split the check; unlike Valentine’s Day, this is acceptable as it shows their independence.

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Boating Bonanza

As published in FOCUS magazine in the November issue.

China’s economic slow-down saw a negative impact on most luxury industries, but yacht sales have grown hand over fist. from 2006 to 2011, the industry swelled 732 per cent. Last year, 3,000 yachts were sold in china; by 2020, experts expect the numbers to hit 100,000. Seizing the opportunity, Chinese producers are stealing market share from more respected American, british and italian brands.

It’s a popular misconception that yachting is the province of the super rich. In Europe, 84 per cent of yachts are worth less than 50,000 euros. As Chinese income levels rise, demand for small- and medium-sized yachts will increase.

Domestic yacht production is still in its infancy, but over 75 mainland manufacturers have captured the profitable middle- and low-end market, with prices 20 to 50 per cent less than foreign brands. with lower prices, they also offer better, localized after-sale service; unlike with foreign firms, owners can maintain and repair their yachts domestically.

The mega-yacht level has a small pool of potential buyers, which means the ability to predict customisation preferences is advantageous. domestic manufacturers have a better understanding of local tastes. In addition, buyers who can afford to dock multiple vessels in different ports for different seasons.

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Driving Vanity

As published in FOCUS Magazine in the September 2013 issue.

The Chinese gathered in the art deco auction house near Shanghai’s iconic bund are not seeking priceless antiques or cherished celebrity memorabilia. Instead, hopefuls are here for a more practical reason – to buy a license plate. To curb traffic congestion and air pollution, the Chinese government has rationed license plate distribution in its largest cities such as beijing, shanghai, guangzhou, and guiyang, causing prices to skyrocket.

Established first in Shanghai nearly 20 years ago, the programme sees today’s Shanghainese buying license plates that cost rmb 90,000, three times as much as a cheap car – for example, a Zotye Z100 comes in at rmb 24,000. Hopefuls hire middlemen, who double as scalpers, believing their expertise will give buyers an edge in the online and in-person auctions. As a country with 220,000 driving fatalities a year, locals pay high premiums for plates with lucky eights representing prosperity and avoid those featuring unlucky fours symbolising death. To crack down on scalping, the shanghai municipal government requires winning bidders to keep their license plate for at least three years.

Beijing’s system is more egalitarian but less economically efficient. The city presents 20,000 new plates a month; drivers can either win one through a lottery or pay a rmb 100,000 flat rate. Meanwhile, guangzhou took a goldilocks approach, offering 50 per cent by lottery, 40 per cent by auction and 10 per cent to cars certified as environmentally friendly and energy efficient.

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