How COVID-19 impacted China’s aircraft industry

The darkest period of China’s aircraft industry

The epidemic has frozen China’s aircraft industry. Chinese domestic residents were scared of the contamination during  travel. As for expatriates and Chinese students who study abroad, it was nearly impossible for them to fly back to China as Chinese authorities closed their borders and implemented the ‘Five One policy’. Hence, the sudden drop in passengers cut off China’s aircraft companies’ cash flow and exposed them to the risk of bankruptcy.

Source: daxue consulting, China’s five-one airline policy during the COVID-19 pandemic

During the Chinese New Year holiday, the occupation rate of flight seats was about 80%, which however decreased to under 60%, and even 40% after the outbreak . In February, China’s aircraft industry lost about 1.2 billion RMB in the domestic market and 300 million RMB in international market every day. If we have a look at the medium-term impact of COVID-19 on the sector, the escalating loss totaled more than 100 billion RMB until May. Thus, there is no doubt that the Coronavirus caused long-term impact on China’s economy and it will need three to five years for China’s aircraft industry to tide over this dark period.

Source: cannews, immediately following the announcement of COVID-19, the domestic flights on January 24^th to 28^th experienced a major gap in supply and demand.

The self-rescue plans of China’s aircraft companies

It was urgent for China’s aircraft companies to take measures to stop the bleeding of resources. Many companies called their jets to an emergency halt to reduce the cost of staff and fuels due to the poor occupancy rate and complicated isolation regulations. Thus, the risk of bankruptcy forced Chinese aircraft companies to implemented technical and organizational transformation. Many of them targeted live webcast to sell discounted tickets, headrests and some special products. It is surprising that the self-rescue plans worked, and they got money to compensate the loss and maintain normal operations.

The outbreak of COVID-19 boosted China’s online shopping market, and the live-streaming is the key to open the door towards Chinese netizens. Therefore, many China’s aircraft companies sold tickets by using Chinese KOLs or creating their own livestreaming rooms. For example, during China’s 6.18 shopping carnival, China eastern airlines promoted a new weekend ticket, which is valued 3,322 RMB and allows passengers to fly to any mainland city until 2021. This promotion piqued Chinese consumers’ traveling desire, and they sold more than 100,000 tickets in one single day! Through these successful self-rescue activities, China eastern airlines not only raised about 300 million RMB cash, but also increased the number of travelers. 

The private jet market has soared in China

After the epidemic has paralyzed China’s general aviation, more flexible and safer private jet has become the first or even the only option for many people, creating the busiest quarter in the history of China’s private jet market. Many wealthy Chinese students who were stuck abroad during COVID-19 chose private jets to come back to China and the price of private jet charter rose dramatically. For instance, the number of foreign private jets flying to China increased 227% during Q1 2020, compared with Q1 2019. Additionally, the price of chartering a private jet with 14 seats rocketed by 30% from 1.35 million RMB to 1.74 million RMB in March. Some student even paid an astonishing 180,000 RMB for a ticket home.

More and more Chinese wealthy choose private jet as their transport tool since it is more convenient and shows a sample of status at the same time. After the outbreak of COVID-19, private jet charter users increased by 300%, and 80% of them were newcomers. Apart from the soaring of private jet market, Chinese billionaires also squandered money on private jet purchasing. Among 466 business jets in greater China, there were 163 private jets owned by 113 Chinese billionaires, which increased by 34 from the year before. Therefore, the vice president of OHFLYER, Haiyang Wang, said that the demand of private jet in China will definitely be higher than before COVID-19.

The development of China’s aircraft manufacturing

The Chinese plane-makers’ fight back against western manufacturers’ grip on the sector

For the past decade China, has been developing its own planes to cast off western manufacturers’ cord on the sector. But the planes made by Commercial Aircraft Corporation of China (Comac), the ARJ21and the C919, have been plenty criticized. It is believed that Chinese-made jets will not rival those of Boeing and Airbus in the short-term. With only 90 seats, the ARJ21 has been rejected by the aircraft industry as inferior to planes from other aircraft manufacturers due to frequent delays and loud noise. On the other hand, the C919, Comac showed  bigger ambitions. Carrying up to 168 passengers, the C919 is designed as China’s first large aircraft to compete with Boeing’s 737 Max and Airbus’s A320neo. Furthermore, Comac is developing a third plane, the CR929, cooperating with Russia, and it is scheduled to be delivered in 2021. However, there still are some risks that Boeing and Airbus will also roll out their new high-performance planes when the CR929 entered the market.

Despite criticism, as a state-backed company, Comac is full in potential with high-tech aircraft manufacturing. It is not strategically correct to underestimate Chinese ability to penetrate the aircraft market. “The aircraft landscape is likely to shift from a European-Us manufacturing duopoly to accommodate a third part, and that’s probably the Chinese.” Shukor Yosof, founder of aviation advisory firm Endau Analytics originally told BBC.

Which markets are China’s plane-makers targeting?

As of now, Comac has received about 815 commitments for the C919 from 28 Chinese airlines and domestic leasing firms. Besides, its main partners are China’s three major airlines, Air China, China Southern and China Eastern.

Right now, only China’s aviation regulator has certified its jets to fly. As for foreign market, its jets may also operate in parts of Asia, Africa and South America that recognize Chinese certification. Then the permission from the US Federal Aviation Administration (FAA) and the European Aviation Safety Agency (EASA) are necessary for it to expand beyond those markets. However, western countries’ green light is still far from certain. Hence, turning around from international market, Comac mainly targets the greater China and foreign zones certificated with fly permission.

Challenges encountered by China’s aircraft manufactures

The main challenges of China’s national aircraft manufacturing companies, like Comac, are technological problems and high cost of components. Taking the C919 as an example, the development of the plane stemmed from 2007, cooperated with more than 200 companies and involved more than 20,000 people. Yet the engine of the C919 is manufactured by French SNEMAC and American GE. Thus, the mismatch of high-cost and low-performance makes China’s plane-makers lack of competitiveness. At the same time, getting the green light of foreign aviation regulators is also a big puzzle, which takes a long time and is full of uncertain.

As for small and private aircraft manufacturing companies in China, their biggest challenge is not about aircraft-related technology, “but getting the license from Civil Aviation Administration of China (CAAC),” Deng Chunpeng, general manager of a private aircraft producing company says. It won’t take a long time for them to solve technical problems like airframe design, the development of engine and components packaging. But the licenses including Production Certificate (PC) and Type Certificate (TC) will take years to get.

The expansion of China’s airport infrastructure

The gap between China’s economic development and airport construction

The U.S, Australia, and Canada have 20,000, 2,000, 1,200 general aviation airports respectively, but there were only 235 in mainland China in 2018. As of 2020, China has programmed and built 244 airports, with a 3.7% annual growth rate. Obviously, the development of China’s general aviation industry is not keeping pace with its overall economic advancement. As for long-term prospects, until 2025, China is planning to strengthen the air transport hub effects of Beijing, Guangzhou and Shanghai airports, and connect 93.2% cities of China.

Source : chyxx.com, The development of China’s general aviation airports

The construction of Beijing Daxing International Airport is aimed to stuff the gap between China’s economic soaring and airport infrastructure. As China’s air transport pivot, Beijing Capital International Airport had become the second airport annually receiving more than 100 million tourists, behind the United States’Atlanta International Airport. However, this airport was built in 1958, which means obsolete facilities cannot support such enormous pedestrian flow anymore.

The Beijing Daxing airport

Occupying 1.4 square kilometers and invested 80 billion RMB, Beijing Daxing International Airport has been dubbed “the 7^th wonder of the world” by the Guardian. Owning such a laurel is not merely because of its immense terminal, but also advanced facilities and user-friendly designs. It is able to annually receive 100 million passengers with four runways for large aircrafts.

As for the interior, passengers just need 8 minutes to arrive at the furthest boarding gate after passing the security check. Besides, Daxing airport’s creative layout largely reduces travelers’ transfer time: 30 minutes for domestic transfer, 45 minutes for international transfer and 60 minutes for domestic-international transfer. So far new airport subway line has been in operation, commuting from south center city in 40 minutes. Therefore, the completion of Beijing Daxing International Airport has eased the air traffic pressure of Beijing, and symbolized China’s efforts on airport construction.

The distribution of China’s aviation network

Beijing-Tianjin-Hebei, Yangtze River Delta and Pearl River Delta are the hubs of China’s aviation network. In recent years, relying on Chinese government’s strategic supports and rapid economic development, Chengdu-Chongqing and Xian account for increasing proportions. In China’s airports passenger flow rank of 2019, the top 5 were Beijing Capital International Airport (100 million passengers), Shanghai Pudong International Airport (76.1 million), Guangzhou Baiyun International Airport (73.4 million), Chengdu Shuangliu International Airport (55.8 million), and Shenzhen Baoan International Airport (52.9 million).

Although the Chinese government suspended all flights to Beijing due to the second outbreak of COVID-19 in mid-June, China’s aviation network won’t change noticeably for the long-term.

Takeaways of China’s aircraft industry post COVID-19

The COVID-19 outbreak is the bust of the century for the global aircraft industry, and China, of course, cannot escape from the misfortune. The shock caused by the epidemic on the sector will need three to five years to adjust. On the positive side, the huge potential market will definitely boost China’s aircraft industry recovery. Besides, thanks to their successful self-rescue plans, many Chinese airlines maintained their cash flow’s normal operation and stimulated people’s traveling desire.

However, China’s aircraft manufacturing and airport infrastructure didn’t follow the pace of economic advancement. China’s plane-makers need to implement technological transformation to improve their aircrafts’ competitiveness, and Chinese government need to speed up the airport construction. If you want to get more information about China’s market, please email dx@daxueconsulting.com

Author: Olivier Liu

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Different types of preschools in China

There are two kinds of preschools in China, each with their different purposes. The combination of preschool and kindergarten contributes to children’s preparation for elementary schools.

Public kindergartens & preschools

Public kindergartens in China have two forms that are distinguished by organizers and funders. The first type is the government-built public preschools that gain funds from the government and are supervised by local governments. The other type is self-funded preschools that raise funds as enterprises and are managed by the local education department. These two kinds of kindergartens both play roles in benefiting people by charging low expenses, decreasing financial strain on families. These schools aim to help children prepare for elementary school, so teachers teach basic manners and knowledge. However, such preschools recruit limited students each year.

Private kindergartens & preschools

Unlike public preschools, private kindergartens created by privates aim to make a profit. Such preschools can be regarded as supplements to public preschools, allowing more students to attend preschools. Private kindergartens also have two types: ordinary and high-key. Ordinary private preschools aim to solve the difficulty of enrollment that many children face when trying to enroll in public preschools. The other kind is high-key preschools. High-key kindergartens usually hire foreigner teachers to teach students, allowing students to enjoy a bilingual environment from early childhood. Meanwhile, high-key preschools pay attention to children’s overall development. However, the expenses of private preschools are usually much higher than in public preschools.

Top 10 kindergartens in China

[Source: eol “Top 10 kindergartens in China”]

Trends of the preschool market in China

As China’s economy expands, parents have more and more economic power to give their children a better education. Thus, many types of preschools have emerged.

International kindergartens are popular

Currently, parents are willing to send their children to international kindergartens. Such preschools hire foreign teachers to teach students. They not only teach from the textbook but also organize extracurricular activities like baking and scientific experiments. Although such schools cost upwards of 200,000 RMB per year, numerous parents still hope their children can enjoy high-quality educational resources. In Zhihu, a writer shared her daughter’s experience at an international kindergarten in Beijing. The international kindergarten helped children learn self-care. Children learn to make requests, ask for help, and express their own opinions.

Preschools plus the internet are in trend

As institutions benefit from increased digitalization, preschools utilize the internet to help manage and improve interactions among children, parents, and teachers. Children can use online platforms to obtain up-to-date information while interactive games help children learn in a fun way. Come Chinese parents are used not to being involved in their children’s kindergarten lives. However, those apps can allow them to know what their children learn in class as well as monitor their performance. Also, such platforms benefit kindergarten teachers. They can use online platforms to arrange courses and deal with educational administration.

Many parents take their children to extracurricular preschools to avoid losing at the starting line

In addition to regular preschool classes, parents also send their children to various extracurricular preschools. Those parents believe that learning more after class can make their children more excellent. Children can consolidate the knowledge they gain at school. Additionally, they can learn many new skills outside regular classes. Codemao Kids, a programming learning website for children, enlightens kids through games, exercising their critical and creative abilities.

Issues of the preschool market in China

Although the preschool market in China has enjoyed success, it still faces some issues. Limited seats induce a competitive enrollment process, and bare teacher welfare makes the industry lack talented professionals. Also, occasional scandals trigger societal anger and disappointment in preschool education. These problems disturb the development of the preschool market in China.

Competitive enrollment

A limited numbers of kindergartens causes difficulty in enrollment. During the enrollment period every year, a competitive process unfolds at kindergartens. Parents stay up waiting in line to sign their children up. Limited quotas in those public schools and expensive tuition create a difficult situation for parents.

Lack of talented professionals

An increasing amount of children necessitates higher requirement of professional teachers. The Center For Education Policy of Southwest University estimated that China needed near 4 million professional kindergarten teachers in 2021, while the gap was 2 million. Kindergarten teachers can only earn a low income. Also, kindergarten teachers’ social status is low, so few people with higher degrees are willing to work as kindergarten teachers. Thus, it is hard to make up this gap in a short time.

Scandals spark the societal outrage

Abuse and bulling occasionally happens at kindergartens and causes tremendous harm to children’s physical and mental health. It also triggers society’s anger toward the management of kindergartens. In 2017, a case at RYB kindergarten child abuse shocked Chinese citizens. The kindergarten teacher, by the name of Liu, harmed four children, inducing mental harm on those children. Influenced by this case, the stock price of RYB slumped 38.41%. This event exposed the incomplete management of the kindergartens. It led to an appeal to strengthen management and train more highly qualified teachers.

[Source: Weibo People’s Daily “People express anger to child abuse”]

Uncertainty during the coronavirus outbreak

As older students in secondary schools can autonomously conduct e-learning during the quarantine period, it can be difficult for parents to navigate education for their little ones, in preschool especially. The main issues surrounding online teaching apps is that there is a lack of supervision, an improper learning atmosphere, and that teachers are unfamiliar with online learning. As it takes time for educational implementation and adaptation, preschools in China need to address potential concerns from parents, such as their decreased confidence in the schools’ handling of the initial outbreak and the transition to in-person classes as the situation eases.

The preschool market in China is bright

After evolving over the years, the preschool market in China has made significant progress in improving children’s education and enriching the content of kindergartens. Children are the future of a country, so preschool education is essential. Although the preschool market in China contains many difficulties, the market scale is continuously enlarging. With the development of more sound policies, the future of the preschool market in China is still promising.

After evolving over the years, the preschool market in China has made significant progress in improving children’s education and enriching the content of kindergartens. Children are the future of a country, so preschool education is essential. Although the preschool market in China contains many difficulties, the market scale is continuously enlarging. With the development of more sound policies, the future of the preschool market in China is still promising.

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Rap music penetrates China under a western influence

The first rap singers in China spoke English because many believed that the Chinese language and its tones don’t fit the genre. One of the first Chinese DJs to rap at the time, DJ V-Nutz (Gary Wang), explained in 2007: “I would say that we don’t have a Chinese style yet. If you really want me to say, what is Chinese style, I would say it’s young. Local kids really enjoy western things right now. Then maybe after 10 or 15 years, maybe they can have their own style.” At that time, certain aspects of the hip-hop culture were making their ways onto Chinese billboards and charts, but not on the airwaves.

Source: VICE, Gary wang partying at ‘The Shelter’ a hip-hop club in a Beijing bomb shelter

The beginning of rap music in China

In 2003, the multinational Beijing hip-hop group Yin Ts’ang was the first mainland Chinese hip-hop group to release an album to critical acclaim. The group was made up of global nomads: two Americans, a Chinese Canadian, and a Beijinger. The diversity of the group – which is considered one of the pioneers of Chinese rap music – reflects Western influence in the beginning of China’s rap music.

Source: The New York Times, The rap group Yin Ts’ang

Yin Ts’ang’s first hit was ‘In Beijing’ (Zai Beijing), from the group’s 2003 debut album, ‘Serve the People.’ The title melts a traditional melody played on the violin against a hip-hop beat. The song, whose Chinese lyrics explore the hidden corners and great deals of the Chinese capital, took the underground music scene by storm, eventually finding its way into karaoke rooms, the internet, and even the playlist of a radio station in Beijing.

The group defends its lyrics in Chinese, which awaken the Chinese urban youth. “Before that, kids listened to hip-hop in English, but maybe less than 1 percent could actually begin to understand”, said Zhong Cheng, a member of the Yin Ts’ang.

Rap music hits Sichuan

2006 saw the rise of another famous rap group from Chengdu called Big Zoo, with several mixtapes and freestyle releases. The group won several domestic awards before fading away in 2011. With its verses in Sichuan dialect, the group is commonly regarded as the one who led the development of the rap of Chengdu, and more importantly, the birth of a new urban subculture in Southwest China.

In the late 2000s, hip-hop venues are flourishing in China, and 2009 saw hip-hop being broadcasted for the first time by the China Central Television for the annual Chinese Lunar New Year Gala.

If the 2010s distinguishes China’s rap as a new genre of music, making Chinese rap at that time is still a profitless and often subversive activity. Thus, it is only in 2017 that Chinese hip-hop scene will burst with a dedicated TV program.

The reality TV show ‘The Rap of China’ has catalyzed the rise of hip-hop in China since 2017, exploring the new potential market to achieve monetization

The underground and metallic decor of ‘The Rap of China’

“Do you have freestyle?” the sentence of Kris Wu, one of the judges of the TV show ‘The Rap of China’ (Zhongguo you xiha, or Zhongguo xin shuochang) went viral on Chinese social networks. The show consists of detecting new talents in Chinese rap, many of them previously underground, via a freestyle contest. Before the start of the 2019 season, the hashtag #TheRapOfChina reached 8.7 billion tags on Weibo across more than 44.23 million users discussing the show.

Through this TV show, iQYI (the Chinese video platform behind the show) explores the potential market of Chinese rap deeper by realizing the monetization of the rap industry. On top of Mainland China and Taiwan, the show is widely distributed to other Asian territories, bringing Chinese hip-hop culture to a broader audience. The show is such a hit among the young generation that it plays a big role in the trends of lifestyle and entertainment consumption in young people.

Since 2017, ten years after Gary Wang’s prediction about the future of the Chinese rappers, the buzzword ‘rap’ peaks according to the Chinese show’s episodes. Surprisingly, Chinese youth use the word ‘rap’ much more than its Chinese counterparts ‘嘻哈’ (xiha, meaning hip-hop) or 说唱 (shuochang meaning rap). The word ‘freestyle has no equivalent in Chinese, and many of the show’s participants mix Chinese and English in their verses.

Source: Baidu Index, the buzzword ‘rap’ peaks according to the Chinese show’s episodes

The Rap of China’s audience brings together Chinese Generation Z

Watching the program, the characteristics of Chinese rap immediately hit the viewer. The show is aimed at young Chinese urban culture, with an industrial and underground design, as illustrated in the image above. Chains, cans of paint, toolboxes, and other construction materials are part of the show’s decor, reflecting the rapid urbanization of China experienced by Chinese youth. The dark atmosphere immerses the viewer in the ambience of underground hip-hop clubs, often located in shelters and basements of major Chinese cities.

The audience brings together the Chinese generation post 95s and 00s. According to Baidu Index, around 70% of the Chinese people who search for ‘rap’ on the Chinese internet are under 30 years old. More surprisingly, females account for 55.8% of the total searches.

Source: Baidu index, daxue consulting analysis, age and gender distribution of rap fans in China

As for geographical distribution, rap consumers are mainly balanced between first- and second-tier cities, Beijing being the number one and Chongqing the 8^th. The keen interest for rap among people from Chengdu city and the Sichuan province near Chongqing city is linked to the emergence of a new kind of rap, called ‘trap’ that shakes western China.

Data source: Baidu index, daxue consulting analysis Geographical distribution of rap fans in China

‘The Rap of China’ highlights Chinese-youth market potential

But what strikes the viewer at the very first glance is the ability of the show to be overcrowded with advertisement messages. The 2019’s season host the financial application 有钱花 (you qian hua, have money to spend) as the main sponsor of the show. The logo of the application appears everywhere, at the top of the show’s logo, at the bottom right corner, and in the decor of the show. The show even features promotional rap clips that highlight the brands’ products. Thus, marketing promotion is at the heart of the competition since participants must compete in promotional clips.

Brands sponsoring the most-watched show among Chinese youth reflect the market potential for brands targeting young Chinese. Thus, outside of the main sponsor, spirits brands such as Absolut Vodka and 江 小白 (Jiangxiaobai), a Baijiu brand from southwest China, are highlighted. A brand of shampoo, Clear by Unilever, appears regularly. Pepsi is also very visible during the show, as is War Horse 我马 (Wo Ma), a Thai Chinese energy drink brand. The American chewing gum brand, Extra, in Chinese 益 达 (Yi Da) and a brand of sanitary pads, are presented through rap clips during the show.

The brands sponsoring the 2019 season of ‘The Rap of China’ reflect the lifestyle of the new Chinese generation.

Rap as a route to gen-z marketing

With all these brands popping up during the show, one can wonder about Chinese young generation’s market potential. Gen Z, or the post-95 generation, includes nearly 170 million people in China. Even though many are not part of the workforce, it doesn’t keep them from spending money. Thus, 70% of them receive at least 3,000 yuan (USD420) in pocket money, while 21% are getting more than 10,000 yuan per month.

Moreover, according to Mckinsey’s China consumer report 2020, “young, free-spending consumers in lower-tier cities are today’s growth engine.” This critical set of consumers is unaffected by slowing growth and rising cost of living that affects top-tier cities in China.

In China, the target consumer does not just start at twenty-somethings with full-time jobs in the office. Many in their late-teens already have cash on hand even if they don’t have a fixed income. And advertisers on ‘The Rap of China’ know this.

Exploring Western China’s largest cities of rappers

As ‘The Rap of China’ displays, hip-hop music incorporates street fashion and internet culture, which is embraced, learned, and made by the young Chinese generation. The demographics analysis of the keyword ‘rap’ on Baidu display East provinces as the epicenter of the trend. However, in the west, we also see Sichuan province being hit by the phenomenon. A new hip-hop revolution called trap occurs in Chongqing and Chengdu, the two largest cities of the west. Trap music is a subgenre of hip-hop, characterized by the significant use of tuned kick drums and bass, and an often-dark ambience and lyrical content.

Meet Chengdu’s hottest rappers: Xie di, Higher brothers, Ty.

In Chengdu, Sichuan province, hip-hop is even hotter than its infamously spicy cuisine. Here lies the Higher Brothers, China’s hottest hip-hop export. This band of four friends is the first to make it internationally with their DIY lyrics, recording, and production. Their ‘Made in China’ clip on YouTube is the most viewed among Chinese hip-hop videos, almost hitting 20 million views.

Source: 88rising’s YouTube channel, Higher Brothers’ clip ‘Made in China’

Like Big Zoo’s former rap, they melt Sichuan dialect, Mandarin and English in their lyrics. But they never do it on purpose, mainly focusing on the meaning of the words in each of these languages, and how it sounds. If no one knows why trap takes off in Chengdu, the Sichuanese dialect could be the reason. This twangy local dialect is said to lend more naturally to the musical style than Mandarin, China’s official language.

The legendary Chengdu City Rap House is the heart of Chengdu’s rap. It’s one of the most influential hip-hop labels in China, best-known for nurturing the success of the Higher Brothers. The collective gathers other super-famous rappers from Chengdu, like Ty. and Boss Shady (Xie Di).

Chengdu’s rappers are up against strict censorship

The latter has known a burst of popularity in 2014 by bringing Chengdu’s rap to a Chinese talent TV show called ‘The Voice of China.’ In 2018, the rapper released a dialect-heavy track called ‘Fuck Off Foreigners’ (Gua laowai). The song’s harsh lyrics towards foreigners got him banned from performing in China for an entire year. But Shady is not letting censorship get him down, announcing its partnership with Ty. to build a new record label.

Ty., Chengdu’s most successful solo rapper domestically, also experienced the throes of censorship through his breakout track ‘Hooked on drugs’ (Hai yao shang le yin), in 2014. The rapper appears then in ‘The Rap of China’ with a more commercial-friendly rap featuring other artists, including Boss Shady. A longtime friend of the Higher Brothers, he is also featured in some of their newly released tracks.

Source: VICE, YouTube, Ty. (left) and Boss Shady (right)

But a new unpleasant rivalry is coming from another neighboring western city, whose rappers have built their popularity on the back of the success of ‘The Rap of China.’

Chongqing, the Atlanta of China

This city is Chongqing, China’s third-largest city, and home to 31 million people. The commonly nicknamed ‘fog city’ or ‘bridge city’ is often compared to Atlanta, Georgia the birthplace of trap music in the United States.

Here lies the GOSH music label, gathering the most influential rappers of Chongqing, with well-known names across China, such as GAI, Bridge, and Wudu Montana. These three rappers all appear in the wildly popular reality show ‘The Rap of China’, with GAI winning the first season, in 2017.

However, GAI’s first burst of popularity came in 2015, along with the release of ‘Gangster,’ a controversial track in which the rapper claims to be a gangster. The track has soon been banned on the multiple Chinese video websites, people questioning the fact that this song could instigate criminal activities.

How a matcha-shop-owner-gone-rapper popularized Chongqing’s rap music

Popularizing rap using Chongqing dialect with similar dialects, GOSH label is maximizing its influence over the southwest region. The first rapper to sing about the fog city is Wudu Montana (Wudu literally meaning ‘fog city’ in Chinese), a matcha tea shop owner. Just like the Yin Ts’ang crew, his first hits told about his daily life growing up in the vast city, and its development since the 90’s. It is this street culture that he tries to transmit in his sounds. According to him, “Chongqing has changed a lot, things that were once small are now big.”

Source: VICE, YouTube, Wudu Montana (left) and Gai (right) on stage

Another rapper, whose name also resonates with the city and its many bridges, has recently become the Chongqing’s new rising star. Bridge is perhaps Chongqing’s rapper whose look is the most explosive. Dreadlocks and large bubble glasses are the hallmarks of this energetic rapper. According to him, trap allows people to express things with beats, just like the Chinese poets did in the old days.

Bridge during his participation for the season 2 of ‘The Rap of China’

Chongqing’s rap is more aggressive than Chengdu’s. This is reflected in what those rapper call ‘attitude.’ If people tend to compare Chengdu and Chongqing’s rap, we see that these rappers have their own shining characteristics, whether they come from Chongqing or Sichuan.           

Chinese rap is going outside of China

That being said about ‘The Rap of China,’ Chengdu, and Chongqing’s rap, we are obviously currently witnessing the rise of the Chinese rap music. But what about globally?  Is there any opportunity for Chinese rap to catch foreign audiences, while foreign streaming music and video platforms are blocked in China?

88rising, a multimedia company and music label for Asian rap in the US

A New-York based company launch in 2015 made its top priority to raise the profile of Asian hip-hop in the United States. Its name is 88rising (the 8 is the luckiest number in the Chinese culture), an Asian-focused record label and media company. The company, which only features 3 to 4 Asian artists at a time, focus on exporting Eastern culture to the West, one viral hit at a time. Among the featured artists, the Higher Brothers’ crew represents the Chinese branch.

Since the Higher Brothers signed in 2016 under 88rising’s banner, the Chengdu’s rap group completed two US tours in front of sold-out crowds. The first move of 88rising to translate the Higher Brothers hype in the United States came with the viral YouTube video ‘Rappers React to Higher Brothers’, where famous US rap artists reacted very positively to their ‘Made in China’ hit. Since then, the crew released its long-awaited new album, ‘Five Stars’ still under the 88rising label.

Source: Higher Brother’s Facebook page announcing their participation at 88rising’s music festival in Los Angeles, 2019

Much of the power of 88rising is due to the fact that it operates more like a PR agency than a record label. Miyashiro, 88rising’s CEO, estimates that only 30% of the company is dedicated to full-time music. In comparison, the other 70% is split between video production, business development, and fostering direct relationships with streaming music and video platforms, their digital playground.

But in China, relationship with Spotify’s teams are not enough, with most foreign streaming platforms blocked and replaced by local equivalent. This explains why 88rising decided to break the Chinese walls by employing a dozen full-time staff in Shanghai.

In 2019, Higher Brothers won the award for hip-hop artist NetEase’s label of the years, 88rising taking the award for Chinese music streaming of the year at the same event.

Could censorship be the glass ceiling of the rise of China’s rap music?

Ironically, one month after receiving these awards, several 88rising tracks were pulled from NetEase, ostensibly for lyrical content failing outside the requirements of Chinese censors. Even the wildly popular reality show ‘The Rap of China’ fall under the state broadcast administration regulations, which prohibited depictions of the hip-hop culture, including tattoos and obscene lyrics. Making rap about drugs, sex, violence, and politics is out of the question.

The beginnings of hip-hop – including trap music – in China were primarily influenced by western culture. Western lyrics often include violence and anti-system verses, a path that Chinese rappers tried at their expense.

Even with censorship, however, the success of rap in China among the young Chinese generation is real. By moving west towards Chengdu, Chinese rap has only proven its uniqueness: it is incisive, technical, and requires great dexterity to mix Chinese dialects, Mandarin, and English. It focuses on the style and character of the rapper, verses from Chinese rappers appearing in the process of building a full-fledged character, with coolness and attitude at its center.

Author: Maxime Bennehard

Also read, what Chinese say about the black lives matter movement

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As the capital city of the most populous nation on Earth, Beijing plays an important role in China’s economy. With a consumer base of more than 20 million, Beijing has become more and more important for foreign companies in many industries. For anyone looking to the Middle Kingdom as a business opportunity, it is essential to understand the workings of Beijing’s economy.

Measured by purchasing power parity (PPP) Beijing’s GDP was worth just over $1 trillion in 2019, about the same as that of the Philippines. Compared to the Philippines’ 100 million citizens however, Beijing’s population of 21 million enjoys a larger share of this economic productivity, with GDP per capita (PPP) of roughly $46,000. By this measure, Beijing’s economy is the most highly developed of administrative divisions in China, outranking even Shanghai. What’s more, this figure has been growing at roughly the same pace as the national economy for the past few years, which is roughly 6%. With such high levels of economic productivity, it is impressive that Beijing’s economy can still grow at this rate.

[Between 2007 and 2018, Beijing’s GDP (PPP) more than tripled, while the city’s population grew from about 14 million to over 21 million. The increase in population and GDP is a boon to Beijing’s economy. Source – National Bureau of Statistics.]

Beijing’s economy is a magnet to foreign companies

With one of the largest and most highly developed economies of any Chinese city, Beijing has been a powerful magnet for foreign companies since China opened up to global market in the late 1970s. Over the past forty years, the city has attracted the attention of countless multinational companies lured by the promise of China’s market. These companies have enjoyed the fruits of China’s economic success, which have seen the city’s nominal GDP more than double in size between 2010 and 2018, from 1.4 to 3 trillion RMB. 

In 2019, it was reported that the number of foreign companies in Beijing’s Guomao district alone amounted to over 10,000. These companies added 60 billion yuan to the city’s tax revenues in 2018. Notable foreign companies with a large footprint in the city include Sony, IBM, Samsung, Shell, Nestle, Volkswagen, Ford and Hewlett-Packard. The list of foreign companies reaping the rewards of Beijing’s economy continues to expand.

Beijing’s economy is not one that any company can thrive in however. In order to better understand the economy of Beijing, foreign companies must examine it from a few different perspectives, including its role as a national IT & electronics hub, its importance as a financial center and its position at the top of the country’s education hierarchy. In addition, foreign companies should keep in mind the role the 2022 Winter Olympics will play in the city’s economy, how infrastructure spending is helping the city grow and how tourism is lifting the fortunes of the city. Finally, it is also worth noting the role that a burgeoning pharmaceuticals industry will have on the city’s expanding economy.

[Zhongguancun, China’s answer to Silicon Valley, at the beginning of its rapid development as an electronics market in the 1980s. Source – Springer Link]

Beijing’s IT & electronics sectors have propelled Beijing’s economy

After rising to importance as an electronics market in the 1980s, Zhongguancun has become one of China’s most important IT neighborhoods. Located in the northwestern part of the city near Peking University and Tsinghua University, the neighborhood has contributed to the IT industry of Beijing and that of China for decades now.

Frequently referred to as “China’s Silicon Valley,” Zhongguancun has fostered the development of many household names in China’s IT sector, such as Lenovo, JD.com, ByteDance (which owns TikTok,) Didi Chuxing and Kuaishou.  In addition to these domestic heavyweights, Zhongguancun has seen the opening of many branches of international IT companies, such as Google, Motorola, MySpace, Sony and Microsoft.

According to Xinhua, the more than 22,000 high-tech companies in Zhongguancun brought in revenue exceeding 5.8 trillion yuan in 2018. Venture capital in China, some of which has flowed into Beijing’s IT sector, surpassed $100 billion in 2018. Seen in this light, the neighborhood is of utmost importance to the economic fabric of the city. In recent years, the success of Zhongguancun has fueled a surge in startup firms in the city. As the area has become an incubator for the tech scene, it has seen the rise of startups such as ByteDance and Didi Chuxing. In addition, Beijing is home to 82 unicorns, startups that are worth more than $1 billion. This number exceed that of even The San-Francisco Bay area, which is only home to 55.

What foreign companies should know about Beijing’s IT sector

For foreign companies eyeing Beijing’s IT sector, it is important to recognize Zhongguancun’s important role as a catalyst for the nation’s IT scene. When looking to Beijing as a potential IT market, it is worth noting the Zhongguancun’s highly integrated network of IT know how and specialization, especially in conjunction with the district’s proximity to the nation’s top universities. Finally, it is worth noting the local government’s generous treatment to the IT industry, which sees payments of loan interest and other preferential policies.

[Beijing’s newly constructed National Speed Skating Oval, located in the Olympic Green to the north of the city center, will be one of the only newly constructed venues in preparation for the 2022 Winter Olympics. Source – Xinhua.]

2022 Winter Olympics will be add a temporary boost to Beijing’s Economy

In 2015, China was chosen as the host of the 2022 Winter Olympics, with Beijing and Zhangjiakou in nearby Hebei province being the two main places with venues for the games. Being the only city in the world to host both the summer and winter Olympics, Beijing’s economy has profited handsomely. Preparations for the games include renovations of existing venues in central Beijing and the construction of Olympic Villages and other venues in Yanqing District as well as Zhangjiakou in nearby Hebei province. In addition, new transportation upgrades will open leading up to the games, including a new high-speed rail connecting Beijing and Zhangjiakou.

The first time Beijing held the Olympics in 2008, the city was transformed by massive projects to improve the image of the city. While spending on infrastructure and venues in preparation for the 2022 winter games is less than a tenth of what was spent in 2008, there will certainly be economic benefits associated with holding the Olympics.

Benefits of hosting the Olympic games

Not only will Beijing’s economy enjoy a boost in infrastructure spending and construction jobs in the lead-up to the 2022 Winter Olympics, but it is also projected that the city will benefit from increased recognition in an increasingly competitive world. While studies find that hosting the Olympic Games doesn’t directly benefit city or national economies as much as expected, the 2022 Winter Olympics will likely benefit the city in terms of increased revenues from tourism, increased socioeconomic benefits from the network effects of expansions to the city’s transport system and from the legacy of rentable sporting venues across the city. In addition, sales of winter sports equipment in China and related travel may grow significantly due to the games.

Foreign companies looking to profit from the upcoming winter Olympics in Beijing would do well to note the nature of profitability during Olympics Games. While some sectors will only benefit leading up to the games, others will only benefit during or following the games. Other sectors however may enjoy a continuous surge in profits, such as the winter sports industry.

[A view of construction cranes dominating the horizon on the outskirts of Beijing. Source – NYTimes]

Large infrastructure projects in Beijing continue to fuel the city’s growth

The expansion of Beijing Capital Airport in the leadup to the 2008 Olympic Games in Beijing saw it increase dramatically in size and passenger throughput. In 2012, Ecquants Analysis estimates showed that the airport contributed $6.5 billion to the city’s economy yearly, which has most likely grown considerably since. In comparison, Dubai International Airport, which has a similar passenger level and size as Beijing’s Capital Airport, has an impact of $26.7 billion. This discrepancy points to the potential PEK’s economic contribution has as the city’s economy continues to mature over the coming decades.

Furthermore, Beijing’s recently constructed Daxing Airport points to further economic benefits. The airport opened in 2019 as a way to relieve congestion at the recently expanded Capital Airport and to increase aircraft capacity in Beijing. Projected to be able to handle more than 100 million passengers per annum, the airport easily more than doubles the city’s aviation capabilities. With further expansions planned to add additional capacity to Daxing Airport, the city’s combined aviation capacity will make it one of the busiest cities in the world when it comes to air traffic.  

[Map of completed and under construction Beijing metro lines. By 2024, the Beijing metro is scheduled to open hundreds of new miles of track, significantly increasing the network. Source – Ran & Hat600]

Boasting one of the largest and busiest metro networks in the world, the Beijing Metro is on track to expand its reach even further in the coming years. With a current total of 700 kilometers, the city has announced plans to expand this figure to 1,000 kilometers by the end of 2021. A study published in 2015 show that new metro stations are likely to lead to a quadrupling of real estate value in the vicinity. With hundreds of new metro stations under construction, Beijing’s real estate markets are poised to witness great changes in value.

The first suburban rail network in China

In addition to the city’s rapidly expanding metro network, Beijing is also in the process of planning and constructing a suburban rail network, the first of its kind in China. With four lines currently in operation and four more schedule to opening this year, the network will add connectivity to new areas of the city as well as add new connections within Beijing, such as line 4, which will connect Beijing’s two airports when it opens.

Aside from the High-speed rail connection between Beijing and Zhangjiakou’s 2022 Winter Olympic Venues, Beijing is also working on other high-speed rail lines that will connect the city with neighboring regions.  The long-awaited Beijing-Harbin high-speed rail line will open in 2020, connecting Beijing’s new Xinghuo Station to Harbin via Chengde, Chaoyang and Shenyang. In addition, an intercity high-speed rail line will connect another newly opened train station in Tongzhou, to Tangshan in neighboring Hebei province. Lastly, a third new high-speed rail line connecting Beijing to the newly constructed Beijing airport and Xiongan City. 

While Beijing’s ever-increasing strain on and ambitious projects in infrastructure reflect those of the country as a whole, it is still worth noting how the city’s projects are transforming the city.  Foreign companies would do well to note how ambitious transport and infrastructure projects will decentralize the city and expand connectivity in the suburbs. Moreover, it is worth realizing that expansion of high-connectivity transport stations farther out from the city center will increasingly prop up land value.

Beijing’s Financial Sector as a major drive in the city’s economy

Located directly west of the Forbidden Palace in the middle of the city is Beijing Financial Street, which is a neighborhood of high-rises containing many of the city’s financial firms. Shanghai was historically the financial hub of China, but Beijing’s standing as a worl financial center has risen in recent years.

Beijing’s financial services, business environment and reputation have improved. Beijng’s financial sector now ranks seventh worldwide, behind Hong Kong and ahead of San Francisco. The increase in ranking will only serve to strengthen the city’s role as a major financial sector and attract more attention from global markets.

The new Lize Business District

The design and construction of Lize Business District in Beijing’s less-affluent Haidian District signals a shift away from the city center. In response to insanely high office rents in the Guomao and Jinrong Street financial districts in the city center, the city of Beijing began demolition and constructing this area in 2010. With more than 400 companies having already set up shop in the new business district and many new office buildings opening up, the district will add a competitive edge to the city’s financial sector. Plans for a new metro station with a direct link to Daxing Airport give the new financial district an edge over Jinrong Street and Guomao.

[Beijing’s Lize Financial District in full construction. The new district is predicted to add substantially to the Beijing’s financial sector with more than 5 million meters² of office space in the pipeline. Source – China Daily]

In recent years, local governments across China have opened up pilot programs offering rewards to companies that set up shop in China. One such scheme was announced in Beijing in 2019, which offers rewards to international foreign institutions that open up in the city. Foreign companies that would do well to keep these incentive packages in mind when looking to Beijing. In addition, they should keep in mind the shift in financial power towards Lize Business District in the southwest part of the city.

Tourism in Beijing still a major driver for the capital city’s economy

As the capital not only of modern China, but also of many dynasties throughout the nation’s history, Beijing is dotted with multiple historical sites that serve as tourist attractions to domestic and international tourists alike. With famous landmarks like the Forbidden Palace, the Temple of Heaven and the Summer Palace, Beijing’s tourism industry has a lot going for it. In addition, the city is located near the Great Wall, which is one of the most well-known tourist attractions in the world.

[Tourists and photographers snap pictures of the sunset behind the Forbidden Palace. One of the most visited tourist attractions in China, the palace welcomed 14 million visitors in 2019. Source – 睿睿 ]

Beijing home to niche tourist sites

Despite falling numbers of overseas tourists, the city of Beijing has seen in increase in domestic tourism coupled with a steady increase of revenue from tourism, which amounted to about 600 billion yuan in 2018. Besides being a magnet for tourists hoping to visit ancient sites of significance, Beijing is also beginning to attract a new kind of tourist. Camping on the Great Wall has become a new form of niche tourism. The Great Wall Marathon has also turned into a tourist attraction in itself, with people coming from all over the world not only to participate, but to spectate. As the largest city near the Great Wall, Beijing is the start-off point for Great Wall excursions.

In addition to a growing industry of niche tourism, the opening of Universal Studios theme park in nearby Tongzhou in 2021 will further add to the city’s tourism industry. Scheduled to be complete by May 2021, the park will be the first of its kind in China and the third in Asia. With a price tag of over $3 billion, the new theme park is certain to attract a wave of tourists.

Foreign companies looking at Beijing’s tourism industry should keep in mind the changing nature of the industry, which is catering more towards domestic tourists than overseas. In addition, it is important to keep in mind that not all tourists coming to the capital city are solely for the main tourist attractions.

Beijing’s Education Industry

As the capital of China, Beijing has amassed not only economic and political clout, but also has become one of the most important centers of education in the nation. In 2018, more than 230,000 students graduated from the city’s ninety-two universities, while more than 80,000 foreign students studied at universities in the city, the largest number of any Chinese city.

With such high levels of prestige, Beijing’s Education Industry can benefit foreign companies in the city by offering up one of the most competitive and highly-skilled markets in the nation.

[View of Galaxy Soho headquarters in Beijing. Swanky new offices and company headquarters have been opening up across the city over the past twenty years. Source – 睿睿 ]

Up and coming: Beijing’s Pharmaceuticals Industry

With the establishment in 2010 of the Beijing Economic-Technological Development Area in Beijing’s southeastern suburb Yizhuang, the city’s pharmaceutical industry has gained more and more traction. Yizhuang Biomedical Industry Park, another effort led by the city of Beijing, has also helped the city’s pharmaceutical industry expand. The proximity of these two areas to each other and across town from the IT hub of Zhongguancun and the country’s top universities have given rise to a virtuous cycle of recruitment and R&D.

Beijing’s Pharmaceuticals Industry in Yizhuang has given rise to many new companies, such as BeiGene, a biotechnology company that is leading the way in the industry. Others, such as the household name Tong Ren Tang Medicine Company, have done well with the government policies that favor the industry in Yizhuang, opening a new plant in the district in recent years.

The pharmaceutical industry in Beijing has access to talent

Foreign companies in the pharmaceutical industry looking to China should pay attention as the city’s newly successful pharmaceutical industry takes off.  Worth keeping in mind is the proximity of this highly successful pharmaceuticals haven to China’s top universities, a juxtaposition that will only lead to more success in coming years.

[A view of Beijing’s Third Ring Road during evening rush hour, dwarfed by high-rise offices on both sides. With seven ring roads and a dense network of expressways crisscrossing the city, Beijing is one of the most highly connected cities in China. Source – 睿睿]

Takeaway for Foreign Companies

When it comes to the economy of Beijing, the most important things for companies to understand are how the city’s role as the capital affects its economy in a positive way and how the city’s policies favor the growth of certain sectors. Watching tech developments in Zhongguancun and financial markets in Lize will assist companies trying to understand the city’s steady rise. Understanding how big infrastructure projects are going to push the center of the city of outwards and rent upwards in the coming years will also help foreign companies when decided how to enter the city’s market. Finally, it is worth keeping an eye on Beijing’s pharmaceutical industry as it becomes a heavyweight in the industry.

As always, foreign companies need to keep in mind the changing nature of China’s economy, especially in light of recent closures due to the outbreak of the novel coronavirus. It is only natural that certain sectors stand to gain from the situation and other certain sectors stand to lose. Due to the city’s importance in China however, its economic comeback will be swift.

Author: Cameron Carlson

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This article Beijing’s Economy: What to understand about growth in the capital city is the first one to appear on Daxue Consulting - Market Research China.

Full transcript below:

Mathieu David: Hello everyone I am Matthieu David, the founder of Daxue Consulting, a strategic marketing research company in China and its podcast China Paradigm and today I am finally with Dominic Johnson here – I am saying finally because we had to reschedule two times and I was very excited actually, two times to have you in the show and finally it’s the third time it’s working.

Why I was excited is because you are a veteran entrepreneur in China you have been in China since 1995, and you started Plastered which is a design apparel company in China, but it’s more than this and I think what we need to discover it’s more than this that’s why I found out through your website and by doing more research – since 2006 so before the crisis, before when we found out that China was becoming a big country, a big economy you were in already China. You are selling not only in Beijing because it didn’t mention but you are very Beijing located you are in Nan Luo Gu Xiang, the place to be in Beijing, the place you visit when you go to Beijing, and now you are selling in more than ten locations worldwide. You have also been a TV presenter, you have written a book for entrepreneurs “China Dream,” and you have been spoken in many, many MBA – eMBA’s sixty Chinese Universities as I read online. Thanks, Dominic, for being with us. 

Dominic Johnson: Hey, thanks, that’s a hell of an intro. First of all, I didn’t like the word veteran at all, which makes me sound very old but maybe a war veteran. I have been in China for 25 years now, but thanks for that. Yeah, I mean you know what – as anyone who has lived in China knows, it’s the land of opportunity, the economy has been booming since I got here in – well 1993 I essentially arrived and so much about entrepreneurship is being in the right place at the right time. I see so many great ideas fall flat just because of timing and for me, I arrived at the right time and there are opportunities everywhere, so I ended up ceasing a lot of opportunities and just being very fortunate to start my design apparel company in China in the right place at the right time. 

Matthieu David: That’s something actually I’d like to talk about , later on, to be at the right place at the right time. I see a lot of entrepreneurs say – who are in China say now that they could not do the same right now, but that’s something I’d like to talk about later on. First, about what you do now, what’s your business of design apparel company in China, could you describe it in more details. so, you are selling clothes in specific location which is in Nan Luo Gu Xiang in Beijing for those who are in Beijing, I guess they all know Nan Luo Gu Xiang that’s the core business. It’s designed apparel and I think for the ones who are watching the video they can see some of the designs behind you, but could you tell us more?

Dominic Johnson: Right, so it started off very simply. Nan Luo Gu Xiang is very famous in  Beijing but I moved to live there in 2003 with my family into an old shared courtyard house with my family and 5 other Chinese families and then one day I had a random idea which was to create some Beijing T-Shirts and just with a very small amount of money I designed and printed a small collection of some quirky T-Shirts, and I opened the very first shop on the street. There used to be a residential street but then I opened a shop there the rent was cheap and it was close to home, I didn’t have much money, and you know ten years later it became the busiest retail street in Beijing and  public holidays it gets a hundred thousand people a day, so it’s one of those kinds of crazy Chinese stories.

 And so, it started off very much as quirky T-Shirts, taking iconic objects and things that were Chinese elements in art design, like old subway tickets, old mugs, old thermoses – I made them into images and created a kind of an iconic Beijing T-Shirt brand. At the beginning, as the brand is about foreigner’s view of Chinese aesthetics, it was mostly foreigners who were buying my stuff but then as I started to attract media attention I slowly moved into the Chinese consumer market and then as the brand grew instead of just taking iconic objects I started to work with more artists and then I became a conceptual artist and I provided ideas and concepts to artists you know in China and now around the world to create much more detailed and technical illustration artwork as we grow the brand, and then the business also grew to become an agency so now we do interior design and art installations and sculptures for other brands. Yeah, so my design apparel company in China kind of started very small and very simple, I invested a tiny amount of my own money which is all I had at the time to open this little shop and then it’s kind of grew organically and so all this opportunity came my way and – yeah right place right time. 

Matthieu David: Could you tell us more about how you design your brand? Is it yourself who designed the T-shirts initially or you partner with artists? Could you tell us more about you foreigner’s view of Chinese aesthetics? 

Dominic Johnson: Right, so the creation is I am the conceptual guy so I can’t draw, I can’t paint. I can’t even use design software – but I have a lot of ideas and those ideas come from really, I’ve lived in China for so long, I am a very visual person. I didn’t do very well at school, and I left England when I was about  eighteen and traveled around the world and eventually arrived in China as a backpacker.

And so, I never thought I was creative or even had a design skill, I just decided to try designing by working with other people. So the design process now is very much – I have ideas and concepts, I write them down then I look for talent online and at events, and as soon as I find the artist who I think has right aesthetic or has a certain skill set that I think will work with the concept, and then I put the concept and the artist together and I work with them very closely to create Chinese elements in art design. The design behind me is a Japanese artist and the concept is very simple it’s a Chinese revolutionary ballet girl, it was an art form the 1960s – 70s when they banned western art influence in China and instead of having ballet they had girls doing ballet but in Mao suits and guns, and so I turned that into a sort of a pop – you know a piece of artwork. So that’s basically what we do, we create pop artwork, comic book artwork, this type of illustration artwork and I work with artists all around the world from North Korea, Japan, Venezuela, Spain all over Europe, Britain to create Beijing centric artwork. 

Matthieu David: Sorry to use this word which is not artistic at all, but what’s the business model behind your design apparel company in China? Do you partner with your artists sharing the profit, do you hire them and then it’s your own creation, your own your brand? If an artist is listening to us, what kind of deal we’d have with you?

Dominic Johnson: Yeah. I am pretty much a bricks and mortar retail business, that’s where we make most of our money is in stores, and so my fixed cost is very high you know with the retail, your net profit is usually pretty low, because of all your fixed cost rents in Beijing is very high. So, I don’t do profit sharing with artists. I make that very clear with them at the beginning that this collaboration is that I came up with the concept, I guide you with sketches to help you create the artwork in the Chinese apparel market. When the artwork is done, I then own it, and I am very clear with artists before we start, with that model.

When I started out, I wasn’t – and I threw myself into a lot of collaborations with creative people and then at the end they kind of like everyone gets pissed off with each other because no one was clear at the beginning. So I learned my lesson early on, so now before I work with an artist I make it very clear that you get a payment to execute this artwork this concept for me and then I own it, because we also license our artwork to other territories, and if the artist isn’t happy with that then generally I just won’t collaborate, so I had to make that very clear at the beginning otherwise the business doesn’t make sense.

Matthieu David: Alright, I see, I understand better now. You mentioned that you see your business as an agency because you are doing as well what I would call interior design. You have painted a wall with your design opposite OWLS you have worked with Lu-Lu Lemon, which could be a competitor in some way I mean they are in the clothing industry and it’s a very established brand. You have worked with Hilton; you have worked with a lot of very iconic bars and places in Beijing. So could you tell us more about how you step by step switch and what I am even more interested is I feel that people went to you to ask you to design for them because you have a very strong identity, which is to be able to put Chinese elements in art design, that very few people do. But I am happy to listen to you if I am correct.

Dominic Johnson: Yeah, I think you know Matthieu it’s very important in life to understand one’s own sandpit, as we call it in business which is the area that you play in better than anybody else. To define your niche so that you can have – you can be competitive and have a market. Now, for me this is even not been in China for a long time it’s in a waiting game I am competing with these Chinese entrepreneurs, who are if not the best entrepreneurs in the world, and it’s a waiting game. I really need to understand my niche, my niche is – I create Beijing-centric pop- art and I am very good at that, because what I do is presenting foreigner’s view of Chinese aesthetics;is that I look at Beijing from a foreigner’s perspective with a  fresh set of eyes, and that’s very interesting and so my niche is really that kind of pop Beijing and I don’t leave that, and so it’s very much my aesthetic and I don’t really have anyone that competes with me on that.

So, as the artwork grew, and I became better and I had more money and I spent a lot of money working with the better and more skilled and famous artist. The design apparel company in China went from a daily t-shirt brand to an art brand, and that was very much my goal. I wanted people to take it seriously I was fed up with them saying you are the guy with the T-Shirt shop, I wanted it to be more than that. So, as we became more well known, I just one day had an opportunity. A friend of mine was starting a cafe chain called Moka Bros, they were opening their first outlet and the founder said to me – I have got this huge wall and I don’t know what to do with it, and I just saw an opportunity to develop print design business in China and I said give me that wall and I am going put a big piece of artwork on it and I am going give you that for free, and then you are going to put my logo on that wall so people know it’s my artwork and then elements from that artwork are going go in your staff’s t-shirt so I thought I could make money on the T-Shirt, I get this amazing advertising in this public space and it really worked, and it worked mostly because Moka Bros is an awesome brand and they created  a lot of buzzes, they have an amazing product and a team service, so the people felt it was a really good combination of this artwork, this experience and so Moka Bros took off and now grew to seven or eight locations around China.

My artwork became more and more visible and from there. That’s how I got Lulu Lemon, you know that then led on to another collaboration that led on The Opposite House, The Hilton and all of these other places around China. Now we are doing an apartment block in Luxemburg and it’s crazy but we have this niche and no one else really does it as well as we do. I know I am the best at print design business in China, and that’s what I stick to, I just do Beijing, and so it was Moka Bros that started it and then people took – as soon as it was onto a wall, people were like okay – this is a whole new medium, it’s not just a T-Shirt anymore. People were like t-shirt’s are T-Shirts – it was on a wall and then I started doing – covering all of their walls with huge installations and people were getting inspired by that and then my phone started to ring and I was getting WeChat’s and emails with people who wanted to collaborate. Private collectors, people who just wanted the prints, and so that changed everything and it became a win-win because then people started paying us to put our artwork up in their locations and it was branded.

We put Plastered 8 into the artwork subtly somehow, so I was being paid to advertise and then I was owning the artwork so you go to the Opposite House, there’s this huge roll of water ski ladies and the people were like wow! that’s incredible, and you see in the corner, ah! by plastered and then that artwork is owned by me. So, you can go to my store, and you can buy that artwork on merchandise and products. So, I am getting paid to advertise the only artwork that I can then put on products. So, it happens organically, but it turned out to be a really big win for us.

Matthieu David: I see, very interesting. Then comes the question of the trademark. You are in the country; we are in the country where a trademark is not very well respected and I think it was even worse before than now. So, your business is using Chinese elements in art design, it’s based on the trademark is based on the fact that people should not copy you. So how did you deal with that? I mean was it an issue maybe it wasn’t. 

Dominic Johnson: Well, one thing I will say Matthieu is when in Rome – which is when I started my brand, I started it all based on stolen IP which was you know I took the old sub tickets from subway commission, and they didn’t trademark them. They had this whole collection of beautiful tickets, and I am a collector of vintage so I collected tickets and I got these beautiful subway tickets and then I put them on T-Shirts and so I went down to trademark office and trademarked them. So, I actually stole them from the subway commission and all of these all thermoses and all-metal bowls that people got as wedding gifts with these beautiful patterns inside. I took out those patterns, I went down to trademark office and trademarked them. So really, I started my brand from stolen IP and then as my brand became popular – now if you take some of my more popular images, you go to Taobao, the Chinese eBay and you can do an image search. You’ll see my products they’re on all kinds of clothing and products. You’ll see them on coffee mugs, you’ll see them on kids’ clothing, you’ll see them on women’s fashion. The more popular I become the more I get stolen and it’s very hard to deal with.  Generally, I don’t put a lot of time and effort into following up on that stuff, I have a lawyer who works on commission so I don’t pay him. He’s a real dragon. He goes after people. If he sees a company that’s got a lot of money and they’re using my artwork, he’ll go after them and sue them, he’ll get some money and share some of the profit with me. I leave that to him.

Me, I concentrate on innovation which is – our brand doesn’t do seasons, we just come up with new artwork in the Chinese apparel market all the time, and we are constantly changing and innovating and trying to stay up with a very fast-changing market. Our core customer is 27 years old, three years ago they were 33 years old. Now we are redefining it, our customers are getting younger, our artwork needs to change with them, and so I just concentrate on innovation. IP – my shit gets stolen all the time, I don’t think about it too much I leave that to the lawyer, I get on with the innovation.

Matthieu David- But does the lawyer gets result in China and is he able to get a result, to get information?

Dominic Johnson: Yeah, you know it’s a funny game, very rarely do I get results from that. But what I do find with the lawyer is that when a big company, like a big hot brand, opened up in Chongqing, somewhere down in china and they opened up their new store, this big investment and they’ve got my artwork all over the front of the store and someone sent it to me on WeChat, I forwarded it to the lawyer – he is rubbing his hands and he’s thinking “I am going after them” so, I leave that to him. I’ve not received any considerable amount of money from this, but you know what it’s a waiting game here. It’s a different country, it’s a different culture, things move very fast here. IP isn’t respected yet; it will be in the future – right now I can’t spend time thinking that it’s just it’s a waste of time for me. I have the people that can deal with that, I get on with what’s important. 

Matthieu David: So the first question, you are in a country where the trademark is not very well respected, and that’s the key of your design apparel company in China and the second question is that you are in a country where censorship is strong, and you are dealing with Chinese elements in art design, including icons of Beijing, sometimes leaders of China. Could you tell us a bit of your – some stories of censorship? You are in the place as well Nan Luo Gu Xiang where it’s a strange place where you can see officials with a civilian, not far from where you are and at the opposite – hipsters and very trendy café at the same time. It’s not a neutral location, it’s a very, very visible location.

Dominic Johnson: Yeah, yeah that’s an interesting question, Matthieu. I think that every culture has its unique eccentricities and I remember being in Myanmar a few years ago to film a TV show, I am also a TV presenter and when I was there a guy from museum got locked up because he created a flyer for a party and it was a Buddha with headphones on and he got  put in prison, and you think how many flyers you see in the world for like Buddha power and Buddha party and it was very simple Buddhist face with headphones on, and I think he is still imprisoned three quarters later, although I haven’t checked on news you know China has its own eccentricities too on that front and it’s a very – you have to play very carefully. I do play with icons and sometimes they might be political icons or people who are involved – I made a stain glass window of Deng Xiaoping, which is very much celebrated there. And yeah, the political climate also changes very quickly here so you just have to be very careful, but at the end of the day I am not trying to be political. I don’t know – I am just celebrating my eye on Beijing, but one has to tread carefully.

It’s not of my culture and I have to keep up to date with things as they change here. Maybe something that wasn’t sensitive five years ago is now, but it’s not my goal to upset it’s my goal to celebrate and so creativity is at its best when its unfettered, when it’s not you know sensitive of course, but here in China it’s a different game, so I think we have to respect the local culture and play around those rules and get creative in other ways and that’s part of the game and I very much enjoy it. 

Matthieu David: How do you know the parameters then of censorship, of what you can, what you cannot, what’s the lead – what cannot be seen as friendly. How do you know, how do you select?

Dominic Johnson: I think you need to have one ear to the ground or you need to be carefully watching what’s going on, and I live here and all my team is Chinese and my life is very much surrounded by Chinese people, so I hear their daily conversations and you might know what hot topics or sensitive topics and things to stay away from. For me, I’m just trying to celebrate Chinese elements in art design that I think are fun. I mean I just came out with a piece of artwork in the Chinese apparel market, which was about – it was like a comic book here, punching and destroying a guy who is doing a live broadcast. I try and take topical things. The live broadcast is very popular in Chinese, people in cafes are doing it. Live broadcast. Here I am having my coffee and these KOL’s – and I just think it’s totally ridiculous though I do a funny bit of artwork where a superhero is killing a live broadcaster, that’s just a bit of fun. But then maybe that will get posted on Chinese twitter and some will say this is disrespectful and then you got to take it down.

You have to be careful; I don’t want to upset people but at the same time I like to be naughty and silly and ridiculous and that’s really the characteristics of my design apparel company in China. It’s an extension of my personality. So, the goal is never to upset, but certainly my goal is to have fun, and sometimes you might tread on the wrong toes, so you have to be careful.

Matthieu David: You mentioned you are also working in Luxemburg on some design and I witnessed when I went to Europe, that China is more and more trending, there is more and more an attraction to China pop culture, a bit like we saw in the past with South Korea. Not to the same degree, but do you find some elements like Bubble Tea, like the culture of China. Do you feel that and do you think that you could play in this area as well actually as a foreigner within- between- The China and the west?

Dominic Johnson: I think you know there is huge potential for what we do because we are doing an east-west, which is much about foreigner’s view of Chinese aesthetics. A lot of what I do is taking western elements like comic book artwork and then adding in Chinese elements, and so it does the bridge. I was very fortunate to attend the Crack illustration festival in Rome last year with my team, and we set up a pop-up shop. That illustration festival is predominantly European artists and so we were the first Chinese brand to go in there and we set up a pop-up shop. It was a four-day event and within two days we sold everything. It was all gone and the reason was it was so exciting for the Italians to see the Chinese pop artwork and so surprising and they had never seen anything like that and when you stand there and tell them the story of the artwork and even the collaborations I did with North Koreans artists – they were just completely blown away and that was very exciting for me to realize the potential of the brand and aesthetical Chinese elements in art design – so yeah of course I think you know a lot of people have real intrigue towards China.

It’s the country that is shaping the world right now and is literally shaping the world and so people are slowly coming to understand China and have intrigued and taking interest in it. And so, I think our artwork is very much part of that. The building they are working on in Luxembourg is a six-storey apartment block for Yapese and the developer went to The Opposite House in Beijing, saw our artwork on the wall and said wow ! this is stunning and he contacted me and said listen I need six floors of artwork and I think your aesthetic would be brilliant, and that’s how it happened. So, these kinds of projects are really exciting and it makes me very proud as well to be able to take our artwork and put them in Europe. So yes, I think by the sheer amount of emails and demand I have from people who want to work with us, you can see that obviously, the whole Chinese elements in art design is becoming very popular. But having said that, I am not out to build the biggest design apparel company in China, Matthieu, I keep my business small for a reason. I see too many businesses die because they are growing. And I have always kept my business smaller, growing it organically and I own it 100%.

And so, I am out to build the best not the biggest and with the agency, I only take on probably 8-10 projects a year and so I can choose which ones I think will work well with the brand. Generally, I would say the 3Fs which are the Fun, Financial and Fame. And it’s going to be two of those F’s you know if it’s just financial. You know if it’s fun and fame that’s great, sometimes people give you an incredible mural or wall to create. The money is not that good, but they give you absolute creative freedom but you want to do it for the Fun and the fame because a lot of people are going to see that wall but sometimes it’s in the corporate office no one is going to see it but they give you a lot of money. So, then it’s the financial and maybe the fun but it’s got to be two of the three Fs and then sometimes the fourth F I always say is just Fuck off! 

Matthieu David:  So, we talked about censorship and I feel that actually, you can play the role of improving the image of China through giving another image of China. Just a slight comment on what we said before. You mentioned emails, you receive emails but when we looked into your business online on Taobao and so on we don’t feel that, maybe we are wrong we didn’t do our analysis correctly, but we didn’t feel that online was a key driver for you. We didn’t feel that sales online were a key point for you, are we correct?

Dominic Johnson: Yes, my online business is very small compared to my retail. I love creating an experience, so our stores in Beijing it’s all about the experience. You know all of our stores are run by retired old Beijing ladies and we do incredible Murals and artwork and everyone gets a free gift. And the stores are all street-level stores and it’s all about the experience. Online is a tough market, especially in China. Taobao is so much noise. There are millions of T-shirts, not to mention many of the T-shirt’s are copying mine and they are extremely cheap and so it’s very hard for me to compete on Taobao which is a big Chinese e-commerce site. I have plastered.com and it’s a niche design apparel company in China so I had never spent money on trying to get the world to see my brand yet. so, I concentrate on my retail stores and the agency side of my business, that’s what brings me the most profit. I do understand online has huge potential but the way I have – a basic day by day strategy is how I work and it’s working for me right now. I haven’t put a lot of money online. I have had people come and I want to buy huge wholesale. The margins are very small, you can’t control the experience. So, I really control the brand and keep it small, keep it profitable, have a great lifestyle that comes with it and I get to create and enjoy things.

Matthieu David: Did your experience in Italy with a pop store change your mind on getting more visibility online?

Dominic Johnson: No, it didn’t. Yes, I just concentrate right now on what we are doing well. I think you know if I am going to put money into a better online store, it would probably be towards the end of next year. This year we have another possible two store openings in China and that’s – I have a small team a small core team of six people and we are concentrating very much on getting that done and executing that well. I know pretty much if I get a store and a good location with good foot traffic, I know I can convert, I know I can guarantee I can convert on that. With online, there is no guarantee and it’s a long tale for me online. So, I don’t have the patience or the time to invest in that right now.

Matthieu David: You mentioned you are opening two new stores and actually I was certainly mistaken in it. But I read that somewhere you opened in Shanghai and you closed in Shanghai and decided to focus on in Beijing, but I feel I am wrong on it; you are still opening locations in China, right?

Dominic Johnson: Yes, we are only in Beijing. Yes, right now we are purely in Beijing, I am looking at possibly setting up a store in a second-tier city, in another spot in China later this year. But Beijing’s 23 million people, we are a Beijing-centric brand, we are concentrating on Beijing. We do have people who carry our products in other places we have sold in. In Germany, in France, in Singapore and other territories, but that is a very small part of our business, that wholesale side. For me, if the cash flow is good and I have got a good location, and I can have a solid legal standing on that location.

Otherwise, I can have a proper business license, so I have to do a lot of due diligence. If the location is good, then I will go for it. but only if I put the money to do that. As I said, I grow organically. I don’t have investors. And I like to grow slowly and keep the business lean. And that can be very difficult in China because there is so much opportunity. People come to you all the time. I had a guy come to the store yesterday. I was just going to the store to inspect a new installation that I was putting in, the guy standing there, he’s just like I do IP for Chelsea and he was speaking big, he was like I want to meet with you now because I want to do like a boutique hotel that’s all related to your print design business in China and of course you’re like – oh that’s very exciting, and then you go meet with him and he talks very big and then you know what, I don’t want to commit to that right now. so, you need to know when to say no, especially in China you need to know when to say no and it can be very, very tough. And so, it’s a constant effort for me. If I see an opportunity, I want to pounce on it but then I think that might stretch our resources we won’t be able to deliver our core product. Well, so it’s a struggle. 

Matthieu David: How big is your team now?

Dominic Johnson: So, I have around 20 employees.

Matthieu David: Okay. Basically, within your shop, right?

Dominic Johnson: So, the shop staff makes up around 14, and the other 6 are my core team of designers, accountant, inventory production, that kind of stuff

Matthieu David: I see, What’s the challenge of managing your shop? What can you share in terms of challenges, the rent is the challenge I think it’s increasing a lot for the last 13 or 14 years, what are the challenges you face?

Dominic Johnson: Yes, there are so many challenges in running any business and retail business is tough. Cash is king in businesses and we produce a lot of ideas. A lot. I am a very impulsive guy, I have an idea I create it, that’s very much a life goal for me. And sometimes the ideas get out of control and suddenly I have no cash because everything is caught up in the store. You know there is 2 million RMB in store and then I have got half a million RMB in the cash flow. You know that’s the real challenge, controlling and curtailing the ideas. Rent is obviously a huge challenge which is a big factor in paying into the net profit. Frontline staff is one thing we have done very well is that you know we only hire ladies above the age of 50 to work in our stores and so our retention is extremely good. Generally, the retention in retail is about 6 months in China, my retention is – I have one old lady, she has worked in my store for 13 years.

I have got another one, she has worked for 11, I have got Li I who has been with my brand for 8 years. They’re local matriarchs, they’re very much part of our experience, they live in the areas where the stores are, so that’s been a big win for us, So, the challenges are huge and I was saying about due diligence. I don’t open the shop anymore so; I work in the street-level stores. A lot of streets level stores have been bricked up and closed down in Beijing because Beijing is trying to move people out of their center of the city because it’s overcrowded they close down businesses. You can lose your design apparel company in China overnight. I mean my flagship store provides a huge amount of our revenue and three years ago they decided to close down the whole street to renovate it. And they closed down a lot of the smaller business that didn’t have business licenses but I was basically closed for three months and I lost a huge amount of money. So, policy, those things can change very quickly here, so the challenges are huge but the opportunities are also huge here in China, just because of the sheer amount of people and just how excited they are by creativity.

Matthieu David: From the management perspective, when you have an idea. How many items do you produce of the T-shirt, I thought you are very creative but on the other hand, you need to produce those T-shirts and predict a bit in how many items you are going to sell. how do you manage that? 

Dominic Johnson: Okay, so fortunately with T-shirts are quite easily controlled you can produce blank T-shirts in bulk. We have data on our stores so we have a very POS system, so when we have a new design, I can print 30 if I want or I can print 1000. They are all screen printed by hand just outside Beijing and so we do an initial test print of let’s say 60 and then we monitor that very closely.

All the ladies who work in our store, the old ladies they use WeChat and they take pictures of our customers and so there is a close relationship you put on a T-shirt and she says can I take a picture of you – sure! She takes a picture and she shares it in our WeChat group with all my core team and then we can see our customers are changing and underneath that picture she has to leave a story because our brand is all about story. You know we are selling a story, so this customer came from Xiaoping and he came in such a car, he is about to get married this year. It’s his third time in Beijing and he works at Volkswagen or whatever that story is incredibly powerful for us because we can understand our customer and so with these small prints we see who is buying it, we see who is not buying it, we realise what the market is for this, what the market is for that and then we have internal meetings and decide you know what kind of route we should go down artistically, which type of Chinese elements in art designs we should maybe make more or less of and at the same time we need to take big risks.

We need to create big outlook that is surprising for a customer because of we are only designing for your customer and I’ve worked with brands like that, they say Dominic can you create this for my shop, you’ve signed a contract, they’re like- can you just do us one first, we’ll send it to our customers and see if they like it – that’s a big mistake. Plastered was built on surprises and people like it when we come out with stuff they never expected, but if you are only designing for your customers, you become like every other brand. you become very boring very quickly. It’s like Matthieu your girlfriend or your wife telling you something to do and you always listen to her you know you always, always say- Yes to everything she can get bored very quickly and with us with the customer, we want to deliver surprises and at least 30-40% of our artwork in the Chinese apparel market has to be new, exciting and surprises. They can fall flat on their face or they can explode but you know our design apparel company in China needs to be innovative; we need to be creative. And that’s how we stay ahead of the other people who are trying to come in the market and copy us.

Matthieu David: So far what has been your best seller?

Dominic Johnson: Crickey, well we have a full print design at the moment which – Chinese are very bold when it comes to fashion, they’ll wear anything. We just came out with a pair of pajamas that are bright pink and have pixel designs all over them, but the people in China wear their pajamas out on the street. Very bold, our current best-sellers are a full print T-shirt. It’s just absolutely madness it’s red, it’s yellow, it’s blue it’s a whole collage of illustration of little ideas, old television sets, old bottles of washing-up liquids, cigarettes, alcohol. It’s like a whole collage of dreams put into a full print T-shirt.

When I saw that T-shirt first designed, I was like I am not sure that’s going to sell. We put it in the store and it all went crazy and we may be able to take that full print design and put it onto pencil cases, onto hoodies, onto tote bags it’s become our best-selling designs of all time. And its complete madness when you look at it. When the Chinese customers come in, they get drawn straight to it. It’s like a shining star in the store, foreign customers not so appealing, but foreign customers are only making the brand 10% or 5% of our business, but the young Chinese crowd comes in and they see that and are like WOW!

Matthieu David: Foreign customers. How many percentages did you say?

Dominic Johnson: About 10%

Matthieu David: 10%. Okay, so it’s mainly Chinese actually clients. Did you, I feel that to appreciate what you do we need to have a distance towards Chinese culture, Chinese history even literature, politics or whatever, especially a distant foreigner’s view of Chinese aesthetics. So, do you think Chinese have this distance or do you think it’s more about designing itself? Are they happy to find back some pictures of the past to play with it or it’s more about the design?

Dominic Johnson: I think No 1]- It’s about whether that design aesthetically can grab them. In terms of the colors and the layout. Aesthetics is number one. Number 2 is when they come in and discover the story and they look in and say Oh look there is that, from when I was young, I remember that from that book. And then your design needs to have meaning. The story is so powerful. You know we spend so much time and money training our frontline staff to be able to tell the story of the brand and tell the story of each design. So absolutely design needs to have meaning and we are selling a story of Plastered, and so aesthetically it grabs them, that’s very important. Then there needs to be the story in that and he needs to be able to have that experience in the store that your frontline staff can tell that story. And then you will find that your conversion rates are extremely high.

But also, we do mad window displays. Right now, we have a giant sculpture in our flagship store, which is an old Chinese toy. Everyone had it in the 1970s, very iconic toy and its face changes every three or four seconds it turns and it’s holding a knife behind its back. And so, people walk past and they see that and they get totally grabbed by it. When you are talking about the street, it’s 50000 people a day. The minute we put that sculpture in the window, our traffic increased by 15% coming into the store. So, to give you an idea February last year we probably had 15000 people that came into that store, February the next year with that sculpture we had almost 20,000 people come in. And so, then you convert on a percentage of that traffic. As you can work out mathematically, the value of that sculpture right away. I am not a big one on numbers, to be honest. I am not really good at numbers.

Matthieu David: I think you know them. You know your numbers.

Dominic Johnson: But I didn’t give you my numbers.

Matthieu David: You said 30,000 people on the street right and you have got 15000 people in your shop. That’s what you just said…                           

Dominic Johnson: 30,000 people a day on that street and I get 15000 people a month in the store. 

Matthieu David:  Oh. Sorry. Got it

Dominic Johnson: On the good month I get 32-33 thousand people in the store.

Matthieu David – Okay. I see – what about Beijing now and Beijing like 15 years ago, 20 years ago what do you feel about the city? How do you analyze the changes in the city? There is a lot of nostalgia I feel with expatriates who have been there for 20 years. What’s your opinion, what’s your feeling about the city and its evolution?

Dominic Johnson: That’s such a question that comes up a lot. People say, what’s the biggest thing that has changed and I never know how to answer that question. Beijing has 8 million people, it’s now 23 million people. When I arrived, it was a flat city. There was no high rises, there was not even a third ring road, now there are 7 ring roads I think about to be. Everything’s changing, people’s body shape is completely changed in the time that I have been here, their diets have changed. When I came here in 1993 if I’d met someone who even left China was surprising. If you met someone – oh I’ve been to America, you’re like -Wow you went to America! I think to myself as to why you came back, why didn’t you stay there? Now you look at your WeChat moments, the social element of it, on any public holiday, my Chinese friends who are in Turkey, in Alaska, in America, in Britain they are all over the world, so everything has changed. But I think the mistake that a lot of people think is Chinese is westernizing is It’s not westernizing it’s globalizing. It’s very much taking on its own character its own eccentric idea of how the world should be, or how they want to celebrate it. And you can see even just in design apparel companies in China, they put all kinds of things together you would never expect.

So, it’s a country with a very long history. It’s just opening up I mean it’s only been open for 40 years that’s it. The economy has been open for 40 years, that’s nothing I mean. there is so far to go and the economy is not really slowing down. People are like Oh China’s economy is – it’s not really. I mean it used to be 10% of this and now it’s 6% of this. You know it’s adding to the world economy the size of the South Korean economy every year now it’s crazy growth when you go out to the second- and third-tier cities. So, opportunities -and it’s still exciting, at the end of the day, I am a very hyperactive person. I love things to be changing all the time, I like to get out and do things. China is a playground for an entrepreneur like me. I am a creative guy, I like to bring ideas to life, I can find any factory In China that can bring my foreigner’s view of Chinese aesthetics to life. I have got a whole wealth of customers in my stores who get excited about my ideas. If there are challenges here – for sure but generally this is an incredible country to be an entrepreneur. If you apply yourself and understand that people here are good people. They are brilliant entrepreneurs; they want to win the game too. But you can build relationships and you cannot lose your moral compass and you can be a good entrepreneur in this country if you ever apply yourself. I had an incredible journey. I have to be lucky for that, definitely, timing has been a huge part of it but another part of it has been understood by people and building relationships and friendships and I have incredible support over the years.

Matthieu David: One question I forgot to ask actually was about the creation of your products? How do you find inspiration? Do you have a pattern of working on the inspiration? do you have time slots where you read, you go through shops, you go through other parts of the city, or is it coming just like it’s coming within the day or in the night or whatever? 

Dominic Johnson:  Yes. You know what, I hate it when people say to me let’s have a creative meeting. It’s almost like a conundrum. They don’t go together. The more you try to make creativity efficient, the worst it works. You can’t make it efficient so you need to give it time. There is a great slogan which I love is- Your brand equals the sum of your life experiences. Which is life is an experience, so for me, I travel a lot and it’s a big part of my inspiration. The brand that I am is made of this young guy that left England traveled around Africa, South America, India, China and saw these incredible things and fell in love and ate incredible food and ended up in dangerous situations and ran out of money. You know it was a little bit silly. I am just celebrating who I am. I understand that life is an experience. And if I am going to have ideas, I need to have a rich filled life. If I need to be happy, I need to be enjoying artwork in the Chinese apparel market. And so, I try just to celebrate who I am, enjoy life and then the ideas seem to come very quickly.

But the importance in terms of execution ideas is Number 1- write them down, number 2- be brave, because of course sometimes you have an idea at the moment and after a couple of beers you feel high and excited, and then you start executing it and you lose all confidence in it. And you start second-guessing yourself and when you second guess it becomes totally water down and shits. So, for me creative is about keeping the purest side of it, getting excited about something, writing down the ideas, delivering it to my team and then trying to execute the correct, the purest form of it and then that’s creativity. And I am not trying to second guess myself too much. The more I think about the costumer the worst the design comes. Sometimes we realize we have to deliver commercial things like print design business in China and I sit down with my creative director, but the customer and then eventually something comes out and its absolute shit and we deliver it and the customer doesn’t even like it.

You know what I mean, so it’s important to be brave and at the same time, of course, there need to be systems in place. And you need to have discipline and continually create because it is very easy to get caught up and think I’ve got writers’ block or I didn’t have any ideas. you just have to work through those moments. And sometimes you produce shit and that happens.

Matthieu David: I feel a bit of – I feel process in what you described, you have an idea, you’re writing it down, you talk to your team. Do you work only on why the other time? Do you work on several ideas at a time? Do you stick to one idea until you know it’s finished and or you give up or you continue? Do you have a framework like this or it’s…?

Dominic Johnson: No, lots of ideas are floating around. So, you know I have an idea – and so quite often what happens is you have an idea to put this on the back burner. you are not quite sure if you want to execute it or if you can execute it but you keep it there. Then another idea comes together and then you stick the two together and realize suddenly it taking two things unrelated and sticking it together anyway. But in the design process a lot of things are floating around a lot and suddenly. This one popped out of them put with this one together and then it created and then I get this artist and it creates an absolute diamond. And in the chaos of my life Matthieu is where I find the diamonds for my design apparel company in China. And it’s important for my life to be chaotic. I believe that. I understand the structure of designing artwork in the Chinese apparel market can set you free. It can, of course, the more structured is my life the more time I have, but the same time with the two structures I have no ideas.

So, I need on one side to be chaotic. I also need to be systemized and balanced. And you got to find that balance and you know Nan Luo Gu Xiang was created on creativity in creative stores. But I am like the only one that’s left all the creative stores have closed down because they couldn’t keep up the rents and that’s because those entrepreneurs couldn’t keep up with the structure and finance side of things. I have been fortunate to surround myself with entrepreneurs in Beijing and members of the entrepreneur’s organization and so I’ve learned from them. I surround myself with smart people who understand systems that understand processes.

Matthieu David: You are a part of EOs?

Dominic Johnson: Yes, I am in a part of the entrepreneur’s organization in Beijing. Have been for 10 years.

Matthieu David: I see. I think I will have interviewed all of them by the end of the year

Dominic Johnson: Yes

Matthieu David: It’s very interesting.

Dominic Johnson: Yes

Matthieu David: I’d like to talk during the coming 5 – 7 minutes because I know you have to leave in coming 7-8 minutes. About the, your other roles, your other experience you have. And You said that China is full of opportunities. And we saw that you had been a TV presenter… you have written a book, and you are speaking to MBAs and EMBAs often because you have been in 60 Chinese universities.

Could you tell us about this last experience I am talking about? What do you tell them? What do you talk about to those MBAs, Emba where they would come up with consumers’ eccentric thinking viz business model which is exactly the opposite of what you said.

Dominic Johnson: Yes, you know what, the story is powerful Matthieu. The story is so powerful and so when I talk to universities, I have been doing this now for 10 years talking to universities ever since I won the British Entrepreneur of the year award in China. I was asked to talk I was terrified about doing it. But then I exercised myself and I got better and every time I did a talk, I realized what made people laugh or kept people’s attention. Every time I finished a talk then I would tweak it and make it better. So, my talk is an ongoing process and I quite often base my success on my talks. I might add in new contents in my talk and then I’ll understand, am I actually getting shit done or am I doing interesting things?

So, my talk is constantly changing. But It’s a story – it starts with me leaving school and then I had a whole list of reasons why I was unsuccessful at school. I was impulsive, I was immature, I was a daydreamer, I was always getting up to dangerous things. These were the things that defined me at school and got me in trouble and why I was unsuccessful in school? Now I take those elements and I tell stories, immature stories. I was immature when I did this, but it led to success. I was impulsive, I didn’t have a business plan for design apparel company in China at that time, so I tell stories based on the reasons why I was unsuccessful at school and then it all comes to the beginning and then a middle and then a very dramatic end, and its all connected.

So, I built this store over the last ten years as I craft myself and craft my own story. And it’s very appealing to the people and it’s very tangible. I tell them how I got into television, how I became a television presenter and how I wore a T-shirt on a Chinese tv show saying I’ll buy your second-hand drugs with my telephone number on it. It is really immature silly stunts that I pulled off and product ideas. They get people excited about creativity. I just share that journey with people and it always goes down well. There are no numbers in it, there is nothing particularly exciting I am not going to tell people about how I’ve made millions of dollars. It’s purely about ideas, creativity, my journey taking what people see as your perceived weaknesses turning them into your strengths and celebrating yourself. 

Matthieu David: What is the most often asked question asked to you?

Dominic Johnson: The university students? In China, a lot of them ask me how I can be creative, which are a very awkward question and I have never thought how to answer it without sounding too cocky or placing yourself on a too-high pedestal. The one-bit advice I always give is back to my saying of your brand equals to somebody’s life experiences. I said for me creativity comes from life and it comes from experiences I said I am sure you can afford a bicycle and so why not, you know we’re in chunk due you right now, I said why not get a new bicycle and ride to a city that’s 3 days away. Don’t make a plan, just get on the bike and go. See who you meet along the way, see the challenges that happen, see the inspiration that comes from there and I can almost guarantee that journey will inspire you. And for me that’s where creativity comes from. And so yes, I get a lot of that.

Matthieu David:  Doing the last three minutes. Could you tell us more about the book you wrote “A foreign entrepreneur’s China dream” You wanted to call before – but the editor didn’t agree?

Dominic Johnson: Yes, publishing in China obviously – you know the publishing account is government-owned. And so, that was a ghostwriter. So, at that time, that book came out I was pretty famous. I was a judge of the Chinese equivalent of the apprentice for five years I had that role. So, I was on television twice a week of an audience of 10 plus million, and a bunch of guys came to me and asked me if I would do that book because I was famous. And so, it was very much the watered-down version of my life but because they had to cut this out and cut that out and that’s a little bit naughty or that’s this. I wanted to call it – which is Beijing dialect saying – piss off, in a kind of polite way.

But then they said no no let’s call it you know “A foreign entrepreneur’s China’s dream”. So that was the book, it was bizarre even having a book because I don’t read and it was nice that people enjoyed it, I get messages every now and then from people who get enjoyed by that book or get inspired by that book. Yes, it was a funny process understanding how publishing works in China.

Matthieu David: Yes. Where can we buy? Where can we buy the book? Only in China or…

Dominic Johnson: No, I don’t think you can. It’s only in Chinese and I think it’s already – I mean it was published four years ago. I mean it’s sold out and I am not sure if they republished it now. So yes, the book is gone.

Matthieu David: Okay. Last question. Do you wear your clothes? Do you wear your brand?

Dominic Johnson: Yes.

Matthieu David:  Right now?

Dominic Johnson: Not always. No, not right now. No, I think I just wear whatever is on the top of my T-shirt pile. Sometimes I wear my own brand sometimes I don’t. It depends on the mood.

Matthieu David: Okay good. Thank you very much, Dominic, for your time. It was very inspiring, very refreshing, very positive as well. It’s good to listen to positive speech in this current world where we talk about negative views about trade war and so on. So, thank you very much for being with us, hope you enjoyed and hope everyone enjoyed the talk to. Thanks, Dominic.

Dominic Johnson: It was great talking with you. 

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

This article Podcast transcript #59: Unique Beijing-centric design apparel company in China is the first one to appear on Daxue Consulting - Market Research China.

The head of France’s fashion federation believes that this new passion for fashion is recurrent in emerging nations that consider appearance with high importance. However, in Beijing and Shanghai, purchasers of high-end fashion aren’t looking at brand logos as much as few years before. They tend to value the style with more and more modern and interesting taste.

As people are getting higher interest and knowledge about fashion, the citizens of the largest cities are now targeted by the worldwide industry. Beijing is now set on creating their own competitive brands and products.

Sculpting Fashion industry in Beijing

One of today’s best fashion schools in China is the Beijing Textile Engineering Institute. Today Beijing Institute of Fashion Technology is welcoming the new Chinese generation, searching to create a strong presence in the worldwide fashion industry. In thirty years, the school has become a pillar in China fashion industry and has formed 50,000 graduates to become influential designers, editors and critics in the fashion industry in Beijing and everywhere around the world.

Many institutions participated in the rise of Beijing as a new fashion centre. The school ESMOD and CAFA (Central Academy of Fine Arts) are shaping the industry. Events are changing the international opinion about China and fashion with tradeshows such as CHIC and FashionNow. An importance influential event in the fashion industry is the China Fashion Week. This world-renowned platform for fashion was established in the capital of China. Beijing fashion shows it top-rated for fashion design, ready-to-wear accessories, styling and new technologies. This show has also become a must-be-there platform for fashion players in China. Indeed, there were more than 320 designers, 350 fashion brands and 768 fashions shows all aspiring to conquer the next most important market of the world. Of course, the media was very present and hundreds of media came from around the world since new trends are now being created in Beijing.

Characteristics of Beijing fashion market players

In China, most fashion publishers and magazines are based in Beijing for historical reasons as well as for the proximity of celebrities, musicians, photographers, designer and other artists.

Numerous successful shops were born in Beijing such as Triple Major and Dongliang and only then expanded to Shanghai. Galeries Lafayette and Brand New China made the choice of basing themselves in Beijing as the city corresponds better to their strategy of distribution all over China.

While Beijing’s middle class isn’t as strong as in Shanghai, purchasing habits are very similar. According to Zhang Da of Boundless, “Beijing is a market where customers are more cultured and experimental and prefer pieces with more character.” This can be explained by the fact that the wealthiest class of Beijing is more in contact with fashion in high circles. Considering Beijing as the Capital for fashion isn’t appropriate according to Leaf Greener of Elle China “Both have their own sense of beauty” She compares Shanghai to Paris as “sophisticated, modern and chic” while she believes Beijing is better reflected by London as “bold, colourful and cultivated where royalty and punks could live in the same city.”

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Daxue Consulting can provide you support in understanding the fashion industry in China. We conduct all the market research and consulting services you may need, such as market research, cost analysis, market reports etc. To know more about the Fashion industry in Beijing, do not hesitate to contact our dedicated project managers by email at dx@daxueconsulting.com.

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This article Fashion industry in Beijing is the first one to appear on Daxue Consulting - Market Research China.

For coffee shop customers in Shanghai, Beijing and Guangzhou, different expectation toward coffee consumption places

Through focus group of professionnels on China market, our expert designed a report about main attitude from citizens of those three cities. The data shows that 65.8% of Beijing citizens believed that it’s necessary to have a well designed coffee room with beautiful decorations. The atmosphere of the coffee shop is very important as well. Then, 65.8% of them do not pay strong attention to price. In Shanghai, people are giving more attention to the price. Also, they are rather more willing to pay for foreign brands than local ones. In Guangzhou, people often spent time in coffee shops in the afternoon to having some afternoon tea. They are, unlike Beijing and Shanghai’s consumers, more caring about the convenience of thge place. 67.8% of them care about if vacant parking spaces are available before they pick which coffee shop to enter, and 56.3% thought it’s not worth to spend much money on drinking coffee.

Coffee Shop Retail localization in Beijing, Shanghai and Guangzhou

So far to now, main customers of Costa coffee shops in Beijing are still people from foreign countries, and local people prefer products which are localized. They do not like to try things that they aren’t familiar with. Hence the location of new-opened coffee shop is generally localized in some streets where the flow of people is high. In Shanghai, the location must be picked at some places that are very quiet and elegant, far away from the noise area. Indeed, Shanghai’s consumer are expecting a more sophisticated consumption. In Guangzhou, first thing to considerate is the traffic. If the traffic is very convenient and the quantity is high, people would like to come all the time.

Different Tastes in China

Consumers in Beijing and Shanghai would rather try some sweet food than people in Guangzhou. Since the tea culture is so important in China, coffee shop retail managers can consider about combine two drinks. When Starbucks first entered Guangzhou, it release a new kind of drink—— Green tea coffee, and it get huge success.

See also: http://philippinesmarketresearch.com/

This article Market Analysis in China: Coffee Shop Retail Chains in Beijing, Shanghai and Guangzhou is the first one to appear on Daxue Consulting - Market Research China.

Even though information technology has developed dramatically in the past several years, it has not been used widely in tourism and related industries when comparing with other industries in Beijing. But this situation has changed a lot recently. E-commerce has penetrated deeply in tourism industry nowadays.

Popularity of online reservation

Nowadays, more and more travelling websites like Elong and Mango take great advantage of OTA (over-the-air) technology and make it a core strategy of company operation. The online rates of Elong and Mango website are both higher than 55% and Ctrip is about 45%. Some companies offer lots of coupons in order to encourage customers to book their trip online. One of the major reasons is to save the cost of every order. Online reservation is about 9 Yuan cheaper than calling center. From the aspect of passengers, it is also easier and cheaper if they can book their trip online. In that case, booking online may have a great possibility becoming the industry trend and thus replace the major function of most calling center in the future.

Importance of wireless reservation

During 2012, online travelling market is separated into three parts: online booking, calling center and wireless booking. In the current situation, the use of wireless in the OTA area is not as frequent as it has in other areas. Based on the high launching rate of smart phone in the cell phone market, the popularizing rate of smart phone is going to increase rapidly. Cyber citizen is going to change their surfing habit without doubt. It is with great certain that online travelling industry is going to enter a quite promising future which will become a great opportunity if marketers in Beijing tourism industry can take advantage of.

Development of market segment

With the fast development of wireless and success case of Priceline, more and more business find the huge opportunities in OTA. Based on the Priceline and Last-minute mode, more business model such as “I bid”, break-prison, best choice, and hotel bargaining and the “best-sale tonight” come into this area. The total online travelling market has been separated into more market segments, for example, hourly rate hotel room, high-end holiday hotel, etc.

Trip product mix

Via the platform of OTA and mode such as group purchase and last-minute, product mix can better satisfy customers’ needs. With the help of these modes, customers may want to meet more value-added needs like ticket booking, renting car, shopping instead of basic necessities. If this trend can be the main stream in the future, on-stop trip booking can bring great convenience to customers and much lower cost and better benefit to marketers.

Based on all of these new trends in the tourism industry, we can see that more and more information technology in getting involved in the marketing. It is going to open a totally new door for the marketing strategy of Beijing tourism. Apart from the traditional marketing strategies and media, all the participator in this market, including travel agency, tourist spots, hotels, restaurants cannot neglect the huge effect from IT industry on tourism market.

Conclusion

To conclude, the total inflow of passengers either from outside of mainland China or from mainland China has increased gradually in the recent years and it is predicted to increase in the future. In order to satisfy different needs of these tourists, Beijing has already made great effort to organize and remarket tourism resources. Even though some segments still remain to be managed, we can anticipate that the future market will tend to be more integrated and internationalized. Another huge trend that may have a great influence on development of tourism industry is the involvement of Information Technology—OTA. With the assistant of advanced technology, each market participator can achieve their own benefit and success. In one word, this market contains quite a lot of opportunities as well as a promising future.

More on Market Analysis in China and China Mystery Shopping

This article Beijing Tourism Market Analysis-Industry trends is the first one to appear on Daxue Consulting - Market Research China.

Beijing is one of the most popular travelling destinations in the world. It has plenty of tourism resources as well as completed supporting facilities. It is well known for its cultural sightseeing spots. Among all the tourist attractions around the world, Beijing owns 6 world cultural heritages, which makes it a city with most world cultural heritages in the world.

Economic effect of tourism

There were about 21 million inbound tourists in Beijing from 2006 to 2010 which increased up to 44% when compared with the last 5 years and thus generated foreign exchange earnings 22.5 billion dollars which was 52.5% more than the comparing period. During the same period, native Chinese tourists were up to 750 million increasing 34.7%, generating 971.2 billion Yuan.

Steady increase of domestic tourism

When talking about travelling in China, lots of Chinese will think about Beijing. As capital city, Beijing is one of the most popular tourist attractions in China. Among all the Chinese travellers almost two thirds are from other provinces while the rest are from local citizen market. Thus the majority of the tourism income comes from out-of-province population.

Problems existing in Beijing tourism market

Even though the market shows great opportunities in current situation, there are still some problems existing. These problems turn out to be huge blocks that prevent future development of the current market.

The elements market is still on its primary stage. Almost 90% of the restaurants as well as lots of travel agencies and tourist attractions are still act as a single part in the market instead of a whole network. The degree of network, integration, internationalization and branding is still pretty low.

What is more, tourism market is not quite organized now. Some tour guides require compensation and prohibited-tips privately and even change the touring routines and projects arbitrarily. Some passengers have been forced to buy products and services offered by travel agencies. Another serious problem is that some tour guides bring their customers to malls in their travel routine in order to get compensation offered by those malls, which obviously decrease the quality of passengers’ trip dramatically.  The entire phenomenon results in the lower the quality of service the decrease of benefit of tourism industry as a whole. In that case, service quality of tourism and other related industries still remain to be improved.

Ecological environment problem has gradually become one of the most serious problems that people care about. This problem has even brought more concern in Beijing. The entire ecological environment of Beijing is listed at the bottom when compared with other tourist attractions around the world. And it is not better when compared with other cities within China. Tons of pollution problems such as air pollution, noise pollution and water pollution in the tourist spot are nowadays the primary problem stopping the healthy and consistent development of Beijing tourism industry.

More on Daxue Consulting Market Research China and China Research

This article Beijing Tourism Market Analysis-Current situation analysis is the first one to appear on Daxue Consulting - Market Research China.

Retail brands in Beijing

China’s retail market is growing at a tremendous rate. In particular, the pace of development of the Beijing retail market has been astounding. In terms of the growth rate of retail sales, Beijing ranked 3rd nationwide, and 1st among the four municipalities. A couple large retail brands in the city include BHG, Ole, Auchan, Carrefour, Wal Mart and 7:11.

BHG(Beijing Hualian Group): Kellogg’s

BHG is a leading Chinese retail. There are three BHG in Beijing: the BHG Food Market and the two BHG Market Places. BHG is a lifestyle market headquartered in Beijing. BHG hypermarkets are committed to high quality, a low-price, good in-store customer service and a lot of variety in the food and general merchandise categories. The company has created its own produce base and fresh food processing and distribution center to satisfy its customer with fresh and healthy produce choices. BHG Market Place is a high-end supermarket, which is positioned to meet the needs of foreigners and local customers who desire a higher quality product selection and shopping experience. BHG Market Place provides international foods which mostly come from Italy, France or Japan such as natural vegetable, fruit, sea food, premium quality meat, ready-to-eat European foods and high quality wine.

Ole: Cotes d’Or

Ole means happiness and joy in Spanish. It is part of the Vanguard Group. It differs from the common supermarket in mainland China because it includes restaurants, leisure entertainment and shopping facilities that provide for goods and services for high-end customers and foreigners. There are three Oles in Beijing. The supermarkets sell all kinds of cheese, French wine, imported pastas and foreign fruits catering to the need of the upper class in Beijing.

7-Eleven

7-Eleven is part of an international chain of convenience stores, operating under Seven-Eleven Japan Co. Ltd, which in turn is owned by Seven & I Holdings Co. of Japan. In addition to the Slurpee and the Big Gulp, 7-Eleven owns several brands of foods and services, including Movie Quik, an in-store video-rental service; Citgo, the gas brand sold at many locations up until 2006; as well as Chief Auto Parts, which has locations adjacent to or near many 7-Eleven locations. The first 7-Eleven in Beijing was opened in 1996. It offered very few 7-Eleven brand name items like the Slurpee. However, it offered a wide array of warm food, including traditional items like the steamed, filled bun. The company also sells beverages, alcohol, candy, periodicals, and other convenience items. Although Beijing locations were originally planned to be open from 7 a.m. until 11 p.m., the majority of stores are open 24 hours every day to suit the lifestyle of Beijingers.

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Sources:

• University of Florida
• New York Times
• Jing Daily

Picture: Wangfujing Beijing

This article Market analysis: Retail in Beijing is the first one to appear on Daxue Consulting - Market Research China.