What are rare earth minerals?

Rare earth minerals or rare earth elements (REE) are a group of 17 minerals that share similar chemical features in the periodic table plus yttrium and scandium. They are considered ‘rare’ not due to lack of supply in the earth’s crust, but rather because extracting, refining and processing them requires tremendous effort and investment. They are used to make multiple high-tech commercial products like hybrid electric motors and hybrid batteries, computer hard drives, mobile phones and camera lenses, portable x-ray units, stadium lights, flat-screen TVs, energy-efficient light bulbs, fiber optics, glass additives etc. These resources are everywhere in our daily use and most of them are from China.

Rare earth minerals, a Chinese monopoly

Today, the production is mainly concentrated in the country. Although China has 30% of the global deposit of rare earth minerals, China attributes 90% of the output. Not only being the top producer in the world, China is also the top user, roughly 70% of global mined production is consumed by China’s downstream industries. For instance, about 75% of global production of neodymium-iron-boron permanent magnets is demanded by domestic industries. Chinese car brands like Byton and all the automotive industry could benefit from this monopoly.

Source: USGS – The evolution of the production of rare earth minerals

Imposed limits on exports of rare earth minerals in China

In 2009, China started to limit exports of these minerals to build up domestic manufacturers to keep more of the profits that would otherwise go to Western and Japanese producers of mobile phone batteries and other products. The restrictive export quotas on rare earth minerals in China made global technology producers concerned about insufficient supply. Hence they tried to reopen or develop new mines in the United States and other regions. Also, Japan and some other countries now recycle rare earth materials.

WTO regulation against rare earth minerals in China

Some countries leaders fear the Chinese monopoly over rare earth minerals, so they attempt to regulate the situation. In March 2012, the European Union, Japan and the United States submitted a complaint to the World Trade Organization regarding rare earth quotas. China started implementing export quotas in 2005. The purpose is first and foremost national: “to protect its natural resources and ensure a sustainable economic development”. Prices increased from 2010 as well as for terbium, a mineral which price increased nine times in a few months. It was the first trial trying to regulate the Chinese monopoly, the country lost the appeal.

An asset for Chinese diplomacy

The important amount of rare earth minerals in China gives the country a strategic advantage in its diplomatic negotiations. For example, the resource was leveraged during the diplomatic tensions with Japan in 2010.

Source: Google maps – The Diaoyu or Senkaku islands

The Diaoyu Islands (Senkaku in Japanese) are maritime areas disputed by both countries. On these islands, Japan captured the captain of a Chinese trawler. This event increased diplomatic tensions and lead to the embargo of rare earth minerals against Japan. China sold just 30% of rare earth minerals to Japan compared to the previous year. This embargo seriously affected the Japanese technology industry which depends on the supply of rare earths minerals from China. The country keeps a strong advantage over rare earths because it takes an average of 25 years to construct a functional mine.

Is the advantage of Rare earth minerals in China overestimated?

Perhaps the advantage that rare earth minerals brings to the country is overestimated. First, rare earth minerals are, ironically, not that rare. In fact, there are several mines around the world: such as in mountain passes in California, in Australia and Vietnam. Second, a rare earth minerals embargo for diplomatic reasons would have terrible consequences for Chinese companies. There would also be retaliations from other countries that are victims of the embargo. Hence, the economic cost is too significant.

Moreover, the use of rare earths as a diplomatic weapon goes against China’s long-term strategy. The country wants to upmarket in its production and focus more on high technology. An embargo on rare earths would lead to an increase in the world price of these minerals and would therefore ultimately be negative for Chinese technology companies, which could see the price of their subcontractors and the entire production chain increased. Also, if the price goes up, some mines would be tempted to re-open again as there will be opportunities for investors.

Mining rare earth minerals is a significant source of pollution

It is difficult to reverse the damage done by extracting rare earth minerals. Yet they are necessary to produce all electric vehicles, which are the poster-child of anti-pollution. The extraction of rare earth minerals in China pollutes and produces toxic waste. In Inner Mongolia, villages near the Baotou mine have levels of radioactivity 32 times higher than average. Whereas, at Chernobyl, the measured radioactivity is only 14 times higher than normal.

Source: Pixabay – The Baotou mine in China

Western countries have stopped the mining of rare earth minerals under environmental constraints. In 1998, the United States was forced to close the open pit mine at Mountain Pass, California, after thousands of liters of radioactive water were accidentally released into the environment. In addition, many countries refuse to allow this type of mine to be built on their territory. Even though in the past several countries produced rare earths, they all stopped because of the danger for the environment. It is difficult to reopen such mines in countries today, public opinion would be against it. This reinforces the undisputed Chinese monopoly for these resources.

China’s rare earth materials shapes our lives in more ways than we know

In conclusion, rare earth minerals are becoming significant components of our lives. They are the source of materials for smartphones, new energy vehicles, and can be found in all the high-tech objects of our daily lives. China concentrates the production of these rare earth minerals and has a strategic advantage. Countries that produce manufactured goods have become dependent on China’s rare earth material exports. This advantage should be balanced, as mining is very harmful to the environment. Moreover, even if it could be a geostrategic deterrent, the use of quotas or restrictions against foreign countries could be harmful for the Chinese economy as some retaliations will come.

Author: Enzio Cacciotto

Rare earths are a necessary material of new energy vehicles

Learn more about the development of new energy vehicles in China’s automotive market

Listen to 100 China entrepreneur stories on China Paradigms, the China business podcast

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This article Rare earth minerals in China: The resource behind NEV, smartphones and modern China’s geopolitical status is the first one to appear on Daxue Consulting - Market Research China.

Suspicions of fraud had already been hanging around for several months after the investment firm Muddy Waters released a report based on 11,260 hours of store traffic video. The report highlights Luckin coffee’s fraud by cross-checking actual orders and customers, and the company’s bottom line.

Source: Luckin Coffee stock price, Luckin’s stock plummeted from $50 to $3.82

As a result, Luckin Coffee stock price plummeted from USD 50 to less than USD 2 in a matter of months. But does this may not mean the end of Luckin. With such a low stock price and a high tech eco-system, there is a possibility to extend the rein of Luckin. Hence, we speculate who could buy the company that once was capturing Starbuck’s share on the coffee market in China?

The fantastic story of an internet company selling coffee

Luckin Coffee is an internet company. Coffee is the product sold by this company which operates more like other Chinese tech startups than a coffee shop. Indeed, Luckin Coffee digitalized and standardized the operation of an offline retail business.

Concretely, Luckin coffee users order through an application and pickup in store, a vast contrast from the large, cushy relaxation areas of its competitor Starbucks. Luckin coffee’s business model is based on new retail in China. This means that the online shopping experience of buying a coffee is supplemented by offline actions of going into a store and being served by a real employee.

Source: Luckin app, Forbes, Luckin Coffee’s business model embodies new retail in China through on app orders needed to be offline picked up

What else defines Luckin coffee as an internet company is the classic cash-burning process to quickly acquire users and scale-up. This method enabled Luckin Coffee to raise the right amount of money to promptly establish thousands of stores across China before going public by a USD 640 million IPO in May 2019 on the Nasdaq. Another interesting finding is that the company’s IPO documents insist on Luckin Coffee’s new retail business model, rather than on its F&B products.

Following the IPO, the company quickly raised USD 1.1 billion in January 2020. The same month, the company made the headlines by becoming the first coffee chain in China. Thanks to its highly praised business model, the company now exceeds the number of Starbucks stores, with more than 6,500 locations.

But the story was too good to be true. Right after the IPO, the company is reported having fabricated financial and operating numbers.

Luckin Coffee’s fraud highlights a fundamentally broken business

On January 31, 2020, short-seller Muddy Waters published an 89-pages anonymous report, claiming that the company had falsified financial and operational figures. Not only claiming that, the report says Luckin Coffee “was a fundamentally broken business that was attempting to instill the culture of drinking coffee into Chinese consumers.”

The report says the number of items sold per store per day was inflated by at least 69% in 2019 3Q and 88% in 2019 4Q. According to the writers, they employed 92 full-time and 1,418 part-time staff to record traffic in 620 Luckin Coffee stores. The data accumulation is impressive, with the collection of thousands of receipts, as displayed below.

Source: Muddy Waters’ anonymous report

Faking in-store order numbers

According to the investigation document, Luckin coffee’s fraud would likely have started occurring around November 23, 2019, when the company started to inflate its own app online order volume.

As all orders are placed online and retrieved from the store, a sequential order number appears on the receipt (such as when ordering at McDonald’s). Therefore, paying attention to these numbers could give a clear idea of how many orders have been placed per day for a specific store.

However, this method cannot be used if Luckin intentionally jumps and skips numbers during the day to purposely distort the tracking results. This is exactly what happened, as evidenced by this screenshot in the report.

Source: Muddy Waters’ anonymous report, Wechat screenshot evidences the inflation of Luckin Coffee’s order volume as one of the methods to manipulate operation figures

Shortly after the revelations of the report, Luckin published a press release to deny the allegations. The company evoked the strength of its business model, combined with the booming coffee market in China: “Luckin Coffee firmly stands by its business model and is confident in benefiting from the strong growth of China’s coffee market in the future.”

The fact that Luckin Coffee’s stock price didn’t drop after the publication of the report, until Luckin’s own internal audit, shows strong trust from the investors in the company’s business model.

But was the magic business model of Luckin Coffee enough to prove that the business could ever reach profitability?

Were Chinese people even ready to drink more coffee?

Data from the International Coffee Organization (ICO) show that the coffee market in China experienced strong growth between 2007 and 2015. But for the past few years, growth has stalled, especially since the players which target the core functional coffee demand are well established and more numerous (Starbucks, Costa Coffee, McCafé).

Source: International Coffee Organization (ICO) 2018, Unroasted coffee beans consumption in China

Coffee consumption is driven by culture rather than economic development

Increasing disposable income does not mean that their small consumption of coffee will explode overnight. Obviously, the coffee market in China was a boon for those who managed to capture the emerging demand in the 2010s (Hello Starbucks). In fact, the global coffee consumption comparison across countries indicates that coffee consumption per capita level is primarily driven by culture rather than economic development.

Indeed, China’s coffee bean consumption per capita is not only significantly behind developed countries such as Japan but also way lower than developing countries such as Vietnam.

More Westernized developing countries such as Vietnam (a former colony of France) and the Philippines (a former colony of Spain and the US) have high coffee consumptions. By contrast, in countries with strong tea cultures, such as China, India, and Sri Lanka, coffee consumptions are low.

Therefore, it’s no wonder that Luckin Coffee burned billions of investors’ dollars without meeting the expected success.

Source: International Coffee Organization (ICO) 2018, Per-capita Coffee cups consumed across Asia

Time for a Business turnaround in China

Even if Chinese people only consume 7 coffee cups per year, they do like coffee. Luckin coffee’s scandal does not contradict this. Rather, it highlights the fact that burning billions won’t make people drink coffee even faster. However, if Chinese people won’t drink more coffee, they will drink more tea.

While the number of tea stores demonstrated a continuous growth trend, the number of freshly brewed coffee stores declined from 121,000 stores in 2016 to 105,000 stores in 2018. Hence, the coffee supply network coverage is not the issue. There is just not enough demand yet.

Data source: Meituan, 2019 Chinese Beverage Industry’s Development Trend Report, The growing number of tea stores highlight the strong growth of the tea market in China

Following these observations, Luckin Coffee did try a business turnaround by starting a new type of product called Luckin Tea in May 2019. But business turnaround in China requires more than starting a new range of products.

Daxue Consulting’s China business turnaround expertise

In order to help a client build its business turnaround in China, Daxue Consulting developed a four-step plan, beginning with an audit of the situation. It consists of identifying where the brand had potential improvement and re-orientation needs. It includes distribution screening (data-collection through Store-Checks in China), brand image, and positioning in its competitive frame (through Benchmark). The following steps include consumer research, marketing activation portfolio, and monitoring plan.

It turns out this article briefly tackles step 1 of daxue’s business turnaround consulting service in China. We identified where Luckin has potential improvement – in tea – but we still need to assess its tea competitive frame.

Could Luckin Coffee’s future be with tea products?

Tea is an entirely different market from coffee. Nowadays, the tea market in China is made up of ‘new style tea 新式茶饮’ which is made of fresh tea leaves and concentrated liquid, such as milk or cream. It also includes topping like jellies, tapioca pearls, and fruit. Hence, while demand is not the limiting factor for the tea market in China, the main challenges lie in supply chain management and in-store production.

Source: Daxue Consulting report, The Tea Market in China

Could Luckin Coffee’s future be with Luckin Tea?

Part of a more aggressive turnaround strategy, Luckin Tea was separated from Luckin Coffee as an independently operated brand in September 2019. However, Luckin Tea in-store production and supply chain management is designed for Coffee products, which are fundamentally different from the new-style tea products.

In a China Paradigm podcast interview, Martin Papp, co-founder of PAPP’S TEA told Daxue Consulting young Chinese are going to Starbucks because they can’t find a tea location that fits their lifestyle. They want a more modern, fashionable, and cool tea brand. And while Luckin Coffee and its spin-off brand Luckin Tea are focusing on digital and financial engineering, HEYTEA appears to be focusing on thrilling their customers via its product development.

This new-style tea brand has lines out of doors in China and proven demand for their fresh flavored elaborated teas. While Luckin Tea products are basically made of blended NFC juice, frozen fruits, and artificial pigment, HEYTEA’s products have an uneven texture with distinct layers of tea, fruits, and hand-made cheese milk topping.

Source: Luckin Coffee, HEYTEA, could Luckin Coffee’s future be with Luckin Tea?

HEYTEA also has extensive capabilities in continually refreshing the menu with new product introduction. It is something quite far from Luckin Tea, whose in-store standardization process leaves little room for product customization.

Could Luckin Coffee’s future be with HEYTEA?

Let’s summarize. Luckin Coffee grew up like a tech company using investors’ money to open more than 6,000 outlets – more than Starbucks – without ever reaching profitability.  The company has been accused of faking its financial and operational figures, which turned out to be true. As a result, Luckin Coffee’s stock price plunged and will soon be delisted from the NASDAQ stock exchange. In a last attempt, Luckin Coffee created Luckin Tea, which turns out to be no more than a desperate move to capture new-style tea lovers with a tea that cannot fall in this category of products.  

On the other hand, HEYTEA is thrilling Chinese customers. The brand is growing based on its traffic, not investor capital, just like Starbucks did in China. The brand has 400 stores, regularly taken by storm by tea lovers. In fact, HEYTEA is Starbucks’ most interesting competitor now. Simply because we saw that it has a tailwind that neither Starbucks nor Luckin Coffee has – a significant, proven and enthusiastic demand.

Should HEYTEA buy Luckin Coffee?

Moreover, HEYTEA is recently moving into coffee. They quickly adopted a Chinese new-retail business model as Luckin did, merging pickup stores and their ordering app called “HEYTEA GO.” The brand is now growing on Luckin Coffe’s field, which previously tried to grow on HEYTEA’s one. The strong difference between the two is that HEYTEA succeeded in its ‘home’ market while Luckin Coffee is slowly dying on its.

Source: EqualOcean, HEYTEA GO pickup stores, could Luckin Coffe’s future be with HEYTEA?

Then the question comes naturally: Should HEYTEA buy Luckin Coffee?

HEYTEA is already doing great at creating popular products that thrill Chinese consumers. But unlike Starbucks, it still doesn’t have a quality footprint of good locations across China. Therefore, according to Jeff Towson, “The next logical move is for HEYTEA is to find a partner to scale up on the real estate aspects.”

Could the tea brand buy Luckin? It could. It could get HEYTEA +6,000 locations in a snap. However, according to Mike Vinkenborg, project leader at Daxue Consulting: “Part of HEYTEA’s mystery is their lines. If the brand becomes too mass, it may lose its level of mystery.”

Still, we could easily imagine HEYTEA buying Luckin Coffee. The new-style tea brand could use it as a strong asset to develop its coffee branch by only selecting a few thousand premium quality Luckin Coffee stores to further threaten its biggest rival, Starbucks.

If Luckin Coffee’s future is uncertain, HEYTEA could be interested in buying the broken business. If not, possibilities are endless for other hot drink businesses to take over the brand. And if not again, let’s see if Luckin Coffee’s business turnaround in China can strengthen its capabilities to turn off rumors of bankruptcy.

Author: Maxime Bennehard

Curious to learn more about China’s tea market?

Check out our official report on the tea market in China!

See our China paradigms episode with a tea entrepreneur

This article Business turnaround in China: What is the future for Luckin Coffee? is the first one to appear on Daxue Consulting - Market Research China.

World Health Organization described China’s response to COVID-19 outbreak as the “most ambitious, agile and aggressive disease containment effort in history”. China’s early isolation and the resulting drop in contact between people helped to reduce cases. The government is not the only body to take swift actions, businesses, schools and individuals also played important roles in preventing the spread of COVID-19. Hence, the learning points are widely applicable. That is why Daxue Consulting examined 50 measures of how China suppresses COVID-19.

NO AND LOW CONTACT

1. SEPARATING STUDENTS IN DINING HALLS

In schools, students had plastic dividers during school meals to prevent cross infection. Some schools divided students lunch periods so fewer students eat at a time.

2. ENFORCED SOCIAL DISTANCE IN SCHOOL

Some primary schools used a creative way to enforce social distancing between students. They had students wear ‘distance hats’ to maintain a distance of one meter from one another.

3. MASKS IN PUBLIC TRANSPORTATION

During the epidemic, the National Health Commission required people to wear masks on public transportation. In addition, the National Health Commission suggested people disinfect their hands after using public transportation.

4. MASKS ARE REQUIRED IN SHOPPING CENTERS

All the employees in shops must wear masks when they are on duty. Guards check consumers’ masks and health code at the door.

5. MASKS ARE REQUIRED BY RESTAURANTS

People without masks cannot enter most restaurants during the epidemic. This measure helped Chinese people to form the habit of wearing masks every day.

6. RESTAURANTS PROVIDE ENVELOPES TO PUT MASKS IN

To prevent masks from getting contaminated on restaurant tables, many restaurants provide envelopes for customers to set their masks down.

7. LIMITED NUMBER OF PEOPLE ALLOWED ON ELEVATORS

It is easy to spread COVID-19 in elevators. Hence, many Chinese office buildings limited the number of people in elevators at one time. Also, plastic is used to cover elevator buttons and the plastic is changed every day. Some office buildings even provide toothpicks or tissue for people to press elevator buttons.

8. BANKS OFFER DISPOSABLE TISSUES TO TOUCH DOOR HANDLES OF ATM

During the epidemic, many banks offered tissues outside each ATM’s door for clients to use when touching door handles.

9. DIDI’S TAXIS PROTECT PASSENGERS BY INSTALLING PLASTIC FILM

From early February, Didi installed protective plastic film in the back of taxis to protect both drivers and passengers. Simultaneously, both passengers and drivers need to wear masks in the car.

10. DELIVERY PEOPLE NOT ALLOWED IN RESIDENTIAL BUILDINGS

According to the policy of local governments, residential areas have a designated area for temporary package storage. Customers shall pick them up by themselves. Contactless delivery reduces the risk of contagion.

11. ONE METER DISTANCE BETWEEN PEOPLE IS REQUIRED WHEN STANDING IN LINE

In correspondence with local government’s regulations during COVID-19, shoppers need to keep 1-2 meters distance from each other when standing in line. To nudge consumers into standing at least one meter apart, stores labeled standing spots.

12. OFFICES ALLOW FLEXIBLE WORK SCHEDULES

Many Chinese companies allowed flexible work plans during COVID-19.  When the situation was serious, only a few employees worked at their offices. Besides, during the epidemic, many companies required employees to work remotely in China. As the situation improved, more employees could work from offices.

Source: Daxue consulting and Dragonfly Group, Impact of the COVID-19 epidemic on the organization and HR within French and French-speaking companies established in China

13. NO SHAKING HANDS IN BUSINESS SETTINGS

To abide by the recommendation to stay 1 to 2 meters from each other, the member of CPPCC National Committee, Yang Zhaoming, advocated that people should use the Chinese traditional greeting way to pat each other on the back or bow instead of shaking hands.

Source: Oriental Daily, How China suppresses COVID-19 report by daxue consulting. Members of the CPPCC National Committee greet each other.

14. THE CENTRAL BANK ENCOURAGED NO CASH PAYMENT

Cash can spread the virus easily. Thus, the People’s Bank of China advised people to use more non-cash methods, especially mobile payments.

15. IMPLEMENTING LOW-CONTACT MEASURES IN RESTAURAUNTS

Another way of how China suppresses COVID-19, was shortening the opening time of restaurants to reduce the crowded traffic. Some restaurants in China offer public chopsticks and spoons to use on shared dishes.

MASS DISINFECTION

16. DISINFECTING PUBLIC TRANSPORTATION

In terms of public transport, the way of how China suppresses COVID-19 included disinfection of public transportation vehicles once a day after operation. Besides, in buses and subway, commonly touched hard surfaces also were disinfected.

17. DISINFECTING COMMERCIAL STORES

In retail industry in China, the disinfection of commercial stores, focusing on the surface of tables, door handles, ground, and walls was obligatory.

18. DISINFECTING COMMUNITIES BY COMMUNITY STAFF

Following the guideline released by Beijing Center for Diseases Prevention and Control (疫情防控中心), commonly touched objects such as stair railings and door handles should be disinfected by chlorine concentration of 250-500mg/L or 75% ethanol once a day.

19. DISINFECTING IN SCHOOLS

The National Health Commission and the local Municipal Health Commission required teachers and staff to disinfect schools.

Source: Sina news, How China suppresses COVID-19 report by daxue consulting. Schools in Miyun thoroughly disinfected every classroom

20. HAND SANITIZER AVAILABLE IN PUBLIC PLACES

People can disinfect their hands in some public places with free sanitizer.

21. SANITIZING PHONES IS ADVOCATED

As people use mobile phones every day, it is easy for the virus to adhere to the surface. Medical experts suggested people to disinfect phones 2-3 times a day by disinfectant wipes.

22. CARRYING DISINFECTING WIPES IS RECOMMENDED

Chinese medical experts suggested carrying some disinfecting wipes every day so that they could sanitize their hands at any time

EDUCATE, TEACH, AND ENCOURAGE

23. PUBLIC ANNOUCEMENTS TO ADVOCATE SELF-PROTECTION

It is quite common in China to see the posters in streets to advocate mask wearing and hand washing. The purpose of the measure is to generate a strong awareness of self-protection.

24. POSTERS WITH HAND WASHING INSTRUCTIONS

In many public places, there are posters released by the local Municipal Health Commission to show hand washing instructions to teach the scientific way of washing hands.

25. PROPAGANDA ON HOW TO DISPOSE OF USED MASKS

People have the awareness of wearing masks which is an effective way of self-protection, as well as protecting others. However, how to deal with the waste masks is also a major issue. If used masks are not disinfected before being discarded, it could contaminate hands again.

26. DISSEMINATE THE KNOWLEDGE OF COVID-19 BASICS AND PREVENTION

Local governments propagandized the prevention measures of coronavirus by street posters that include:

• Introduction of COVID-19
• How the coronavirus spreads and prevention
• COVID-19 symptoms
• What to do if you show symptoms

27. DAILY TEMPERATURE CHECKS FOR PUBLIC TRANSPORTATION STAFF

In terms of public transportation, the way of how China suppresses COVID-19 was measuring of employees’ temperature. Besides, wearing masks and disposable gloves was obligatory. However, the duration of enforcing this measure differs city by city based on the severity of the local outbreak.

28. SCHOOLS RELEASED ONLINE COURSES

During the epidemic, all Chinese schools were closed for 2+ months and students had to stay at home. In order to make sure that course progress would not be disrupted by COVID-19, the Department of Education released a policy which required  schools and universities to launch online courses.

29. OVERSEAS CHINESE DONATED MASKS TO CHINESE HOSPITALS

When the epidemic was arising in China, the amount of masks available was inadequate. International students donated money and masks to China.

30. CHINESE EMBASSY ARRANGED AIR LINES TO BRING INTERNATIONAL STUDENTS HOME

Due to the coronavirus outbreak overseas, many flights were cancelled. This led to a large quantity of Chinese travelers stuck in foreign countries. Thus, the Chinese embassy arranged flights to bring them home.

31. AUTOMATIC VISA EXTENSION FOR FOREIGNERS

The Chinese government took foreigners in China into account as well. As traveling became unsafe during the pandemic, the Chinese government automatically extended all visas for two months if they expired.

POPULATION CONTROL

32. PEOPLE WHO REJECTED EPIDEMIC PREVENTION MEASURES WOULD BE PROSECUTED FOR LEGAL LIABILITIES

People who have been in an epidemic region/city or closely contacted people with suspected/diagnosed cases had to accept temperature tests and centralized or home-quarantine for 14 days. If someone refused to give their information or accept body temperature tests, it would count as a crime of endangering public safety.

33. LOCAL GOVERNEMNET LAUNCHED HEALTH CODES

Citizens could generate the personal health code through mobile apps in China, WeChat public account and QR code. The health code served as an electronic voucher for individuals to enter or leave cities. There are 3 types of them:

1. Red: Need to be quarantined for 14 days
2. Yellow: Need to be quarantined for 8 days
3. Green: No need quarantine and free to enter any public places.

34. RESTAURANTS AND ONLINE FOOD DELIVERY PLATFORMS SHOW THE BODY TEMPERATURE OF STAFF

Restaurants and online food delivery platforms in China launched many measures to ensure the food safety.

Temperature tests for delivery people and restaurant employees twice a day, disinfection of delivery boxes, wearing masks at work and contactless delivery service were very important during the epidemic. These measures had a great contribution to how China suppresses COVID-19.

35. MEASURES IN RESTAURANTS, BARS, NIGHTCLUBS REQUIRED BY LOCAL GOVERNMENT

The main measures of how China suppresses COVID-19 in public places were: limiting the number of tables and diners, reducing the placement of tables and chairs, and increasing the distance between tables. Testing the body temperature of every consumer was also obligatory.

36. BODY TEMPERATURE CHECK AND PASSES ARE REQUIRED BY OFFICE BUILDINGS

Guards check body temperatures at the entrance of office buildings in China. Delivered goods are in designated places at the entrance under the unified management and control. The air conditioning system in office buildings was turned off during the epidemic. All employees working in office buildings need to apply for passes, people from outside need to register personal information at the entrance.

37. LIMITATING THE NUMBER OF TOURISTS

Online booking tickets helped to control the number of tourists in China in certain time period. The number of tourists in every scenic spot could not exceed 30% of its largest capacity. Tour groups cannot have more than 30 people. Indoor tourist sites were all closed.

38. BAIDU LAUNCHED CORONAVIRUS INFECTION MAPS

Chinese search engine, Baidu launched the “fight against pneumonia” map to let users know the latest and accurate information in real time. People can have a better understanding of the of the epidemic situation in each city by using the map

39. MEASURES TO MANAGE ACCESS/EXIT OF COMMUNITIES

When people come from other provinces or countries, they have to register travel info in their communities. Before entering a community, guards measure the temperature of every individual according the regulation of local governments. Some communities required residents to apply for pass codes on WeChat mini program.

40. CHECKING BODY TEMPERATURE BEFORE ENTERING STORES

According to local government’s policy, testing body temperature before entering stores is important to protect customers and employees’ safety.

41. MEASURING PASSENGERS’ TEMPERATURE BY THERMAL CAMERAS IN TRANSPORTATION STATIONS

Transportation stations, including subways, railways, and airports, have infrared thermometers. The system automatically detects the temperature of passengers when they pass security checkpoints.

42. MINI PROGRAM TO TRACK PEOPLE’S TRAVEL HISTORY

The China Academy of Information and Communications Technology (CAICT) launched a mini program to track everyone’s travel history in past 14 days to see if they have been places seriously affected by COVID-19.

43. REGISTERING ON A “HEALTH CLOUD SYSTEM” BY QR CODE TO ENTER SHANGHAI

Passengers who entered Shanghai shall apply for on-line health registration on the “health cloud” system.

44. QR CODES TRACK PEOPLE’S POTENTIAL CONTACT WITH THE CORONAVIRUS

After scanning the QR code, passengers would know if they had close contact with suspected cases. They get the information by text messages to self-quarantine at home if they had.

QUARANTINE MEASURES

45. ARRANGING CENTRALIZED QUARANTINE IN HOTELS FOR PEOPLE FROM FOREIGN AND DOMESTIC EPIDEMIC REGIONS

According to the Chinese government’s policy, people coming from domestic epidemic areas and all overseas areas should stay under the quarantine in hotels for 14 days. Doctors record their body temperature twice a day during quarantine. On the thirteenth day, they need to take a virus test. If their test results are negative, they can return home.

46. IMPLEMENTING HOME-QUARANTINE FOR PEOPLE FROM HIGH-RISK REGIONS

People from overseas and domestic high-risk regions should stay under the quarantine for 14 days at home.

 Groups which meet the requirement of self-quarantine at home:

1. Over 70 years old
2. Children
3. Pregnant women
4. Living alone

Doctors and police measure their body temperature twice a day. Also, there are door trackers on their doors. If doors open over 1 cm during the home-quarantine period, the police will be notified.

Source: Laiyuan, How China suppresses COVID-19 report by daxue consulting.

47. LOCAL GOVERNMENT GIVES OUT GUIDELINES IN DIFFERENT LANGUAGES

China’s local governments gave out guidelines in different languages, so every foreigner in China understood what rules they should follow. Besides, the National Immigration Administration of the PRC gave out Chinese-English bilingual handouts of Laws observed by foreigners in China.

48. DISINFECTING THE TRASH OF QUARANTINED PEOPLE

Every community set up a temporary garbage collection point to place garbage generated by quarantined people. The local Landscaping & City Appearance Administrative Bureau sent staff to disinfect the garbage before delivering it to incineration plants.

49. MASS TESTING

In June 2020 China has completed a mass testing programme in Wuhan. Authorities in Wuhan have found more than 200 asymptomatic cases of the new coronavirus. Testing helps to find asymptomatic cases and people with an early stage of decease and put them under the quarantine.  

50. FINES FOR PEOPLE WHO DO NOT COVER THEIR NOSE AND MOUTH

Even though people must wear masks, many do it in a wrong way. Since April 2020 anyone who doesn’t cover their nose and mouth when coughing or sneezing will be fined.

KEY TAKEAWAYS

Digital technology was integral to containing COVID-19

Chinese government effectively identified cases and controlled the population by using Location Based Services (LBS) and big data technology. Also, big data platforms release real-time data about COVID-19, which is helpful to ease the public panic. At last, those technologies will continuously contribute to China’s public administration in the future.

The government & businesses educated the public on hygiene and social distancing tactics

Chinese local governments widely used signs to guide people to follow regulations during the epidemic. This nudged people on public transportation and in shops to keep a distance of 1-2 meters from one another.

Acting early was the key to contain COVID-19

Once COVID-19 was recognized as contagious, China took immediate measures to reduce population flow, such as the lockdown of Wuhan in January. Many cities and provinces took emergency control measures before discovering any COVID-19 cases. Those measures limited the spread of COVID-19 and gained time for follow-up actions. In addition, China’s capable of rapid response is important to managing public crisis.

Many COVID-19 prevention measures were decided on the city or province level

Chinese local governments took steps according to the different situation of provinces and cities. Also, the duration and enforcement are not uniform in different regions and communities. The advantage is that local governments can respond to the epidemic quickly according to the specific circumstances of each region. The downside is that China lacks a unified plan and supervision, which lead to the inefficiency of some measures.

See our report on how China suppresses COVID-19

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This article 50 measures China uses to suppress the spread of COVID-19 is the first one to appear on Daxue Consulting - Market Research China.

Matthieu David interviews Guillaume Rué de Bernadac, Founder & CEO at Académie de Bernadac. Etiquette is a tool that any person should possess whether they use it in professional interactions or social ones. In China, royal etiquette is a subject of interest and more and more people are enrolling for courses. How does Académie de Bernadac service the need for royal etiquette on the Chinese market? How do they market their service and how are the courses structured? Find out the answers to these questions and many more by listening to the interview.

• 0:15 Guest introduction
• 2:30 Académie de Bernadac – a brief company presentation
• 5:10 What prices and services does Académie de Bernadac offer?
• 8:03 More details about the size of the company
• 10:28 Royal Etiquette classes – why clients may enjoy them for different reasons
• 13:54 Why is Tier 1 of royal etiquette the most popular set of classes?
• 15:33 Adapting to the Chinese market – how have the lessons changed to accommodate Chinese culture?
• 19:00 Selling luxury – the brand of a product is all about emotions
• 20:17 Do clients apply etiquette outside their professional lives?
• 22:18 Adapting the lessons for luxury brands the function on the Chinese market
• 27:30 How does technology mesh with the heritage component of luxury brands?
• 28:57 Using live streaming for open advertisement
• 31:09 Best practices to get the most out of livestreaming
• 32:51 The importance of the Zhihu QA platform for Académie de Bernadac?
• 35:53 Specifics: how does Académie de Bernadac use Zhihu?
• 42:06 Misperception – how is French culture viewed in China?
• 44:11 Royal dreams can be motivators for etiquette learning
• 46:44 What book has inspired Guillaume Rué de Bernadac in his entrepreneurial journey?
• 47:57 What does Guillaume Rué de Bernadac read to stay up to date about China?
• 49:04 What can be learned from using WeChat?
• 50:07 What book about China would Guillaume Rué de Bernadac recommend?
• 51:38 If he has extra time what other business would Guillaume Rué de Bernadac pursue?
• 53:27 What success and failure have Guillaume Rué de Bernadac witnessed in China?

 China Paradigm website

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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.

This article China Paradigm 105: Teaching Royal etiquette to affluent Chinese is the first one to appear on Daxue Consulting - Market Research China.

According to statistics released in early 2020 by the People’s Bank of China (PBOC) the number of electronic payments processed by country’s banks increased by 6.3% compared to the same period in 2018. 62.1 billion electronic payments have been registered, including 30.7 billion of mobile transactions, representing a year-on-year increase of 73.6%. In March 2020, 776.08 million persons were using mobile payment in China.

COVID-19 boosted online and mobile payments in China

After the COVID-19 epidemic in China, the Payment & Clearing Association of China (PCAC) launched an action on February 28, 2020 to encourage people to use mobile payment, online payment and QR payment to avoid the risk of infection.

Just after the Labor Day holiday in May, payment giants released their payment data. According to Zhuanlan, compared with Qingming Festival in April, the average daily transaction amount of UnionPay increased by 7.7%. Perhaps COVID-19 is the driving force on online transactions in China. The online platform handles 1.354 billion capital online payment businesses on a daily basis, an increase of 54.59% year-on-year. At the same time, the number of offline barcode payment (mobile payment) transactions on a daily basis increased by 48.5% year-on-year. In terms of Alipay, the payment frequency of sightseeing spots has increased by 120%; the amount of payment Wechat paid for restaurants under the line has increased by 447% compared with that in March.

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In 2018, around 83% of all payments were made via mobile payment modes

China has developed differently in terms of payment methods: while all countries have switched from cash to credit cards and are now switching to mobile phones, China has skipped a step. The use of the credit card in China is sporadic, if not non-existent.

And even though mobile payment is overgrowing across the continent, Chinese people are using phone payments more often than their neighbors in Asia.

Contact us for any question on the Chinese market

Why and how do mobile payments in China work?

This increase in the use of smartphone payments in China is linked to the growth of e-commerce and m-commerce. Indeed, if the share of online sales may still seem relatively low, it is increasing very quickly.

Experts even estimate that mobile commerce in China will reach about $1.5 trillion in sales in 2019, representing a quarter of the country’s overall retail market.

Also, mobile payments have been so successful in China because they are fast and straightforward. And this speed is possible thanks to the QR codes. In China QR Codes are everywhere; even street musicians have a QR Code to collect money.

• There are two ways to pay via QR Codes in China: The customer scans the seller’s QR code, which is very often printed and visible at the checkout, on restaurant tables and even on products in some stores. The customer then chooses the amount and can send the money directly to the seller.
• The customer shows the QR code displayed on his smartphone, and the seller scans it. This method is even simpler and faster because the customer has nothing to do; it is up to the seller to select the amount that will then be deducted from his mobile wallet.

China has therefore quickly adopted mobile payment, and this is mainly because it is very easy for sellers. Unlike Apple Pay, where sellers have to buy technology to receive a payment, in China, a simple piece of paper printed with the QR code is enough.

Mobile payment methods in China in 2019

Tenpay (including WeChat Pay and QQ Wallet)

Tenpay has the biggest market share by penetration rate in China, with 84,3% in 2018. Enveloped by Tencent Company, which owns the most popular social media in China, Wechat (Weixin), Tenpay has developed the most used mobile payment solution in China: WeChat Pay.

WeChat, the Chinese giant, sees 1.08 billion monthly active users in 2018 and more than 900 million users on a monthly basis. We could barely compare this to Apple Pay which has only reached 127 million monthly active users in the world.

Today Wechat pay strategy in China is to extend its services to various financial products – from investment funds to insurance, allowing users to pay for it directly within the app.

Wechat pay transaction fees of 0.1% start at withdrawals over 10,000 RMB as well as overseas transactions such as in case of cross border commerce. The app currently supports 9 currencies, against 18 for AliPay. Cross-border transactions can still be complicated, but WeChat has recently partnered with Adyen, an international payment technology company to facilitate access to China for foreign companies.

Alipay

Alipay is the only online payment system used on Taobao, which is the leading shopping website in China, owned by Alibaba.

Alipay has the second biggest market share in China with over 900 million users worldwide at the end of 2018 and 700 million active users. Many major websites use Alipay as an e-commerce payment method, such as Taobao, Amazon, JD.com and AirAsia, and other 40 million small shops and sellers in China.

Considering low trust in China’s online payment system, they introduced escrow (the payment is made by the buyer before the product is shipped and the payment is released when the product is received) and immediate payment (used to pay for hotel room bookings, flight bookings or other items that do not need to be shipped) to solve the trust issue and to expand the market.

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As a foreign company to set up on this platform, you need to pay USD 1,000. Transaction fees are 2.5 – 3.0% depending on your annual transaction volume.

For Chinese companies there is no setup fee, they need only pay 0.7-1.2% as transaction fees. You can communicate with Nanjing Marketing Group for the information on setting up your account. Alipay has arrangements with over 60 Chinese banks, Visa and Mastercard.

China Union Pay

Union Pay is the world’s largest payment card issuer with approximately 30% of cards worldwide being a China UnionPay card (CUP). China Union Pay is the only domestic bank card organization in China, linking the ATMs of 14 major banks and many smaller banks throughout mainland China. It is also an Electronic Funds Transfer at Point of Sale (EFTPOS).

With China Payment Services, international merchants do not need a physical presence in China, nor do they need a Chinese bank account.

The “push payment” principle is a different process that Westerners may not be accustomed to, whereby users are directed to their personal bank account to authorize the payment.

Many sizeable international eCommerce merchants in China are choosing to offer liberal return policies for card payments, rather than provide a Cash on Delivery option, making UnionPay card payments an excellent China online payment method for any international merchant. In 2019, Union Pay is planning to enter the European market in a move that could cause serious competition for Visa and Mastercard.

Paypal

Paypal entered into China in 2005 with services specifically designed for the Chinese population, including Chinese entrepreneurs.

But the Chinese market of mobile payment methods is very difficult to conquer for Paypal, especially against the competition.  In 2017, an agreement was reached with Baidu Wallet that allows Chinese companies to have better access to the international market and vice versa. PayPal and China UnionPay have also agreed to work together.

How do consumers pay in China?

Cash on Delivery (COD)

Cash on delivery makes up the largest percentage of online payment methods in China. Famous websites such as Dangdang, Amazon, JD.com are conducting methods like this as one option. COD is a payment method in which it is the carrier who ensures the collection of the payment in return for part of the goods and who takes care of the return of the amount to the seller.

There are many reasons for the preference for this payment method in China. Firstly, goods can be quality assured by the receiver before payment. Secondly, if people don’t have an account for online payment (for example a senior or someone from a rural area who is not good at using a computer), they tend to choose this method. COD payment can be made by cash (uncommon) certified check or money order.

Credit Cards in China (China UnionPay cards)

Online credit card usage in China is less than 5%, not as popular as in Western countries. International cards such as Visa and MasterCard are not common online payment methods due to the low-trust associated with them in China.

Debit Cards (China UnionPay cards)

Debit cards are widely used by Chinese consumers for Internet purchases. The funds paid using a debit card are transferred immediately from the bearer’s account through use of a “push payment“ principle. During the online payment process, users are directed to their personal bank account where they physically log in and authorize the transaction.

Although COD makes up the most significant percentage of China online payment methods, the trend towards using debit/credit cards (China UnionPay cards) is continually increasing as more domestic and international online merchants integrate the option of online card payments on their website.

Shipping methods in China

Major shipping companies in China

1. SF Express (Shunfeng Express) 深圳顺丰速运

It has built an extensive business unit covering research and development, logistics, pickup & delivery network, etc. which spans the nation (including Hong Kong, Macau, and Taiwan). At the same time, its international network has been actively expanding to South Korea, Singapore, Malaysia, Japan, the United States, and Europe.

2. STO Express 上海申通快递

Covering Mainland China and Hong Kong, Macau and Taiwan,  this shipping company is in service 365 days all year round.

3. Shanghai YTO Express 上海圆通速递

Yto express is a large famous private shipping company in China. They have set up 4800 branches and have covered more than 1380 cities and 76 airports all over China.

4. TTK Express 上海天天快递

They have weixin service as a method to track the package. Their business is mainly in Mainland China and Taiwan.

5. Yundaex 上海韵达快运

Their business is mainly in Mainland China and Taiwan. For international packages, they work with DHL, UPS, TNT, EMS.

6. EMS (Worldwide express mail service) 邮政特快

EMS is one of the major shipping companies in China which owns China Postal Airlines and China Post Logistics. The company has nearly 100,000 employees and 45,000 sales outlets in more than 200 countries and regions. The company possesses the world-acclaimed brand “EMS” and the leading domestic logistics brand “CNPL.”

Contact us for any question on the Chinese market

How can foreign businesses use new mobile payment methods to boost their business in China?

Create official accounts to provide special offers

The Alipay and WeChat Pay mobile payment methods offer the possibility to set up individual marketing campaigns. They are not only payment tools, it goes further. For example, you can attract your customers’ attention by directly offering coupons and promotions that can be used via Wechat Pay or Alipay. These coupons can be placed in applications during critical events such as the Golden Week, Singles Day, the Chinese New Year, etc.  For Wechat, it is called the WeChat Voucher solution.

You can also offer your customers a Wechat membership card which is a virtual discount card with the cumulative discount at several levels. Then, you will need to measure these actions, the ROI, to determine the impact on your business but it can attract new consumers and simplify your customer journey.

Allow mobile payments for your Chinese clients, out of China

According to a 2018 survey by Nielsen and Alipay, 91% of Chinese tourists would shop more if overseas merchants had mobile payment options. So if you want to increase your customer base of Chinese tourists, you can develop your payment options.

Allowing mobile payments for Chinese customers is what many countries are doing. According to Alipay’s statistics, in 2018, the number of mobile payment transactions has increased 75 times in Russia, 12 times in Canada and eight times in Malaysia. The same phenomenon has been observed in New Zealand, Australia, and Finland.

Recently, the Galeries Lafayette group in France, whose Chinese customers represent approximately 25% of its €2 billion turnovers, also chose to that implement this strategy.

After opening a store dedicated to Asian customers, the Galeries Lafayette group now accepts payments with Wechat. For the company, this is a logical step in its strategy to conquer the Chinese tourism market.

Want to know more about how you could leverage online payment platforms in China? Daxue Consulting’s Online market research service provides you with in-house service for every step of your research project and can help you to draw a comprehensive digital mapping of your sales funnels in China.

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

This article Payment methods in China: How China became a mobile-first nation | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

The unexpected coronavirus epidemic has subverted the way many Chinese people work. On the first day of resumption of work on February 3rd, 200 million people used DingTalk (钉钉)  to work remotely from home. Due to the excessive number of instantaneous visits, remote conference tools in China such as DingTalk, Tencent Meeting (腾讯会议) and Feishu (飞书) had a surge in growth. The video conferencing market in China was put on the map due to the Coronavirus outbreak when white collar workers had no choice but to work remote for two month’s time

Remote conference tools in China were not always popular. Chinese people prefer to discuss business face to face, as it is important in developing business relationships. However, the epidemic has become a catalyst of the boom of telecommuting market. In the past month, hundreds of millions of workers passively participated in a large-scale social experiment of remote conferencing in China. This experiment had not been strictly planned, but rather hastily entered the battlefield on an unprecedented scale. The participants of the experiment included company managers, white-collar employees and a large number of online office product providers. Now that China’s economy is recovering after COVID-19, the phenomenon also raises a question: how the video conferencing market in China will develop after business returns to normal

Source: qimai, Chinese Apple Store Rankings for Chinese remote work tools

The concerns of remote conferencing in China

The greatest convenience of remote conference tools is to save time and expenses of commuting and travel. In the past, the average commute time for people work in Beijing and Shanghai was almost one hour. In addition to getting up early to get prepared, they had to get up two hours in advance. After working from home for an extended period of time, most people found that they woke up later, and their working hours were longer.

As business owners or managers are most concerned about efficiency issues, they may wonder if employees still work hard from home.  They may ask themselves, do employees oversleep or get easily distracted, and can the progress keep up with the company needs? Therefore, it is important to improve online office efficiency and deliver remote office iteration rules once a week. On the first day of “Cloud Office”, most people felt that work efficiency was low because they all measured the efficiency of remote office based on the thinking of on-site office.

In the traditional Chinese office environment, employees are on-site, punching in at 9 a.m. and leaving at 6 p.m. More so than in western offices, it is important to the manager that employees show their dedication by clocking in long hours. The manager was more able to verify whether the employee has worked at least 8 hours by their naked eyes. Now, the manager has no way to verify that they actually worked for 8 hours since employees are ‘hidden’ through their computers. Therefore, many managers simply believed that employee definitely would not work for 8 hours.

Trust becomes a crucial factor for China’s remote work tools market to develop

Business owners and managers can see that everyone is working hard for 8 hours on-site. Even though, in fact, 8 hours on-site does not mean 8 hours of real work. Although there is no way to monitor at home, it does not mean that the work efficiency is lower than on-site work.

A week after the resumption of work, companies adopted the new project management manner said that remote conference did not affect the efficiency of work. Contrarily, it somehow showed higher efficiency than working on site.

‘Trust’ is the most important thing for Chinese managers. Managers should be able to believe that employees can do the same or better jobs at home than they do in the office. In order to support this kind of trust, the corresponding performance measure methods should also be adjusted. They should shift from time contribution to results oriented. Whether business owners could change their methods about performance measure and develop trust in their employees becomes a crucial factor for the remote conference tools market in China to develop.

Competition among Chinese remote conference tools

In February, when the epidemic prevention and control situation was most tense, the average daily downloads of DingTalk, WeChat Work and Tencent Meeting reached 229,400, 205,600 and 217,800 respectively.

These three Apps have been in the top 10 of the Apple App Store free application rankings since February 4th, corresponding to the high download volume and frequency of use. The video conferencing market in China have been greatly boosted during the epidemic. According to Apple App Store data, the current version update frequency for DingTalk is 2 times per week, WeChat Work 1.5 times per week. Tencent meeting is slightly lower, but it has reached 1.3 times per week as well.

Main functions and features of 3 mainstream remote conference tools in China:

WeChat Work: For office scenarios, WeChat Work currently provides free basic applications, including announcements, punching cards, approvals, reports, schedules, and collaboration tools. The basic operations are the same as WeChat and can exchange information with WeChat.

Source: Zhike, WeChat Work video discussion among employees working remotely during COVID-19

Huawei Cloud WeLink: WeLink is an intelligent work platform that Huawei Cloud launched at the end of 2019. It provides functions such as health check-in, information notification, 1,000-person online collaboration, thousand-person video conferencing, audio knowledge audio, cloud documents, online training, and work reports. It also can connect to large screen, smart camera, cloud printer, NFC and other external hardware devices.

DingTalk: The well-established remote conference tool, which has the functions of employees’ groups, group live broadcast, punching cards, online collaborative documents, nailing approval, and logs. It allows external intelligent hardware, audio and video calls. It provides adaptation solutions for industries such as medical, education, and government.

Source: News.nciae, DingTalk online class

Challenges of Chinese remote conference tools

As the epidemic prevention and control situation has gradually slowed down, more and more enterprises have returned to work on site. Daily activity has become the core KPI of remote conference tools in China. The only way to survive in the remote conference tools market in China is to ensure the amount of daily activity. This is not an easy task. There are three problems to be solved behind the video conferencing market in China.

Challenge #1: Building a tight connection between the office and online

A good remote conference tool requires a tight connection between office scenes and various functions. Therefore, users will not experience the split feeling of switching between different software. This requires remote conference tool innovators in China not only have a product thinking skill but also a platform thinking skill.

WeChat Work is an example of one of the successful remote conference tools in China. The version of WeChat Work 3.0, released on the “2020 WeChat Open Course PRO” in January, not only launches an efficiency package, but also a one-stop video function supporting video and audio calls and micro-documents supporting office collaboration. Wechat Work 3.0 also supports the “session mark” function of information processing, opens 13 types of 390 interfaces covering basic capabilities such as communication, storage, and security.

Source: Zhike, Wechat Work 3.0 switches between different software

Challenge #2: Connecting with external customers

The core essence of remote conference tools is to connect customers externally and continue the business. As WeChat Work can connect with WeChat, WeChat Work users can add WeChat personal users, the two Apps are on different platforms, but they can communicate and connect directly. WeChat Work is the only remote conference tool in China that can achieve the insensible connection of C-end touch.

Source: Zhike, Wechat Work user adds Wechat personal user

Challenge #3: Making remote work tools double as marketing tools

As mentioned above, Chinese remote conferencing tools need to connect customers externally and establish their own private database. This is only the first step for remote conference tools in China to survive and establish barriers to new entrants. In other words, they should establish their own ecological network to achieve a closed marketing loop, which is both remote conference tools and marketing tools.

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This article The video conferencing market in China booms with remote work demand is the first one to appear on Daxue Consulting - Market Research China.

This article will take a look at some of the main trends in the healthcare market in China, especially in tangent with COVID-19.

COVID-19 impact on healthcare in China

The COVID-19 has disturbed mankind’s way of life. Corresponding to the change in life, the consumer demand varies. To dip into the COVID-19 impact, here is a peek at the impact on healthcare in China.

Key sentiment: treat yourself

Since the epidemic, 75% of consumers are giving greater importance to their wellbeing, the demand of products for precaution such as dietary supplements, traditional Chinese medicine, vaccines and health insurance are expected to grow.

Mental treatment

Chinese mental health was also impacted by COVID-19. During the epidemic, many individuals have reported that themselves and their families have suffered from insomnia. Because of the quarantine, young Chinese people often stay up late watching series and playing games, damaging regular sleeping patterns. Some of them stated that they need help from melatonin and sleeping pills. The situation got even worst for medical workers. Due to high pressure and daily limited scope of activities, mental health significantly weakens and even aroused mental health disorders. When it comes to COVID-19 impact on healthcare in China, mental healthcare should also be taken into consideration.

The adoption of technology in healthcare offerings would be accelerated

A notable feature of China’s response to the COVID-19 has been the widespread use of mobile apps for medical information and services. Healthcare apps like Ping An Good Doctor, Ding Xiang Yuan, and Chunyu Doctor saw their user bases grow dramatically in response to the COVID-19. Ping An Good Doctor, for instance, reported a 900 percent increase in new users from December 2019 to January 2020.

During the epidemic, some Chinese hospitals are utilized robots to assist medical workers. Wuhan’s Hongshan Sports Centeri used robots and IoT-enabled technology to monitor patients’ temperatures, vital signs, heart rates, and other indicators to reduce personal interaction.

Focus on pharmaceuticals and vaccines

After the official confirmation that COVID-19 was human-to-human transmissible, Chinese citizens were keen on exploiting methods to combat the virus. Xinhua advised concerned people to try Shuang Huang Lian, an oral remedy, to combat virus, backing up the claim with a study by the Shanghai Institute of Meteria Medica and the Wuhan Institute of Virology. After the news report, Shuang Huang Lian sold out across the country and reached its peak on Baidu search even though the claim was denied by the popular medical information site Dxy.

[Source: Baidu Index, Shuang Huang Lian and COVID-19 searches on Baidu]

However, the Chinese pharmaceutical industry did stand in the spotlight during COVID-19 epidemic by proving its efficacy by practice. Of the confirmed cases of COVID-19 in China, 74,187 people used traditional Chinese medicine, accounting for 91.5%. Observation of clinical efficacy shows that the total effective rate of Chinese pharmaceutical to combat the virus has reached more than 90%. With the effective result shown, the global demand for Chinese pharmaceuticals are expected to soar.

Since the outbreak of COVID-19, people paid continuous attention to vaccines, which is seen as the core method to change the status quo and bring to normal life back.

[Source: Baidu Index, Chinese netizen searches for vaccines during COVID-19]

Segments of the healthcare market in China

People’s growing awareness of healthcare and the acceleration of population aging have brought prosperity to healthcare market in China.

Healthcare services and facilities in China

Healthcare in China is mainly supported by facilities such as hospitals and nursing homes.

Hospitals in China

The total number of hospitals in China has increased significantly over the last decade from roughly 197 thousand in 2008 to about 33 thousand hospitals in 2018. The region with the highest number of hospitals in China had been Shandong province with 2,451 hospitals, followed by Sichuan province with 2,219 hospitals. The booming trend of Chinese hospitals can be interpreted by the improve of China’s medical security system. 1,344.52 million people, over 95% of the country’s total population had been covered by the basic medical insurance system.

Chinese hospitals are divided into public hospitals and private hospitals by economic type. There had been 21,165 private hospitals in China, including 2,185 new ones compared with the same period of 2018 and accounting for 63.9% of the total number of hospitals. Social capital largely flows to specialized hospitals which need low investment but produce high return on investment and are in demand. In China, over 65% of private hospitals are specialized hospitals.

Nursing homes in China

With the increase of income and the improve in the pension system in China, pension consciousness is gaining popularity among the elder, the demand for nursing homes in China is stimulated. From 2013 to 2017, the number of patients in nursing homes in China showed an overall upward trend, which reached more than 2 million in 2018. However, the supply gap was growing from 2016 to 2018, reaching 9.14 million in 2018. The composition of nursing homes is unified since most of them are government facilities; there are relatively few privately owned ones.

Regarding the required services for nursing homes, 18.9% of China’s elderly population requires professional treatment, however, 15.9% of practitioners lack senior-focused professional training and 76.9% only receive fundamental training.  Related searches to “nursing homes” are “price,” “is it profitable to run a private nursing home,” and “how much is the nursing home per month.”

The medical device market in China

AI in China’s healthcare

AI is greatly applied in the healthcare market in China. The market size of the AI-related healthcare industry already reached 9.6 billion RMB. In 2019, AI expenditure in Chinese hospitals was RMB1.7 billion, with an increase of 88% over the previous year. A survey conducted by AI Blue Book – Chinese AI development in healthcare 2019 shows that a majority of Chinese respondents (78.4%) hold supportive attitudes towards the development of AI in healthcare.

AI has become a national strategy in China. The state has put forward higher requirements for the development of medical artificial intelligence. In July 2017, the State Council issued the “Circular if the State Council on Printing and Distributing Plan for Artificial Intelligence Development in a New Era”.

AI’s unprecedented tech advancements stood out during COVID-19. Regarding healthcare, the most visible use of AI is in mass surveillance and diagnosis which greatly help on combating the virus.

The biotech market in China

The industry scale of the biotech market in China boomed from 2010 to 2017, with a growth from RMB315.6 billion to RMB919.4 billion. The average CAGR is 17.7%. In China, the biotech industry are divided into seven categories: biomedical industry, biomedical engineering, bioagriculture, biomanufacturing industry, bioenergy industry, bioenvironmental protection industry, and bioservice industry.

[Data source: chyxx.com –The Market Size of biotech in China, 2010-2017]

Biotech greatly contributed to speed up the confirmation of COVID-19. The core of COVID-19 testing diagnostic kits are Biochip, which enables virus testing within 15 minutes.

The diabetes treatment market in China

China is currently the country with the largest number of diabetes patients, which is around 116.4 million adults. The prevalence of diabetes in China increased by 2.7% from 2008 to 2013. The 20 to 39-year age group drives the increase of over-weight and obesity. IDF estimates that the annual health expenditure on diabetes in China is 294.6 billion dollars, ranking the first in the world.

In the early stage of diabetes, the increase in blood sugar of diabetic patients will not cause obvious symptoms of discomfort. It can only be discovered and diagnosed by blood collection, which makes it difficult for early detection and screening of diabetic patients. The penetration rate of diabetes diagnosis and treatment in China is only 30%, and over 60 million patients have not received treatment. With the development of economic, the national healthcare in China raises. Local governments have proposed a policy of free medical examination for the elderly once a year. In the early future, the demand of diabetes treatment will continue to expand with increasing penetration rate of diagnosis.

Dominated by foreign brands

Foreign brands still dominate the diabetes treatment market in China. They remain as the major contributors of new diabetic drug innovations. Compared with the global market, China’s diabetes drug structure is backwards, with traditional hypoglycemic drugs as the mainstay. But the new hypoglycemic is developing. In the adjustment of the national medical insurance catalog in 2017, five domestic DPP-4 inhibitors were included in the national catalog, and then liraglutide also entered the national medical insurance catalog through national negotiations. The launch of the new mechanism of hypoglycemic medicine in China and the introduction of them into the national medical insurance will bring about a structural upgrade of the domestic diabetes drug market. However, due to the high price of the new mechanism of hypoglycemic drugs, they are only used as second-line drugs.

Medicine market in China

Pharmaceutical market in China

China’s pharmaceutical market has been constantly growing in recent years. It is estimated to reach $161.8 billion by 2023 and take a 30% share of the global market. As part of the “Made in China 2025” industrial plan, China hopes to reinvent its pharmaceutical industry. The pharmaceutical industry is a high-technology field that requires massive amounts of research and development.

The vaccine market in China

As an important precaution method, vaccine is spurring in the healthcare market in China. Driven by the ‘Two Child Policy’ and the booming demand for novel vaccines such as HPV vaccine, the market size of Chinese vaccine is estimated to grow to 40 billion yuan in 2025.

[Data source: Statista, size of Chinese Vaccine Market, 2019-2025]

There are two categories of Chinese vaccine one stands for public sector (Category I) which are compulsory and free of charge, while the other one is part of the private sector (Category II). Category II vaccines in China will be included in the free-of-charge category I vaccines in China, leaving less market share for foreign companies and making it more difficult for foreign-made vaccines to stay in the Chinese vaccine market.

The traditional Chinese medicine (TCM) market in China

The market size of TCM is expected to reach to RMB537.6 billion in 2020, which account for 32.4% of the medicine market in China. TCM treatment shared the same popularity as western medicine when it comes to healthcare in China. A survey shown that 49% of respondents prefer TCM treatment, which is basically the same as that of Western medicine.

[Data source: Qianzhan, The Market Size of TCM in China, 2011-2020]

Indeed, we can find the first traces of traditional Chinese medicine 5,000 years ago. The treatment also adapted to the modern life and modern practices of the Chinese medicine. Traditional Chinese medicine has spread to 183 countries and regions in the world, currently 103 Member States have approved the use of acupuncture, 29 of which have established laws and regulations on traditional medicine, and 18 have included acupuncture in the medical insurance system. With the international recognition of traditional Chinese medicine and the “Belt and Road Development Plan for Traditional Chinese Medicine (2016-2020)” and other policies to encourage Chinese medicine culture to “go global”, the import and export trade see a good opportunity for development.

Author: Dongni He

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This article The healthcare market in China is the first one to appear on Daxue Consulting - Market Research China.

China is a leading country in the world’s paper production, consumption and imports for decades. However, Chinese paper market is facing both opportunities and challenges..

Production, consumption and revenue of paper and paperboard in China experienced a drop in 2018

[Data Source: Chinese paper industry Association, “The production volume and consumption volume of paper and paperboard industry in China”]

Generally, the paper market in China saw an increasing trend from 2008 to 2018. According to the statistics released by the Chinese paper industry Association, the production and consumption of paper and paperboard in China had a stable annual growth rate of 3.08% and 3.16% respectively. In 2018, China’s consumption reached 104.39 million tons and it produced over 104.35 million tons to rank the first in the world. However, compared with that of 2017, the production of paper and paperboard decreased by 6.24% while the consumption experienced a drop of 4.2%.

[Data Source: Chinese paper industry Association, “Industry revenue of paper and paperboard in China”]

Similarly, in 2008, the industry revenue of paper and paperboard in China declined for the first time in more than a decade, decreasing from 921.5 billion yuan in 2017 to 815.2 billion yuan.

China’s imports and exports of paper, paperboard and papermaking raw materials

The imports and exports of paper and paperboard show opposite trends

Due to old production technique, China had been importing more paper and paperboard than exporting before 2010. Since 2010, the exports have exceeded imports in Chinese paper and paperboard industry. The imports dropped from 6.37 million tons in 2002 to 2.82 million tons in 2014, and then gradually rose to 6.22 million tons in 2018 while the exports increased from 0.855 million tons in 2002 to 6.81 in 2014, and then fell back to 6.18 million tons in 2018.

The imports of papermaking raw materials (pulp, waste paper) have increased at a rapid rate and significantly exceeded the exports for decades

[Data Source: China Customs, “The imports and exports of pulp in China”]

The imports of raw materials of papermaking in China, including pulp, waste paper, paper veneer have grown at a fast pace for over thirty years because of the increase in the demand for paper products and lack of high-quality raw materials. China has imported a large amount of raw materials from the international markets and the imports of pulp and waste paper have soared from 5.26, 6.87 million tons in 2002 to 24.79, 17.03 million tons in 2018 respectively. The shortage of papermaking raw materials and the increasing demand in the Chinese paper market can explain such trend of imports and exports of papermaking raw materials.  

Different kinds of paper and paperboards

The paper and paperboards industry breaks down into the cardboard, corrugated paper, uncoated printing & writing paper, white board, household paper, coated paper, package paper and others.

The above pie charts compare the production and consumption of different kinds of paper and paperboard in China in 2018. Cardboard, corrugated paper and uncoated printing & writing paper are main kinds of paper and paperboards in terms of both the production and consumption. The white board, coated paper and package paper ranked the fourth, the fifth and the sixth of the production respectively. As for consumption, the proportion of package paper is slightly higher than that of household paper.

[Data Source: Chinese paper industry Association, “The production volume and consumption volume of Chinese household paper market”]

It is worth noting that the production and consumption of Chinese household paper (which breaks down into the kitchen paper, toilet paper, paper napkin, tissues, women’s sanitary napkins, and baby products) saw a continuous upward trend from 2009 to 2018, raising from 5.8 million tons to 9.7 million tons in production and from 5.3 million tons to 9 million tons in consumption. The average annual growth rate of production was 5.88% while that of consumption was 6.1% in the same period.   

The production and consumption of cardboard, corrugated paper and package paper showed similar trends with the paper and paperboard industry in the period from 2009 to 2018: increased steadily from 2009 to 2017 and fell back in 2018, with annual growth rate ranging from 2% to 3%.

A giant paper brand in China: APP

The Singaporean-based company, Asia Pulp & Paper, also known in the paper industry as APP, is one of the largest pulp and paper companies in the world. APP-China has focused on operations in the Yangtze River and Pearl River Delta regions since 1992, and has invested in several large world-leading pulp & paper companies, including Gold East, Ningbo Zhonghua, Ningbo Asia, Gold Huasheng, Gold Hongye, Hainan Jinhai and Guangxi Jingui as well as large scale, modern fast-growing forests.

Following the enterprise philosophy of sustainable development, APP always attaches importance to its special relationships with society and environment. It strives to protect environment and take social responsibility. In order to make APP a first-class enterprise of the world which integrates forestry, pulp and paper production, it invested heavily on artificial forestry development. Until now, its forestry enterprises has made over 4.3 million mu of artificial forestry in China, and the circulating economy model that integrates forestry, pulp and paper production has taken shape now.

Furthermore, over 10 pulp and paper enterprises invested by APP have all passed accreditation of ISO 14001 International Environment Management System, and Ningbo Zhonghua was the first paper-making enterprise that passed accreditation of ISO 14001 International Environment Management System in China. Gold East Paper and Ningbo Zhonghua Paper were awarded “National Environment Friendly Enterprise” in September 2004 and November 2005 respectively, which gradually changes the bad image of pollution maker of paper-making enterprises.

External challenges: The impacts of China’s new regulations on the paper industry

The biggest challenge for Chinese paper industry is the serious shortage of domestic raw materials and China has become highly dependent on international raw materials suppliers. However, due to more and more demands and awareness of environmental protection, in recent years the Chinese government has implemented a series of new regulations on raw materials of papermaking importing, for example, prohibiting importing of unsorted waste paper, lowering the foreign (non-paper) content in the imported waste paper from 1.5% to 0.5% and implanting new import restrictions on recovered paper.

The new policies and regulations have far-reaching impact on China papermaking industry. In China, paper and paperboard producers are currently facing a growing challenge of rising prices across the chain. Although in 2019, China’s containerboard demand recovered to some degree and the recovered paper gap was made up by imports of recycled pulp and containerboard. However, in 2020, with China’s move towards zero RCP (recovered paper) imports, a further potential 40% to 50% reduction in RCP imports will trigger a ‘new’ raw materials supply gap. China’s producers in paper and paperboard industry will continue to be challenged by this new situation.

Internal challenges: Reform in paper industry in China

From the perspective of domestic paper industry, a number of problems accumulated in China’s paper industry during the Golden Decade (2000-2010) have begun to erupt, such as dependence on raw material imports, structural overcapacity, high import dependency of high-end paper products and un-established waste paper recycling and classification system.

In addition, from 2011 to 2015, China has eliminated backward paper capacity of 40 million tons and target for new closure will be another 8 million tons during 2016–2020, which means the industry integration will continue to increasing. It could be tough for small market share companies as well as high polluting and high energy-consuming companies in paper industry.

Potential business opportunity of paper market in China

From demand side, there is still room for development in Chinese paper market

In 2017, the world’s per capita consumption of paper was 54.71 kg per year. Europe and North America are the main force of paper consumption: the figure was 229 kg per year for North America and 178.7 kg for Western Europe. Comparatively, China’s per capita consumption of paper was 75 kilograms. Per capita paper consumption is closely related to the economic development of various regions.

In developed areas, people have relatively higher requirements for the quality of life, which is often reflected in the more exquisite product packaging, the increase in consumption volume of household paper and the continuous emergence of new subdivision paper demand, leading to higher paper consumption.

Since 2000, China’s per capita consumption of paper has increased by 150%. However, the current figure (75 kg per year) is still low considering China’s economic rise. From a global perspective, China’s per capita paper consumption has much room for growth.  

Also, as we have mentioned before, the Chinese household paper market has great potential opportunities. If you need more information about this market, please refer to the toilet paper market in China.

Opportunities during industrial transformation

Since available domestic recycled pulp capacities and the weak waste paper recycling capacities cannot sufficiently fill the gap between demand and supply yet, there are opportunities for additional containerboard imports. And due to the more and more strict import restrictions on waste paper, international importers with high-quality waste paper will be more competitive. Also, the import restrictions will provide great opportunities for both international and domestic waste paper recycling market, which aims to improve China’s waste paper utilization and recycling rate.

Facing both internal and external challenges, many paper companies are accelerating the structural adjustment and continue to eliminating less efficient capacities. At the same time, paper companies have been expanding into the industrial chain through the extension of upstream and downstream, in order to achieve the control of raw materials by reducing costs.

Government goals of self-sufficiency

It may be a good timing for companies to invest in new capacity in China if substantially less efficient capacities leave the market.  

Overall, the paper market in China is set to enter a new era of great challenges and opportunities while transforming towards achieving the Chinese government’s goals of self-sufficiency and environmental sustainability. Challenges could sometimes be turned into business opportunities if you are sensitive and insightful enough.

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This article Paper market in China: Imports and exports in balance is the first one to appear on Daxue Consulting - Market Research China.

1. Creating a Chinese business name

Finding an appropriate Chinese name for your company is a requirement. Once you have registered a Business Name, you may go a step ahead to getting a logo for your new business. All these three should be unique and not like any other registered business. This will be the trademark of your business and if in doubt over the name, logo or domain selected, there are sites that can help you know if the one you select or create has already been taken. By failing to do so, you may end up registering using either a business that closed or one that never took off, eventually bringing confusion to prospective customers who search for your business.

When starting a business in China, there are certain research strategies to find a solid business or brand name. Unless you are a native Chinese speaker, it is not advised to choose a name yourself. There are many underlying factors to maneuver. For one, dialects; something that sounds nice in Mandarin may translate to something unappealing in Cantonese or Shanghainese. Secondly is tones. Although a translation of a brand name might accurately describe the brand, Chinese speakers are sensitive to how tones of syllables fit together. Hence certain phrases may sound poetic and charming, while other phrases may sound unappealing. Third is meaning. Some brands choose to transcribe the sound of their brand in English to Chinese without considering the meaning. This can be disastrous if the characters used have a conflicting meaning with the brand purpose.   

2. Have a business plan backed with market research

Failing to have an established business plan is like planning to fail. One thing that a new start-up again may confuse is a Business Plan and a Business Structure. These are two different things. First, doing some research and deciding whether to be a Sole Proprietor, venture into a Partnership or register a company, should be the first step into knowing what business plan to have. Once you have decided on the type of business, you can then lay down the plan. Contained in a Business Plan are aspects of funding as well as what type of business venture to undertake. It will also entail how you plan on spending, so as not to over or underspend.

When starting a business in China, market research is an important part of a business plan. Consumer research like social listening or focus groups can help brands understand their target consumer preferences. Feasibility research and market sizing help companies understand the practical steps to take the capture their share of the market.

3. Create a business structure that supports flexibility

A business structure is different from the business plan. While new startups confuse this, they eventually lack a management scheme and gradually finish to poor management. So, a Business Structure is what entails what every employee in the business is to do. From the executives, accountants, superintendents, junior staff to all other working employees. When deciding on what structure to have, it is advised to seek the knowledge of professionals and experts in the field as such, professionals such as lawyers, accountants, and even some business people may help you understand and decide on the best business structure for your business.

Adapting to a more Chinese business structure can be quite demanding. Higher ups in Chinese companies demand a lot from inferiors, but in turn, treat them like family. Although often being very hierarchical, Chinese companies tend to be more nimble than their western counterparts. Companies that aim to compete in the rapidly changing Chinese market must also have a business structure that supports flexibility.

4. Finding the right business location

This is a vital element. For those looking to register a business in China, failing to understand the laws of the land could lead to problems. Again, this is among the biggest problems faced by startups. You will need to understand laws relating to taxes, registering the business as well as the many different laws within the country. So, to avoid legal when starting a business in China, it is similarly advised to seek the counsel of those experienced in the field or do thorough research.

Many foreigners who are starting a business in China flock to cities like Shanghai and Beijing. However, although China’s megacities are well-connected and have a lot to offer, it is worth considering smaller cities where prices may be lower. For example, setting up a business in Hangzhou is great for online companies.

5. Finding your competitive edge

The nature of the business is an essential aspect in determining how things will be run. In other words, this is a sure way to set yourself apart from other ventures depending on the type of business you carry on. Note that, this is also an aspect in the Business Plan, and because of that it should be a well-researched type of business to avoid huge competition. Though competition is good, you will need to offer something new to the competitive edge so as to keep the light on.

Without a competitive edge, in the competitive Chinese market, brands are forced to compete by price, which means taking slim profit margins. In the food and beverage industry, a competitive edge could be health and safety. Chinese consumers are growing more health conscious, and especially since the COVID-19 outbreak, consumer have health on their mid.

Never stop learning

So, considering these factors carefully, you will be on the way to having a fruitful business. It is also recommended to do more research over the matter of opening a business to have enough knowledge when you do so.

For those seriously considering starting a business in China, learn from those who have succeeded before you. The China Paradigms podcast series has over 100 stories from entrepreneurs in China, from a wide range of backgrounds and industries. You can find the podcast on Apple Podcasts, Spotify, Soundcloud and Youtube.

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This article 5 Things everyone gets wrong when starting a business in China is the first one to appear on Daxue Consulting - Market Research China.

While the epidemic is expanding globally, Chinese economy is gradually emerging from its lethargy. After the country’s quarantine has just ended, Chinese consumer behavior is no longer the same as before. During the epidemic, we have seen giant brands cutting down their operation like Ikea, Starbucks, and McDonald’s. The chain of events leads to the need of Coronavirus crisis management in China.

Crisis management in China have never been more critical for brands, which had to adapt their operation strategies to protect their employees and customers from contamination to stay afloat. From fast food to e-commerce, including AI and transport, here is an overview of the measures taken by leading brands in these industries to handle the coronavirus crisis, and how they bounced back

Didi’s Coronavirus crisis management in China: Keep driving through the epidemic

Reports of multiple drivers being diagnosed with the coronavirus affected China’s ride-hailing service market, while travel restrictions across the country had already hit the industry hard. Concerns have arisen over potential infections after a driver on Didi Chuxing, China’s largest ride-hailing company, was diagnosed with the coronavirus in early February. Under these not-so-favorable circumstances, Didi Chuxing has taken strategic steps for Coronavirus crisis management  in China.

A special fleet for medical workers and citizens

After shutting down service provision in a range of cities including Wuhan and Beijing, the company has deployed two exclusive fleets of drivers dressed in protective uniforms with regularly disinfected vehicles. The 1,336 volunteer drivers operated in Wuhan, the epicenter of the outbreak, and in Shanghai to provide free transportation services to all hospital staff. Didi’s special fleet is said to have transported more than 9,500 medical workers in Wuhan and Shanghai. This measure is the first one to be listed in the “Didi on the frontlines, Didi in action” feature, directly accessible on the Didi application. The company also said to have RMB 200 million (around USD 28 million) mobilized for protective medical supplies and allowances for these fleets.

[Source: Didi, Weibo – The special fleet for medical workers in Wuhan]

The in-app feature is entitled ‘Your ride is protected, travel with peace of mind’, detailing rules to be followed by both drivers and riders to protect themselves from contamination including standards for masks, ventilation, and vehicle cleanliness. The ‘Safety Center’ of the application has been updated to include these safety rules. The company’s main communication channels, the Didi app and the Weibo social media account, followed by 3 million people, are mobilized to spread the messages from the company to the community. During the outbreak, Didi has posting daily on its Weibo account.

[Source: Didi app – Coronavirus crisis management in China]

Special measures for special drivers

In the boring-at-home times where scrutinizing and reacting to the news has become the main Chinese consumer behavior, an agile communication strategy in China is vital to keep control over one brand’s image. On February 4, Chinese social media Weibo ignited after a Didi driver was diagnosed with the Coronavirus. “Didi is in touch with the driver and will provide extra subsidy for him during the treatment,” the company said in a quick reaction on February 6. “We have provided relevant information to the local government and are working closely with them on virus prevention and control.” Following this measure, the company released a special insurance program providing a daily allowance up to RMB 30,000 (USD 4,300) for any driver who is hospitalized for the Coronavirus.

To enhance the safety of the drivers and passengers, the ride-hailing company opened ‘driver epidemic prevention service station’ in 106 cities across China to distribute face masks, disinfectant, and other anti-epidemic materials to the drivers.

[Source: Didi, Weibo – one of the 106 ‘driver epidemic prevention service station’]

As the number of passengers drops during the epidemic, Didi wants to showcase that its cars remain the safest means of transportation. In order to further safeguard citizens’ safety on the road, DiDi introduced the “epidemic prevention” QR code, which includes the sterilization records and register information of each car. On the Weibo account, numerous pictures illustrate the disinfection of vehicles by the drivers.

The results of Didi’s crisis management in China

DiDi’s timely Coronavirus crisis response received positive feedback from society, strengthening DiDi’s brand awareness in China. The Huhhot government reported DiDi’s response to the coronavirus epidemic on February 29^th, and praised its actions on preventing and control the disease.

[Source: Didi, Weibo –Positive social reaction]

After DiDi announced to take actions to prevent the spread of the virus, a Weibo post about DiDi’s handling of the crisis went viral. Many Chinese netizens praised DiDi’s efforts to act as a socially conscious company. As of early March, since the virus has been under control in mainland China, resident trips in major cities has increased by more than 30%.

McDonald’s coronavirus crisis management in China: Safeguarded meals

“China is a critical market for us, and we’re very concerned about the situation over there” CEO of McDonald’s said late January. Adding its name to the list of global companies bracing themselves for the impact of the coronavirus outbreak, the American fast-food chain decided to shut about 300 restaurants localized in areas where the spread of the epidemic was significant. With 3,000 restaurants still in operation across China, what measures have been taken to ensure the safety of both employees and customers?

A special Coronavirus crisis management team to deal with the outbreak

McDonalds was checking the temperature of customers as early as January 2020. While the coronavirus crisis was in its infancy, the company was already well prepared to protect the health of its employees and customers. Thus, strict in-store prevention measures were taken such as equipping stores with hand sanitizer for customers and disinfecting frequently touched surfaces

According to its CEO, the American company decided to set up a special crisis unit to deal with the outbreak. Handling Coronavirus crisis management, the unit’s work has been witnessed through a specific communication strategy with a campaign called ‘放心送’, meaning ‘worry free deliveries’. Indeed, Chinese consumer behavior during the outbreak involves ordering delivery rather than going outside for lunch.

[Source: Eleme饿了么 – McDonald’s ‘放心送’ campaign to adapt Chinese consumer behavior during the epidemic ]

Contactless delivery during the Coronavirus outbreak in China

On February 1st, McDonald’s launched a contactless delivery service available on food ordering platforms such as Meituan美团, Eleme 饿了么, and its own application. As people rely massively on Meituan美团 and Eleme饿了么 to order meals, the company’s communication strategy in China has paid attention to get visibility on these third-party platforms. Following six epidemic prevention principles, the contactless delivery service aims to ensure the delivery of safe meals. Temperature is systematically checked, from the cook to the delivery person, restaurant and kitchen are regularly disinfected as well as the delivery box and the delivery bike. Employees are required to wash their hands and wear a mask. The meal is dispatched in front of the residences as deliverers are not allowed to make door-to-door deliveries. All delivery orders are accompanied by a ‘Safety Delivery Card’, which indicates the name and temperature of the prep and delivery staff.

[Source: daxue consulting ‘Safety Delivery Card’]

Free meals for medical staff

Following Didi’s strategy to be present on the frontlines directly offering its core services, McDonald’s is offering free meals to medical staffs fighting against the coronavirus. One week after the opening of a dedicated restaurant in Wuhan, on February 3, the company announced on Weibo to have delivered around 3,500 free meals to support the battle.

[Source: McDonald’s Weibo – Free meals distribution to medical workers in Wuhan, a key component of their Coronavirus crisis management strategy.]

The result of McDonald’s crisis management in China

Due to McDonald’s quick strategy adaptions, around 3,000 offline stores operated as usual during the coronavirus outbreak, which have minimized financial loss. To further support its customers, the company introduced a Big Mac Burger combo and named it as “助你一BIG之力” (‘spare no effort to help you’.) The combo only costs 20 RMB and was available from March 4 to March 24. To convey positive energy, McDonald’s started a topic called “助你一BIG之力” on Weibo, encouraging consumers to create DIY “cheer up” cards.

The company has won respect and support from Chinese consumers, evidenced by their engagement to support the brand on the Chinese social medias. Under one of McDonald’s WeChat posts with 100k+ reads, one reader said she is greatly moved by learning the news that McDonald’s delivered free meals for medical workers, and she will continue to support McDonald’s.

McDonald’s once again proves that beyond the name and the symbol, it embodies the concept of Globalization: think global, act local. Indeed, its Coronavirus crisis management and communication strategy in Chinaare testimony to the brand’s capacity to successfully adapt to local market constraints.

Baidu’s crisis strategy – AI for a safer world

BBaidu, the tech giant that operates the country’s largest search engine, spares no effort to help those working to stop the Coronavirus outbreak. Predicting that the turnover in 2020 Q1 would fall by 5% to 13% compared with the same period last year, Baidu’s online advertising and marketing service sector is badly affected by the epidemic.  However Baidu’s internet search solutions may benefit from the situation, since people are much more likely to do research and stay informed of new developments. Thus, from January 21 to 24, more than 1 billion people on average searched or browsed information on 2019-nCoV on Baidu every day.

Baidu’s crisis strategy during the Coronavirus involves  AI and big data. In 2017 the company made no secrets of its ambitions to become the first global company in the Artificial Intelligence sector. Well, it seems that Baidu brilliantly took advantage of the recent events to show off its AI-fueled muscles, aiming to improve its brand awareness in China and beyond, in this specific field.

Baidu uses AI to predict virus’ secondary structure

On January 30, Baidu Research Institute opened up ‘LinearFold’, its RNA prediction algorithm, to global genetic testing agencies, epidemic prevention centers, and scientific research institutes, for free. The ‘LinearFold’ deep learning tool only takes 27 seconds to solve the RNA secondary structure of the 2019-nCoV — 120 times faster than the top classic algorithms. This tool, which could appear to the uninitiated as a gadget for biologists, is one of the latest breakthroughs in the medical field and an opportunity to better understand the virus and develop targeting vaccines.

New features to spread knowledge

On its search engine and map applications, the tech company has set up a powerful information center closely following the reported new cases and providing insightful trend data. The application menu shows real-time infected cases at several scale levels, evolution curves, location of the nearest hospitals, top researches of netizens on the virus, as well as options to take free online courses. The platform displays the number of visits to the information center, which reached more than 2.5 billion views.

[Source: Baidu app – Information center about COVID-2019 m]

Among others, a new self-testing feature using AI and big data is available from February 11. After the user has entered basic information about his state of health, the tool reviews a new coronavirus pneumonia diagnosis and treatment scheme and combines many online consultation cases. For the better or worse, it gives diagnostic probabilities of infection.

Big data powered maps

The tech company has also integrated the coronavirus outbreak into its Map app, making it easier for people to avoid contaminated areas. The company had built a special ‘epidemic map’ which shows the location of both confirmed and suspected coronavirus patients in real-time.

[Source: Baidu Map App – The ‘epidemic map’]

Another interesting tool is the ‘Migration Trend Map’ feature. People can check the migration status of all Mainland cities from the first day of the Spring festival to now. In 2018, it was estimated that Chinese travelers made around 3 billion trips during the 40-day Spring Festival period. The feature is useful when it comes to making travel plans to go back home at the end of the Chinese New Year and avoid the rush. After entering Baidu’s migration platform, people can select the ‘migration destination’ or ‘migration source’ of a city and view the graph of migration trends compared to last year’s one. While it’s not clear how the epidemic map collects data to ascertain the locations of the patients, the migration map is powered by the positioning data from users of the standard Baidu Map service, which has been densified to ensure privacy.

[Source: Baidu ‘Migration Trend Map’]

The result of Baidu’s crisis management in China

By being a resource for real-time information, the value of Baidu as an information portal has been highlighted. Since the coronavirus outbreak, over 1 billion people searched and read coronavirus related information through Baidu every day. As of March 20th, 651.6 million people had visited the “online diagnose” platform powered by Baidu health, and over 30 million people had consulted the platform. Therefore, recognized as a reliable information portal, the average daily active users of Baidu APP exceeded 20 million, a 10.4% growth compared with the same period in 2019.

JD.com – an opportunistic déjà vu

Just like nowadays, when the SARS virus swept through China in 2002-2003, it resulted in millions of workers isolating themselves in their homes. This phenomenon turned out to be pivotal for several now dominant e-commerce companies, such as JD.com.

The company was created in 1998 by Richard Liu, and initially sold magneto-optical products in the Zhongguancun High-Tech Industrial Park region of Beijing. By 2003, the company was thriving with 12 physical stores. However, the severe SARS outbreak threatened Jingdong’s future. Recognizing this as an opportunity to pivot the business, Liu quickly reconsidered his brick-and-mortar storefront and the possibilities for the same idea using an e-commerce model. The e-commerce platform became a big hit almost immediately, and JD.com was born.

The coronavirus outbreak hovers like a deja-vu for China’s biggest online retailer. Following a similar scheme as 15 years ago, JD.com is taking advantage of the epidemic to implement a based-on-innovative Coronavirus crisis management strategy.

Deliveries by drones and robots

It’s a unique opportunity for the company to soar above its competitors. JD reported its first successful delivery via drone in Hebei province on February 7th. The drone completed a delivery to a remote village, which delivery people used to reach with a boat, a route temporarily closed because of the outbreak. The day before, on February 6, JD’s autonomous delivery robot successfully made its first delivery to Wuhan Ninth Hospital, a designated hospital for the treatment of the novel coronavirus pneumonia in the epicenter of the outbreak. “JD autonomous delivery robots can help reduce human-to-human contact making them an ideal solution for last-mile delivery solution in Wuhan” said Qi Kong, Head of Autonomous Driving at JD Logistics

[Source: Freight Waves – JD’s drone completing delivery test]

Deliveries by drone and autonomous robots are not a brand-new service from JD.com, which already began daily operation in two test cities last year. These exploits, beyond its practical and beneficial effects to avoid contamination, are a part of a well-established communication strategy in China to exhibit the brand capabilities. The e-commerce company made videos of the two deliveries that are frequently shared on Chinese social media, as well as Twitter, LinkedIn, and Facebook.

Special measures for special deliveries

JD’s corporate website, Weibo and social media accounts detail other individual steps taken against the coronavirus. Like Baidu, the online player sometimes posts more than five times a day virus-related content on Weibo. Grateful to its delivery couriers, the company released the portraits of some of these ten thousand ‘heroes in red’ who were still working during the peak of the epidemic to meet consumer demand in China. Similar to Didi, the company stepped up the allocation of emergency materials for epidemic prevention, such as masks, thermometers, protective glasses and clothing, disinfectant, and a special insurance plan for its employees on the frontlines.

The Coronavirus crisis management of JD.com also welcomes AI as a powerful instrument to join the fight. On February 4, JD implemented its ‘smart epidemic assistant’ into the Wuhan Mayor’s Office WeChat account. The smart assistant, relying on AI capabilities, including semantic and syntax understanding, can automatically answer a wide range of questions from the Wuhan’s dwellers. Currently, it provides functions including epidemic self-screening, medical guidance, and even a way to inquire if a user’s flight or train had a coronavirus patient on it. Cloud and AI branches of the e-commerce giant also launched the ‘Emergency Resources Information Platform’ which provides municipal and medical institutions direct access to 3,000 online medical suppliers. As of February 4, the platform has performed the sourcing of more than 19 million protective face masks.

The result of JD.com’S crisis management in China

During the outbreak, JD.com made great contributions to ensure the stable operation of front-line assistance. Social responsibility and impressive logistics management allowed the brand to receive positive comments and obtain good reputation. For example, Dr. Zhong Nanshan – who discovered the SARS and is therefore widely recognized in China – wrote a thank-you note for JD’s “frontline medical assistance and urgent delivery of medical supplies to Wuhan.”

On March 2nd, JD.com published its 2019 Q4 financial report. After seeing the initial impact of the virus, JD.com still estimated an increase of more than 10% of the net income year-on-year in 2020 Q1. As JD.com continued increasing technology development, its anti-risk capabilities of the supply chain and logistics system have improved significantly.

Proper Coronavirus crisis management will improve brand awareness in China

Throughout the crisis, brands operating in China have demonstrated that they have a significant role to play in these times of public health challenges. Many of the brands have put robust measures to ensure the safety of their employees to ensure the business continuity – sometimes with great financial consequences. Overall, brands’ communication strategy in China show an understanding, caution, and optimism, which reflect trust in the future.

It’s precisely because there will be a future that brands, dare to innovate by engaging their core competencies in their China crisis strategies. Seizing crisis as an opportunity to show to the world that they not only have social duties, but also an increasing positive social impact. As China’s economic recovery from COVID-19 continues, it is now in the hands of other countries to figure out the best crisis management strategies.

Author: Maxime Bennehard

The ultimate Coronavirus economic impact in China report

Everything you need to know about the coronavirus by daxue consulting from Daxue Consulting

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