Insights and ideas to solve the toughest business challenges in China

Gao Feng

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Gao Feng

'E-commerce' is rapidly evolving into 'New Retail.' Jack Ma, Alibaba

I am not a sci-fi fan, but I did see Minority Report in 2002. I don't remember anything about the movie, except the scene where Tom Cruise is walking down a shopping mall hallway and ads pop up, one after another, each tailored to Tom's preferences. Fast forward 15 years (just 15 years) and Alibaba's New Retail is getting us closer to that experience.

Ed Tse, founder of the Gao Feng consultancy and the leading expert on Chinese innovation, introduced me to New Retail in a recent conversation. You will find his explanation of New Retail below, along with a couple of videos showing New Retail in action - as amazing today as Minority Report seemed years ago. Perhaps even more amazing is the China business strategy, the 'Third Way,' that made things like New Retail possible. Ed explains the Third Way in Part Two of our discussion that I will be posting soon. Chinese do do things their own way, as the Third Way again demonstrates. For now, have a look at the future today. And, stay tuned for Part Two for Ed's explanation of the Third Way that made New Retail possible.

1. 'E-commerce' is rapidly evolving into 'New Retail.' Jack Ma, Alibaba

‍ 'Minority Report' - 2002 sci-fi...

'Ed Tse, founder of the Gao Feng consultancy, says, 'Recently, Alibaba has gotten significantly into New Retail. In his October 2016 letter to Alibaba shareholders, Jack Ma wrote':

  • 'Commerce as we know it is changing in front of our eyes.'
  • 'E-commerce' is rapidly evolving into 'New Retail.'
  • 'The boundary between offline and online commerce disappears as we focus on fulfilling the personalized needs of each customer.'

Ed explains, 'New Retail combines of online retail and offline retail.'

  • 'This is also known in China as "O.M.O." or "Online Merging with Offline" - merging through technology - sensor technology, online payment, artificial intelligence, and so on - to make the customer experience very much hassle-free.'
  • 'This is an entirely new ecosystem for retail.'
  • 'And, besides its own stores, Alibaba is now working with a large number of offline retailers so that they can build their own New Retail ecosystems.'

Amzaon led the way. 'China needs a pioneer. What the Chinese are very good at is picking up a concept and applying it in China in a much more intensive and much faster manner.'

  • 'In this case, the pioneer was Amazon Go, and the outcome is Alibaba's New Retail.'

'With Alibaba, ecommerce is still the core. But, through ecommerce, it also built the basic infrastructure and the basic capabilities relying on big data. On connectivity. On its ability to create an ubiquitous user space.'

  • 'Alibaba's Taobao, the online commerce platform, for example, has something like 500 million daily active users. Ubiquitous database, user space.'
  • 'To do something like New Retail, you have to have that kind of ubiquitous user space. You have to know each of the users, individually.'
  • 'Alibaba will know you, "Malcolm Riddell," individually. Even though it has an ubiquitous database with information about hundreds of millions of users on that database, Alibaba knows you individually.'
  • 'And, using that information Alibaba can personalize your New Retail shopping experience.'

Ed describes how the Alibaba's New Retail might work as an ecosystem.

  • 'You register on the app, or if are a user of Alibaba's Taobao you don't need to register.'
  • 'If you a user of Taobao, Alibaba already knows your preferences, what kind of products that you like.'
  • 'When you go to a store, you are identified right away through facial recognition or body recognition.'
  • 'You go in and robots will automatically take you to where your favorite products are. You go to your aisle, you look at a product. You may make some choices. You scan the QR code.'
  • 'The app will know or automatically what kind of product you want to buy or don't want to buy.'
  • 'Then, you press a button, check out, and just walk out.'
  • 'The merchandise will be delivered by smart logistics to your home within "X" number of hours.'

2. New Retail, a 'third way' ecosystem among ecosytems 

New Retail is one of a multitude of ecosystems that are part of China's 'Third Way' of doing strategy.

  • In Part Two of our conversation, Ed Tse, founder of the Gao Feng consultancy will explain more about the Third Way. 
  • For now, here's a brief explanation. 

Ed notes, 'Lots of people ask me, "It seems that all of a sudden there are so many Chinese companies that have become so big, so valuable, so quickly. How did they do it?" I answer...'

  • 'The very best Chinese companies, or the fastest growing Chinese companies are those who adopt the "third way" of thinking about strategy.'
  • 'Using "third way" strategy, they make multiple jumps from business to another business to another business, and so on - as the chart below shows.'

'In the process, they fill in the gaps in capability through creating ecosystems - a network of collaborators - who can help them.'

  • 'You put all of a company's ecosystems together, and they become one mega-ecosystem.'
  • 'That mega-ecosystem is the major contributor to the high valuation of these kind of companies.'

3. Watch New Retail in action

Alibaba has a website, Alizila: News from Alibaba.

Here are two pretty amazing short videos from the site that show the New Retail experience for customers.

Have a look.

'Take a Tour of a Hema Supermarket and Experience "New Retail"'(3:03 mins)
'The "New Retail" Inside Alibaba: How New Retail Is Changing Everything' (5:28)
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The extraordinary power of China's corporate 'mega ecosystems'

AP

Besides Alibaba and Tencent, companies like Ping An Insurance Group, Baidu and JD.com are building out mega ecosystems with incredible speed and intensity. Even some traditional manufacturers are moving in this direction. Zhejiang Geely Holding Group has gone from producing entry-level cars to selling premium models with the help of foreign acquisitions and has been the first Chinese carmaker to move into on-demand mobility services. It has also been experimenting with connected intelligent vehicles, shared ownership programs and flying cars, together assembling a sprawling transportation services ecosystem.

Nikkei Asia Review

Some observers have criticized China's market economy for lacking the "creative destruction" that is said to give Western capitalism its lasting vitality.

Such doubts are misplaced as the new year is likely to underscore. In recent weeks, Didi Chuxing, the country's predominant ride services app, has moved to add bike-sharing options to its platform and has acquired Bluegogo, a bike operator that had run into difficulties. The move clearly positions Didi, already one of the world's most valuable startups, to take on current bike-sharing leader Mobike. Meanwhile, Meituan-Dianping, which is best known for its food delivery service and has more than 250 million users, has moved to offer car-hailing services in competition with Didi.

The fight is on. Didi Senior Vice President Chen Ting has already said Meituan's move will touch off the "war of the century." In the background is the increasing overlap between the business networks of China's two most valuable listed companies, Tencent Holdings and Alibaba Group Holding. After a series of mergers, both have ended up as key shareholders of Didi. Tencent also backs Meituan and Mobike while Alibaba is a major investor in Ofo, which is Mobike's top rival as well as a partner of Didi's.

Not long ago, many argued that state-owned enterprises were becoming increasingly dominant in China's economy at the expense of the private sector. These observers highlighted government protections enjoyed by state companies and noted their privileged access to resources and market niches.

In reality, the fastest-growing companies in China over the last few decades have predominantly, if not entirely, been entrepreneurial companies from the private sector. According to a study by the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences, new economy sectors, ranging from e-commerce to car-hailing services, expanded twice as quickly as China's overall GDP over the 10 years to 2016. These new economy companies are nearly always private sector companies.

Some observers have criticized China's market economy for lacking the "creative destruction" that is said to give Western capitalism its lasting vitality.

Such doubts are misplaced as the new year is likely to underscore. In recent weeks, Didi Chuxing, the country's predominant ride services app, has moved to add bike-sharing options to its platform and has acquired Bluegogo, a bike operator that had run into difficulties. The move clearly positions Didi, already one of the world's most valuable startups, to take on current bike-sharing leader Mobike. Meanwhile, Meituan-Dianping, which is best known for its food delivery service and has more than 250 million users, has moved to offer car-hailing services in competition with Didi.

The fight is on. Didi Senior Vice President Chen Ting has already said Meituan's move will touch off the "war of the century." In the background is the increasing overlap between the business networks of China's two most valuable listed companies, Tencent Holdings and Alibaba Group Holding. After a series of mergers, both have ended up as key shareholders of Didi. Tencent also backs Meituan and Mobike while Alibaba is a major investor in Ofo, which is Mobike's top rival as well as a partner of Didi's.

Not long ago, many argued that state-owned enterprises were becoming increasingly dominant in China's economy at the expense of the private sector. These observers highlighted government protections enjoyed by state companies and noted their privileged access to resources and market niches.

In reality, the fastest-growing companies in China over the last few decades have predominantly, if not entirely, been entrepreneurial companies from the private sector. According to a study by the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences, new economy sectors, ranging from e-commerce to car-hailing services, expanded twice as quickly as China's overall GDP over the 10 years to 2016. These new economy companies are nearly always private sector companies.

‍‍Meituan-Dianping, which is best known for its food delivery service, has moved to offer car hailing in competition with Didi. © AP

The most valuable Chinese companies today are typically "mega ecosystem" players which operate networks of businesses that can support each other and supplement each other's capabilities. A milestone was crossed last year when Alibaba and Tencent, the mega ecosystem leaders, surpassed Facebook in market capitalization.

The growth of entrepreneurial Chinese companies has been amazing. According to tech-sector funding research company CB Insights, the number of unlisted Chinese companies valued at $1 billion or more -- the so-called "unicorns" -- has risen to 59. The U.S., with nearly twice as many unicorns, is the only country where CB Insights counts more.

The Chinese though are closing the gap fast. Five years ago, CB counted only three Chinese unicorns, less than a quarter as many as it tallied then in the U.S. Those in China now valued at $30 billion or more include Didi, Meituan, Ant Financial Services Group and smartphone maker Xiaomi.

The notion of a business ecosystem is not new. Apple, the world's most valuable company, was a pioneer in this regard when it launched the iPhone back in 2007 and made the App Store its platform for distributing apps. Other leading U.S. tech companies such as Amazon.com and Alphabet are also ecosystem players. Chinese companies, however, have turned out to be even more adept at building such organizations.

Alibaba, Tencent and Xiaomi are prime examples of mega ecosystems. Building out from their original core businesses, they have jumped into a string of new sectors as market opportunities have popped up amid economic reform and technological developments have enabled them to disrupt existing means of doing business.

Alibaba started as a small business-to-business online marketplace almost 20 years ago. Around 2003, when online shopping was emerging, Alibaba jumped in with consumer-to-consumer site Taobao and later business-to-consumer site Tmall. Next Alibaba started Alipay to support mobile online payments and then later used its platform to offer wealth management services, including the Yu'e Bao money market fund, which subsequently became the backbone of its network's internet finance business.

Today, Alibaba's internet finance interests are grouped under Ant Financial, which includes businesses such as electronic payment processing, banking, social credit scoring and financial cloud services. (Alibaba said on Feb. 1 that it will resume its direct shareholding in Ant, exercising rights to take a one-third stake.) Alibaba has also branched into areas including big data, smart logistics, media, auto-mobility and cloud storage. Each sector has its own system which together form Alibaba's mega ecosystem. Though its development took a somewhat different course, Tencent has built a mega ecosystem too.

‍‍Tencent Holdings has built one of the China's most successful mega ecosystems, including mobile payment service WeChat Pay, which can be used at some vending machines in the country. © Reuters

Chinese companies seem more inclined than their Western counterparts to migrate across sector boundaries and create larger ecosystems. This is perhaps because new market opportunities have been popping up more frequently in China and its consumers have embraced smartphone apps more closely. When they sense an opening, Chinese companies can quickly form ecosystems of collaborative partnerships.

In contrast, most foreign multinational corporations tend to focus on what they have been doing all along and avoid jumping across sector boundaries. This is a result of the "core competence" doctrine that has governed corporate strategy thinking in the West for about 30 years. Whle Chinese companies are more inclined to expand "horizontally" into new sectors, Western companies tend to grow "vertically" to areas upstream or downstream from their original focus.

Besides Alibaba and Tencent, companies like Ping An Insurance Group, Baidu and JD.com are building out mega ecosystems with incredible speed and intensity. Even some traditional manufacturers are moving in this direction. Zhejiang Geely Holding Group has gone from producing entry-level cars to selling premium models with the help of foreign acquisitions and has been the first Chinese carmaker to move into on-demand mobility services. It has also been experimenting with connected intelligent vehicles, shared ownership programs and flying cars, together assembling a sprawling transportation services ecosystem.

Clearly access to abundant user data is key for these kinds of companies. Even bike-sharing services like Mobike and Ofo claim that they are data-centric companies, signaling that they will also build out their ecosystems with consumer lifestyle at the core.

New technologies such as the internet of things and 5G mobile networks will enable companies to crisscross sectors faster and more capably. The operations of China's mega ecosystems will overlap increasingly with each other, driving even more intense competition.

Perhaps more collaborations in some cases or even the merging of mega-ecosystems will take place. The "coopetition" that results would be even more dynamic. The already powerful mega ecosystem players could then get even more powerful. This will be exciting to watch.

Edward Tse is founder and CEO of Gao Feng Advisory Co., a global strategy and management consulting firm with roots in China, and the author of "China's Disruptors."

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'Inside China’s quest to become the global leader in AI'

The World Post

'The RMB did not like the trade data at all, and it weakened immediately - over 1% today.' 'Overnight, the world has moved a little bit away from its U.S.-centric obsession about equity volatility in the United States and around the world to what's going on in China,' says Bob Savage, CEO of TRACK and member of the soon-to-be-launched China Analyst Network.

SHANGHAI — If all goes as planned, China hopes to be the world leader in artificial intelligence by 2030. If successful, Beijing’s “moonshot” initiative – recently unveiled by the government – has the potential to be a game-changer not just for Chinese society but for global geopolitics as well. My bet is that China will indeed reach its goal over the next decade, in part because of how far it has already come. While so much of the world today lacks clear direction, China has an edge in its ability to combine strong, top-down government directive with vibrant grassroots-level innovation. Beyond this, China has an abundance of data to train AI-learning algorithms because of its huge population of Internet users – more than 700 million. China’s thriving mobile Internet ecosystem also provides a test bed for AI researchers to collect and analyze valuable demographics and transactional and behavioral big data and to conduct large-scale experiments at a much higher level than foreign counterparts. 

This combination places Beijing in a unique position to dominate AI in just over a decade. It would be imprudent to expect otherwise. To understand why, look no further than the country’s current technological advancements. China is investing in AI at the local level Today, a number of local governments in China are offering financial incentives to encourage AI-related innovations. With the government’s assistance, Guizhou, one of the poorest provinces in the country, has become known as China’s “big data hub.” Major Internet companies such as Apple, Alibaba, Tencent and Qualcomm have set up new big data centers in the province, in large part due to this initiative. And in 2016, government data reported a 10.5 percent growth in Guizhou’s gross domestic product, one of the highest GDP increases among China’s provinces and municipalities. Another example is the municipality of Chongqing. It was one of the first municipalities in China to establish a bureau to support local AI development. In May, Chongqing partnered with Baidu, a local search engine, to foster AI and big data. Elsewhere in China, Xiong’an New Area, a newly established district near Beijing, and Guangdong-Hong Kong-Macau Greater Bay Area, a city cluster, have also incorporated AI in their development plans as a key economic growth engine.

China is inspiring tech to prioritize AI The Chinese government’s favorable policies have inspired innovations across a wide range of tech players in the country. Leading Internet giants such as Baidu, Alibaba and Tencent, rising start-ups like iCarbonX and SenseTime, as well as “unicorns” – companies that have reached $1 billion valuation – like Didi Chuxing and Xiaomi are either adopting AI technology already in their operations or investing in it. Baidu, for example, has shifted its company strategy from “mobile-first” to “AI-first.” Some of its initiatives include DuerOS, a conversational AI system that can be integrated into smart devices such as speakers, televisions and refrigerators; Project Apollo, an open source platform for the research and development of autonomous vehicles; and Baidu Brain, an AI platform with 60 different AI-enabled services. Its rival Tencent has also established its own AI lab, which developed the software that famously defeated high-ranking Japanese “Go” player Ryo Ichiriki earlier this year. Additionally, Chinese health care start-up iCarbonX is building a digital “ecosystem” using AI technology to collect users’ biological and psychological data, provide personalized health analysis and predict users’ health status. 

And SenseTime, a Chinese AI start-up founded in 2014, focuses on innovative computer vision and deep learning technology. In July, SenseTime claimed it had raised the largest single round investment in AI globally at $410 million. Still, there are some significant gaps to close before China becomes the world leader in AI. According to a recent AI report from Tencent Research Institute, the number of AI companies in China lags behind those in the United States, especially in the areas of core components and processes. China still falls short of the U.S. when it comes to new ideas and research related to AI but appears to have the upper hand in the application and implementation of these AI technologies. Another potential challenge is geopolitics. According to an unreleased Pentagon report cited by Reuters, the U.S. government views Chinese investments in American AI start-ups as a potential threat to national security. As a result, the U.S. wants to scrutinize cross-border investment in sensitive AI technologies. On top of that, the Trump administration has proposed a 10 percent cut to the National Science Foundation’s spending on “intelligent systems.” This could present potential opportunity for China, through strong government support and financial incentives, to attract U.S. talent to set up AI labs and conduct pilots in China. 

China has some work to do before it successfully harnesses the potential of AI. But it has the resources and talent to reach its goal – and now it has the political will to make it a national priority. That combination will be hard to beat. This was produced by The WorldPost, a partnership of the Berggruen Institute and The Washington Post.

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The father of business consulting in China knows why eBay failed there

Photographer: Calvin Sit

In the early 1990s, when China was still struggling to shrug off the straightjacket of its planned economy, the man appointed to lead the first business consulting firm allowed in the nation was immediately confronted with the scope of the challenge ahead.

By Joseph Catanzaro, INTHEBLACK

In the early 1990s, when China was still struggling to shrug off the straightjacket of its planned economy, the man appointed to lead the first business consulting firm allowed in the nation was immediately confronted with the scope of the challenge ahead. 

“There wasn’t even a concept of what a company was,” says Dr Edward Tse. “Everything was a state-owned enterprise (SOE), and a SOE is very different from a company like we know them today.”

Tse, raised in Hong Kong and educated both there and in the US, was poached from McKinsey & Company by Boston Consulting Group (BCG) in 1993. BCG was the first business consulting firm given approval by the Chinese Government to set up shop in mainland China.

The nation was beginning to open up to the world under economic reforms, and BCG saw potential in both China and Tse. It has proven to be a wise choice. Tse is held in high esteem in China: he’s the man everyone wants to know and he’s regarded as one of the best management consultants in the business. 

Made managing partner of BCG’s China practice, Tse says his initial work with China’s fledgling business community wasn’t just about convincing potential clients that his people could do a good job, but being good at convincing them what they did actually constituted a job. 

“People asked, ‘what do you guys actually do?’. We’d say, ‘well, we manage a consulting firm to advise companies’. They’d shake their heads. They couldn’t understand what a consulting firm was.”

Fast-forward two decades, and both China and its consulting industry are vastly changed. In 2016, foreign direct investment in China grew by 4.1 per cent year-on-year to US$118 billion, reports China’s Ministry of Commerce. China’s consulting sector, which is helping guide those foreign companies and local businesses, was valued at about US$3 billion in 2015 by UK-based Source Information Services. In early 2017, IBISWorld put the sector’s worth at US$25 billion. 

China business pioneer

Sitting on a high-speed train traveling at hundreds of kilometers per hour through what is now the world’s second biggest economy, Tse says he believed early on that the potential rewards of doing business in China would far outweigh the challenges. He waves away the suggestion he is the founding father of China’s now booming consulting sector, despite his role as the first to steer a practice through those uncharted waters. Instead, he puts his appointment down to “right place and right time”.

“At that time there weren’t many ethnic Chinese strategy consultants and so demand and supply made it happen,” he says. 

Others believe Tse is just being humble. 

“Edward Tse must be considered a pioneer in the field of business consulting in China,” says Shane Tedjarati, a former client and now president of Global High Growth Regions for Honeywell. “I’ve known Dr Tse for over two decades and he’s provided invaluable advice on numerous industries, including automotive and high technology.”

All Tse will admit is he was busy from the get-go. In the early 1990s, foreign firms suddenly had access to the most populous nation on the planet. 

“We [BCG] received a frenzy of inquiries and projects, right away,” Tse says. 

In the past 20 years, he has continued to advise companies on how best to enter the China market, initially at BCG, and later as Booz & Company’s senior partner and chairman for Greater China. 

Along the way he’s written award-winning books on China business strategy and management (The China Strategy in 2010 and China’s Disruptors in 2015), had board appointments on Chinese state-owned giants including Baoshan Iron & Steel, and been given government advisory roles in Hong Kong and Shanghai. 

He’s also earned himself a reputation in business circles as a China whisperer. Tse is tight-lipped about his client list, but it’s understood it includes some of the biggest names in global business, across a wide range of sectors. 

The China market evolution continues

Tse, however, is not one to rest on his laurels. He says, in China, it isn’t an option. “The China market is still evolving. The China market we knew 20 years ago is different to the market 10 years ago, and the China market today. It’s a moving target.” 

There are some big factors behind China’s ever-changing business landscape, Tse explains. Foremost is that China’s transition to a totally free market economy won’t be completed for another few decades, meaning the business landscape will continue to shift as protectionist legislation is scaled back and SOE monopolies are challenged.  

That’s one reason why Tse has continued his own evolution. Just before Booz & Company merged with PwC in 2014 (becoming Strategy&), Tse struck out on his own to found the Gao Feng Advisory Company, which is firmly rooted in China.  

After decades of telling foreign companies their China business needed to be more China-centric, Tse took his own advice. 

“China was always at the fringe, not the core, for the big multinational companies,” he says, “and that also applied to the big consulting companies, because they were headquartered in the West.”

“People asked, ‘what do you guys actually do?’… They couldn’t understand what a consulting firm was.”

Tse’s Gao Feng practice is at the front of a new wave of Chinese consulting firms that are beginning to compete with the multinational players in China. With about 100 consultants spread across Beijing, Shanghai and Hong Kong, it is still a small practice, but Tse says Gao Feng is punching above its weight and is now often “invited to compete with the big firms”. 

His first suggestion for businesses looking to break into China is not to arrogantly assume that the one-size-fits-all approach successfully used in 100 other markets will work there. This isn’t a revelation, because he’s been saying it for 20 years; the surprise is that many foreign business leaders still think their company is the exception, and does not have to adapt. 

“China’s transition from a planned economy is still going on and in my opinion it will take another few decades to complete that transition,” he says. “This is unique. I don’t know another country in the world doing this. 

“You have got a much more complex [business] ecosystem in China. The players are not just pure commercial players: you have private companies and multinationals, but you have also got SOEs who play a different ball game … the government is also very involved in driving the economy.”

Secrets of success and failure

Underestimating just how different China is, and where problems and competition may arise, has been the death knell of more than one bid to enter the China market, says Tse. This pitfall can be avoided, he adds, but it involves giving up something global head offices rarely like to relinquish: control. 

“You have to put the brainpower for the real decision-making here in China,” says Tse. 

Dr Edward Tse

Dr Edward Tse, He points to eBay’s unsuccessful 2002 bid to make it in China. The internet giant ran up the white flag after being beaten by a then much smaller home-grown company, Alibaba. It’s what can happen when a multinational doesn’t give its China office enough autonomy, says Tse. 

“eBay didn’t understand the complexities of the China market. They required everything to be done almost exactly as they they did it in the US,” he says. 

“Alibaba was smaller but its team was flexible and adapted quickly. They understood what the consumer wanted and they developed a locally accepted version of the business model. 

“If it would take a week before eBay [with its head office overseas] could make a decision and come back to China with it, during that one week Alibaba could have made five decisions. This is how Alibaba beat eBay.” 

Implementing a Western, “democratic and by consensus” management style has also often proven a mistake, adds Tse. Most of the successful companies in China, both domestic and foreign, are led by a particular brand of executive that resonates with the local Chinese workforce. 

“The … leaders who are successful at multinationals are usually in a control mode,” he says. “They tend to be viewed as the big boss, someone with authority who has a lot of decision-making power and is able to drive the business in a very local way despite what headquarters wants them to do. They are really quite good at saying this is what we do, we have vision, we have purpose, and the team will then follow.”

The Chinese consumer

The other, obvious side of the success equation is the reception from Chinese consumers. 

Tse says too many multinationals come in with a view that their core product will simply work in China, as is. Yet with little or no brand recognition to rely on, foreign products are often less appealing to consumers than local alternatives. 

Tse points to Coke as a company that did a reasonable job of adapting its product presentation to appeal to Chinese consumers and diversified its product line to capture more market share. 

“They genuinely tried to create a more locally accepted product line. At the same time, while they are trying to develop local products such as juices and Chinese tea, I think they’re still hanging too much on their core carbonated drinks.”

The biggest challenge facing businesses coming into China now, however, is digital disruption.  

Chinese consumers are accustomed to using digital payment systems, expect to be able to order almost every product online on established platforms, and have these products delivered to their door – often in less than 24 hours, says Tse. 

China’s level of technology acceptance and integration is unparalleled anywhere in the world outside of Silicon Valley. 

“If you’re headquartered outside of China, you don’t get a sense of the rapid digital disruption in China,” Tse says. “The local guys based in China know, and I’m sure they inform headquarters, but they don’t get it. They hear the words internet, mobile, digital payment, P2P (peer-to-peer); they hear the terms but don’t understand deeply the change in China.”

For those thinking they can play catch up or feel their way into the market, the first man in China’s consulting sector offers a last piece of advice: “The Chinese consumer won’t wait.” 

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Is china prematurely declaring victory in its reforms?

8/30/17
Xinhua

At the heart of China's economic take-off during the last four decades is a fragile equilibrium between economic reforms and one­ party rule. The communist party has demonstrated pragmatism and adaptability - but just at a time when China seeks to fully enter the knowledge economy and participate in global markets, it has put the brake on further reforms.

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C-to-C Internet Commerce- From Taobao Shops to Taobao Villages

One is some of the local government-owned SOEs are the sources for overcapacity. The reason is because the local government also wants to ensure there's some degree of employment locally, and perhaps some source of taxation. The Chinese government is now going to need to start the so-called supply-side economics to try to consolidate overcapacity in a number of sectors. It's going to impinge on the interests of many of these local SOEs as well as the local governments who own them.

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Why SOE Reform is So Tough

'...SOEs need to reform, because on one hand, many of them have achieved a lot for China. On the other hand, they've actually created quite a lot of harm, in particular in the areas of overcapacity but also in the areas of corruption we've talked about.'

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How SOEs & Local Governments Create Overcapacity

One is some of the local government-owned SOEs are the sources for overcapacity. The reason is because the local government also wants to ensure there's some degree of employment locally, and perhaps some source of taxation. The Chinese government is now going to need to start the so-called supply-side economics to try to consolidate overcapacity in a number of sectors. It's going to impinge on the interests of many of these local SOEs as well as the local governments who own them.

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How Alibaba, Xiaomi, & Tencent are Changing the Rules of Business

An Interview of Ed Tse, the author of 'China's Disruptors: Alibaba, Xiaomi, & Tencent... how innovative 'Disruptor' companies are restructuring China's economy.'

The real force in Chinese economy is increasingly private companies, not SOEs. / Leading private Chinese companies are innovative and ambitious

Today, probably the biggest phenomenon happening in China’s business is the rise of China’s private sector and as part of that, entrepreneurship and innovation. China’s economy has previously been dominated by major SOEs. 

They are resourceful, often protected by preferential policies and enjoy certain privileges. Some western media called China “State Capitalism” which carries a somewhat negative connotation—a capitalist way where the government plays a major, directive role. Is that right? It is, but it is not the full picture. 

Many people outside of China were surprised last year when Alibaba went for an initial public listing (IPO) in the New York stock market as the largest valued initial listing. Jack Ma, the founder, appeared on the front pages of New York Times, CNN and other leading media, catching lots of eyeballs.

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