The Interesting Undertones of Chinese Regulation
Keeping up with the dynamic Chinese consumer is essential for anyone selling in China, but it's also a good idea to stay abreast of ever-changing regulations. We obviously need to comply with the laws, but also understanding the regulations' nuances provides interesting insights into how Beijing wants to shape things, which affects almost every component of selling in China.
Many exporters are familiar with last month's introduction of cross border and daigou regulations which provided further evidence of Beijing's support for local products. In addition, there has been a string of recent introductions of new laws that foreign brands should be aware of. There's the possible ¥1 million ($154K) fine for using superlatives in communications, such as the “highest”, “best” or “national level,” reminding brands to be humble when operating in China.
New food and beverage safety laws were launched last October in hope of addressing one of China's most pertinent challenges - the lack of trust in food. The evolving rules will impact many exporters, covering everything from pre-imports to selling online.
In March this year we were again reminded how conservative China's law makers remain, when they banned homosexuality, drinking and vengeance on television. Last month, new legislation prohibited reality TV from featuring celebrities' kids, halting production of shows such as the uber-popular Daddy Where Are We Going, which has been used by international destinations New Zealand, Fiji and Western Australia to promote their attractions. Even the big budget Tang Dynasty drama was pulled and edited after it was considered that A-lister Fan Bingbing showed too much cleavage.
Trade shows haven't been immune either, with female models in tight dresses and miniskirts banned from last year's Shanghai Auto Show.
Whereas online has traditionally been less regulated than traditional channels, this is changing. New rules are constantly introduced by digital channels such as Tmall, WeChat and Youku which reflect direction from Beijing; the most recent ban on eating banana's sexily on streaming video.
New online search engine regulations were also swiftly introduced this week, following the outcry from the death of a 21-year old student who had found ineffective treatment after clicking on a paid medical advertisement on Baidu. The tragedy may also further impact Chinese consumers' search behaviour, which is already different from the West due to limited trust in Baidu results. #BringBackGoogle.
No product or service selling in China is immune to Beijing policy, so best to keep on top of it. Here are this week's news and highlights for China:
Chinese Consumers
China Trademark Law Again in Spotlight After Apple Ruling: Apple has lost the exclusive rights to the “iPhone” trademark in China, and will now have to share it with a Beijing-based leather products maker.
Beijing Rent Ranked World’s Least Affordable: Average rental prices in Beijing are more than 1.2 times average salaries. Beijing's house prices grew 18% in the year to March. With house buying restrictions for residents without a Beijing Hukou, renting is the only option for many in Beijing.
Australian Company Bottles Air for Chinese Consumers: Australian entrepreneurs are canning air from Australian spots such as Sydney's Bondi Beach and Queensland's Gold Coast, targeted at Chinese consumers. Each can contains 140 breaths of good Aussie air.
Financial and Technology Companies Ranked Most Authentic Brands in China: Chinese consumers are the least cynical toward brands according to a global survey by Cohn & Wolfe, with 36% believing brands and companies are "open and honest," compared to 23% in the US, 13% in Singapore, 7% in Germany and 5% in Sweden. In yet another brand ranking survey, Chinese banks and tech companies are considered the most real, reliable and respectful local brands, whereas Disney, Amazon, Apple, Samsung and Lego also made the top-10. A similar survey by Luxe.CO found the top foreign lifestyle and fashion brands in China are Chanel, Starbucks, Cartier, IKEA and Nike.
Digital China
China Curbs Baidu Healthcare Ads Business After Student's Death: Beijing has introduced new rules stating that paid advertising must now account for no more than 30% of a page's search results and the positioning of paid adverts cannot only be based on the highest bidder. Healthcare accounts for 20-30% of Baidu's search revenue.
China Bans Camgirls from Sexy Banana Eating Online: Chinese streaming services have banned hosts from filming themselves eating the suggestive yellow fruit "in an erotic manner.
"Room to Grow – China’s Internet Plus Strategy: The Internet Plus Strategy seeks to spur entrepreneurship but what does it mean for foreign firms?
Why Alibaba Is Thriving In A Challenging Global Economy: Alibaba's Joe Tsai's view why his company's focus on Chinese consumers is helping its revenue continue to grow. The value of merchandise sold in Q1 on Alibaba platforms grew 22% year on year, with active shoppers up 16 million to 423 million. Mobile accounted for 73% of all sales, up from 51% a year ago. Similarly, JD's quarterly results showed even stronger 55% year-on-year growth in merchandise sales, and some coups such as Germany's Tom Tailor launching its first Chinese online store on the platform.
Is Alibaba The Real Winner Of This Multi-Million Online Celebrity Ad Auction?: Relatively unknown cosmetics startup Lily & Beauty paid ¥22 million ($3.4 million) for the first ad on China’s latest amateur video sensation, Papi Jiang. The price is even higher than the ads for China’s most popular TV event, the Spring Festival Gala. No bananas please Papi.
Food & Beverage
China's New Food Safety Law: Benefits for Chinese Consumers, Challenges for SMEs Food Exporters?: On 1 October 2015 the New Food Safety Law (NFSL) draft entered into force, with several new regulations, national food safety standards and measures published over the past few months. Emphasis is shifting from supervision and inspection at ports, towards the control of manufacturers in the country of origin and post-market inspection. There is a new burden of responsibility placed on everyone involved in the food chain, including exporters and online sellers.
Trends at SIAL China: Food and beverage product, packaging and positioning trends in China from Asia’s largest food innovation exhibition, SIAL.
Chinese Tourists
Singapore Casinos Big Drawcard for Chinese Tourists: More Chinese travellers are making Singapore their final destination following the lifting of a decades-old ban on casinos. This has helped double the number of Chinese visitors. Gaming and entertainment revenue is the largest single source of Singapore's tourism income, accounting for 24% of all receipts in the first nine months of 2015.
Banking & Payments
WeChat Payment Reached Over 300K Retail Stores: Over 200 million users have linked their bank ATM cards with WeChat, which allows auto-deduction from the corresponding bank account while they make payment using WeChat. 30% of McDonald’s purchases are paid using WeChat, with 30% paying by cash and 21% by Alipay.
Education
Why So Many Chinese Students Come to the U.S.: Getting into the few fiercely-contested positions in China's reputable universities takes years of study for the gaokao entrance exam, including memorising poetry tracing back to the 7th century. Cheating has become so rampant, that there have even been protests by parents angry that their children were not allowed to cheat. Although the number of local universities has grown 150% in the past 15-years, many believe local universities leave graduates ill-prepared for a global economy. American institutions are an attractive alternative, even for those who aren't particularly wealthy, with hockey-stick growth since 2000.
Fashion
Vipshop’s Active Customers Close to 20 Million in Q4 2015: Active customers on online flash sale retailer VipShop grew 58% in 2015 from a year ago to 19.8 million.
Cars
Chinese Consumers Go for Hi-Tech Premium Cars: Premium car owners in China are more emotional and younger than owners in Europe, averaging 33 years old. 80% of owners' purchase decisions are greatly influenced by controllability and advanced technology according to Hurun.That's the Skinny for the week! See previous newsletter here. Contact China Skinny for marketing, research and digital advice and implementation.
