Matthieu David: Hello everyone, today we are going to go through our new vitamin and health supplements sector in China report, which was published in July 2020.

Here to talk about it with me is Allison.

Allison Malmsten: Hi, I am Allison, the marketing manager at Daxue Consulting.

Matthieu David: Thanks for being here. So today we go through this topic which is the Vitamin and Health supplements sector in China, which has been a topic for years, it has been impacted by cross border eCommerce, it has been – actually I don’t know if I could say dominated but influenced a lot by brands from overseas and we are going to see which countries are more valued by Chinese consumers, but if we compare China to the west, what would be your conclusion, Allison, after reading the report?

Allison Malmsten: So, I think one thing that really sticks out is there’s different motivations to take health care supplements in China. In China the number one concern is skin health and the appearance of the skin, so a lot of the supplements will market themselves towards skincare and you might even see for example a specific supplement that’s in China marketed as a skincare product, but then it helps with skincare and then in the west, it might be marketed as it helps with the immune system or something else.

Matthieu David: Very interesting. So it has been in some ways rebranded for the Chinese consumers and I think in the report we mentioned that there was some – also fake statements – do you feel that the fact that the same vitamins would be branded for skin instead of immune system in other countries, would be considered a fake statement or is it just different properties which are – communicated on – what’s your reaction when you read reports?

Allison Malmsten: Yeah that’s very interesting. Its hard to say whether it’s really fake, I mean we would really have to dig into the research done by the companies that created the products and did their own testing further on health departments and their local governments’ approval, but yeah I do think that – for example, some products in China might be marketed as skin lightening, especially like – on another note, some moisturizers might be marketed as skin lightening, whereas in the west moisturizers are known to keep your skin more tanned because it causes you to not shed skin. So, yeah, I think in order to really know the answer to that, you would have to follow a group of consumers for a while to see how it really – how the vitamins really manifest in the body. To a certain extent there’s obviously going to be an amount of the mental factor or the placebo effect like if you believe a certain vitamin is going to make your skin look healthier or it’s going to improve your immune system, you might look in the mirror and say – wow, my skin is glowing today when in reality you don’t really know if its improved that much.

Matthieu David: And in the topics you wanted to mention too when we compare China to the west, is about the level of consumption and the room for growth which seems to be still steep in China?

Allison Malmsten: Yeah, so currently China’s vitamin market has about a 10% YoY growth rate, now this is about the same growth rate as the US in the 70’s, but in the US in the 70’s a lot of these products were still developing and a lot of them would have very negative side effects, and so obviously this would hinder the market growth. But, right now a lot of these products they have already been perfected over a couple of decades now, and so there’s a lot of room for them to really be successful and grow very quickly. However, that being said, China’s market size is still quite a bit smaller, if I look at the number – sorry I have to look at the number really quick but China’s market size –

Matthieu David: The numbers you came up with when we talked about it is that – it was a per capita standing and China was still standing on 18$ USD where the US is –

Allison Malmsten: Yeah, the annual consumption is only 18$ USD per person, whereas in the US it’s like around $400 or was it 140?

Matthieu David: Its 148 – the number you came with, so that’s a very, very common way of looking at where you could still grow in China, what segment could still grow is to look at the per capita consumption and to say that China within the coming 10 -20 years will catch up the level of Korea or the US. So, it would be a ten-fold or maybe 8-fold growth if you look at the numbers. That may not happen but that gives a little bit an idea of the gap which could be caught up. At least certainly the case let’s say for – half the population is certainly believable, maybe not the entire population, so its still a fold of maybe 4-5 times.

Allison Malmsten: Yeah and then for japan and Korea the per capita expenditure on health supplements is 100$ so that’s still five times more than China.

Matthieu David: Yeah so that’s certainly why as well a lot of brands are looking at China because they see there’s an appetite for it, there is a culture of eating supplements or superfood, to become a little bit of – that’s the topic I’d like to discuss, a bit of a superhuman, I feel there is a bit in China, a culture of being super-efficient and superman or superwoman and in order to reach this level, either to exercise or to eat a lot of supplements. So, in terms of culture, it seems to fit and in terms of spending it seems not to have reached the maximum.

Allison Malmsten: Yeah definitely I think Chinese especially millennials and Gen-Z are really looking to become the best that they can be and they’re willing to make purchases to do so. Some factors for a healthy lifestyle perceived amongst Chinese people are for example a balanced diet which in a survey by Mintel, 50% of Chinese believed that its important and they do have a healthy diet, but then 49%believed that it is important, but they don’t believe that their diet is healthy enough. And so, this is just an example of about 50% of people are out there and they think they want to do better, they want to close that gap between their ideal self and their current self.

Matthieu David: And that’s something interesting in the report as well. We didn’t want to dig in too much when we were talking about the report today but when you look at the search on Baidu and what’s trending, one of the trends during and after COVID-19 was to try to understand what is junk food and what is a healthy food, because actually people have a hard time to distinguish what is junk food and what is healthy food. We think about fast food when we think about junk food, but it’s not necessarily healthy when its not fast food. Are very oily dishes healthy? Certainly not. And so, there is a request – quest I would say, by Chinese consumers to understand what healthy and not healthy is during COVID-19 and after COVID-19. So, that brings up a topic about COVID-19, how COVID-19 has impacted the industry overall, the self, the perceptions, and I think it’s also impacted prices.

Allison Malmsten: Yeah definitely. So, Covid-19 did stimulate the sales of the vitamins and health supplements sector in China, for sure one topic is immunity and based on the results from Baidu’s searches, you can see that the search for how to improve immunity has skyrocketed around the time that Wuhan was closed down. And then that results in people trying to optimize their health and so vitamins – they had some big online deals, so during February – March, and April, some top brands like By-Health and Swisse were already up in sales by around 40-60% from the year before, and, of course, a lot of this is because people were in general shopping online more and so because this is measuring online sales, that can explain some of these numbers, but there was a lot of price dropping from February-March-April to try and encourage these consumers to shop online and buy their products.

Matthieu David: Yeah, to that we need to remember that the shops closed, the online sales may have cannibalized the offline sales, so all in all the market may not have grown as much as 40-60% during and after Covid-19.

What kind of vitamins Chinese eat most? You mentioned that some vitamins are marketed towards skin more than in the west, but are there some vitamins that Chinese prefer, or health supplements?

Allison Malmsten: So the most popular vitamin is vitamin E and in the US for comparison, Vitamin E falls in like the 8^th or 9^th spot for Vitamins and Vitamin E is marketed as something for skin, something to help elderly, and then after vitamin E comes Vitamin C – which is a bit more popular in the US at least, because it’s known for immunity – preventing colds – so yeah – and then after that is vitamin A which is of course known to help eye sight.

Matthieu David: We mentioned at the beginning that health supplements and vitamins – again I’m not sure to use the right word by dominated, but are largely influenced by overseas players, foreign players. How the different countries perceived by Chinese people. We know that Australia and New Zealand usually have a good image in terms of nature, in terms of food – is it a case in vitamins and health supplements and what other countries stand out?

Allison Malmsten: So Australia definitely stands out, 22% of the vitamin imports in China are from Australia, they’re know for vitamin C – calcium, collagen, grapeseed and dietary fibre and I think the idea that Australia is kind of green, healthy, natural is definitely true in this case – there is one Australian brand that their offline store is kind of like an Australian theme and its decorated kind of like a forest or a jungle and its all green and leaves and I think that’s definitely consistent with their marketing message of being – hey, we’re Australian so we’re natural and yeah I think that’s very effective in the vitamin industry.

Second is the US – they account for 20% of the imports and they’re known for big brands like GNC and so some of those marketing strategies they use like KOL’s and they’re known because they have a big strong brand name and so some people when they’re looking for trustworthy brand names, they might go for some of these foreign brands.

Matthieu David: So you already touched the point about marketing strategies for herb supplements by mentioning some KOL – you mentioned three strategies or tactics that you wanted to go into – one is to use multiple channels to reach consumers – you already mentioned shops – offline shops, and the second one is the market to the right consumers and in the report, we see that the most – the segment expressing the highest interest into vitamins and health supplements, doesn’t mean the segment which is buying the most actually. But the one which is expressing most interest is about 20-29 years old and then you have the 30-39, but this is really the core segment, which looks always a bit younger than the one you would expect – 20 – 29 and so to market to the right consumers would be your second recommendation, to be very careful on this, and secondly its to leverage social media and gain insight from them. Can you elaborate a bit more about those three directions you suggest to form brands in the health supplements and vitamins to explore?

Allison Malmsten: Yeah so first point – using multiple channels to reach consumers, in China omni channel is very important. New retail which is the combination of online and offline – so like we talked about earlier a lot of these products are sold on platforms like Alibaba’s Taobao and Tmall, but at the same time a lot of the brand awareness comes from seeing the stores and going into the stores. One of the strategies that brands use is pop up stores, which is where they kind of have a little exhibit pop up in the street or in the mall and these little pop up stores, they really encourage people to take pictures and share on social media which for them after the cost of the pop up store, the following social media sharing is all free for them.

GNC has had pop up stores, Blackmores and yeah – so that’s how they reach consumers, they do branding offline and you can of course purchase offline too, that increases their brand awareness and then the stores are very interactive and then they might hop online for that final purchase.

Next point – marketing to the right consumers. So, based on our analysis from Baidu, who is searching about vitamins?

Well, it appears that 20-29-year old’s are the main people searching for these products. In contrast when we did an analysis on searching for healthy food, the target age – the age group of the people searching for healthy food was the 30-year olds. So, it does show that the 20-29-year old’s, they are definitely curios to learn more about these products and maybe compare them online, so a lot of the brands do cater their marketing tactics to reach these groups. One strategy is KOL marketing, another example which I thought was pretty clever was that one brand that had a sleep supplement, it’s called [Chinese 16:37] it’s a Chinese brand, they actually target people who stay up late at night, which is likely to be college students and they have these videos that play late at night, talking about marketing their products and they also have comics released late at night, kind of to target those people. Similar to Zhai people like we talked about last time, its targeting that group of people. So that’s kind of some interesting ways – there’s another By-Health, collaborated with transformers, which was really popular when the 20 -29-year old’s – when they were kids. So, it’s a little bit of a nostalgia marketing right there – so that’s –

Matthieu David: It’s interesting to see them targeting a specific context in which you may think of health supplements or vitamins, I really like those niches where you find your sweet spot and Chinese seems to have found that and By-Health, working with, collaborating with Transformers.

I have been always, since I’m in China – surprised how transformers have been popular in China and competing with Disney. I don’t know if its part of Disney, I don’t think so right –

Allison Malmsten: I don’t know, I was never a fan of it.

Matthieu David: But it seems to be more familiar to Chinese than the very well-known Disney cartoon or movies that we would have been familiar with in Europe or in the US – Transformers have really made a mark in China.

AAllison Malmsten: Right. And what’s also interesting is that whilst Star Wars kind of took over the world and everybody ahs seen all of the Star Wars movies; Star Wars is actually not famous in China at all.

Matthieu David: Interesting too, yeah. Very interesting, we need to challenge what we believe as well known and as taken for granted in China, always reconsider it.

And the last one you were mentioning is leveraging social media to reach consumers and gain insights.

Allison Malmsten: Yeah, so when it comes to reaching consumers, one interesting thing is Chinese people – especially on WeChat, they love to use emojis and those little dancing cartoons, they love to use those and so Blackmores has actually released their own emoji for one and then also something that’s very interesting is – if these brands can do some social media listening to see what Chinese consumers are saying about their brands, there’s a lot of learning.

1 – some three key things that we picked out, that was very interesting to us is some of the three biggest complaints about vitamins was 1] that the pill tasted bad. 2] that the pill was too large and 3] that the effects were not obvious enough.

For the first two points –

Matthieu David: Sorry to interrupt but I like to stop on pill tasted bad – maybe that’s something you wanted to say but the fact that the pill tasted bad, I’m wondering if its not good. Because you don’t expect something healthy to taste good. You don’t expect a medicine to taste good. Actually, if it tastes bad, it may link more to something more scientific and chemical or – chemical in a positive way, made by science – something made on purpose, not to please you but to do good for your body.

Allison Malmsten:  Yeah what I thought was really interesting is that – these vitamins are obviously – like they’re not made to be eaten or really chewed on. So that’s why – what’s interesting in China they say literally eat medicine, but in the West, we say take medicine – I don’t know how it is in French but in English, we don’t think of it as eating, and so I think what was very interesting is they would say that the medicine or that the vitamin it doesn’t taste good and I think – well, from my perspective, from the western perspective, obviously – its not candy. I mean, they can add a little bit of sugar to the recipe to maybe make it taste better, but the purpose is not for taste. Although some vitamin C ones might taste citric, but there are some pills like fish oil pills, for example, they’re not going to taste good. So, I just thought that’s very interesting that they comment that it tastes bad and they complain about that.

I actually went and looked at amazon reviews in the West and I saw that nobody was commenting about the taste, cause you just think that’s irrelevant, but that’s a good point to say – maybe the product was not stored properly, maybe it was not kept in a cool enough condition or maybe it was past the expiration or something. Yeah, and then the second point was –

Matthieu David: It’s interesting how semantics could influence also the comments from consumers because of the expiration to eat medicine, in French we say the same as in the US – to take medicine, instead of taking – which certainly would imply different thinking in French relationship with food and with medicine and to associate food and medicine because you eat medicine – it’s a very interesting point.

And the last thing you wanted to mention is about healthy lifestyle, right?

Allison Malmsten: Yeah so, we were curious to look at how do Chinese define a healthy lifestyle – obviously that can be perceived as differently across cultures. What we found was very interesting among Chinese people, nutritious food is definitely the most important factor in their – the first choice they make to improve health condition. After that is trying to make better life choices like sleeping more or maybe even using Chinese traditional medicine and then health supplements comes next – but what I thought was interesting is sports and fitness came last and I don’t know if this is my own personal bias but I think in the US when we think – oh we want to make healthy life choices – we think first we go to the gym and the very last thing is changing our eating habits. We always want to outwork a bad diet, we always want to try and work it off at the gym, but in China, it looks like it’s the opposite. It seems that nutritious food comes first and fitness comes last. Health supplements are in the middle, but like you mentioned – with the language, especially with the word for taking health supplements being to eat – I wouldn’t be surprised if that’s more closely related to the perception of nutritious food.

Matthieu David: Interesting. Also in China, my experience is that there is this tendency to think about a miracle solution like when you get – you don’t feel good or you have a cold, you would drink hot water and then you have this one solution fits all – I feel with vitamins and with health supplements, you have this relationship also like miracle solution to whatever problem you have, except that you may have one specific vitamin health supplement to solve your specific problem instead of one solution fitting all.

Another thing I liked in the report and found very inspiring, interesting and something certainly to look at more deeply in the future, is about how to market vitamins and health supplements and it seems that the packaging is very important. It seems also that when you want to connect with the Gen-Z, you may think also about Buddhist healthcare. You may also think about some ingredients like honey, goji berry, tea with health ingredients, fermented food, wheat proteins, things that resonate with the Gen-Z and lastly health is not only – we talked about eating medicine, but actually there are a lot of other products to make it possible for health supplements and vitamins to cobrand their product, which are devices, which are affiliated appliances that somethings certainly a bit new in the mind of consumers to have like air purifiers, to have water purifiers, to have different tools, devices plugged with electricity, IoT, using the internet for health – one being all the Xiaomi devices to track your health, like your pulse and so on.

So, there are a lot of opportunities to communicate about your health I feel in China – it’s a very, very aware market about health. Do you feel the same?

Allison Malmsten: Yeah, in fact, you mentioned about the Chinese magical solution – I think that’s very interesting because I think eastern medicine is kind of – it’s about bringing the body back into balance and I believe that all health problems are caused from the body being out of balance and so doing something like drinking hot water to somebody who believes in that is – drinking hot water, it will solve digestive issues, it will solve skin issues, it will solve any kind of stomach ache if you ate something bad, of course, if you have the flu or anything, you absolutely are supposed to drink hot water. So I think that there’s a lot of belief that no matter what problem your body is having, its having it because its out of balance and then there is this key thing that can bring your body back into balance whether it means cooling you down or warming you up, based on the yin-yang, whereas western medicine is targeting like – okay so you have a stomach problem and we have to identify what the problem is and based on what the problem is there will be a specific remedy for that or medicine for that and it might not be – we won’t relate it to another problem that you’re having in the body.

So I think even though there’s a lot of Chinese people today who don’t necessarily believe in Chinese medicine, you will still find that when talking about food or when talking about a lot of these different life things that these beliefs will kind of sneak their way into the conversation and into the thought and yeah – if that makes any sense – whether they believe in Chinese medicine or not, they’ve grown up with the culture and they’ve grown up with family members telling them what to eat when you’re feeling a certain way or what ingredients help with what type of illness and I think its hard to separate that for the rest of their life. So I think that using these very traditional ingredients like goji berries or fermented food or even using them and then marketing them in the products, again ginger is a really good one and ginseng – that could be really beneficial for marketing in China, versus like if you use ginger in your marketing in the West, people might be like – okay! What is that supposed to do?

MatthMatthieu David: Very true. Thanks for taking the time Allison to talk about the report, and if you want to know more about the report you can find the report on SlideShare, they are all stored on SlideShare and on our website. Thanks for listening everyone.

Find the full Vitamin and Health Supplements Market Report 

This article Market Tidbits transcript #3: A quick glance at the vitamin and health supplements sector in China is the first one to appear on Daxue Consulting - Market Research China.

The number of students going abroad is mounting every year as increasing numbers of Chinese students are looking for an experience overseas. Between 2008 and 2016, the number of students studying abroad had increased from 179,800 to 544,500 showing overwhelming growth. In 2017 alone, 608,400 students left China for overseas study. This fast growth has been developing since 2010 and has been growing year on year. Today, China is the largest source of international students and is expected to grow. Yu Minhong, the founder and CEO of the New Oriental Education and Technology Group as well as a member of the Chinese People’s Political Consultative Conference’s National Committee, estimates that the number of students studying abroad will peak at 700,000 to 800,000 each year. However, the coronavirus outbreak has caused Chinese students to re-evaluate their study abroad plans, gradually initiating a shift in destination preferences and post-grad decisions.

Why is China’s study abroad rate increasing?

The price of student exchanges has also become increasingly more affordable as the booming economy has allowed more parents and students to meet these heavy costs. This has allowed more Chinese students the opportunity to go overseas in order to increase their chances of employment after graduation. This is especially important as 2010 brought a higher percentage of unemployed graduate students causing students to look for ways to differentiate themselves in the job market. Many students, however, despite the abroad experience often return home with the compound annual growth rate (CAGR) being 14.9% for returnees and 11.7% for students going abroad. This is as many students intend to go back after studying or find the job market overseas too difficult with them often having lower revenues. The government also offers incentives to returnees in China with them having better opportunities in larger cities which they would not have been able to access without foreign education.

Chinese students studying abroad: Destination preferences

Due to China’s massive population, it sends more students abroad than any other country and this number is still rising. This is seen with growth in the number of returning Chinese students overtaking the number of students studying abroad in 2016. The United States (US), however, has been the preferred destination for many Chinese students with it remaining the top destination year on year.  The quality of a US education is reputable and many Chinese students study in the US may hope to stay and live there after graduation in order to enjoy the lifestyle of a developed country. Further, many Chinese international students prefer to study in English speaking countries with the US, Australia and the UK making up approximately 60% of outbound students. China is also the largest source of international students in many countries with Chinese students accounting for 30% of students in America, Canada, Australia and New Zealand.

However, what may have been a popular destination could be fading due to the pandemic and various political clashes (such as trade war).

According to a report on the economic impacts of the pandemic published in April by the US-China Economic and Security Review Commission, a host of issues can reduce Chinese demand for higher education in the US in the following academic year. These include delays or cancellations of US entrance exams in China, travel restrictions, and the perpetuating uncertainty of when US college classes will be in-person. The economic impacts could be severe as nearly a third of all tuition payments to US public universities stem from international students. Also, cancelled university recruitment events in China and inability to work with local recruitment agencies could further contribute to the decrease in enrolment (learn more on how the coronavirus has impacted Chinese students’ study abroad decisions).

Prior to the coronavirus outbreak, there has already been a decline in enrolments from Chinese students in US schools, most of which are part of the larger picture of rising Sino-US political tensions. For instance, visa refusals have been a common problem facing Chinese students. As such, the development and job opportunities back home prove to be attractive reasons for the drop in Chinese students seeking to settle overseas after graduation, which was 85.4% in 2013 but 79.4% in 2016.

Other countries are also increasing their awareness in China as they gain market share slowly and Chinese students are ready to assess new destinations. It is clear, however, that English speaking countries have an added advantage to attract Chinese students who want to better their English speaking skills. Some regions have become more popular with East Asia and the Pacific taking a significant portion of Chinese students with the convenience of location. This is with Japan as the 4^th most popular country and South Korea as the 6^th most popular country in 2016.  This is also with Chinese students accounting for 57.3% of international students in Japan and 49.3% of students in South Korea. Many students also studied in Hong Kong due to its proximity.

Why do Chinese students study overseas?

Chinese students abroad: Social, personal and professional benefits

When surveyed it was found that 82.5% of companies and employers give returnee employees privileged treatment. A CCG survey found that almost half of the Chinese students surveyed who studied abroad believed that they were more competitive than their peers who studied at domestic universities. This is proven true with 20% of companies promoting returnees faster and 17.5% preferring returnees for core positions and 50% of state-owned enterprises claiming that they welcome returnees into core positions. These figures alone show the importance employers place on abroad studies with these high percentages indicative of the professional benefits provided to those with an overseas degree.

Another benefit this provides for Chinese citizens the influence abroad education has on Hukou. Hukou is strict and complicated household registration system which also doubles as a domestic passport that regulates the Chinese population both socially and geographically. It determines factors such as where a person can live and work, where their children can go to school particularly so if they belong to a rural area and the social welfare benefits they can receive. Returnees from abroad studies get a more flexible Hukou transfer policy which helps them settle down in tier 1 cities and gives them more opportunities in terms of experience and salary. Further, preferential policies are also provided by the government to get returnees to start a business by providing grants and incentives such as free or discounted offices or tax-free cars. This is in order to attract Chinese talents back to China.

Besides the social and professional benefits provided by organizations and the government, there are personal benefits for Chinese students who go on exchange. This is evident as 64% of Chinese international students pursue abroad education in order to enrich their personal experience. This includes improvement of their English skills, the knowledge they gain of a different culture, overseas life experience and an international network. These benefits can be gained by any student studying overseas but English based exchanges are particularly beneficial for Chinese students who have been studying English throughout a school. This is as it gives students a chance to gain practical experience in a different environment that makes them more employable in the long run. Other than Chinese and Spanish, English is one of the most widespread languages in the world. It has gained increasing importance with English being an official language in at least quarter of the world, with 400 million people speaking English as their first language and 1 in 5 people being able to speak or understand some English. The role of English in China cannot be understated especially as it is integral for professionals to compete within the business environment. This is illustrated with parents understanding this importance as they start English education early in order for their children to start off more competitively, thereby spiking the demand for English teachers in China.

Another major benefit is also the waiving of the Gaokao entrance exam. Gaokao is the test undertaken by high school students in order to study at university and it is known worldwide for being an extremely difficult and stressful exam. The test has been said to determine the course of a student’s life and is the only way to enter university. The supply of university spots is also known for not meeting demand- making the pressure on high school students enormous. Those who previously did not anticipate abroad studies and those determined to study overseas do not need to pass Gaokao which takes a significant amount of stress off of students.

Chinese studying overseas: Criteria for students picking universities

As studying abroad is very important for students and parents a lot of thought goes into picking the university and country they will be studying at. A big determining factor to consider is the country itself. This requires evaluating the country itself by its size, population, economy and development degree. Chinese people prefer countries which are bigger and have a larger population, higher economic power and the development degree which makes the US the most popular country to go to. Some students are also concerned about the culture of the country itself.

Further, the school awareness in China that is the school’s brand reputation is very important. This is evident with 61% of students in a survey conducted by WSE choosing school reputation as the top consideration of school selection, with the success rate following at 48%, school location at 40% and expected income level after graduation being at 39%. This is as about 80% of international Chinese students go back to China after graduation which makes the school’s awareness and reputation important when considering job prospects in the future.

Moreover, the ranking itself is very important with many different versions of school rankings applying in China to help students and parents make decisions. This includes the QS World University Rankings and the Academic Ranking of World Universities and ranking in the top 100 is very beneficial to students wishing to return to China.

Additionally, the curriculum offered by the school itself is vital. This is with weight in decision making relating to the design of the curriculum, the composition of it, the availability of course choice, the quality and exclusivity of each course and even the internship opportunities that the school supports.

Lastly, whilst all of the above is extremely important, the cost is often a major determining factor. This includes the cost of tuition, living expenses and scholarships available. As such, many students go to Hong Kong for further study due to the lower expense and some European countries provide free public education for the same reason. This is evident with 45% of students being concerned about the cost of studying abroad, compared to only 27% of parents. Cost is especially important as 89% of students traveling abroad self-finance their study so they are very receptive to scholarships or less expensive locations.

International education: How do Chinese people look for information to choose the right university?

Chinese study abroad agencies and specialized education companies are important in helping students to pick countries and universities to study abroad at. They offer a broad range of services to students and help foreign universities and programs get more visibility among students. Due to the services offered, student’s families are willing to a pay a large amount of money for these services which include counseling services on programs, assistance in preparation, application and admission processes, test preparation, English classes as well as international study tours. The Beijing overseas service association also can help abroad institutions to select good partners among agencies to promote institutions in China.

Further, as stated, online information is very important with Chinese students spending a significant amount of time looking at the best destination, university ranking and application process. As such, a good online presence is essential for an overseas university- especially if it is not a top ranking one. Particularly, 31% of students depend on social media when researching for their study destination. They also look to the alumni network for recommendations and feedback as students trust advice from those who have attended the school itself. As such, it is important for universities to have good ambassadors as Chinese students want to hear about the university in a more personal and informal way.

Trends in types of study undertaken by Chinese students

The types of study undertaken by Chinese students themselves vary with the type of study they undertake. This is with Master and Bachelor degrees at the forefront of reasons for going overseas for study, with other avenues collectively making up the remaining 31%. There is, however, a preference for longer study programs over shorter ones. This is with slower growth for shorter study options in comparison to the faster growth experienced by Bachelor and Masters degrees. This is as shorter exchanges are not as popular with Chinese students who prefer to spend the duration of their program overseas with four or two years being favored over a few months.

There are also trends evident in the degrees undertaken by Chinese students. This is with both engineering and business management as the most popular degrees chosen by students. However, in 2016 subjects shifted as more students paid attention to their own preferences over parental preferences and what is expected of them. This was evident as the Center for China & Globalization reported a decline in 2016 with students studying engineering, computer science and IT, math and statistics and social sciences, whilst the number of students who chose to study business management, foreign language and literature and education increased. Further, it was mentioned that subjects relating to business management, trade and corporate management and finance have increased as development in China has created more demand for professionals in these fields.

Market difficulty in China for student exchanges in lesser-known countries

Consulting agencies specializing in overseas programs still promote the US and other popular speaking countries such as the UK, Canada and Australia. As such, standing out from those countries can be quite challenging for smaller countries. This is as knowledge of the country studied at and a school’s ranking is very important for students. This is due to the implications it has for the employability of students, especially those wishing to return to China. Further, social recognition and prestige also play a role beyond professional necessity which can also be a determining factor for parents and students, especially from tier 1 cities.

Study abroad: The Belt and Road Initiative and its effect on Chinese international students

According to Forbes, the Belt and Road Initiative will affect 60% of the world’s population with the participation of 76 countries from Asia, Africa and Europe. The trade and infrastructure undertaking is thought to be one of the most ambitious undertakings in human history and is viewed as ‘a sort of 21st-century silk road’. Along with connecting through trade, Beijing currently offers 10,000 places each year for students who come from countries within the Belt and Road Initiative with China attracting more than 200,000 students from 64 of 68 Belt and Road countries in 2016. Further, since 2013 when the launch of the Belt and Road initiative took place, Chinese students have also flocked to Belt and Road countries with 24 educational agreements being signed between some of these countries since April 2017. This initiative opens up substantial and wide opportunities to educational bodies of countries within the initiative, with the Chinese government wanting to strengthen both educational and trade bonds between countries.

Opportunities for brands wanting to enter the Chinese market

Chinese students prefer English speaking countries in order to improve their English as it is a must-have skill in the work environment with 60% of Chinese students currently going abroad to the US, Australia and the UK. As a result, this increasing need for English helps leverage English speaking countries for exchanges as a whole – not just the top destinations sought by students. This is seen as Chinese students are now exploring new countries for overseas studies. There is, however, due to the Road and Belt Initiative, an opportunity for growth for many more educational organizations and countries to attract Chinese students using the initiative as leverage to strengthen the appeal for Chinese students. This is especially where educational organizations are not within the top 100 or are as well known to Chinese students. This awareness in China is particularly important as going abroad is meant to enhance employability and employment opportunities which cannot be achieved without businesses being aware of the educational organization. Further, an emphasis on the social and personal benefits students are looking for, along with strengthening programs in the more popular university courses, will help make organizations stand out to students. Most importantly, recognition by the Chinese Ministry of Education of the degree and the university itself is necessary for recognition and desirability among the Chinese.

Moreover, there are opportunities for educational organizations that are located in less expensive countries or areas should highlight their desirability and more expensive schools should offer scholarships in order to appeal to students who are self-financing their abroad study. However, it is also important to note that the urban middle classes are also estimated to increase; a McKinsey survey in 2015 found that there were 10 million affluent households with more than 300,000 RMB, and it is estimated to be 18 million by 2020. These households were mostly found in tier 1 to 3 cities but tier 4 to 5 cities were found to be steadily increasing their income. This growth in disposable income and wealth among cities is likely to have a positive effect is on expanding the number of students studying abroad and providing opportunities for more countries than in the past. Although there have been recent declines in Chinese students studying in the US as well as more returnees upon graduation, studying abroad is still a reflection of social mobility and status. The UK sits behind the US as a top destination, with pursuing a master’s degree as an attractive choice with its one-year program considering costs and study requirements. In the coming years, we may see a larger shift in the preference of university destinations among Chinese students in light of the recent events.

See how COVID-19 has impacted Chinese students’ aspirations to study and work abroad.

Author: Jessica Farrell 

Daxue Consulting has conducted a series of surveys on Competitive Benchmarking in China and developed a specific framework to analyze the key insights related to your competition in China.

Competitive analysis is defined as identifying your competitors and evaluating their strategies to determine their strengths and weaknesses about those of your product or service. Daxue provides you with the tools needed to win in a market full of players.

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The O2O food delivery market in China is estimated to be worth over 37 billion USD, and it is growing rapidly. Among the products sold online, food is one of the most promising categories: online food sales rose by 36.8% year-over-year in the first two months of 2018. Food delivery apps have an estimated 355 million users, meaning that a quarter of all Chinese people are ordering food from their phones. There are more than 1.8 million food delivery orders placed every day in Beijing alone.

Transformation of eating habits in China

Getting takeout food is a relatively recent phenomenon in the country. The trend started with foreign fast food franchises such as McDonald’s in the 1990s. Homegrown local restaurants, such as noodle houses and those offering regional specialties, followed suit. But it was not until the rise of online food delivery platforms that the O2O delivery market in China took off.

Since 2009, when the first food delivery app Ele.me appeared, the number of customers using these platforms has gone up from zero to 406 million at the end of 2018. Nearly half of China’s internet user base has ordered takeout food through apps at some point in their life.

The development of online delivery has improved the food processing and supply capabilities of offline restaurants. At the same time, it has also stimulated new demands due to convenient and fast services. As of 2020, the growth rate of O2O food delivery market in China is more than 10%. It exceeds the growth rate of the traditional catering industry. Due to the development of diversified consumption habits of Chinese people, the food delivery market in China will exceed 300 billion yuan in 2020.

Fast food category dominates in terms of O2O food consumption

In the first half of 2019, fast food accounted for 69% of O2O food consumption. Western food and local dishes had second and third place. Such categories as seafood barbecue, milk tea, desserts also were popular among Chinese consumers when ordering food.

The number of seafood O2O orders increased in 2019

The proportion of seafood in China‘s O2O delivery market increased. It is an important category for night delivery consumption. In the first half of 2019, users consumed more than 150 million seafood barbecues on the Meituan takeaway platform. It had a year-on-year increase of 55.3%. In the first half of 2019, the order volume of crayfish has exceeded 20 million orders. It is about 300 million crayfish.

Semi-prepared food and vegetables as a new trend in the O2O food delivery market in China

Online shopping for semi-prepared dishes has become a new choice for young consumers. This new trend has led to a rapid increase in sales of semi-prepared food. In 2019, 800,000 semi-finished dishes have been sold. At the same time many elderly people have changed their habit of hoarding vegetables for Spring Festival. They started to order home delivered fresh vegetables. Sales on the platform Taoxianda increased 172 percent compared to 2018. “The semi-prepared dishes satisfy young people’s enjoyment of cooking at home,” said Yongcheng, a sales clerk at Tmall.

Penetration rate of the O2O food delivery market in China continues to increase

As the market scale continues to grow rapidly, the penetration rate of the food delivery industry continues to increase. In 2018, the penetration rate was 10.8%.  By the third quarter of 2019, this figure had increased to 15.9%.

Breakdown of the O2O food delivery market in China

The food delivery services in China work through apps, which show lists of food providers nearby or allow the user to search for specific restaurants. Clicking on the restaurant brings up the menu and the ordering system, which uses online payments or bank cards. The apps also allow users to rate the food and service, as well as show the location of the delivery driver so an order can be tracked. The apps take about 20% of the order revenues.

The Chinese food delivery industry is high growth and highly profitable, but it is hard for outsiders to enter the space because two platforms control 90% of the food delivery app marketplace.

Who are China’s food delivery industry’s consumers?

The food delivery industry in China is so large and profitable because of how often consumers make purchases. 256 million people in China used online food ordering services in 2016, and in 2017 that number rose to 346 million. Now it is 355 million.  35% of food-delivery app users order food one to three times a week, and a separate 35% of users order food four to six times a week, according to a report by iiMedia Research.

Online food delivery service users are primarily white collar workers. In 2015, about 63% of online food delivery app users were white-collar workers and 30.5% were students. Now, 83% are white-collar workers, and only 10% are students.

Consumers are clustered in top tier cities, with Shanghai boasting the highest number of users per capita.

Consumer demographics are split nearly evenly by gender, with women making up 51% of food delivery app users. Users are overwhelmingly young, with 75% between ages 18 and 39.

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Food delivery in China is popular among all income demographics. Consumers are split nearly evenly by income level, with high-income consumers boasting only a small edge.

Why is food delivery so popular in China?

Because of the intense competition between delivery apps in Great China, consumers often receive steep discounts and coupons when they place an order. This can often make ordering food cheaper than eating it in a house. The intensive couponing practice is a result of price wars between the industry’s two major players, Ele.me and Meituan. The rivalry has hit both companies hard, with Meituan’s operating losses crippling year-over-year to USD 510 million in the third quarter of 2018. Ele.me will also face pressure soon as their parent company Alibaba copes with slowing revenue growth. Coupons are no longer as high as they once were, but consumers still receive them often.

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Meal delivery in the Chinese market is significantly more popular in China than in the West, owing in some part to the fact that food delivery costs in China are about 10% to 20% of what they are in the US.

Which apps dominate the food-delivery industry in China?

The food delivery market is a duopoly dominated by Chinese tech giants Alibaba and Tencent, who own Ele.me and Meituan respectively. Combined, these two delivery apps control a 90% share of China’s food delivery market.

Longtime rivals Alibaba and Tencent have been competing across industries for years, and China’s meal delivery is just yet another sector for them to battle in. The two giants are not just competing for the O2O food delivery market in China, but they are racing to gain new users who can be guided to other Alibaba or Tencent services. Owning Ele.me gives Alibaba a treasure trove of consumer data, and the same goes for Tencent’s ownership of Meituan. Data derived from Chinese meal delivery apps provides insights about consumer spending power, eating preferences, and payment profiles.

Chinese meal delivery app: Ele.me

Ele.me is China’s largest food delivery giant with 53.4% market share. They have 260 million users, 3 million couriers, and are estimated to have delivered nearly 300 million orders. Alibaba in 2018 valued Ele.me at USD 9.5 billion.

Chinese meal delivery app: Meituan Waimai

Meituan Waimai, commonly known as Meituan, controls 40% of China’s food delivery market. Similar to Ele.me, Meituan is an online-to-offline (O2O) food delivery app that provides users with online ordering, food delivery, and some other related services in China. Significantly, Meituan offers more non-food delivery services than Ele.me, such as flowers, office supplies, and more.

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What are the benefits/drawbacks for restaurants of being on food delivery apps in China?

Listings on food delivery apps give restaurants in the Chinese market new profit sources, widened service awareness, and new consumers. App operations can be so profitable that some “virtual restaurants” operate out of the kitchen only. However, profit margins for restaurants are declining swiftly. To gain Chinese market share, Ele.me and Didi provided restaurants with subsidies to entice them into selling food on their apps. But as the apps struggle to become profitable, they are raising commission rates on the food providers. Commission rates vary by restaurant location, size, and type, but most restaurants give the apps 20% of order revenues. For restaurants operating on low margins, this can hit hard. To keep profits stable, restaurants must shift the burden to consumers and raise menu prices. Otherwise, they are forced to absorb the new costs – keeping consumers happy but hitting their profit margin hard.

The Chinese food-delivery industry: Looking ahead

Ride-hailing app Didi recently threw its hat into the food-delivery ring, starting in March 2018. Didi provided subsidies and incentives to restaurants and consumers, forcing Meituan to follow suit before local authorities stepped in to demand an end to the “extreme” marketing practices. As Didi expands to other cities, the subsidy battles will likely continue.

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This article The O2O food delivery market in China 2019| Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

[Data Source: Statista, size of the facemask market in China]

2021 estimations after COVID-19 show a slowdown of the trend, but the memory of the pandemic will still account for a significant part of the demand.

Before the outbreak, the face mask market in China was much more driven by pollution concerns than disease. Pollution alerts often led to a surge in demand on the Chinese e-commerce marketplaces. Resulting from COVID-19, an unprecedented surge in national demand for face masks pushed thousands of new manufacturers to start producing face masks, with the support of local authorities. However, the rush for N95 masks with higher filtering capabilities has largely benefited the American brand 3M, which dominates the N95 face mask market in China.

China met global face mask demand with a production boom

Since the re-qualification of the outbreak as a global pandemic, China experienced a mask-making boom. In 2020, More than 38,000 new companies registered to make or trade face masks. China was already the main market for protective masks production in the world, making half of the global output in 2019. In February 2019, the country had already risen its capacity from 20 million to 110 million. Concerns about overcapacity in the offer on the Chinese market have quickly disappeared, with China’s face masks being in urgent demand from other countries.

In April 2020, foreign governments’ ‘wild feeding frenzy’ for Chinese protective face masks brought chaos to the landscape of manufacturers. A medical supplier during the pandemic told the South China Morning Post: “mask machines are like cash printers.” To meet global demand, many factories that were making completely different products like car parts, electronic parts, or plastic toys, therefore turned to mask production. With governments fighting for ramping up their stocks, quality controls at purchase were often completely avoided in favor of shipping speed.

New regulations to prevent face mask scams

The influx of new actors to the market has led to a dilution of the quality and a surge in scams, forcing the Chinese government to change the rules. Mid-April’s new regulations from China’s customs agency require companies manufacturing PPE (Protective Personal Equipment) for export to go through a government-led process. Mask exporters also need to prove that their products meet the relevant regulatory standards of the destination country.

This move comes after a global backlash in which foreign countries were supplied shoddy products, undermining China’s position as ‘the global savior.’

As long as the pandemic doesn’t end, the Chinese face mask market will stay warmly flooded with transactions. However, foreign countries are now ramping up their own productions to be less dependent on Chinese exportations.

Thus, if the pandemic is an instant boon for the Chinese face mask market, the gold rush will soon end, and many actors may be left aside.

National issues supporting the Face Mask Market in China

The face mask market in China is largely driven by external events like epidemics and pollution. Most recently, the Coronavirus outbreak has caused face masks to sell out all over China. Originating in Wuhan late December, the 2019 new Corona Virus (2019-nCoV), has infected over 28,000 people and killed about 570  in Chinese mainland as of February 7^th 2020. – The rapid spiral in the number of identified n-CoV cases forced the Chinese government to seal cities and public transport. The Spring Festival holidays had been extended by a week, hoping to curb the spread of the epidemic. Two months before the destructive outbreak, China’s National Health Commission had already called to effectively enhance prevention measures in anticipation of the upcoming flu season, looking for a more standardized process for diagnosis and treatment.

But the 2019-nCoV is by far neither the first nor the last to appear on Chinese soil. China has always been considered by the World Health Organization (WHO) a hot spot for new influenza viruses; there is indeed no other country on earth where so many people have close contact with wild animals. Thus, the n-CoV reminds of the lethal 2002-3 severe acute respiratory syndrome (SARS), but also less widely known avian influenza A(H7N9) virus, which killed 212 people in China according to a 2015 WHO report.

In the meantime, according to the Global Health Observatory, total health expenditure per capita in 2014 in the country reached 731 USD, which is much lower than the 2014 world average of 1041 USD. This report from the OECD shows that China counted 1.8 physicians per 1000 people in 2015, which is slightly more than the World average of 1.5, but almost twice less than the OECD countries.

Pollution drives the functional mask market in China

Flu prevention is not the only health problem that China is facing. Air pollution is another one, which has become one of the most intensely discussed livelihood issues that the Chinese government focused on the 12th National People’s Congress (NPC), held in Beijing on March 5, 2016. Chinese Premier Li Keqiang declared a “war on pollution” at the Communist-controlled NPC parliament in 2014.  Three years later, average particulate levels in Chinese cities still do not meet the World Health Organisation (WHO)’s standards, which considers anything over 10 PM2.5 as health hazard (maximum annual average PM 2.5 exposure). According to this infographic, in 2016, Beijing had  a yearly average of 7.3 times above the WHO’s recommended safe levels.

N95 masks in China: A shield in a war against the Coronavirus

In January 2020, Chinese President Xi Jinping declared “a people’s war against the [n-CoV] epidemic” over a governmental meeting, stressing that prevention and public awareness remain the most effective measures to fight a pandemic. Since the 2002-3 SARS, people rely on wearing surgical masks. Especially high-filtering specialized N95 masks, during illness as one of the main preventive barriers against propagation. Claimed as an effective way to protect oneself from the virus, face masks have been urgently brought to the fore as a daily necessity and a fast-moving consumer good in China, resulting in a massive gap between market demand and supply.  On January 3, 2020, just over a week after the new coronavirus outbreak, China “urgently needs” protective medical equipment while medical masks shortages were reported across the country.

 Face masks, also called ‘kouzhao’ (In Chinese口罩) usually cover the nose and mouth and include cotton masks with cute designs, surgical masks, and imported high-end filters. In 2014, officials in Shanghai considered distributing free protective masks to residents after the financial hub of China “suffered one of the worst spells of air pollution on record,” reported The Telegraph. At this time, PM2.5, fine ambient particles less than 2.5 micrometers in diameter causing cardiovascular diseases and lung cancers, rocketed to levels that were more than 20 times those deemed safe by the WHO.

Red alert in Northern China

In December 2016, northern China (including Beijing, Tianjin, and around 70 other northern Chinese cities) had been covered for weeks in thick toxic smog, composed of high concentrations of PM2.5. It is one of the worst episodes of air pollution the country has seen, affecting 460 million people.

The “red alert” was declared in 24 cities, prompting the closing of schools and airports, restricting traffic and asking citizens to stay indoors. In response, online shoppers splurged on filtration masks, and anti-pollution equipment , with e-commerce firms and brands reporting record demand, as explained by Reuters. In December 2016, Internet retailer JD.com Inc sold to domestic consumers about 15 million US-branded filtration masks through its online marketplaces. 

Face mask price inflation

The 2016 measures to counter air pollution strangely resemble the drastic measures of early 2020 to stem the spread of the new coronavirus, forcing dozens of Chinese cities to quarantine. As a result, 80 million masks were sold on Taobao over the two days of January 20 and 21. The BBC also reports that the price of a 20-mask box jumped to 1,100 yuan ($158) on Jan. 21, up from 178 yuan in November. Between December 30 and January 24, 3M, the most popular face mask brand in China, added $1.4 billion in market value. Honeywell, the American conglomerate that also sells face masks in China, added $500 million in market value, in the same frame time.

Overall, due to significant health crises, the protective face mask market in China, still dominated by Western brands that control more than half of the Chinese market, is heating up. Many budget manufacturers and low-cost producers from Japan and China are now trying to get a slice of it.

Rising demand for face masks in China

The demand volume of protective masks in China has grown continuously since 2012. State media estimate the protective face mask market in China was worth nearly 4 billion yuan ($600 million) in 2015. Along with the improvement of the living standard of people in urban areas and the rise of the middle-class, people’s awareness of pollution, germs and contaminants protection is increasing all the time, especially for young children, and will maintain rapid growth.

Protective face mask production in China

China’s protective face mask market enterprises are mainly distributed in the eastern region, and Bohai Rim, Yangtze River Delta Region, and Pearl River Delta Region are the major production areas. Shandong province serves as the center of the masks industry in China with another production hub, Dadian, dubbed the “mask village” for producing the cheapest pieces.

There are more than 300 mask processing and supporting enterprises in Dadian village, Jiaozhou City of Shandong with an annual production capacity of nearly 1 billion pieces. Realizing about CNY 1.1 billion ($160 million) of output value, it accounts for more than 80% of market shares nationwide (data based in 2017).

Currently, common protective masks widely available in every convenient store are priced at CNY less than 1 or 2 ($0.15 to 0.40) to CNY 30 or 40 ($4.5 to 5.8), and they are made from cotton yarn, activated carbon, and other materials. Along with the continuous increase of Chinese residents’ incomes and the improvement of people’s living standard, people have a stronger awareness about the environment and health. As a result, consumers are willing to pay more to protect themselves from health crises’ effects. They look for more comfortable and effective masks, such as Vogmask or Cambridge masks, which generally range in price from CNY 120 to 245 CNY ($19 to 37, based on 2019 Tmall/Taobao prices and currency exchange rates).  To meet growing demand in China, new market entrants like Airinum focus on the high-end market, with stylish design and high-quality replaceable filters.

Collectivism and Chinese consumer psychology 

“In China, people just pretend or assume that it is useful. It’s a mass behavior,” indicates Wong Chit Ming, a researcher at Hong Kong University’s school of public health. “You may feel a little better…but there’s no real evidence this might help.” This is collective consumer psychology among the Chinese who are entirely concerned about the threat of air pollution and germs during flu season. For him, Chinese people have the impression that this could resolve the problem of air quality and they should, therefore, do something to protect themselves from the harmful air, which will comfort them emotionally regardless the practical effect.

Different style and functions for the Face Mask Market in China

China Textile Commercial Association officially released ‘the community standards of PM2.5 protective masks’. The standards were implemented on March 1, 2016. Before this date, China had no quality standards for face masks for personal use, and the majority masks available claiming to reduce particulate matter by 99% on the market were not protecting against PM2.5.

According to the FDA, “Face masks and N95 respirators protect the wearer from liquid and airborne particles contaminating the face. They are one part of an infection-control strategy.” While face masks like medical and surgical masks are meant to block large-particle droplets, splashes, sprays or splatter that may contain germs from reaching your mouth, they are more loose fitting than N95 masks which are meant to achieve very close facial fit. The ‘N95’ designation means that the mask blocks at least 95 percent of very small (0.3 micron) test particles. Properly fitted, N95 respirators’ filtering capabilities exceed those of face masks, making N95 masks the most popular choice in times of pollution and influenza season. Currently, the N95 mask market in China is dominated by the giant 3M, as it is the only brand to be N95 approved by the Center for Disease Control and Prevention (CDC).

[Source: South China Morning Post ‘3M N95 Masks in China’]

Choosing the most effective mask

At present, the variety of types of anti-dust and anti-contamination masks sold in online shops and outlets have contributed to the disorder of this market. Those most popular kinds of masks are always those masks which have a relatively simple wearing process. Still, the vast majority of Chinese residents use cheap cotton masks that offer little protection. Also, expensive specialized N95 masks aren’t made to fit Chinese faces well, according to a study from Wuhan researchers. Even those benefiting from China’s Kou Zhao boom admit that their masks can only do that much.

Except for the most common cotton masks, active carbon mask which can be recycled and praised for  its adsorption force becomes another hot choice in China market. As some researchers analyze, China’s functional mask market has not been arousing general consumption groups’ attention due to its late start. But now it has garnered significant attention.

Division of the Chinese Mask market

Simple market research shows that on Taobao/Tmall, the top-selling mask brands are replicas of each other. Top brands sold in Dec 2018 to Jan 2019 are listed in the graphic below:

Lack of diverse options in China’s mask market

These brands and their products are the same in almost all aspects including materials, designs, promotional strategies, pictures used online and textual description. It is very likely that these masks are produced by the same producer. However, there is no trace showing the actual manufacturer of the products, and thus unable to identify whether the domestic mask product is highly concentrated or not.

Based on Xinhua.net, the overall face mask market in China is mostly controlled by the international giants 3M, which occupies almost 90% of all the market share, followed by Honeywell and Ludun 绿盾 with less than 5% respectively. Other brands such as Uvex and Hakugen have a non-significant market segment of less than 1% respectively.

To be noted that, among all these brands, only Ludun 绿盾 is produced by Chinese domestic company Sinotextiles Corporation Limited, other brands are all international based.

Another market analysis renders different views on the masks industry in China. According to a market report, four major domestic mask producers own 7 major brands. The largest domestic mask manufacturer is Shanghai Dragon Corporation 上海龙头股份 (market share 6.52% with 2 brands) followed by Shanghai MNP Inc 上海美科 (market share 7.14% with 3 brands), Teda Tianjin 天津泰达 (market share 5.90% with 1 brand) and Dongguan Rongxin 东莞容鑫防静电技术 (market share 1.00% with 1 brand) in a descending order.

The future of the Face Mask Market in China

There is an increasing demand for both functional and comfortable masks, so much improvement has been achieved in protective measures, what’s more, these functional masks are equipped with high technological contents. Thus, the additional value increases correspondingly. For example, masks for controlling bacteria and protecting virus should carefully suit with people’s facial form. Obviously, such a malignant environment we are living in is difficult to be improved thoroughly in a short time. Therefore, self-protection measure appears to surge high unprecedentedly, bringing vigor to the protective face mask industry in China.

New market studies in late 2018 found that ‘smart’ masks are now more welcomed than traditional protective face masks. Now major mask buyers in China not only consider the function of filtering but want to buy smarter equipped masks. With some AI microchips implanted into masks, those new products can both monitor the filtering function and other rates affecting human body performances including heart rates, air pressure, humidity and other air-related live data. Some other products even developed a replaceable filter with AI function, and these products are more like sports equipment than simply anti-pollution masks. Their filters can be replaced to imitate different air pressure levels and add on training difficulties when people try to exercise under a thin-air condition and to improve cardio abilities. Most buyers of this new type of AI-based masks are female, and 53% of the buyers are less than 30.

Many investors have seen this opportunity; it is estimated that the production value of China’s functional mask market will grow up to CNY 10 billion in the next five years.

Author: Maxime Bennehard

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

COVID-19 boosted online and mobile payments in China

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

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

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

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

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

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Why and how do mobile payments in China work?

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

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

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

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

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

Mobile payment methods in China in 2019

Tenpay (including WeChat Pay and QQ Wallet)

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

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

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

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

Alipay

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

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

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

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

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

China Union Pay

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

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

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

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

Paypal

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

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

How do consumers pay in China?

Cash on Delivery (COD)

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

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

Credit Cards in China (China UnionPay cards)

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

Debit Cards (China UnionPay cards)

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

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

Shipping methods in China

Major shipping companies in China

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

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

2. STO Express 上海申通快递

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

3. Shanghai YTO Express 上海圆通速递

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

4. TTK Express 上海天天快递

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

5. Yundaex 上海韵达快运

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

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

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

Contact us for any question on the Chinese market

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

Create official accounts to provide special offers

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

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

Allow mobile payments for your Chinese clients, out of China

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

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

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

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

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

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

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

Full transcript below:

Matthieu David:

Hello, I am Matthieu David the founder of Daxue Consulting, a strategic market research company based in China – in Beijing, Shanghai and Hong Kong. We have been working with more than 400 clients over the last 10 years since 2010.

What are the basics you need to know about taxes in China to manage your business? The first thing is corporate taxes. The tax on profit is 25%. Without going too much into detail, most companies need to pay 25% of their profit as taxes. There are a couple of elements you need to know and check with your accountant or your lawyer at least every year. Usually, there is a bracket, under which you have to pay a lower corporate tax. For instance, if my memory serves me right, in 2018, businesses with less than 1 million RMB of profit have to pay half the tax, meaning 12.5%. When you are exceeding this limit, you were taxed at a 25% rate on the entire profit. So, there is no step and as soon as you break this 1 million you were taxed at 25%. For 2017, the limit was much lower and in 2019 it is much higher. It changes every year, so you have to double-check with your accountant and your lawyer and ask them if you have a question of whether you need to pay taxes and at which level you can have a reduced tax rate. Corporate tax is one thing. You can have reduced taxes if you have a tech company and only in some very specific cases. Actually, for most of the cases, tax reduction does not apply. The cases when it applies are only when you are in a tech park with very specific synergies and when you have a 5-year plan, but this has to be decided with a local government, provincial government or national government and it is not an easy way. So, don’t rely too much on a reduced tax because this happens only rarely.

What do you need to know as an entrepreneur about VAT in China? First thing is that there is a VAT for products and there is a VAT for services. For many years, VAT on services was not deductible. So, you could not deduct the VAT on the VAT you actually had to pay on your costs. This has changed, following one of the biggest reforms in China a few years ago. Still, you need to understand that some VATs are not deductible. For instance, small taxpayer VAT. Let’s go back to the different VAT rates: 15% for products, 6% for services. What you also need to know is that on top of these two types of VAT you have an additional tax of about 10%. Again, it is important that you check with your accountant and lawyer. So, the framework is the following: you have VAT for products, VAT for services and also small taxpayers specific VAT which are not deductible. So those people with few VAT invoices with small taxpayer rate, let’s say 3.5%, then it is not deductible. In services, it can range from around 6% – which is usually the case for most businesses – up to a much higher rate. So, check with your lawyer and accountant. We have now seen the basics and this video will help you to ask the right questions to your accountant or lawyer.

Daxue Talks is a show powered by daxue consulting, a china-based strategic market research company founded in 2010! With Daxue Talks, you will stay up to date with all the latest business updates in China.

This article Daxue Talks transcript #32: How is profit taxed in China and what are the different Chinese VAT rates is the first one to appear on Daxue Consulting - Market Research China.

地点: 上海交通大学

在为期一天的培训中，您将了解到如何：

脱离天猫或京东此类传统电商平台，完成品牌独立化；

定义品牌官网的独特卖点

发展品牌私域流量并建立社群

价格: MBA学生390元，初创企业520元，已成立的公司590 (包含早饭，午饭和应有尽有的能量咖啡)

折扣: 2月20日前订票可享受－30%的优惠；如您的参加人数大于三人，请咨询我们享受特别优惠。

什么是品牌独立？

品牌独立意味着品牌方可以独立管理消费者流量（也称为“私域流量”）。独立的品牌不会通过京东，天猫和考拉这类传统电商平台销售产品，而是通过自己的官方网站(brand.com)完成销售以及流量的获取。品牌的独立渠道主要包括：官方网站(brand.com)，官方应用程序(brand app)，小程序以及品牌线下零售店。

品牌独立的优势是什么？

首先，品牌方可以节省推广活动相关的费用。其次，品牌方通过使用更完善的客户管理(CRM)系统直接与消费者进行互动。此外，品牌知名度的提高会同时带动消费者忠诚度的提升，并且基于对消费者需求的更好理解，消费者的用户体验也会得到改善。最后，消费者的购买决定将更少的受到价格影响，而更多的被忠诚度驱动。

你可以扫描下方的二维码来报名参加我们的活动！完成报名后，我们会在短时间内将本次活动的更多相关信息发送到你的邮箱。

See this article about Brand Independence workshop in English.

This article 通过品牌独立提高品牌知名度 is the first one to appear on Daxue Consulting - Market Research China.

Date: March 5th, 2020, from 9:30 am to 6:30 pm (including breakfast and lunch)

Location: Jiaotong University

Within one day, learn how to:

Gain independence from marketplaces like Tmall, JD, and others;

Define a Unique Positioning for your brand website;

Develop your private traffic and your community.

Price: 390 RMB for MBA students, 520 RMB for start-ups, 590 RMB for established companies (include breakfast, lunch and all the coffee you need to be full of energy).

Discount: – 30% for early bird booked before February 20th. For group prices (more than 3 people), we apply special discounts, ask us!

Why you want to achieve brand independence in China

Brand independence is when a brand does not rely on third parties like online marketplaces to sell products. In other words, it is when a brand draws clients directly to their website instead of an online marketplace.

Why is brand independence advantageous?

Firstly, brand independence creates a stronger brand image, which keeps your product on top of mind of potential customers. Rather than searching for the product on an online marketplace where your products are listed alongside your competitors, customers directly to your website. Secondly, your brand owns the traffic it draws. You do not need to share the traffic with competitors in the marketplace. The way your product is shown on the market place is not subject to the algorithms of third-party platforms, which may not work in your favor. With brand independence, customer data is yours to analyze and is not hidden or filtered by a third party site. It is the most transparent way to know how customers spend time looking at your products online.

In addition, brand independence is cost-effective. Brands must give around 15% of your sales commission to Amazon (when you sell in the West) or 6 – 10% of your sales commission to TMall (when you sell in China). And this is just the tip of the iceberg!

We invite you to a seminar to analyze whether brand independence is right for you and answer all your questions.

To register for the event, scan the QR code below! More information about the event location will be emailed to you shortly.

This article How brand independence can maximize profits | workshop in Shanghai is the first one to appear on Daxue Consulting - Market Research China.

Date:  March 5th, 2020 from 9:30 am to 6:30 pm (including breakfast and lunch)

Location: Jiaotong University

Within one day, learn how to:

Gain independence from marketplaces like Tmall, JD, and others;

Define a Unique Positioning for your brand website;

Develop your private traffic and your community.

Price: 390 RMB for MBA students, 520 RMB for start-ups, 590 RMB for established companies (include breakfast, lunch and all the coffee you need to be full of energy).

Discount: – 30% for early bird booked before February 20th. For group prices (more than 3 people), we apply special discounts, ask us!

What is brand independence in China? Brand.com vs Marketplaces

To register for the event, scan the QR code below! More information about the event location will be emailed to you shortly.

Brand independence is when your brand’s sales and customer engagement take place in an environment your brand has full ownership. How can a brand take ownership of customer engagement? Two simple ways first are by using the brand’s website instead of marketplaces like JD.com and Taobao. Second is by creating private traffic with consumers so the iterations are in control of your brand and not owned by social media networks. Brand independence in China makes sense when most of your business or a sizable amount of your business is linked or managed by a marketplace, and you don’t want to be managed or linked to a marketplace.

China has built its e-commerce through marketplaces: Tmall, JD – and many others which are on small verticals, the new once like Xiaohongshu or Kaola for instance, is one of them.

All brands are welcome to join our Brand Independence workshop in Shanghai, where we will share what we’ve done so far for various brands, and teach you how to make your brand independent.

Watch a video about Brand Independence in China in French.

This article What is brand independence in China? | Workshop by daxue consulting is the first one to appear on Daxue Consulting - Market Research China.

The domestic Tourism Market in China

In 2017, the domestic tourism market in China hosted five billion visitors, and a significant number of them opted to visit marine and wildlife parks. For example, more than 31,000 tourists visited the Qingdao Haichang Polar Ocean World in 2017, up 64% from the year before. Chimelong Ocean Kingdom saw a 40% increase in attendance between 2014 and 2016. Larger facilities such as the Beijing Zoo can see up to 6 million visitors per year.

Baidu search index: Zoos in China

Users on Chinese search engine Baidu search for “zoo” (动物园) an average of 1840 times per day. Searches spike during national holidays such as the spring festival, golden week, or May 1^st. Average daily searches have increased by 21% since 2011.

Baidu search index: Aquariums in China

“Aquarium” is a less popular search term on Baidu than “zoo.” Baidu users search for “aquarium” (水族馆) an average of 582 times per day. Search frequency has increased by 13% since 2011.

Increasing searches on Baidu for zoos and aquariums in China reflect a growing consumer interest in this type of theme park, especially during holidays and periods of nice weather.

Marine Parks and Aquariums in China

More than 60 marine parks are currently operational in China, ranging from large scale developments to add-ons at larger theme parks. Between 2015 and 2017, ocean theme parks operating throughout China experienced a 20% hike in attendance. There are more than 36 large-scale projects set to launch in the next two years.

Looking beyond domestic projects, park operators like Haichang Ocean Park Holdings plan to capitalize on the industry trend and build marine parks along the beltway of countries making up China’s silk road trade initiative. The company is in discussion with several Chinese-owned infrastructure builders to develop three to four ocean parks along the silk road in countries like Bangladesh and Madagascar. Haichang will also embark on an “asset light” strategy of designing and operating resorts for state-backed companies.

Haichang aims to become the world’s largest marine theme park operator following the opening of three new projects in Shanghai, Zhengzhou, and Sanya. Their newly-opened Ocean Park in Shanghai is expected to attract at least 3 million visitors per year. The mega theme park, which cost RMB 3 billion to build, covers more than 190,000 square meters and features 12 exhibition halls, 4 interactive experience zones, and 3 cinemas. Customer spending at the ocean park is about 250 RMB per person, including entrance fees and souvenir purchases. Haichang posted net profits of USD 8.83 million in the first half of 2017, up 38.9% from the previous year.

Poaching and animal mistreatment in China’s Marine Parks

The marine park industry’s growth in China comes with a dangerous demand for threatened or endangered aquatic species. There are currently no government regulations or standards regarding animal trade in China, and no government agency has a clear regulatory responsibility over the illegal trade of endangered wildlife. This has created dire animal welfare conditions and a dangerous gray area of immunity for poachers. Lucio Conti, vice-president for marine facilities at Atlantis Sanya, notes worrying that fisherman in coastal cities can often provide interested parties with any aquatic animal they desire, endangered or not.

China is the main driver of the captive marine mammal industry globally. Since 2014, 872 cetaceans have been put into captivity in China to satiate consumer demand for more marine species on exhibit. Endangered species like orcas (killer whales) and beluga whales are common among the marine animals illegally caught and sold. At least 15 Russian orcas were imported to China between 2013 and 2017. As an extremely endangered breed, the capture of any orcas is dangerous for the species – especially because once in captivity, their rate of mortality is extremely high. However, the prospect of high profits will continue to attract the capture of rare marine wildlife, legal or not. While China is not the only country fueling demand for illegally-captured cetaceans, the nation is the world’s largest driver of demand.

Animals at marine parks in China are often the subject of maltreatment including squalid conditions and poor welfare practices. Al Jazeera’s 101 East sent undercover investigators to China’s 15 biggest marine parks and discovered what was described as “widespread neglect and abuse.” At one aquarium, reporters found a freezer full of dolphin carcasses that died from over-working, with their intestines twisted from the leaps and moves they were forced to do in circus shows.

While marine shows and breeding programs in the West are winding down under intense regulation and pressure from animal welfare groups, the practice of marine shows and breeding programs is flourishing in China.

Many new marine parks in China are run by companies with little or no experience caring for cetaceans. Furthermore, all profit incentives for marine park developers and showrunners are short-term, so the moral and ethical impacts of animal maltreatment are rarely if ever, considered. The few foreign companies that run wildlife and marine parks in China adapt to Chinese standards of animal care.

Zoos and Wildlife Parks in China

Over the last five years, many zoos in China have undertaken modernization projects and built new exhibits. Zoos in China are often more akin to theme parks than scientific outposts. They are frequently run entirely by commercial principles, with little emphasis on conservation and the types of animals on display determined more by wildlife trader inventories than conservation or breeding needs.

Top 5 most famous zoos and wildlife parks as well as aquariums and marine parks in China

The most popular zoos and wildlife parks in China, by number and rating of reviews, are:

1. Dujiangyan Panda Base, Chengdu;
2. Chimelong Safari Park, Guangzhou;
3. Dalian Forest Zoo, Dalian;
4. Harbin Polarland, Harbin;
5. Chongqing Zoo, Chongqing.

Top 5 most famous aquariums and marine parks in China.The most popular aquariums and marine parks in China, by number and rating of reviews, are:

1. Chimelong Ocean Kingdom, Zhuhai;
2. Ji Di Guan Pole Aquarium, Dalian;
3. Sun Asia Ocean World and Polar World, Dalian;
4. Beijing Aquarium, Beijing;
5. Shanghai Ocean Aquarium, Shanghai.

Mistreatment of Animals in Chinese Wildlife Parks

Despite the Chinese zoo and wildlife park industry’s relatively large size, animal conditions in the parks are atrocious. Some pack animals are kept isolated, while other animals that thrive in lone-wolf situations are forced into proximity with others of their kind. Animals are often kept in tiny cages or at bare, concrete facilities. They are frequently fed the wrong foods or given inaccurate serving sizes, leading to obesity or malnourishment.

Often, animals in Chinese wildlife parks are mistreated in the name of entertainment. At the Siberian Tiger Park in Harbin, visitors can pay to throw live chickens, ducks, and even cows to tigers. At the Shanghai Wildlife Park, staff regularly ride ostriches in races. In 2010 the State Forestry Administration outlawed animal circus acts, but that regulation applies only to state-owned zoos, meaning that performances are still common in wildlife parks.

It is not just wildlife staff guilty of mistreating the captive animals. There is often little signage or supervision of visitor activity, so visitors are allowed to enter the parks without any education of proper etiquette. Tourists regularly throw junk food and trash at animals, and a visitor at the Yunnan Wildlife Park once threw RMB 10,000 into a giraffe enclosure. A tourist at the Zhuyuwan Zoo in Jiangsu pelted kangaroos with stones to get them hopping. A teenage boy at Yangzhou’s Slender West Lake scenic area attacked two black swans and stomped on their eggs. Chinese tourists at the Beijing zoo were caught chasing and manhandling peacocks, even ripping out their tail feathers for souvenirs. An elderly woman at the Dalian Forest Zoo was photographed pulling the hair off a camel and shoving it in her purse. Two Chinese men stole and ate a black swan from Xujiahui Park in Shanghai. For contrast, visitors at zoos in America are discouraged from even yelling at animals or rapping on their cages. Tourists at Chinese animal parks are alarmingly uneducated about how to treat the animals, and lax staff supervision allows the visitors to mistreat the animals.

Animal facilities in China are largely unsupervised due to overlaps between different government agencies. The Ministry of Agriculture oversees aquariums, the State Forestry Bureau is responsible for wildlife parks, and zoos are run by the Ministry of Housing and Urban-Rural Development. An animal protection law for China was considered in 2010, but ultimately struck down.

Zoos and aquariums in China vs the United States

The Zoos and Aquariums industry in the US is growing slower than in China, but still growing. The industry grew by 1.5% over the past 5 years to reach a revenue of USD 2 billion in 2018. The market size of the Zoos and Aquariums industry in the US is expected to increase by 2.9% in 2019.

The United States is often considered to have some of the highest animal welfare standards in the world, but laws regarding the display and treatment of wild animals in captivity vary by state. The Animal Welfare Act (AWA) is the primary piece of federal legislating regulating captive wild animals. The 1966 law regards “warm-blooded” animals who are bred for commercial sale, used in research, transported commercially or publicly exhibited. The AWA establishes baseline standards for the care, handling, and transport of animals exhibited in zoos. The 1973 Endangered Species Act (ESA) is another law used to protect captive wild animals that are listed as threatened or endangered. In several cases, animals held in poor conditions at zoos have been transferred to sanctuaries under the ESA. However, the US has only minimal standards for animal protection, and most state and federal governing agencies do not have the resources to adequately enforce what laws there are. China’s complete lack of animal protection laws is unique on a global scale, but even countries with such laws are not treating their captive animals much better than China is.

The future of the zoo and aquarium industry in China

There are numerous ways to draw in visitors and boost ticket sales without resorting to poaching or abusing animals in the name of entertainment. To stand apart from competitors and draw in visitors looking for a unique experience, some zoos and aquariums in China are building creative new exhibits.

The Guangzhou zoo in 2018 closed its circus performance and launched a “VR Zoo” with more than 20 devices for visitors to watch the feeding, playing, and breeding of various wild animals. The first phase of construction cost USD 3.1 million, with more investments planned. The exhibit is a massive hit, and on its first day of opening, more than 20,000 people visited the VR section of the zoo.

American company Landmark Entertainment Group plans to roll out in China a series of aquariums with a heavy virtual reality component. Visitors will spend 1/3 of their visit wearing a virtual reality headset, where at the press of a button they can virtually witness their animal of choice swim by, watch animals being fed, or even see all the fish turn to skeletons if they choose.

VR exhibits in zoos and aquariums across China fit with the government’s anticipated role of AI in the country. Beijing expects that AI should support China’s economic and social development, with batches of distinctive innovative enterprises and an ecological system of innovation.

Other animal parks in China have created unique exhibits without a VR element. Atlantis Sanya worked hard to combine water park and aquarium elements to entertain visitors in China. They boast many water rides, including a slide that takes riders in a pipe through the shark tank. Visitors can snorkel or scuba dive, feed stingrays and walk on the floor of the shark tank.

At the Lehe Ledu Wildlife Zoo in Chongqing, tourists are caged while the animals roam free. Visitors board caged vehicles that drive slowly through large animal enclosures, occasionally stopping near the animals for tourists to look at and photograph. Raw meat is hung off the sides of the vehicle to encourage animals to come closer. When the park opened in 2015, the attraction was sold out for three months straight. The “reverse zoo” inspired emulations across China, and now the Harbin Tiger Park offers a similar attraction alongside their traditional exhibits.

Exploding Chinese interest in seeing and learning about aquatic and land animals has fueled a rapid industry growth with dangerous consequences. To meet new consumer demand and fill newly built facilities, poachers are importing endangered species at an alarming rate, and the animals in captivity at Chinese parks are often kept in terrible conditions. Despite a growing number of tourists visiting marine and wildlife parks, the Chinese government has not regulated the zoo and aquarium industry so it can operate responsibly and sustainably.

Author: Alison Bogy

Make the new economic China Paradigm positive leverage for your business

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

This article Impacts of the Rising Zoo and Aquarium Industry in China | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.