Corruption & Chabuduo: Why Chinese Keep Buying Imports
Chabuduo is a word used far too often in China, as British writer James Palmer eloquently scribed earlier this month. It spans wider than corruption; a challenge that Beijing must overcome to successfully deliver its Supply-Side reforms. It is why Chinese consumers buy countless foreign brands, and why data-rich companies like Alibaba ad JD place so much focus on imported products. In short, it is a deeply-embedded attitude in China that 'close enough' is good enough.
Whilst there are some true craftspeople in China, the vast majority of goods and service providers still don't take pride in their work like a shoe maker in Milan, a chocolatier in Zurich, a toilet seat maker in Tokyo or an analyst at China Skinny.
Although many Chinese businesses and workers don't appear to care, Chinese consumers see things a little differently. Recent research by Pew found that consumers feel the quality of manufactured goods and the safety of food and medicine is a bigger problem than China's lung-choking air pollution.
Consumers are voting with their wallets. McKinsey's research was the latest to highlight the trend of trading-up by Chinese consumers. 44% have traded up their cosmetics purchases between 2011 and 2015, compared with 4% who traded down. 25% even traded up their rice purchases versus 3% trading down. Cars selling for ¥100,000-¥250,000 ($14,800-$37,000) grew twice as fast as cars less than ¥100,000, and over ¥250,000 grew even faster.
Agriculture and food security is one of Beijing's key focuses, and the recipient of hundreds of billions of investment dollars. Yet chabuduo still plagues many components of the supply chain. Understanding how China is addressing this is crucial for anyone in the food and beverage industry, whether exporting to China, being supplied by Chinese companies or competing against them. China Skinny's Mark Tanner joins a remarkable line up of Chinese and foreign experts in New Zealand's beautiful harbour capital Wellington next Thursday and Friday, 27-28 October to discuss the Rise of Chinese Agriculture. It would be great to see you there. More info here.
China's chabuduo culture will continue to present significant opportunities to exporters of quality goods and services for some time yet; particularly those that are marketed well and in the right sales channels. China Skinny can assist with that. See below to see highlights of the news this week. Here are this week's news and highlights for China:
Chinese Consumers
Chabuduo! Close enough ...: The prevailing attitude in China is chabuduo, or ‘close enough’. It’s a phrase you’ll hear with grating regularity, one that speaks to a job 70% done, a plan sketched out but never completed, a gauge unchecked or a socket put in the wrong size. Chabuduo is the corrosive opposite of the impulse towards craftmanship.
Chinese are Confident of World Role: 42% of Chinese say the safety of medicine is a very big problem, and 40% say the same about food safety according to Pew Research. 35% of Chinese consumers consider the quality of manufactured goods to be a big problem, versus 37% concerned about water pollution and 34% air pollution.
Chinese Consumers: Revisiting Our Predictions: McKinsey looks back to their 2011 China predictions and how accurate they have been. While geographic differences persist, Chinese consumers are generally more individualistic, more willing to pay for nonnecessities and discretionary items, more brand loyal, and more willing to trade up to more expensive purchases—even as their hallmark pragmatism endures.
China Shrugs Off the Ties That Bind: The average Chinese household size was 3.1 people in 2015 versus 4.43 people in 1982. 51.7% of Masters students were women in 2014 versus 44.2% in 2004. Birth rates have dropped from 22.3 per 1,000 people in 1982 to 12.4 per 1,000 in 2014.
Connect with me on 'Leading Elite': Behind the Chinese Names of Western Brands: BMW is 'Treasure Horse' (Baoma), belVita is 'Baking Sunny Mornings' (BeiLang), LinkedIn is 'Leading Elite' (LingYing) and Marvel is 'Comic Power' (ManWei). Western brands’ Chinese names are often a close phonetic match, but they’re so much more, too.
The Absurd Face of China’s Censorship: In another example of Chinese censorship, a state-run bookstore in Shanghai opened the plastic wrapping around a batch of Merriam-Webster's English dictionaries and tore out the page containing a definition of Taiwan. 77% of respondents in Pew research thought that their way of life needed to be protected against foreign influence.
Digital China
Most European Websites Load too Slowly for Chinese Consumers: Chinese consumers expect a website to launch within 4.8 seconds according to CDNetworks – but 85% of European websites fail to meet that target, with many brands taking longer than 30 seconds. 85% say a poor performing website reflects badly on a brand, and 57% are concerned that a slow website is insecure. Some 17% said they were concerned that a brand whose website loads slowly does not value Chinese custom.
China’s Bike-Sharing Battle Looks a lot Like its Ride-Hailing War: Following Mobike's $10 million investment in August, Beijing-based bike sharing startup Ofo announced a US$130 million series C round – its fifth round of funding since the service went online 13 months ago. Ofo is part of China’s burgeoning bike sharing industry, where users park their bikes wherever they want and use an app to find available bikes parked nearby. Like ride-hailing, bike sharing relies on investor money to attract users with rock bottom prices - Mobike’s service costs ¥1 ($0.15) per half hour, plus a $45 deposit.
China Has Now Eclipsed the U.S. in AI Research: United States was an early leader on the AI subset of deep-learning research, but since 2014, China has stormed past it in terms of the number of papers published annually on the subject. When factoring in the quality of the research - papers that have been cited at least once - China also overtook America in 2014.
Health
How China's Biggest Search Engine Aims to Fix a Huge Crisis in Health Care: A Bot: Baidu's Doctor app has a new AI feature — Melody the medical assistant. Melody responds in real time to health queries by asking further questions, while comparing responses with Baidu's database of medical information. It then poses a possible diagnosis to a doctor who can recommend the next steps. There will be a global shortfall of almost 13 million health-care professionals within two decades according to WHO.
Food & Beverage
Yum Blames South China Sea Dispute for Hurting Results in Asia: Analysts had projected a 4.1% same-store increase in sales in Q3 for Yum Brand's KFC, Pizza Hut and Taco Bell in China, but sales fell 1% instead, with the company claiming the dispute over the South China Sea was to blame.
China's Sweet Tooth for Chocolate Melts with Economic Slowdown: Chocolate sales in China declined 2.4% in 2015 according to Euromonitor. While Chinese consumers are snacking frequently, they are looking for healthier snacks than in the past. Hershey's, Ferrero and Mondelez have all made China investments in the hundreds of millions of dollars since last year.
Chinese Tourists
Cartoon Figures Help Attract Chinese Customers in Airline Market: Themed flights have become more and more common in China's airline market. A Doraemon-themed flight between Shanghai and Tokyo used painted planes and promotional events giving people the chance to meet the cat-like robot in person. Eastern Airlines arranged two Disney themed flights after the Shanghai Disneyland opened in June. Hainan Airlines teamed up with Kung Fu Panda recently during the National Day holiday. Capital Airlines paired with the cartoon monkey Paul Frank for one of its domestic flights in September.
Finance
Chinese Consumers Could Feel Pinch of Debt: China's household debt as a percentage of GDP has grown from 27.9% to 40.7% in the past 5 years. Household debt is now worth 53.3% of household bank deposits, up from 39.7%. Nearly a quarter of all outstanding mortgage debt in China was taken out in the past 12 months.That's the Skinny for the week! See previous newsletters here. Contact China Skinny for marketing, research and digital advice and implementation.
