Chinese Innovation is Coming to a City Near You

While all of us have enjoyed the results of Chinese inventions from paper, printing, tea and porcelain, to the less-cited toilet paper, pasta, ice cream and football, it's likely we're going to benefit from many more in our lifetimes, particularly in the technology category.

China's modern transformation has been led by engineers.  A late-90s study found that more than 80% of the mayors of China's large cities, Party leaders and Central Committee members held degrees in engineering or the sciences.  Many of those engineers are steering all-important Government policies such as the "Internet Plus" strategy, which will see increased focus on developing world-leading innovations related to the Internet.

Market-raised cash injections are also fostering tech innovations in China.  There are now more than a dozen Chinese tech businesses worth over $1 billion, with venture capital growing more than 300% last year to $15.5 billion. On the surface, most Chinese tech companies look similar to Western companies.  Yet dig a little deeper and you'll see Chinese firms pioneering mobile, ecommerce, finance, microtransactions, social commerce and O2O features that are making the West's tech companies take notice - and even copy.  

China is a fine breeding ground for innovation.  Decades of state capitalism has led to some very inefficient ways of doing things, creating the perfect environment for disruptive technologies that meet the needs of increasingly sophisticated and demanding Chinese customers.  China's massive population of tech-savvy consumers, who together account for 59% of the world's smartphone app downloads, have the scale to tempt many aspiring engineers.  More than 10,000 new companies are registered each day in China.

Building efficiency, isn't just about creating shorter queues in hospitals, making paying for things easier, or more efficient ride sharing.  It's also servicing those softer, but still important needs such as customer service.  

China's phenomenal rise of ecommerce can be attributed to competitive pricing, convenience and range, but also for providing consumers with a level of service that most haven't experienced before.  Service isn't always great in China's brick and mortar stores, but if you drop the ball on ecommerce, your store, brands and products will be slated with negative online reviews.  This effects both consumers' perception of your brand during their research, in addition to search result positions on ecommerce platforms.  With so much at stake, online vendors bend over backwards to please their customers, which has seen ecommerce platforms such as Taobao, Tmall and Jingdong have the highest satisfaction and consumer loyalty of any brand in China.

In short, Chinese consumers are receiving technology-assisted service and convenience.  This has helped build an ecosystem of innovations that are increasingly moving beyond Chinese borders, and it is also a reason Chinese have growing expectations when buying a product or service, which need to be met or exceeded.  China Skinny can help with that.  We hope you enjoy this week's Skinny.

 Chinese Consumers

The Wild, Wild East: China's urban consumption will almost double from $3.2 trillion today to $5.6 trillion in 2020 according to BCG. Whilst many are talking up inland China as the biggest untapped opportunities, there are still many up-and-coming cities in eastern China such as Suqian, Xuzhou and Wuhu, and still lucrative niches in the crowded Tier 1 markets of Shanghai, Beijing, Guangzhou and Shenzhen.

Chinese Trade Data Latest Indicator of Sluggish Growth: While food imports to China in August increased 25% year-on-year, overall imports decreased 13.8%, with demand for commodities such as iron ore and aluminium drying up. 

Three Reasons Why Chinese Consumers Love the Queen – and Why Britain Should Too: When Chinese consumers were asked which words they associate with Britain, top of the list was the Queen. 27% of Chinese shoppers said they get their inspiration for fashion and home style from the Queen and the royal family, with the royal warrant important for increasing desirability of British lifestyle and brands from more than half of those surveyed, according to Qing Wang from the University of Warwick Business School.

Best CRT Post Today? Not in China: China's advertising laws have been overhauled this month, imposing fines of up to ¥1 million ($157,350) for brands that use superlatives such as the "highest", "best" or "national level". Brands are also banned from using child stars under the age of ten to promote their products.

 Internet, Mobiles & Ecommerce

Buzzwords: Ecommerce and Digital Payment in China: Ecommerce is the talk of the town in China, and here are a few buzzwords that are good to know.

It’s All Go: Venture-capital investment in China reached a record $15.5 billion in 2014, more than triple 2013’s level. China has more than a dozen tech businesses with a valuation of over a billion dollars. “Chinese consumers are now so demanding and globally minded…you need to be world-class to serve China,” says Gary Rieschel of venture-capital firm Qiming Ventures.

China is Buying About One-Fifth of the World’s Apple Watches: Just over one million Apple watches are estimated to have been sold in China since they launched in May - about 22% of global sales. That's lower than the 26% that China contributes to Apple's revenue overall. 40% of Apple watch sales are estimated to come from Apple stores, 28% from Apple's online store and the remainder from third party stores and overseas vendors.  Apple is hoping the new rose-gold coloured iPhone 6S will hold special appeal to Chinese consumers. The brand looks to be out of favour with state media again: the iPhone along with the Samsung Galaxy were the focus of a poor quality report on CCTV, whereas top local players Xiaomi and Huawei weren't even mentioned.

How to Buy a Xiaomi in Two Short Months: Xiaomi may be the world's second most valuable startup after Uber, and China's top selling smartphone brand, but it still isn't straight forward to buy one of their devices.  How long will the flash sale marketing tactic work for them with brands like Huawei nipping at their heels?

A Day in the Life of a Chinese App Addict: Last year, Chinese smartphone users downloaded 185 billion apps, 59% of all downloads worldwide. Gaming apps were the most popular category in China but shopping, video-streaming, and image-and-video apps for social media are catching up quickly.

 Food & Beverage

Finding Yin Yang Balance In Your Food Choices: Duck is cooling, chicken is heating: some of the fascinating yin yang traits Chinese associate with food.

Intellectual Property in China’s Food & Beverage Industry: Trademarks, including 3-D marks such as packaging or containers, and trade secrets are all vastly important in China's food and beverage market where reputation is everything.

China Plows Big Money Into Australian Agriculture: Chinese consumers perceived Australian-grown food to be three times as safe as food grown in China, and 50% healthier than food grown in the U.S., Brazil or France according a Reputation Institute survey in 2013.

Ambient Drinking Yoghurt to Achieve $5.6 Billion in Sales by 2017: Since its launch in 2010, sales of drinking yoghurt have soared, accounting for 13% of China's yoghurt category in 2014. Convenience, taste and nutritional benefits have contributed to its popularity. 

 Chinese Tourists

Robust Growth Forecast for China's Outbound Tourism: 42% of Chinese tourists surveyed said they were willing to spend as much as 20% of their living expenses on travel according to World Tourism Cities research. While outbound tourism numbers grew 11% last year, their spending increased 28%.

Dutch Villages, Small Cities Look to Attract More Chinese Visitors: Dutch villages such as Giethoorn are seeing two thirds of their hotel guests coming from China. They're catering for the visitors with initiatives such as Chinese language travel cards, smaller bicycles, firmer beds and noodle cookers.  Chinese visitors to the Netherlands grew 15% last year and are expect to grow 18% this year, spending almost twice as much per person on average.

 Health

Toads Skin, Herbs Feed China’s $2.7 Billion Cancer Fight: Sales of traditional cancer treatments, with ingredients such as toad skin and turtle shell, surged 35% to almost ¥17 billion ($2.7 billion) last year in China.  That's twice as fast as the 17% growth for the overall ¥65 billion ($10.2 billion) cancer drug market. A new cancer case occurs every 10 seconds in China. 

That's the Skinny for the week! See previous newsletter here. Contact China Skinny for marketing, research and digital advice and implementation.