Matthieu David interviews Michael Chiao, a Founding Partner at MEGI and Axel Standard. Finance and accounting management are important for companies as they weigh heavily in decision-making. That’s why MEGI, cloud-based accounting software has seen a great subscriber count since it’s creation. But is there a local market for such software? Are Chinese companies getting this type of management done internally or are they moving towards streamlining it? Find out the answers to these questions and more in this new China Paradigm interview.

• 2:55 MEGI – brief company history
• 4:33 The coronavirus outbreak – growing the company in uncertain times
• 7:10 MEGI – current client base
• 8:03 Small numbers or niche numbers – what is MEGI’s focus demographic?
• 9:35 Foreign companies vs Local companies in China – the culture difference in finance management
• 13:42 Do Chinese companies do analog SaaS services internally?
• 17:23 Are Chinese small and medium companies changing the way they manage their business internally?
• 23:25 Current company yearly revenue
• 26:24 What was the initial subscriber goal for MEGI?
• 29:38 What specific key features do clients value for MEGI?
• 33:04 How hard is the process of bank reconciliation through MEGI?
• 35:23 China’s baking system accessibility – how hard is it to integrate with MEGI software?
• 37:48 How is MEGI able to handle finance reconciliation in the present?
• 41:16 Why did MEGI decide to focus on the financial statements?
• 46:12 Big Data Collection – has MEGI achieved critical mass yet?
• 51:42 What type of loans can small and medium companies expect to get from other companies or banks in China?
• 56:38 What is the process of deciding and then implementing a new feature for MEGI?
• 1:00:30 Listening to your client – a key requirement in software feature development?
• 1:01:49 What is Axel Standard and what do they do?
• 1:06:26 How has computer science evolved since 1998?
• 1:08:51 How has China benefited over the years by opening up to the world?

We believe, that China, with 20% of world population and as the second world economy, is impacting every single business, small to big. That is why it is a new paradigm. How does China impact your business is the ultimate question we will answer through those podcasts.

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 #113: Understanding business practices and technology maturity in China through a SaaS case is the first one to appear on Daxue Consulting - Market Research China.

Cloud computing is the storage and processing of data on remote data centers. Cloud storage reduces the burden on computers which makes possible more work flexibility. A large tech savvy population and need for data security drive the development of cloud computing in China.

China has the largest online population in the world, with over 800 million internet users. Therefore it is no surprise that China generates an enormous amount of data that must be stored securely. Cloud-based servers are more scalable, affordable, and secure than on-site servers, so they perfectly satisfy China’s huge demand for flexible data storage.

The technology is being rapidly developed in various sectors and is already generating over five billion dollars in revenue annually. Generally the three main types of business delivery models available for cloud computing are Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS). Meanwhile, data can be stored from the public cloud, private cloud and hybrid cloud.

Sizing the Chinese cloud computing market

In 2018, the Chinese cloud computing market was second in terms of overall size. It accrued approximately $13.4 billion dollars in annual revenue compared to $53.4 billion of the US. Despite this, the Chinese government is dedicated to pushing the market to approximately $64 billion by 2020, creating major business opportunities for cloud computing providers. At any rate, China’s cloud computing industry is projected to exceed 300 billion yuan ($42.3 billion dollars) by 2023, by which time an estimated 60% of domestic companies and government agencies will be using cloud computing services.

[Source(s): Statista, IDC, China’s cloud computing market size]

According to the Chinese Ministry of Industry and Information Technology (MIIT), from 2015 to 2019 officials have been working to more than double the scale of China’s cloud computing industry. Many analysts predict that public cloud usage rates could grow more than 20% annually to 2023.

Large enterprises, government agencies and financial institutions accelerate the pace of cloud application

Furthermore, according to an interpretation of the MIIT’s Action Plan, China’s cloud computing industrial structure continues to optimize. Key technologies such as large-scale concurrent processing, mass data storage and data center energy-saving have achieved great breakthroughs in standards. Also, backbone enterprises are working to develop more strategies to improve their business categories. With many large bodies like enterprises and government institutions relying on cloud computing in China, the technology is applied into an increasingly wide range of industries.

According to data from market research firm IDC, cloud computing and artificial intelligence will more than double the rates of innovation and productivity at Chinese companies and organizations by 2021. For these reasons, cloud computing is considered a crucial infrastructural force in China’s push for an industrial upgrade as it moves to embrace new technologies like artificial intelligence, internet of things, and big data.

The graph below portrays IaaS as the segment with the biggest market share in cloud computing in China. The forecasted market size of software-as-a-service (SaaS) will continue to be the largest among the three with CRM and Mail management as the most widely used application types.

[Source: Statista, Cloud Computing in China – Statistics & Facts]

Chinese Government’s Cloud Computing Industry Development Mandate

As part of a larger development strategy for advancing Chinese software and information technology services, the Chinese government plans to continue to make large investments over the next few years to drive domestic cloud computing development.

Through the ‘Internet Plus’ strategy, introduced in 2015, the Chinese government is pushing for the development of the domestic cloud computing industry to modernize manufacturing and other domestic industries. In short, this strategy promotes the integration of cloud computing with big data and IoT.

China’s cloud computing market is still at the nascent stage; however, it is likely to witness tremendous growth across all the industry verticals with public sector, manufacturing, retail, and healthcare sectors among major adopters of cloud computing services. Also, fast pace deployment of 4G LTE mobile network across China is anticipated to support further penetration of cloud computing services among end user organizations. The cloud market has particularly strong growth potential, underpinned by government initiatives and major investment by vendors in infrastructure and human capital. A new cybersecurity law will protect local cloud and hosting players from growing international competition.

Government support for the Chinese cloud computing market will see strong growth continue. Domestic firms have been set the target by China’s Ministry of Industry and Information Technology’s goal of increasing cloud revenues by at least 50% annually over the next few years, including a focus on generating revenues for cloud services from international sources and building China’s presence in the global cloud computing market. There is also an eight-point initiative that includes the creation of a national industry data recovery center and a national safety control service center for China’s data security.

Trends in the Cloud Computing Space

The future of cloud computing looks vast, connected and increasingly fast. While the concept and initial design of cloud computing began in the United States as a way to store data, networks, intelligence and more over the Internet, the refinement of cloud-based platforms and services are spreading widely in China. From individual consumer cloud services for storing photos, to multibillion-dollar corporations that need to house intelligent data, this technology has become internationally ubiquitous in the last ten years.

Globally, the cloud computing industry is dominated by American companies such as Amazon, Microsoft, and Google, which controlled a combined 57% of the overall market in 2018. According to Wikibon Research, the global cloud market hit $237 billion in 2018 and is estimated to reach $814 billion by 2027. With mega corporations like Google, IBM and Amazon mostly running cloud systems in the U.S., it’s easy to overlook China’s market for now. Data shows, however, that companies like Alibaba (which currently ranks fifth in the global cloud computing market), Tencent and Huawei have worked their way up the ranks and are growing rapidly.

[Source: Statista, Synergy Research Group, Global market share of leading cloud providers]

China’s cloud computing market will be the largest in the world

China’s cloud market is set to become the largest in the world by 2023. But right now, it remains nascent and insubstantial compared with its respective sectors in mature economies. The Chinese market is roughly one-tenth the size of the US equivalent. The market is expanding but remains fragmented, which means that much of it is up for grabs. Domestic tech heavyweights Alibaba and Tencent, along with international players like Amazon and Microsoft, all want a piece of what will eventually become a very large pie.

Despite the challenges presented by the Chinese market, several large, well-resourced U.S. cloud providers have established operations in China through joint partnerships with local companies. For example, Microsoft has partnered with 21Vianet, a Chinese data services firm, to roll out public cloud. Other U.S. companies are also operating in China. Amazon is partnering with ChinaNetCenter to offer cloud services and IBM is teaming with 21Vianet to offer its hybrid cloud platform.

Tense domestic competition drives growth

Furthermore, in the decade since e-commerce giant Alibaba became one of the first domestic players to tap into the market in 2009, China’s internet giants have been pouring resources into building up their cloud infrastructure services. Companies like Huawei, Tencent, and Baidu are now working feverishly to deploy their own cloud computing-based services. Among Chinese tech players, the excitement surrounding cloud computing’s potential as a growth driver is real.

Thus, local competition is another significant factor to take into consideration. Several Chinese companies are well-positioned in their domestic market. E-commerce giant Alibaba’s Aliyun is already a notable competitor, servicing 1.4 million customers directly and indirectly. China Mobile, China Unicom, China Telecom, Baidu, Tencent and ZTE among others, are also well-positioned in the market.

The Chinese cloud computing market is dominated by local players

China’s cloud market is dominated by local players, with IDC figures showing Alibaba Cloud as holding 42% of the public cloud marketplace in 2018, followed by Tencent Cloud at 12%, China Telecom with 9%, and Amazon Web Services (AWS) close behind with 6%. The total market for cloud infrastructure and software in the world’s second-largest economy reached $5.4 billion in the first half of 2019.

As you can see below, they are leading in each of the four key market segments: data center hardware/software, cloud computing services, colocation and CDN.

[Source: Synergy Research Group, This graph shows the market size (greater to the right) and annualized growth rate (high growth will place at the top of the chart) for the Chinese Cloud and Data Center Market]

Where is the growth and opportunities in the Chinese cloud computing market?

China has been a frontrunner in many different tech industry verticals, from AI and the Internet of Things (IoT), to smart cars and virtual reality (VR) services. As a direct result, the Chinese government and businesses have worked to also strengthen cloud computing technologies to support the data infrastructure of many of these emerging technologies.

According to Zhang Feng, chief engineer with China’s Ministry of Industry and Information Technology, China’s overall cloud industry reached a scale of $48 billion, and the IoT industry surpassed $174 billion in 2018. In other words, there are many businesses in many industries looking to implement cutting edge cloud computing technologies. Thus, increased development by Chinese companies on their cloud services offerings will continue to support the domestic market’s growth.

Along with this, the SME market in particular continues to offer strong growth potential and will be an important driver of demand for cloud computing in China. With security being a key hurdle, Chinese SMEs will likely continue to favor Chinese cloud providers for their IT services expansion. The SME cloud market was a key area of growth over the previous years and the fastest growth rates were for hosted communication and collaboration services, but in terms of total demand, it is Infrastructure-as-a-service (IaaS) and business applications that dominated.

Chinese companies are sensitive about their data

In the past, concerns over cost, security and logistics meant many Chinese businesses were reluctant to migrate to the cloud. Chinese companies are extremely sensitive when it comes to their data, with the vast majority still preferring it to be stored in-country.

However, encouraged by decreasing costs and Chinese government policy, a growing number of Chinese firms, unhampered by decades of outdated IT infrastructure, are now adopting cloud-based alternatives to on-site enterprise hardware and software. This is especially the case with China’s burgeoning number of SMEs, which typically have smaller budgets and therefore prefer the lean business models supported by SaaS. Customer relationship management software (CRM), office automation software (OA), intelligent manufacturing software (IM) and office collaboration software top their shopping lists.

Alibaba Cloud Leads China’s Cloud Computing Market

It opened up to third-party customers in 2009 and offers a comprehensive suite of cloud services, including web hosting, elastic computing, data migration, database, storage and content delivery networks, large-scale computing, security, and management and application serves.

Alibaba Cloud is China’s largest public cloud service provider with the most advanced cloud network, including 11 data centers and more than 2,300 CDN nodes in mainland China. Although being the world’s fifth biggest player in having just 5% of the global cloud market, it holds a 40% share of China’s domestic market and provides international companies with seamless access to China through Alibaba Cloud’s

China Gateway solution. Alibaba Cloud’s ongoing focus on innovation and internationalization has allowed it to outperform major Cloud vendors in the Asia Pacific market.

[Source: Deloitte, Overview of Alibaba’s Cloud Products and Solutions]

Alibaba Cloud’s Recent Performance

In its December 2019 4Q earnings, Alibaba maintained its leadership position in the Chinese cloud computing market by developing technology and business solutions that enable the digital transformation of businesses across industries in both the public and private sectors. During the quarter Alibaba Cloud reached two important financial and technological milestones.

62% YOY growth

First, their cloud computing business generated, for the first time, over 10 billion RMB in revenue, growing 62% year-over-year. This was driven by increased revenue in its public cloud and hybrid cloud businesses.

Applying public cloud infrastructure

Second, ahead of last year’s 11.11 Shopping Festival, Alibaba Cloud enabled the migration of the core systems of their e-commerce businesses onto their public cloud. During the festival, Alibaba Cloud provided a highly scalable, reliable and secure public cloud infrastructure that handled a single day GMV of RMB 268.4 billion (US$38.4 billion). Its public cloud infrastructure and technologies enabled Alibaba to process over 544,000 orders per second at peak and 970 petabytes of data without disruption for the full 24 hour period during the festival.

The company believes that the migration of the core systems of Alibaba’s e-commerce businesses onto the public cloud is a major milestone that not only will generate greater operating efficiencies for Alibaba but also will encourage more customers to adopt their public cloud infrastructure.

Cloud computing now represents more than 7% of all of the company’s revenues as Alibaba continues to cement its cloud position in China and in the Asia Pacific region.

A Promising Future for the Chinese Cloud Computing Industry

China still has a complex regulatory environment with intense local competition. However, the market opportunity is attractive to a point where foreign firms are willing to invest heavily in the cloud sector and take necessary measures to be compliant. Massive investments from both public and private actors also support this trend as it enables higher speed connections in remote areas and better wireless connectivity in the whole country.

Huge private sector investment, strong government backing and young talent are together rallying behind the growth of China’s cloud computing industry. The thirst for big data and information on consumer trends from corporate marketing departments will likewise drive demand for cloud-based database technology.

The other primary driving force will be market demand. Given the growing appetite for on-demand video, short-videos and live-streaming, mobile gaming and online content in China, content providers will need to invest in elastic computing services, auto-scaling, content delivery networks and server load balancers in order to provide uninterrupted service and fast download speeds. Demand for cloud products will also increase as companies invest in new technologies such as O2O services, IoT integration and online payments, or expand into overseas markets.

Mobile security will be another priority for the industry. As the world’s largest smartphone market, China is regarded as a mobile-centric market, and different to PC-centric markets found in the West. China’s tech savvy population is leading the way in adopting mobile payments, O2O services, mobile gaming and designing their lives around their smartphone. While Android is the leader in powering mobile applications for the China market, its operating system also remains highly susceptible to external attacks. To address data security and the concerns of Chinese mobile users, foreign companies will need to invest in mobile security, while still offering fast load speed and high availability to users.

Public vs. Private Cloud

[Source: Technode, Mckinsey, Spending on public and private cloud computing in China]

Although Chinese businesses are beginning to ramp up investment in cloud computing, they use cloud computing services at a lower rate than companies in the United States and other developed markets. While Chinese companies generally prefer the private cloud (i.e., data is stored on a company’s intranet), rather than the public cloud (i.e., data is stored by the provider), China’s public cloud market is set to grow over 20% by 2020 as more Chinese companies adopt public cloud services.

For foreign cloud firms, the local ecosystem features several peculiarities that have so far restricted them from securing significant market share on a global level. In addition to standard regulations that prohibit foreign cloud providers, they also face a market unready for widespread public cloud adoption. Unlike more mature cloud markets, firms still prefer private cloud solutions, which allow them to maintain full ownership and control of physical resources. However, the public cloud model is slowly waking up in China and in the future hybrid cloud models will likely become mainstream as more businesses choose both solutions for different ends.

What are the opportunities and concerns for foreign businesses?

Given the growing importance of data in business operations, cloud computing is a must for MNCs operating in China. However, setting up cloud computing solutions in China presents unique challenges including legislative and technical aspects of MNC cloud options. Despite the uncertainties and challenges, global cloud providers cannot afford to ignore China’s large and growing market. Increasingly competitive domestic players are finding their niche, but multinationals still have an opportunity to shape the market. As a market player it is time to identify target segments and invest in solutions for this customer base, as China’s IT buyers decide how they will take advantage of what the cloud has to offer.

Current regulations stipulate that foreign cloud providers must partner with local Chinese companies to serve customers in China, and the cloud computing industry is still regulated. The main challenges facing cloud computing within, from or to China stem from the information security aspect. This involves issues such as data cross-border transfer, personal information protection, data processing and mining among others.

While its tech market is growing, China still needs to enhance its core cloud technologies and encourage its adoption across markets. According to a recent report by Alibaba, areas that Chinese businesses require the most cloud assistance include IoT integration, mobile security and expansion into overseas markets. However, the convergence of emerging cloud technology trends and China’s increasing demands for the use of cloud services will open cross-border business opportunities. The tech sector will benefit tremendously from collaboration and partnership initiatives between firms in China and the rest of the world.

Mastering the Cloud Economy

How to navigate your approach?

Two characteristics of China’s cloud market may help enterprise vendors navigate their approach.

• Technology providers selling cloud software, services and hardware can strengthen their value proposition by developing a better understanding of cloud economics, customer preferences, and the impact of the cloud’s ascendance in legacy and disruptive technologies.

• State-owned enterprises account for a large share of total IT spending and are highly concentrated in government, banking and financial services. In these sectors, most IT spending focuses on large, complex, highly integrated legacy systems that cannot easily move to the cloud. A large and dynamic start-up scene has emerged in China, and is spending on the cloud. However, that still represents only a small fraction of total IT spending. In the U.S., cloud providers are addressing mainstream companies across industries, but that’s more difficult to do in an economy dominated by state-owned enterprises.

Choosing a Provider

When entering the Chinese cloud market, Alibaba maintains that website load speed is crucial anywhere, but particularly important in the mobile-centric market like China. Thus, the best option to minimize latency, improve SEO visibility, and provide high availability is to host in Mainland China.

The clear local market leader, Alibaba has earned the title of trusted partner for Chinese firms expanding into European availability zones. And with the growth of China’s cloud industry and now with China Gateway, it’s looking to do the same for companies moving in the other direction. Selina Yuan, president of international business of Alibaba Cloud Intelligence says that the “primary challenges foreign organizations face are “security, connectivity and demanding cross-border digital infrastructure setup issues.”

Therefore, for any multinational vendors or business it is important to assess how your business can fit into the proper Chinese ecosystem from both a technology and business perspective.

Author: Jeffrey Craig

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This article Cloud computing in China 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.

Internet retail in China is unique in many ways. Chinese consumers value the convenience offered by internet retailing. It makes shopping possible at any time, anywhere, as long as there is a computer or mobile device with internet access. Product comparisons and price comparisons are just a click away. Home delivery and competitive prices are also good news for time-pressed working consumers. 

Moreover, improving online security, the convenience of payment method, and the mushrooming of various business-to-consumer (B2C) online shopping platforms increasingly ensured that Chinese consumers felt at ease with purchasing online, resulting in the rocketing growth of internet retail in China. While JD.com, Suning.co, and Alibaba remain the major players, the growth rate of internet retail in China is forecast to slow down.

[Source: Statista “The Internet Retail market in China is fairly concentrated, with the leading players taking up over 90% of the transaction share.”]

Emerging trends in internet retail in China 

The industry grows into a collaborative ecosystem as retailers seek  M&A opportunities as a solution of growth

Over the past few years, the internet retailing market has undergone rapid changes and many retailers struggled to keep up with those changes. Amazon marketplace exited China due to fierce competition from local players. Alibaba-owned Hema had taken over Wal-Mart in the rapidly growing domestic online supermarket. As leading local retailers continue to modernize and transform at a rapid pace, multinational retailers are now seeking support from their local comparatives. For instance, in June 2016, Walmart sold its Chinese e-commerce website, Yihaodian, to JD.com, which would enable Walmart to access a broader range of potential customers. Carrefour, a French-owned hypermarket chain, sold 80% stake of its business in China to a local grocery retailers Wumart.

 Many local players also partook in mergers and acquisitions in China.  For example, in September 2019, Alibaba acquired Kaola (网易考拉) for $2 billion, Netease’s cross-border e-commerce platform, and integrate it with Tmall to form the largest cross-border e-commerce platform in China. The internet retail in China presents increasingly more industry M&A activities like JD and Tmall’s. 

The internet mindset prevails in the increasingly transparent internet retailing industry

As the current customers have been acclimatized to an increasingly transparent internet environment, mainly ascribe to the data-driven AI technology in China, the future customers will be likely to have total transparency about every purchase and consumption choice they make. According to Ernst Young’s consumer research, to attain the consumer of 2030, companies need to rethink their deliverables. Today, companies try to engage consumers by delivering the brand promise of product or service, while the extent to which it actually delivers can be vague, and consumers often need to take it on trust. 

[Source: Taobao.com “Taobao offering deep discounts has become a way to show price transparency to the consumers of today, which makes brands and companies to adjust their business model to pass the savings to consumers.”]

The future retailing we are modeling will likely to be more transparent. Companies will have to fill the uncertainty along the decision-making journey, delivering measurable, personalized outcomes to the consequence of every quantifiable purchase. To do that, some companies have already taken preliminary measures on optimizing their business models. They look for opportunities to cut costs through outsourcing or divesting some of their current operations, to form strategic partnerships, and to focus exclusively on where and how they can add value. 

Lower-tier cities and demographics other than the youth and females display strong potential 

As the domestic internet retailing reaching maturity in the higher tier cities, retailers are looking for expanding their reach to rural areas or lower-tier cities, where the customer profitability is still high and competition is less fierce. According to the National Bureau of Statistics of China (NBSC), from 2013 to 2017, the per capita disposable income and consumer goods expenditure of rural household (9.3% and 7.6% respectively) increased at a faster rate than that of in urban households (8.3% and 5.4% respectively), suggesting a strong potential for the development of internet retailing. Moreover, the Chinese government is also in support of expanding e-commerce to the lower-tier cities. 

Besides, as the profitability of younger and middle-aged, female demographics are saturating, new demographics such as male and the older generations offer strong potential for e-commerce in China. Interestingly to see is that recent studies have identified the growth of male skincare and cosmetics in the retail market in China. Expansion into emerging geographic and go beyond traditional demographic help to sustain dynamic growth within the industry. 

Cross-border e-commerce targeting emerging markets

According to statistics, China accounts for over 50% of the Asia-Pacific online retail sector value, followed by Japan (10.4%) and South Korea (8.1%). The rest of Asia-Pacific amounted to 11.8%. The recent years have witnessed the South-east Asia countries including Thailand, Vietnam, Singapore, Malaysia emerging in the growth of online retail. These countries have shown significant development in internet service and logistics, which offers strong potential for internet retailing. With Internet giants like Tencent and Alibaba tapping into these markets, the Chinese government is also encouraging to export domestic productions and a surplus of production capacity to foreign markets.  

Chinese e-commerce platforms are not playing in the top league of e-commerce in Southeast Asia as consumers prefer local e-commerce sites. However, they are quite competitive and with their strategic focus shifting towards emerging markets, those leading Chinese retailers will keep pace with the local platforms in the coming years. They might achieve this by M&A or investing in local platforms to reach a wider pool of customers. For instance, Alibaba invested in the Southeast Asian e-commerce platform Lazada, and Tencent invested in SEA, a Singapore-based gaming app and Internet company that owns the e-commerce platform Shopee.

[Source: KrAsia, App Annie “Lazada and Shopee are leading the e-commerce retail in Southeast Asia.”]

Future internet retailing landscape: Shaped by key players but watch out for disruptive innovation 

Leading internet retailers experimenting on the O2O integrated model

Given the explosive growth of the channel, it seems apparent that more store-based retailers are likely to enter internet retailing. However, recent years have witnessed the major internet retailers expand to offline. For instance, Tmall has opened up Tmall Xiaodian (天猫小店) convenience stores to gain offline traffic while addressing the growing convenience store sector in the country. Vip.com (唯品会), an online retailing channel of Guangzhou VIPSHOP Information and Technology Co., also has had their physical stores in department stores in lower-tier cities. These exemplify that traditional retailing does have its advantages, and will continue to attract a fixed group of consumers. This is mainly because consumers are expected to continue to rely on brick-and-mortar stores for grocery products such as fresh vegetables and fruit. Meanwhile, there are consumers who are not internet-savvy. 

Consequently, the future internet retail in China will see more pure e-commerce players increasing their reach and the outcome of experimenting with the O2O integrated business model. For those companies which are not pure e-commerce retailers, the major issue to resolve will be how to avoid cannibalizing their sales from store-based outlets with sales from their online sales platforms. After all, the investment in setting up an online platform for store-based retailers is not small.

Collaboration as an avenue of growth will further consolidate the industry 

To consolidate their leading positions, the top internet retailers are expected to strengthen their business model over the forecast period to keep pace with changing consumer needs, to fulfill unmet needs, and to gain economies of scale. As they look for chances to cut costs, raise capital, and improve performance, more than half (53%) plan to outsource or divest some of their current operations, according to the industry research. This may lead to more collaborations from the delivering end to the receiving. 

As the future internet retailing demands a more collaborative ecosystem, it is likely to see the industry becoming more consolidated with the internet moguls acquiring the underdogs that offer significant transitional capacities. On a global scale, China has leading retail technology and innovative customer experience, it has become an attractive destination for acquisition. 

What Daxue can do for you 

While the incumbents are looking for changes to adapt to future consumers, the extent to which they can actually transform can be hard to tell. This is mainly because the existing players so often have established their systems from day one and changes might be difficult to implement. However, for new entrants, it’s relatively easier to apply disruptive changes due to the inchoate business model they are experimenting with.

Therefore, the newly entered retailers have the luxury to change fast enough or stay relevant, whilst the existing players need to stay vigilant on the disruptive forces in the market.

What Daxue Consulting offers are insightful analysis of the market and an integrated solution for businesses in the market or planning on entering. With a real understanding of the market, we make sure a balance between what

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What Chinese people did at home during the epidemic

The main lock-downs of the Coronavirus epidemic in China lasted over two months. However, as China’s economy is recovering from COVID-19, the potential for another outbreak is ever-present. The months that consumers spent indoors have significantly altered China’s stay-at-home economy. Even when the pandemic becomes a thing of the past, the length of the outbreak is long enough to cause new habits to form, and the severity of the outbreak is enough to forever change consumer values.

Six new trends of China’s market during the epidemic

1. Mobile games have seen explosive growth

The average DAU of Arena of Valor reached 50 million during the 2020 CNY.

2. Video industry performed well overall

Short videos got more welcomed. Live-streaming and foreign movies and TV dramas are growing popular.

3. Fresh food ecommerce is facing more demands

Major platforms are in short supply.  The DAU of JD one-hour delivery reached 1 million, while Hema reached 400 thousand.

4. Online education becomes necessary

After the government announcing to postpone the starting day of school, online learning APPs achieved dramatic growth.

5. Online medical care attracts more attention

The demand on remote medical inquiry and O2O medical ecommerce in China increased remarkably.

6. Remote working has become the mainstream

The DAU of Dingtalk is going to exceed 100 million, with absolute advantage in the market.

Main activities of Chinese while at home

In addition to daily household duties like cooking, childcare and pet care, Chinese people spend more time on information acquisition as well as investment. The end of the outbreak could give way for consumers’ growing reliance on social media and APPs for information and an increase in financial awareness.

In general, Chinese people felt optimistic about the impact of the Coronavirus in China. 63 percent told that they are optimistic and only 2 percent were pessimistic.

[Data Source: 199it.com, COVID-19 impact on Chinese consumer behavior report by daxue consulting. How Chinese people feel optimistic about COVID-19 impact]

Activities of Chinese people in different age groups

Under 20s

Chinese digital natives increased their time spent binge-watching TV series and online learning.

20-30yo

Millennials also spent time binge watching TV series and playing mobile games.

30-40yo

30-40year-old watched the news through short videos, and extensively talked to others and cooked.

40-50yo

40-50year olds spent more time on WeChat, cooking and watching news.

Over 50s

Those over 50 paid much attention to news, health information and the management of their community.

Chinese consumers developed new habits

Among all respondents, 73.5% tried at least one new service for the first time. All the services listed below will likely keep a strong growth. Additionally, many people said they will continue to use these online services after the epidemic.

[Data Source: 199it.com, COVID-19 impact on Chinese consumer behavior report by daxue consulting. Most of Chinese people tried at least one new service during the epidemic]

COVID-19 changed the way of Chinese people get information

Outside of news apps, WeChat, Weibo and short video apps became the main channels for Chinese to obtain information. Information supply form with social function is more likely to gain traffic in the future. 48% said they will continue to spend more time in information acquisition after the outbreak. Business and finance represent the second news trend, this financial interest will last after the epidemic.

[Data Source: NetEase Positioning & CTR, COVID-19 impact on Chinese consumer behavior report by daxue consulting. WeChat, Weibo and short video apps became important information acquisition channels]

Online study apps are now a necessity

The epidemic largely decreased the cost for online education platforms to attract consumers. Students and parents in tier-2 and 3 cities have greatly improved their awareness and acceptance of online education in China. It created huge traffic for online education platforms. During the epidemic, the daily active users of Xueersi (学而思) online education platform exceeded 10 million. Many new users are come from tier-2, 3 and 4 cities.

However, the online education industry still has some difficulties. For example, it’s hard for online educators to create an atmosphere which is conducive to learning. Many teachers don’t have much experience on online teaching and cannot conveniently interact with students. Moreover, students need supervision to help them concentrate on online courses, but many parents don’t have time. Online education platforms need to launch more interactive teaching modes to gain more consumers after COVID-19.

COVID-19 outbreak effect on Chinese consumption

Consumer tendencies during the COVID-19 epidemic

The coronavirus outbreak has improved people’s safety consciousness. JD data showed commodities that reduce disease and meet nutritional needs are more popular. Frozen food, snacks and health products have a high proportion of online consumption.

Indoor fitness equipment purchases skyrocketed during the epidemic. JD data shows that the turnover of wall pulley increased by 109% YOY during the 2020 CNY, jump ropes increased by 56% and rowing machines increased by 134%.

[Data Source: JD.com, COVID-19 impact on Chinese consumer behavior report by daxue consulting. Commodities that reduce disease and fitness equipment became popular]

Health-related consumption increased

The epidemic may have a lasting impact on attitudes towards a healthy and sanitary lifestyle.

For instance, laundry sanitizer sales increased 643% according to Suning. Antiseptic hand sanitizer sales increased 1.7% according to Suning.

Staying at home for a long time made people find new ways of stress relief, like Yoga or indoor workouts. They also started to access more info and products about disinfection.

These health-related considerations may change consumer habits, such as investments in household cleaning, disinfection products and at-home workout equipment.

Three types of consumption that reduced in the short term

COVID-19 greatly impacted China’s beverage market, especially liquors. Normally, CNY accounts for a high proportion of liquor sales. However, the epidemic caused a full-scale impact on consumption of gifts and catering.

Less automobile consumption is an inevitable short-term outcome. Consumers’ behaviors also changed during the outbreak. Online sales are now attracting more consumers since they want to prevent the risk of cross infections in 4S shops.

Coronavirus seriously affected offline air-conditioning market in China. The spread of the epidemic has greatly restrained consumer demand, especially the need for replacements that are not urgent.

Where did consumers shop during the epidemic

COVID-19 has changed consumption in both frequency and preferred channels. Many consumers choose to reduce the frequency of shopping due to fear of going out.

More than half of consumers have moved from offline stores to e-commerce. Online penetration rate during the epidemic period was as high as 68.2% which increased by 50.7%.

[Data Source: Dataway, E-commerce became a key shopping channel during the epidemic]

Explosive growth of fresh food e-commerce

As of 6th February 2020, JD daily active users have exceeded 1 million, Hema and Dingdong Maicai exceeded 400 thousand. The number of daily users is still increasing.

Normally, people can make a habit after using the same channel 4 to 5 times. Since the coronavirus outbreak, most consumers ordered fresh food by e-commerce far more than 4-5 times. It means the industry had not previously received much attention and will play an important role in the future.

After the panic consumption in the epidemic period, food delivery services in China will keep growing.

[Data Source: MobTech, COVID-19 impact on Chinese consumer behavior report by daxue consulting. More and more Chinese people use food e-commerce platforms]

Live-stream proactively met consumers needs

The general performance of the apparel industry fell by 60% – 80% during the epidemic. However, brands that promote products by live-stream had much more sales than others. In addition, other industries have joined the live-stream tide, such as cosmetics and fresh vegetables.

If a live-stream sales model for brands during the epidemic is sloppy, then they will have to be more strategic after the epidemic to maintain sales.

COVID-19 outbreak effect on Chinese entertainment

Mobile game market will upgrade

During the Coronavirus outbreak, demand for mobile games increased enormously. The top mobile game companies (such as Tencent) expended their business and further seized the market space of small companies. But the sustainability of mobile games’ boom is questionable once the epidemic subsides.

[Data Source: Capital Watch, COVID-19 impact on Chinese consumer behavior report by daxue consulting. Revenue of mobile gaming sector is growing]

Short video platforms gained many new users

During the Coronavirus outbreak, there was an increase in China’s short video market. Before the epidemic, young people widely used short video platforms. They spent more time on short video platforms for entertainment during the epidemic.

Also, it is easier for short video platforms to have new users from middle-aged and elderly groups than the past. Now many young people started to teach their parents to use short video platforms when they were at home. It makes the platforms accessible to them as a form of entertainment long after the epidemic ends.

[Data Source: Quest Mobile, COVID-19 impact on Chinese consumer behavior report by daxue consulting. Short-video market in China is increasing during the epidemic]

Live-stream further enhanced user stickiness during the epidemic

Live-stream is useful for enhancing user stickiness, it is growing during the COVID-19 epidemic. On top video apps, live-stream users spend more time (more than 120 minutes/day) than other users during the Coronavirus outbreak. Tourist sites and venues like museums and bars also started to use live-stream to increase exposure during the epidemic. This may be a new growth point for the live-stream market even after the epidemic.

[Data Source: Quest Mobile, COVID-19 impact on Chinese consumer behavior report by daxue consulting. Live-stream got more users during the epidemic]

Video games are the most popular live stream

During the epidemic, video game live-streams attracted more viewers than any other live-streams. Many of those audiences follow specific gaming KOLs in China, which means they have high users’ stickiness. Since more people are returning to work, the time of live-stream is the key to remain those audience.

[Data Source: iResearch, Game live-stream became more popular during the epidemic]

Increased demand for movies and TV dramas

Because of the Coronavirus, all movie releases were postponed or canceled. Users could see some Chinese movies on the Internet platforms such as Xigua video and Douyin. Online TV dramas also received many views during the epidemic.

Through the way of “film + Internet“, movies can have new development channels and rid the model of box-office revenue. It also can be the way of small and medium-budget films to compete with big movies.

[Data Source: MobTech, COVID-19 impact on Chinese consumer behavior report by daxue consulting. Movies and TV dramas became more popular during the epidemic]

The consumption boom after the epidemic

Chinese people look forward to going out again after Covid-19

21-30-year old hope to have dinner with friends and family in restaurants after the epidemic. They focus on the quality and health of restaurants. They are the key clients of catering market’s recovery.

31-40-year old wish to travel after the epidemic. Most of them will choose short trips in China since the epidemic is still serious in other countries. They probably will get away from the most popular travel destinations to avoid crowds.

41-50-year old plan to visit their parents after the epidemic. They usually purchase health products for their parents, thus health related products will even have more sales than before.

More purchases will come after COVID-19

According to the survey of DATA100, more than 70% of consumers say they will purchase more after the epidemic. Thus, Chinese consumption will have a quick growth after their daily lives return to normal.

[Data Source: 100.com, COVID-19 impact on Chinese consumer behavior report by daxue consulting. Chinese consumption will grow after the epidemic]

What will be Chinese people’s first consumption after COVID-19

Food & Beverage

29.3% of consumers choose “Food & Beverage” as the first consumption after COVID-19. There is no doubt that many of them would take milk tea and hot pot as the first choice.

Go shopping

15.8% of consumers choose to “Go shopping”, far exceeding other consumer scenarios. It may be related to consumers’ long-sufficient shopping desire during the epidemic.

Still stay at home

9.7% of consumers choose to still stay at home, which should be related to the fear brought by the epidemic. They will keep the way of consumption during the epidemic.

[Data Source: Dataway survey, COVID-19 impact on Chinese consumer behavior report by daxue consulting. Food and beverage will be the first consumption after the epidemic]

Resuming work is helping consumption recovery

China’s recovery from COVID-19 outbreak impacts on consumption. More than 50% employees were already back at work during the first week of March 2020.

The white-collar people in the first-tier cities are the first group back at work. They showed high consumption demand for F&B, especially delivery services. The food delivery is growing very fast in tier-1 cities.

Consumption areas that are starting to recover

[Source: Reuter Communications, China gradually goes back to business]

Increased caution regarding health and finance

In terms of consumption, Coronavirus has a greater impact on young people, especially consumers between 20-30 years old. The epidemic may invoke feelings of financial insecurity. Hence, they may be inclined to have less impulse spending and save more.

The health management of the Chinese consumers will be the primary consideration. Additionally, consumers may pay more attention to the science behind health and diet. Health products and organic food may have long-term growth trends.

The epidemic made consumers realize the importance of insurance, they will secure further family risk prevention from purchasing insurance.

Key Takeaways

Chinese daily life went online during the epidemic

The Coronavirus outbreak largely increased the time spent online, it further digitalized the Chinese people’s consumption, entertainment, and social lives.

Health-related market achieved much growth

Due to the epidemic, the Chinese consumers are paying more attention to health-related goods such as household cleaning products and fitness equipment, this habit may continue for a long term.

Fresh food e-commerce should continue to expand penetration

The epidemic has provided a large growth for fresh food e-commerce to increase the penetration rate of the industry, so it may follow the trend to improve further.

Many consumers will remain cautious

The sense of panic and depression during the epidemic may linger, part of consumers may be more cautious and health-conscious.

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Reasons why couples divorce in China

Initial pressure to marry

Divorce is a complicated social phenomenon and affected and restrained by many factors such as career plans, income, preferences, habits, physical situations. Many young Chinese people receive pressure from their parents and society to marry before the age of 30. Additionally, both women and men are educated at a higher rate than ever before, creating a world of opportunity for themselves, yet facing expectations to marry young and have a family. Women may be pressured into marrying early, knowing that they will be considered ‘leftover women’ by society if they are single after 30. As a result, many marriages were formed under pressure and end in divorce.

Economic issues

Another reason for divorce stems from economic issues. Although women are becoming closer to men in the career playing field, the expectations for men to take their share in childcare and housework have not changes as quickly. This results in less communication and a breakdown in relationships between couples.

Simplification of registration

Third is the simplification of divorce registration in China. These simplified divorce laws also state that whoever purchased the home of the couple gains sole ownership of the property. Thus, many couples who normally would be afraid of losing half of their property, no longer have to worry. Due to the simplicity of the Chinese divorce process, more Chinese couples are beginning to file for divorce.

Legal loopholes

Fourth, divorces in China are also a way to take advantage of a loophole in Chinese laws. In 2016, news broke that people were happily divorcing in Shanghai for more favorable deposit rates on property purchases. In a similar way, Chinese parents are now beginning to separate to get their children into better schools. By divorcing, one of the parents is legally allowed to switch their place of residence and place their children in a school outside of their original residential district.

Different attitudes toward divorce in China: suffering vs. freedom

In Zhihu, a topic named “what kind of experience is divorce?” gives rise to 11 thousand followings, 22 million views and thousands of comments talking about their experiences when going through a divorce in China. Some people treat divorce as relief, but there are still many ones who are struggling.

Divorce makes life much harder for some

In China, some couples still feel pain after divorce, since they think divorce increases their both physical and spiritual burden. First, many divorced people choose to divorce because they experienced abuse, derailment or suffered in other forms. Even after the divorce, they are still unable to let go of the past. Second, the cost of divorce leads to a heavy financial burden. Children growing up with a single parent will be faced with much more psychological and emotional problems than their peers who grow up in normal families. If so, parents will pay more in the future to treat children’s psychological and mental problems. Meanwhile, the cost involved in the assignment of property. Property may suffer a loss during the process of assignment because of the dispute. These factors are also why some couples choose not to divorce.

Divorced people in China gradually look for new lives

There are also numerous couples notice that divorce is not the end of life, and they still have the power to pursue happiness. In The Couple is not the Same Birds, a documentation won the thirteenth FIRST Youth Film Exhibition nomination, the director compares his divorced parents’ lives between 18 years ago and now. The couple got divorced because of interminable disputes. They felt sad for their past happiness and their reasonless decision to their marriage, but gradually understood that divorce made them get rid of further distress.

Children living in divorced families in China

Divorce may relieve couples, but children are usually the worst victims. Zhihu’s comments show that plenty of children are affected by their parents’ divorce in China. They feel their need is ignored and they are abandoned. Especially some other children would make fun of them and gossip relatives may also tease them. Tan, the son of the couple in The Couple is not the Same Birds, expressed his hate to parents. In the court, he was asked who he wanted to follow and he felt despair. After grown-up, he got out of the family shadow, but held the view that he did not believe in love anymore.

In contrast, there are also children live happily after parents’ divorce in China. Rather than bear parents’ disputes, those children prefer to grow up in a more peaceful environment. A harmonious family is beneficial to children’s physical and mental development. Qilin Guo, a famous crosstalk actor’s son, appreciates his stepmother’s care. His parents divorced due to a broken relationship, but his stepmother makes him feel the warmth of home and led him to become an excellent actor.

Divorced consumers in China

Now, in China, divorce is no longer regarded as taboo. Increasingly more people think divorce is often an appropriate decision. Thus, more attention is accumulated in using divorce as a bridge to promote various industries. More companies gradually make their products fit for the topic of divorce and develop the market for divorced people.

General consumption portraits of divorced people in China

Dating apps help divorced people pursue new happiness

Dating applications are useful tools to help divorced people to chase new happiness. Zhenai.com is such a platform with the official website and real stores. It allows users to target people based on certain criteria. One of these criteria is ‘divorced’, making it so divorced people can easily find other divorcees. .

Connect advertisements with the topic of divorce

Advertising is another helpful way to combine products with the topic of divorce to attract customers. In 2014, Rejoice launched a mini film talking about a couple’s journey from meeting to divorce, triggering over 40 million views in just four weeks; and it promoted a hashtag “#IBelieveInLoveAgain” to call for keeping love alive. Terence Lam, P&G Greater China hair care marketing general manager, said “We believe that no matter how complicated relationships can be, there is always a way to smooth things out. This is a position worth taking for our brand, to have a strong point of view on this cultural phenomenon”. Divorced people can feel empathy with advertisements and link themselves to the products and the brands, which stimulate the sales of products.

A dissolving taboo

In China, divorce is in an increasing trend for various reasons related to economic, legal, and psychological factors. People also hold different views to divorce that divorce can bring freedom and also pain. Meanwhile, more companies started to design services catering to divorced consumers and connect their products with the topic of the divorce.

Author: April Peng

Learn more on the legal issues on marriage in China

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Astrology is defined as “The study of the movements and relative positions of celestial bodies interpreted as having an influence on human affairs and the natural world.” It originated from the western society. Nevertheless, astrology is popular in China and has affected Chinese people’s daily lives and consumption. Astrology has even made its way into China marketing campaigns targeting young consumers.

The popularity of Astrology in China: western Astrology is more popular with Chinese people

Internet activity reveal the popularity of western Astrology in China. According to Baidu Index, during the period of 2012- 2020  Astrology was searched 16 times more on Baidu than Chinese zodiac. According to Zhihu, 474 topics that are related to Astrology are discussed by Zhihu users in China.

[Photo source: Baidu Index, ‘Search index of Astrology VS Chinese Zodiac’]

The history of Astrology in China

Even though Astrology has been widely discussed by Chinese people in the last decade, it has existed in Chinese society for more than 1000 years. In Sui Dynasty (581-618), Indian monks firstly introduced Astrology to Chinese society. During Qing Dynasty (1636-1912), Kang Youwei, the famous Chinese philosopher and politician standardized the translation of Astrology in China, which has been used in the following years until now.  In the 1990s, Western astrology began to seep into Chinese people’s daily lives. The internet has fostered and spread the popularity of Astrology in China.

Some Chinese consider astrology in who to date and who to hire

During social occasions, Chinese people discuss the latest gossip and tidbits about their astrological profiles. According to The New York Times, social media accounts with millions of followers share weekly horoscope forecasts. On dating APPS, users show their zodiac signs alongside their age, salary, car and home ownership status. More and more Chinese consider astrology  during all kinds of major life decisions including relationship advice, making friends, having babies, and even hiring employees.

Profile of Chinese Astrology fans: dominated by females and youth

Chinese people with different backgrounds hold diverse attitudes and perceptions towards Astrology.

According to a survey conducted by woshipm, 82% of the responders believe in Astrology and females tend to believe it more. Additionally, people aged below 25 are more likely to be Chinese Astrology fans. 47% of the responders read articles related to Astrology occasionally while merely 9% of them read them every day.

[Data source: Research Center of Cheetah Mobile, ‘Chinese people’s attitudes towards Astrology (2019)’]

[Data source: Research Center of Cheetah Mobile, ‘Frequency of browsing content of Astrology (2019)’]

Regarding to content, Chinese Astrology fans are likely to know about personality analysis, lucky numbers/dates/items and relationship insightsadvice.

[Data source: Research Center of Cheetah Mobile, ‘Popularity of Astrology in China’]

In terms of the channels, Chinese Astrology fans access the information regarding Astrology, websites, Astrology apps and influencers’ social media accounts are the common platforms.

[Data source: Research Center of Cheetah Mobile, ‘How Chinese access Astrology related content’]

Rationales for the popularity of Astrology in China: obtaining psychological comfort matters 

Gaining psychological comfort, self-recognition and entertainment, and socializing with others explain Chinese Astrology fans’ obsession with it. Many responders indicate that they turn to astrology for clarity during tough times, which can provide psychological comfort. Chinese Astrology fans feel their lives are out of their control, and reading articles related to Astrology would ease their mind as they can understand the forces behind their destiny. For those who responded gaining self-recognition, they believe that people from different zodiac signs has specific talents. By discovering and  amplifying the talent, these people can maximize their success.

Some answers from Zhihu users have verified these reasons and they are in favor of Astrology. Psychological comfort or related terms is a common  reasons put forth by Chinese astrology fans. Many of them feel that the description of their zodiac signs are accurate as these match their personalities. Some of them mentioned that their belief in Astrology is related to their relationships.

[Photo source: Zhihu, Chinese netizens explaining why Astrology is popular in China]

From the academic perspective, an author from The Outlook Magazine argues that Astrology has been prevalent since ancient China as it was a mean of forecasting national incidents, wars and harvest. Thus this has been a tradition in China, anticipating one’s fate based on Astrology. Nowadays Chinese people prefer the western Astrology instead of Chinese horoscope is due to the fact that the west Astrology is more complex and supported by art works and literature, while Chinese horoscope is relatively abstract and hard to understand.

Astrology market in China: fostered by social media behavior

Social media has been an incubator that has fostered the Astrology market in China as astrology features low barrier to entry, entertainment-orientation and socialization. According to WeChat official accounts, 313 results are tagged as “Astrology” and Uncle Tongdao is the most popular with the search index of 974.1. On Weibo, Jin Li Da Wang (Koi) and Tao Bai Bai have 20.78 million followers and 7.95 million followers respectively. 

Some companies have developed Astrology apps in Astrology market in China. In comparison with Astrology promoted on social media accounts, Astrology apps provide diversified services such as paid Q&A, paid anticipation and Astrology lessons. Moreover, their services are not limited to Astrology but also dice, luck tests and personality tests.

[Photo source: woshipm, ‘Astrology apps in China’]

Case study: the success of Uncle Tongdao

[Photo source: meihua.info, ‘Uncle Tongdao’]

Uncle Tongdao is a successful Astrology brand in China. In 2014, Uncle Tongdao went viral on the Internet as its cartoons and images fitted Chinese netizens’ appetite. By combining Astrology related culture and the 2-dimention culture, Uncle Tongdao is able to win the heart of Chinese Astrology fans. By the end of 2018, Uncle Tongdao had more than 60 million followers on social media and become the representative in Astrology in China. 

The business model of Uncle Tongdao is innovated in China as it combines IP operation, IP authorization, IP E-commerce, IP community and IP crossover marketing. As a result, the company generates its business eco-system and keeps producing business value for its partners. Uncle Tongdao has become one of the most valuable Intellectual Property entities in China.

Astrology co-branding in China

Apart from the online sector, Uncle Tongdao also expands its business area to offline sector by establishing subsidiaries that carry on publishing, souvenir and dramas, etc. On May 20th, Along with many other co-branding ventures, Uncle Tongdao alongside with I-ORANGE, an advertising company set up pop-up wedding dress stores. It was an event for single people and encouraged them to face their relationship status regardless of people’s judgments. It turned out to be a successful campaign as the societal pressures of singles is quite a headache for Chinese young adults.  

[Photo source: meihua.info, ‘Pop-up wedding dress store, an Astrology marketing campaign in China’]

Astrology in the hospitality industry

Uncle Tongdao also collaborated with Atour and established a hotel that features Astrology culture in Chengdu. The business vision is providing a comfort zone for young people to alleviate stress.

[Photo source: meihua.info, ‘Uncle Tongdao x Atour Hotel, an Astrology marketing campaign in China’]

Ride your start sign to work

In 2017, Uncle Tongdao collaborated with ofo, a bike-sharing company in China and launched some Astrology-themed shared bikes in China. Uncle Tongdao claimed that,  riding the personal zodiac signbrings luck to commuters in China. 

[Photo source: meihua.info, ‘Uncle Tongdao x ofo bikes’]

Future trend of the Astrology market in China: focusing on platforms, core values and big data

In the foreseeable future, the development of Astrology market in China ought to innovate its channels and content of products. Finding the right platform

Chinese Astrology fans cannot bother downloading apps to access Astrology information. Instead, WeChat official accounts or mini programs are the more convenient platforms.

Focusing on mainstream culture

Secondly, brands should focus on mainstream culture and subculture that are popular with youth in China so that they can alter their products and tailor to different needs. Astrology is a trend to watch for marketing to millennial and gen Z consumers.

Providing comfort

Furthermore, Astrology companies in China should always maintain the core value of satisfying users’ needs by including psychological comfort, positive energy and stress relief in their messages. Considering the fact that Chinese Astrology fans turn to the art for clarity during tough times.

Getting technical

Last but not least, AI and big data will be applicable in Astrology market in China since they are able to make Astrology more convincing. Since 2018, some Astrology APPs have been developing and testing the feasibility of this application and the result is yet to be known.

Popular Astrology topic: How Chinese people from different zodiac signs behave in the relationship?

Speaking of relationships, Chinese youth, especially girls, like to relate personalities to zodiac signs. Undoubtedly, Astrology serves as a reference when they make decisions on their relationships. The table listed below is the summary of characteristics of different zodiac signs. Whether it is reliable or not, it varies case by case!

Author: Amelia Han

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Market Segmentation of the B2C e-commerce industry in China

The primary activities in this industry include sales of clothing, cosmetics , maternity and children’s goods, food, digital products, and jewelry and watches. As for products and services segmentation, computer, communications, and consumer electronics make up the largest share (34.2%). Clothes, shoes and bags make up the next largest share (31.5%).         

Who are B2C e-commerce consumers in China

Digital-savvy consumers with higher education levels will be more likely to become e-commerce consumers.  Therefore, as B2C e-commerce enterprises continuously improve their service and product quality with low prices for customers, they have managed to retain existing customers and attract new customers. 

In terms of the geographic spread of the industry, first-tier cities, including Guangzhou, Zhejiang, Jiangsu, and Shanghai are more developed in Internet-based retail due to regional economic development and transportation infrastructure and are approaching saturation, with the e-commerce user penetration being as high as 73%. As a result, more businesses are expanding to second- and third-tier cities with the developments of the internet environment and logistics systems in those regions. Hence, the industry will gradually become more geographically balanced.  

Key drivers that lead to the rapid growth of Chinese B2C e-commerce 

Various factors have led to the ongoing success of B2C e-commerce in China. As for the technological factors, pervasive broadband connections have boosted demand in the e-commerce market, especially mobile e-commerce. According to the China Internet Network Information Center (CINIC), 73.6% of internet users had made purchases online in 2018.That is 592.1 million people spending more than $1.2 trillion online. Mobile transactions make up over half of the online sales. Besides, emerging technological trends, including new payment systems, Big Data analytics, and artificial intelligence, have supported the growth of e-commerce in China over the past years.

For instance, Alibaba Group created one of the most prolifically used online payment system Alipay to be used in Alibaba’s e-commerce platforms as well as other 460,000 external platforms (Alibaba), which controls around half of China’s online payment market. Alternative payment method such as deferred or installment plan Huabei (花呗) that has become ubiquitous in China also contributes significantly to the growth of Chines B2C e-commerce. It is projected that by 2024, 20% of B2C e-commerce transactions will be made using an installment plan, alternative payment. Moreover, big data-enabled product recommendations, as well as AI-based product recognition functions, have enhanced customer experiences to another level in e-commerce, with which the traditional brick-and-mortar model can never compete. 

[Source: Alipay app， left： Huabei, a ubiquitous virtual credit card system available on Alipay. Right：Jiebei is a credit loan sub-system on Alipay that allows users to instantly withdraw money into Alipay’s savings account]

Taking socio-economic factors into consideration, B2C e-commerce displays more competitive advantages. According to a survey done among Chinese consumers, price competitiveness is the main reason for shopping online, with 52% of respondents saying it is a significant factor for them. Compared with physical stores, online stores are free from rent, utilities, store fixtures and fittings, and these savings are passed onto customers. Besides, free shipping, full visibility over the delivery process, reduced cost of delivery and returns, comprehensive parcel tracking altogether increases customer confidence in online shopping, and ultimately, affect consumer purchasing behaviors that are leaning towards electronic commerce.    

Major players in China’s B2C e-commerce industry 

Looking only at the B2C e-commerce market in China, Tmall, JD, Suning, Vipshop stand out for this review. It is noted that the market displays high market share penetration with the leading four enterprises accounting for 96.1% of the industry Gross Merchandise Volume (GMV) share. By the end of 2018, Tmall and JD are the top two B2C e-commerce platforms in China, taking 61.4% and 24.2% of the Gross Merchandise Volume (GMV) share respectively. Suning and Vipshop rank the third and the fourth respectively in the industry.

Meanwhile, it is also worth noting that the market, over the recent years, has witnessed several emerging minor players such as Pinduoduo（拼多多）and Hema（盒马）, providing expanded products and services to the industry while the market share of the top four players has declined slightly.    

Tmall’s Singles’ Day Marketing Plan  

Tmall is an independent B2C online platform under the Alibaba Group. Unlike Taobao Marketplace, which is Alibaba’s C2C e-commerce platform that used to have counterfeiting issues, Tmall is perceived as a more reliable channel to purchase authentic and quality branded products through well-established brands’ flagship stores on Tmall. In 2008, Alibaba Group launched its Singles’ Day shopping festival via its B2C e-commerce platform Tmall, hosting a large-scale online shopping event to drive sales, including extensive discounts from retailers and incentives. As the Singles’ Day event expanded into a larger scale retail event, it is rebranded as the ‘11.11 Global Shopping Festival’, in conjunction with the Group’s globalization strategy, targeting not only the domestic market, but also the international online shoppers.

As of 2018, the 10th anniversary of the festival has witnessed more than $20 billion in transactions in 24 hours. These days the festival is more than prices and aggressive discounts, it has gradually evolved to an interactive shopping experience, moving towards gamification in a fun and social way that is paramount in improving customer engagement. 

The Competitive Advantage of JD.com

Jingdong (JD.com), as the biggest 3C (computer, communication, consumer electronics) online shopping platform in the B2C sector of e-commerce in China, gains its competitive edge through three strategies: price, channel, and sales promotion. The CEO Liu Qiangdong believes the high inventory turnover and cash turnover rate and good cost management contribute as key to his company’s success as an online retail business. Statistics show that JD.com has an inventory turnover rate of 12 days and pays off its inventory at the spot while its major competitor Suning and Gome have an average of 47 to 60 days of inventory turnover and 112 days of payment term.

[Source: JD.com “The top three product categories at JD.com are household appliance, mobile phone/communication/electronics, and computer/office, indicating a 3C-focused market positioning”]

Emerging trends in China’s B2C e-commerce industry: Demand for more integrated solutions

JD.com vice president and JD Retail Solutions general manager Chenkai Ling revealed that the future of retail will be boundless, that is the merging of content commerce, social commerce, and AI would create a seamless online-to-offline (O2O) shopping experiences. Jack Ma, the founder of Alibaba, envisioned future retail as the era of New Retail and has started to established New Retail infrastructure, empowering brands with data that redefines the relationship among customers, merchandise, and stores. With many brands have started to leverage the New Retail model, the sector will see more integrated solutions to the seamless omnichannel consumer experience. 

Technological advances benefit retailers in the B2C e-commerce

Jayne James, the director of international services at the UK delivery company Yodel, believed that the key factor led to the success of many Chinese e-commerce companies like Alibaba and JD.com is that they grow their businesses in the internet age with tech at their core. Over the past few years, we have seen many Chinese e-commerce enterprises employing Big Data analytics to study customers and impact their decision-making journey at hyper-speed while enhancing their competitiveness of supply chain, resulting in better operational efficiency and reduced costs. Suggested products and adverts from brands can access targeted customers instantaneously based on customers’ search and are easier to make real impact with just one click. Artificial intelligence (AI), Virtual Reality (VR), and instant mobile payments have also been used to enhance companies’ store performance on digital platforms, stimulating purchases.

[Source: Taobao “Alternative payment methods like interest-free installment payment stimulate online purchases”]

Leveraging social media trends

Though technological advances in B2C e-commerce sites are effective in driving e-store foot traffic, it is still hard to drive purchases. Therefore, social factors play vital roles in the sales pipeline and contributing significantly to store conversion rates. It is said that Chinese consumers are generally influenced by online content and 31% of Chinese consumers share a picture of food or drink they consume several times per week on social media. This indicates that brands have to work on the human side of the marketing and leverage the “Check-in Economy” (打卡经济) to impact customer consumption behaviours.

The Check-In Economy describes the social media phenomena of Chinese consumers taking photos to show their current location or activity.  Leveraging the Check-In Economy means that brands try to capitalize on this phenomena by encouraging  people to take photos of places or products and upload onto social media, creating user-generated content.

KOL marketing for B2C ecommerce

Numerous brands enter their target customer groups through collaborations with social media influencers or Key Opinion Leaders (KOLs) who have a solid audience base that will be converted into the buyers of the endorsed brands. For brands that have a limited budget, Key Opinion Customers (KOCs) and live streaming provide alternative ways to drive leads. The former is the main force of UGC, and the later uses a push marketing strategy to target mobile users. According to statistics, Chinese consumers use their phones for mobile payments 60 times more than consumers in the States do.  

Cross-border import retail e-commerce platforms are gaining popularity in China

Chinese consumers generally perceive imported products and foreign brands as premium. Thus, it makes sense that cross-border import retail e-commerce has displayed double-digit growth since 2013 and will continue to grow strongly. According to Statista, Chinese online shoppers go for cross-border import e-commerce platforms mainly for food, beauty, and personal care products, and apparel, footwear, and bags. In recent years, there is an increasing number of cross-border import e-commerce platforms emerging in the B2C e-commerce market in China. Brands capitalize on the consumption trend that leans towards foreign products and international brands.

Tmall International, NetEase Kaola, JD Global are the three most popular platforms in this sector, with NetEase Kaola making up the highest transaction value (27.7%), followed by Tmall Global (25.1%) in 2019. The consumer confidence in product authenticity on cross-border e-commerce platforms in China showed the same ranking as transaction value, with NetEase Kaola (38.8%) slightly outmatching Tmall International (36.1%). It is of importance to point out that although Little Red Book (Xiaohongshu) only ranks the fifth in transaction value, it has a strong presence among the female online shoppers in China and enjoys relatively high consumer confidence in product authenticity (15.9%). Considering that its main features as a platform for user-generated content (UGC), especially product reviews and native ads through celebrities’ and influencers’ accounts, it has great potential to become a major cross-border import B2C e-commerce platform.

[Data Source: Statista “Cross-border import retail e-commerce sector is gaining popularity in the B2C e-commerce in China”]

Why foreign brands should enter China’s B2C e-commerce market

The B2C e-commerce market in China displays high profit, high customer concentrations as well as high labor efficiency. Additionally,  Chinese online shoppers generally have customer confidence and positive attitudes towards imported products and brands, indicating a great market potential for foreign brands planning to enter the B2C e-commerce in China. Moreover, as the country’s middle-class grows and disposable incomes increase, consumers tend to purchase not only greater quantity but a variety of goods on online platforms, which have competitive advantages at price, services, customer experiences and alternative payment methods over physical stores. Last but not least, the future B2C e-commerce in China is likely to enjoy preferential regulations from the Chinese government, creating a more favorable environment that will benefit both domestic and foreign investors.

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The 2020 Lunar New Year will be remembered for more than just the year of the rat. In addition to celebrating the New Year with family, China also had its hands full containing the outbreak of the Novel Coronavirus. The economic impact of the Coronavirus can be felt around the world. On 23^rd January, the Wuhan’s Government decided to seal off the city from all outside contact in an effort to stop the spread of the Coronavirus. Since then, other cities in China have decided to cancel public events and citizens are suggested to stay at home. In a few short weeks, the streets of Chinese cities went from bustling with traffic and pedestrians to eerily empty. As the virus spreads, many cities in the coastal province of Zhejiang are now also getting sealed off. To prevent more spread, a majority of Chinese are cooped up in their homes. While Wuhan fights the virus, Chinese people are fighting off boredom. Lets look at the Chinese daily life during the coronavirus outbreak

Chinese are active on social media platforms during the coronavirus outbreak in China 

Weibo: share updated information of the Novel Coronavirus

Weibo (similar to Twitter) is the most popular social media platform which enables Chinese people to share and discuss up-to-date information regarding the Novel Coronavirus in China. According to Weibo, on February 4, 2020, approximately 13 out of 23 topics are about the Novel Coronavirus in China. In addition to the information of the Novel Coronavirus, topics related to as celebrities, like Kobe Bryant’s death, are being discussed on Weibo. Some topics reaching over 1 million reads per minute.

WeChat Posts: Chinese are staying updated on the virus

WeChat (similar to WhatsApp) is also a popular social media platform which enables Chinese people to access up-to-date information regarding the Novel Coronavirus in China. During the period of Chinese New Year, the updated Novel Coronavirus is placed in the top on every user’s page so that they are able to access this information easily.

[Photo source: WeChat, ‘Update of Novel Coronavirus’]

Chinese are extensively using video platforms  

According to the ranking in App Store, in the entertainment sector, 7 out of 10 apps are video platforms. This has proven that Chinese people are keen on watching movies or TV dramas during the Coronavirus outbreak. Cinema in China has temporarily shut down during this period. Nevertheless, this does not impede the release of New Year Movies. One example is the debut online premier of Lost in Russia. By the 27^th January, it has reached 0.6 billion of views from 0.18 billion  viewers. Since then more than 26 New Year Movies, including ones from previous years, have been on via video platforms such as Youku, TenCent and iQIYI.

[Photo source: App Store, ‘Ranking of entertainment apps’]

[Photo source: 36Kr, ‘New Year Movies in 2020’]

Online shopping: medical products and daily necessities  

E-commerce is a major part of the Chinese daily life during the Coronavrus outbreak. Since Chinese people are not suggested to go out, they do even more shopping online. According to JD’s Big Data Research Institute, during the Chinese New Year in 2020, people were likely to purchase medical products ( medicine and masks), hygiene products (hand wash and disinfectant) and food. From 24^th January to 4^th January, JD has delivered 19, 000 tons of staple food, 5.9 million liters of cooking oil, 15 million units of instant noodles and 4000 tons of fresh food.

During the Chinese New Year in 2020, several food sectors have prominent performances. Sales of cooking oil experienced a significant growth with 556% YOY. Compared with the same period last year, sales of prepared food and instant drinks increased by 423% while that of dairy products rose by 300%. Sales of staple food were 20 times more than the figure last Chinese New Year and sales of frozen food were 7 times more than that in the same period last year.

As for the fresh food sector, sales during the Chinese New Year in 2020 were 370% more than that prior to this period. Furthermore, the sales of vegetables were 9 times more than that in the same period last year. The sales of meat were 7.5 times more than that of the last Chinese New Year. The below graph shows how the proportion of sales on JD changed between 2019 and 2020.

[Data source: JD Big Data Research Institute, ‘Change in consumption during CNY (2020 VS 2019)’]

Mobile Gaming: multiplayer online battle arena sector is the most popular. Plague Inc. rises ahead

The outbreak of the Novel Coronavirus caused Chinese citizens to turn to gaming for in-home entertainment. Data has revealed that Chinese people have spent more time gaming during the Chinese New Year in 2020. According to Baidu Index, the searches related to mobile gaming has boosted from 26th January onwards. According APP store rankings, Honor of Kings and Game for Peace are the most popular mobile games among Chinese people. During the last Chinese New Year, the daily active users of Honor of Kings was consistently 70 million whereas that of Game for Peace was 30 million. However, the performance during the Chinese New Year in 2020 is more outstanding. The daily active users of Honor of Kings has reached 120 to 150 million  while that of Game for Peace has reached 80 to 100 million during this period.

Coronavirus inspires gamers to play Plague Inc.

Besides, it is noticeable that Plague Inc. has become increasingly popular along with the expanding influence of the Coronavirus. According to the ranking in the App Store, since  January 19th, downloads have surged rapidly and it is now ranked first in the paid game sector.

[Photo source: Baidu Index, ‘Search index of mobile gaming’]

[Photo source: App Store, ‘Ranking of game apps’]

Online fitness: Rejoice Sport and Keep are keeping Chinese active during the Coronavirus outbreak

During the Coronavirus outbreak, Chinese are looking for ways to stay in shape. Mobile fitness apps such as Rejoice Sport and Keep are gaining traction, as they can do exercise at home. According to qimai, from 27th January onwards, the search index has increased drastically and maintained at 9407. Prior to the Chinese New Year in 2020, the figure fluctuated around 8600.

[Photo source: qimai, ‘Search index of Keep’]

[Photo source: zcool, ‘Page of Keep’]

Education Platforms: Chinese students study through the  Coronavirus outbreak

The Coronavirus outbreak does not affect Chinese students’ passion on study. The downloads of Some education apps such as Yuan Fu Dao, Ren Jiao Dian Du and Xueersi Online School experience a significant increase. Moreover, from 9^th January to 30^th January, the period prior to the Chinese New Year, the search index of the mentioned apps remained stable. However, from 30^th January onwards, the 6th day of the Chinese New Year, their search index have risen significantly to around 9000.

[Photo source: qimai, ‘Search index of education apps’]

Discussion forum and cooking apps get traffic during the coronavirus outbreak

Other mobile apps such as XiaChuFang (cooking app), Zhihu (similar to Quora) and Douban (similar to Reddit) are also popular with Chinese people during the Chinese New Year in 2020. Moreover, it is noticeable that the search index of Xia Chu Fang has boosted from 27th January onwards and has reached 9000. During the coronavirus outbreak, Chinese people dare not dine out. Cooking at home seems to be an alternative for them. On 4th February, the app was out of order and it had terrified lots of users as they claimed to rely on such an app for cooking.

As for the discussion forum, Zhihu and Douban, Zhihu has maintained its search index around 9250 during the Chinese New Year in 2020 whereas Douban has stable increase in search index since 27th January.

[Photo source: qimai, ‘Search index of discussion forum and cooking app’]

Traditional games and activities during Chinese New Year in 2020 have been brought online

In general, traditional games in Chinese New Year such as paying a new year call (拜年), and playing Chinese poker and mahjong are common activities during Chinese New Year. However, these activities require gathering and are likely to spread the coronavirus among families. In order to avoid such activities, there are now penalties for gather to play games, and people are encouraged to report these to the police. Despite the fact that gathering to play Chinese pokers and mahjong is prohibited, online Chinese pokers and mahjong are the alternatives. According to qimai, on 7^th February, the search index of different types of Chinese pokers occupied the top-5 positions in the ranking of game’s search index. This has indicated the popularity of these traditional games.

In the image below of top searched APPs during the Coronavirus outbreak, all poker games are circled in red.

[Photo source: qimai, ‘Ranking of game’s search index: Chinese poker games are circled in red’ ]

[Photo source: yiwan, ‘Online mahjong’]

Coronavirus made a 1000 year old tradition go digital

Chinese people normally go to the temple fair during Chinese New Year to pray for luck and health for their families. With over 1000 years of history, it is hard to imagine a Chinese new year where families do not gather at local temples. However, owing to the outbreak of Coronavirus, the temple was banned in every Chinese city.

Nevertheless, there is an alternative for this event. For example, the temple fair in Foshan, Guangdong has switched to a online temple fair. Every year, on the 16th day of the Chinese New Year residents from Foshan carry handmade windmills and lettuce  through a bridge, which can bring luck and happiness to people. This year, people from Foshan attended the temple fair via their mobile phones. By browsing and clicking the handmade windmills and lettuce that appeared on the page, users were able to “walk through the bridge” as if they did so in reality. Photos of the temple fair are placed on the page so that users could feel the event’s atmosphere.

[Photo source: Sohu, ‘Temple Fair in Foshan (2018)’ ]

[Photo source: WeChat, ‘Online Temple Fair in Foshan (2020)’]

Unusual activities that combat boredom during the Coronavirus outbreak

Even though Chinese people can access a variety of activities via electronic devices, some people feel extremely bored at home. According to Baidu Index, the search index of “Boring” and “Stuck at home” has surged significantly during the Chinese New Year in 2020.

[Photo source: Baidu Index, ‘Search index of “boring” (on the left) and “Stuck at home” (on the right)’ shows boredom in the Chinese daily life during the Coronavirus outbreak]

Therefore, what to do at home has become a popular topic on social media. On Weibo, Chinese people are likely to search “how to kill time at home”, “what to do at living room”, etc. Some Chinese have funny ideas like fishing at home and making crafts with seeds.  

[Photo source: Sina, ‘Fishing at home’]

[Photo source: Sina, ‘Seed craft’]

On 27^th January, residents from Wuhan launched an event, singing at the window, in order to cheer themselves up. At 8 PM, residents from different communities in Wuhan played the music and sang at the window. Lately, this event was criticized by doctors as it increased the risk of coronavirus infection.

Coronavirus memes created by Chinese netizens: embody non-mask phobia

Even if the current situation in China is serious, Chinese have faced it with a sense of humor. The following memes and funny pictures embody this.

People are suggested to wear masks in the public area. On 26^th January 2020, Guangdong government has established a policy regarding wearing masks in public areas. Penalties apply to people who refuse to wear masks. A lot of memes are created and are related to masks during the Coronavirus outbreak. Chinese people tease that masks are trendy, even putting masks on their pets. Moreover, masks are precious and are thought to be luxurious gifts, sharing them in Red Envelopes which are normally used for gifting money.

[Photo source: Zhihu, ‘Memes of Coronavirus’]

When the coronavirus started to break out in China, the older generation were in contempt of it and refused to wear masks. It was hard for Chinese youth to convince them. Thus, they create lots of memes which embody their helplessness.

Thankfully, the situation has reversed. Due to the spread of the coronavirus in China, the older generation has gradually been aware of how serious the situation is and now wear masks while going out.

 [Photo source: Zhihu, ‘Memes of Coronavirus’]

During the Coronavirus outbreak, Henan province has been widely discussed on social media due to its effective precaution. Every village in Henan has implemented a strict rule, that is, people are not allowed to visit the village that they do not come from. Villagers take turns to guard the entrance and prevent other people from entering.

[Photo source: Huxiu, ‘Villagers from Henan, guarding the entrance’]

Author: Amelia Han

The ultimate Coronavirus economic impact in China report

This article Chinese daily life during the Coronavirus outbreak: Facing boredom with humor and digitization is the first one to appear on Daxue Consulting - Market Research China.

Nike’s lunar new year commercial: a game of cat and mouse

Nike’s lunar new year commercial is a story spanning decades about the battle between a polite niece and her determined auntie. Every year during the Chinese spring festival, the tenacious auntie insists on giving her niece a red envelope stuffed with money, and, every year, the little girl politely refuses to accept the gift. Due to the stubbornness of both sides, they have turned red-envelope-giving-and-refusing into a competitive sport.

At the beginning of the ad, the audience thinks that the refusal of the little girl is a “play hard to get” strategy to appear polite and well-behaved. However, as time passes, the little girl becomes a schoolgirl, then a college student. She races away from her extremely generous aunt, who chases after her niece across the first through the city, and then the countryside. As a result, the aunt’s insistence always wins. Come to the technology age, she even outsmarts her niece by sending her countless virtual red envelopes via smartphone.

Jump to many years later

The little girl already has her own family with her own little girl. Yet, the battle does not stop there. Now she is old enough and entitled to give her beloved auntie red envelope on Chinese New Year. At the end of the commercial, the auntie appears at the door and the Chinese audience thinks that, finally, the niece will have her “revenge” after so many years and give her aunt the red packet. However, the camera turns back to a pair of Nike running shoes on the auntie’s feet and the “come after me if you dare” look on her face. A new chasing competition begins, however this time, the other way around. The aunt may be getting older, but she does not plan to give up. Like the slogan at the end of the ad – 新年不承认（Hold Nothing Back This New Year）.

Why has Nike’s lunar new year commercial generated buzz on Chinese social media?

In China, a red envelope or a red packet (known as Hóngbāo in Chinese, 红包) is a monetary gift which is given during holidays or special occasions such as weddings, graduation or the birth of a baby. Everyone in China is familiar with red envelopes, and most Chinese millennials have been taught to refuse gifts, including red envelopes. Refusing gifts is considered a good manner, to not appear greedy or taking the present for granted. 

Nike has taken a very smart approach on the Chinese hong-bao tradition and presented it humorously and playfully. According to Nike, even though the festivities of Chinese New Year, they try to remind the audience to celebrate and have fun; to stay active during a season of plentiful eating. Chinese consumers start to appreciate the efforts put into a campaign and how much a brand understands their culture. The chance is much higher for international brands to gain more favorable feedbacks among Chinese consumers, when they feel understood and respected. Nike’s lunar new year commercial has succeeded to do so.

A culturally conscious campaign is a quality campaign.

Chinese millennials are more and more aware of quality. Quality means not only the quality of the product, but also which of a marketing campaign. Simple strategies such as celebrity endorsement may not have the same impact on consumers as they did in the past. As we can see from the top comments on Weibo regarding Nike’s lunar new year commercial, Chinese millennials on social media can differentiate a brand with the ad itself. They even try to reflect on their purchasing decisions based on their own observation of commercial strategies adopted by brands.

Translations of the top comments on Weibo under Nike’s lunar new year commercial:

Everything else aside, Nike is quite good at advertising.

This is not “Nike” at all, oh no, this is absolutely “Nike”.

The ad is quite good. Yesterday I was still fascinated by how impressive Adidas’s new year ad with lots of stars was. After watching this, I think Nike’s lunar new year commercial is even better. In my opinion, brands like Nike, Apple, McDonald and Coca-Cola use less celebrities. Instead, brands such as Adidas, Samsung, KFC and Pepsi adopt more celebrity endorsement. Coincidentally, I prefer using products from the first category. Maybe the style of commercial does affect my purchasing decisions without me noticing.

OMG… How could Nike’s commercial be this awesome !!!!

Tips from local experts are crucial for a successful campaign for foreign brands in China 

For international brands who are not familiar with Chinese culture, it is extremely important to get acquainted with the local sentiment and be careful about the cultural expression. Compare with Nike’s humorous and energic take of Chinese tradition, Dolce & Gabbana public relations crisis in China at the end of 2018 was rather a regret. The brand was accused to be insensitive, stereotypical and disrespectful. “Western brands seeking to enter and expand in China should be aware of Chinese cultural sensibilities,” said Angelica Cheung – Editor in Chief of Vogue China – reported by WWD. “Instead of dictating everything from head office, they would gain a lot from listening to the opinions and insights of their Chinese teams.”

Author: Chencen Zhu

Watch the Nike Chinese new year’s ad:

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