Trade relations between Australia and China

[Source: Daxue Consulting]

The 5th round of tax reduction starts from the first day in 2019 leading to over 96% of total Australian products, approximately 5000 kinds of goods exported to China are free of tariff. Amid this round of tax reduction, wine, salmon, lobster, oyster, and honey will get free trade to China. In the meantime, all products from China traded to Australia are expected to be zero tax. In 2017, Australian beef accounted for 16.66% of China’s total beef imports. Seafood from Australia soared over four times than the previous year in terms of exports to China.

China is at the top list of tourism expenditure during the period from Feb.2107 to Feb.2018, valued $11.3 billion, up 26.5% year-on-year growth, occupying 52% of Australian earnings from international tourists. Averagely, each Chinese tourist spends ten days in Australia with 8,472 AUD expenditure.

In 2017, there are 800,000 students from abroad going to Australia to study. Chinese students account for 38% of the total population, climbing 18.1% over the previous year.

Trade relations between East Asia and China

South Korea’s business avenues to China: China is South Korea’s #1 Importer

[Source: Daxue Consulting]

Integrated circuits are the top bilateral trade product between China and South Korea, regarding both import and export volume. China is South Korea’s first largest cosmetics and beauty export destination. Beauty and cosmetics trade volume from South Korea to China surged a 23.1% growth in 2017, up to 13 billion RMB. Amore Pacific and LG Household & HealthCare among other beauty companies account for the top two trade share to China, 30.26% and 29.35% respectively. Also, free trade agreement plays a vital role in bilateral trade. Zero-tariff products have covered 50% of bilateral trade volume.

Cities in China such as Tianjin, Dalian, Yantai, Weihai have regular routes both for passengers and cargo to Incheon, Busan in South Korea. In 2018, over 5 million Chinese people traveled to South Korea, up 14.5% to 630,000 people from 2017. China takes a third of total foreign visitors, at the top list of South Korea’s visitors.

Trade relations between Europe and China

Germany’s business avenues to China: Germany is an exporter of many goods to China

[Source: Daxue Consulting]

Commenting on the preferences of the Chinese in beer, we turn to Yan Yuze, who is the owner of a local beer in the northeastern Chinese city of Shenyang – one of the largest Chinese markets for beer. He told to CGTN that many of his customers have been ordering German beer during this year’s soccer season.

What is important for car business is that China will steeply cut import tariffs for automobiles and car parts, opening up greater access to the world’s largest auto market amid an easing of trade tensions with the United States. China’s tariff move will be a major boost to overseas carmakers, especially helping premium brands such as Germany’s BMW, electric car maker Tesla and Daimler AG’s Mercedes-Benz close a price gap on local rivals.

Chinese become more and more global choosing tourism as one of the favorite activities. Chinese tourists are very interested in the different attractions that Germany can offer. In German cities, the Chinese are an important source of revenue for retailers. According to a survey conducted on the commercial behavior of Chinese tourists, in Munich, they spend an average of 513 euros (558 dollars) per day.

Spain’s business avenues to China: Chinese feelings for Spain

[Source: Daxue Consulting]

Another pride of the Spaniards and the fact that Spain strengthened its position in 2017 as the main supplier of pork to China, ahead of Germany, Canada, and the US.

Mediterranean products are becoming more and more popular in China as the Belt and Road initiative continues to go underway.  At the beginning of 2017, Spain accounted for 81% of the total olive oil imports to China, leading far ahead of Italy (13%), Greece (2%).

Spain is the second most popular tourist destination in the world, only after France. It attracted about 82 million visitors in 2017, 700,000 of them from China, a number which the United Nations World Tourism Organization (UNWTO) estimates will rise to about 1 million by 2020.

Trade relations between North America and China

Mexico’s business avenues to China: Peace or war

[Source: Daxue Consulting]

As Dezan Shira and Associates claim Mexico continues to seek to improve its participation in the Chinese market to achieve more balanced trade, despite the fact that approximately 70 percent of Mexico’s imports from China are intermediate or capital goods, which are used or repurposed for re-export.

Beer, one of Mexico’s main export products to China, grew 35.5% to US$38.59 million.

Vladimir Kocerha, economic and commercial counselor of Peru in Shanghai, said the avocado trade had benefited from China’s cuts in import tariffs and continuous increases in imports of Latin American fruit.

China imported 8,800 tonnes, 16,700 tonnes, and 6,700 tonnes of the nutritious-rich fruit from Mexico, Chile and Peru, respectively last year.

Trade relations between South America and China

Brazil’s business avenues to China: Chinese business investment

[Source: Daxue Consulting]

“We’re definitely going global,” said Didi Chuxing president Jean Liu in one interview. And the company is moving fast towards that direction, each partner or region at a time. Didi invested in Brazil through investment in local ride-hailing leader 99. The investment builds upon the deep existing partnership between DiDi and 99 to further accelerate market growth in Latin America and bring more transportation choices to the region’s citizens.

Chile’s business avenues to China: Chinese trade partner

[Source: Daxue Consulting]

According to President of the Association of Fruit Exporters of Chile AG (ASOEX), Ronald Bown Fernández, Chilean fruit exports during the recently completed 2017-2018 campaign reached a total of 2,781,092 tons. This entailed an increase of 6.7% compared to the 2016-2017 season. He said: “This increase has been achieved thanks to the record volumes of cherries and blueberries shipped, mainly in Asia and China”.

In conversation with Produce Report at FHC China 2016, Juan Enrique Lazo, General Manager of the Chilean Hass Avocado Committee, described the success, present and future, of Chilean avocados in China. “Chile will supply 60 percent of China’s avocado market this November, and the majority of avocados one finds in Chinese supermarkets and fruit stores these days originate from Chile.”

Talking about the upcoming plans, Chile will join China´s Belt and Road initiative, Foreign Minister Roberto Ampuero said, in a move to deepen economic and political cooperation with the Asian powerhouse. Ampuero emphasized that joining China´s global infrastructure initiative would make Chile more attractive to Chinese investors and position the Andean nation as the “landing point for investments in Latin America.”

Trade relations between Japan and China

[Source: Daxue Consulting]

In 2017, China’s importation of electric-mechanical products and parts from Japan rose 4.5% to $4.22 billion, accounting for 25.6% of the total imports. China is Japan’s second largest foreign automobile markets. In 2017, sales by Japanese carmakers Toyota, Nissan, Honda and Mazda in the Chinese market all hit record highs. Nissan reported a 12% rise in sales to more than 1.52 million units last year, while Honda sold more than 1.44 million cars, up 15.5 percent year on year.

Tourists from China’s mainland made more than 7.3 million trips to Japan in 2017, up 28% from 2016. Tourists from Japan traveling to China boosts 3% in 2017 from 2016 up to 2.68 million visits.

In 2018, the population of Chinese students studying in Japan had surpassed 100,000, achieving 40% of overall overseas students in Japan.

Daxue Consulting helps you get the best of the Chinese market

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

This article Prospects behind the Great Wall: Who are Chinese business and trade partners? | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

There are two types of FinTech firms: technology-centered and financial-service-oriented firms. Both of the FinTech types are earning a customer-centric reputation by bridging the gap between what financial services firms currently offer versus customers’ wishes. They are improving customer journeys by merging financial services seamlessly with daily activities to make banking and other financial services invisible and frictionless through a more customer experience-based approach (such as real-time updates), innovative business models (such as P2P lending), customized solutions, and optimal and transparent pricing.

FinTech in China

In effect, China, unlike Japan and the US, has leapfrogged from cash to mobile payments, bypassing the payment cards system. While undergoing this significant period globally, FinTech remains mysterious to most people. We summarize the basic concepts about FinTech and explain how it will likely develop in the future, as well as how international companies can leverage it in China.

Contact us for any question on the Chinese market

The breakdown of FinTech in terms of technologies involved in it

According to Mrs. Kan, Executive Director and Alternate CEO of China CITIC Bank International (CNCBI), the technology within FinTech can be categorized as ‘ABCD’ which are Artificial Intelligence (AI), Biometrics, Cloud and (Big) Data.

[Source: Daxue Consulting]

“Integrating AI and Robotic Process Automation (RPA) technology into our business enable the bank to save time and money by automating high volume and repetitive tasks such as account opening, anti-money laundering (AML) checking and user acceptance testing,” she suggests. Toumi RA (Robot Advisor), a FinTech company in China, aims to leverage robot to process large amounts of information quickly. Hu Jinhui, CTO of the company, points out that even sophisticated employees will pale in data collection and analysis compared with robots.

In traditional banking, customer authentication relies on the physical presence of the customer at a branch, a signature on paper or the input of a password. Whereas, in the digital world, the deployment of sophisticated biometrics solutions at customer touch points, such as via mobile banking, can improve the user experience. Upon registration, customers will be able to access their banking applications without having to memorize and input various login IDs and passwords.

Cloud computing offers the possibility of a more cost-effective infrastructure design model and allows people access to the same kinds of applications through the internet, leading to high efficiency, low cost and data security. It has taken only a few years for the concept of cloud computing in China to transform from research to practice. Fortunately, for China, its internet companies, like Tencent caught the trend immediately.

Big data serves as the pivot of the three technologies mentioned above, which contributes to an extensive database that includes all the customer-related information necessary for detailed and personalized analysis. In China, where access to secondary data is difficult due to lack of transparency, Big Data offers excellent opportunities to get an infinite amount of data to understand consumers better and predict their behavior. Thanks to this, Chinese companies will be closer than ever to their customers. To give an idea of the gigantism of Big Data, the state-owned Industrial and Commercial Bank of China (ICBC, 中国工商银行) alone had amassed 4.9 petabytes (or 4,900 terabytes that equal to 4,900,000 gigabytes) of data in March 2014. The Big Data in China is expected to grow by more than 60% in the years coming and reach total revenue of 46.29 billion yuan in 2019.

Also, blockchain gained much popularity in the past four years as the technology behind cryptocurrency. Digital currency has many benefits, including reducing the costs associated with the issuing and circulation of bank notes; improving the efficiency and transparency of economic transactions; preventing financial crimes such as money laundering and tax evasion; promoting financial inclusion. Combining shared databases and cryptography, blockchain technology allows multiple parties to have simultaneous access to a constantly updated digital ledger that cannot be altered. Blockchain has far from cooled down by increasing restricted regulations; on the contrary, many experts within the industry expect it to be widely used more rationally. Every international company knows sending global payments to China is costly and time-consuming. To solve the problem, Remitsy uses the blockchain technology and conversions in Bitcoin, with fees as low as 1% and speeds as quick as six hours.

Know-how of FinTech

FinTech firms are now penetrating nearly every financial services segment, driving innovation and disruption. Subsegment focus areas of FinTech include digital payments (PayTech), fully digital insurance (InsurTech), banking (BankTech), wealth management services (WealthTech), and the creation of marketplaces for selling financial products.

BankTech refers to retail banking technology startups focused on lending, cross-border transfers, and money management. PayTech focuses on the payment space and is used by firms such as Alibaba and Tencent. WealthTech firms are to online/mobile wealth or investment management firms such as Lufux, Ant Finance, and Betterment. InsurTech refers to the use of technology and innovation to make the insurance industry more efficient and customer-centric, typical Chinese firms including Ping An Insurance, Taikang Insurance Group, and Sunshine Insurance Group.

What is the FinTech status quo in China and what is the motivation driving it?

[Source: Goldman Sachs Global FinTech Survey China summary in 2017]

The mobile payment scene in modern China

In 2018, mobile payment saw vigorous volume growth, up 7.4 percent at the first half of the year, reaching 566 million people according to a report on the country’s internet development by the China Internet Network Information Center (CNNIC). In addition, the percentage of Chinese internet users using online financial services rose from 16.7 percent to 21 percent in the first half of 2018. Overall, 788 million Chinese used mobile phones to surf the internet in the first half of 2018, making up 98.3 percent of the total internet users.

[Source: Daxue Consulting]

Competition for market share has propelled innovations that connect online payments with face-to-face retail transactions. QR codes, a type of matrix barcode, have been vital in facilitating the offline-to-online interaction and are widely used in China’s retail businesses, from street food vendors to Starbucks, from subway tickets to taxis, and even street performers. QR codes can be used for both the buyer and seller, for example, a shopkeeper can display a code that customers scan with their mobile phone to initiate a payment, or a customer’s WeChat or Alipay account can generate a unique, transaction-specific code that a retailer scans to complete a transaction. In either case, the mobile phone serves as both the credit card and the wallet. Money transfer between parties is also as simple as sending a text message.

Two ways of QR codes applications [Source: Daxue Consulting]

In popular destinations such as Hong Kong, Thailand, Japan, and Korea, WeChat Pay and Alipay are aggressively expanding their reach by forming local partnerships with places frequently explored by tourists, including airport duty-free shops, scenic spots, shopping malls, and restaurants.

An average Chinese consumer has 3.6 debit cards, but only 1 out of 3 has a credit card. The low credit card penetration but extremely high debit card penetration set a unique stage for digital payment to grow. Also, the low penetration of credit cards meant there was a massive, untapped pool of consumers needing credit, paving the way for FinTech in the credit space. As merchants were onboarded rapidly due to the low fixed cost of adoption and incentive pricing by Tencent and Alibaba, it became possible to use digital cash in Alipay or Wechat Pay accounts to buy almost anything. That’s the reason, we believe, why mobile payment has become more prosperous in China than in anywhere another country else in the world. China was a late mover in terms of digitization and mobile penetration but leapfrogged into being a global leader.

As for the scene of mobile and online payments, we identify B2C (Business to Consumer), C2C (Consumer to Consumer) and B2B (Business to Business) as the three main payment channels in China based on nature of the transaction. However, the fact is that it will be hard for third-party payment companies to make meaningful direct profits from payment processing unless they have other channels for monetization within their ecosystem.

CONTACT US NOW TO ANSWER YOUR QUESTIONS ABOUT BUSINESS IN CHINA

The unique attributes of the Chinese digital landscape propel a cashless trend in the country

China’s FinTech miracle lies in the country’s unique technology ecosystem: a tech-savvy population, an underdeveloped banking industry, and an initially relaxed regulatory environment. Perhaps most significant of all, more than 95 percent of China’s internet users—or 772 million people—access the web via a mobile device, according to CNNIC. All the above, the unique environment cultivates Chinese users’ to be heavily reliant on mobile payment, which in turn drives the development of online lending and its adoption.

China has become the global leader in online lending, accounting for three-quarters of the worldwide market. The majority of China’s online lending is peer-to-peer (P2P). Online lending platforms connect potential borrowers with lenders who are seeking returns higher than bank-offered interest rates. Among online lending platforms, there are multi-functions players such as Meituan Dianping which expands its business to mobile payment and online lending. It is evident in the industry that mobile payment can rarely bring much profit, but many market players regard mobile payment as a gateway to drive traffic into their closed-loop ecosystems and then, reap benefits from online lending services. The same logic why Baidu, spent 900 million RMB to initiate the sponsorship with CCTV Spring festival gala in 2019 to promote Du Xiaoman Financial.

Small and medium-sized enterprises (SMEs) are behind the momentum for online lending services in China

According to the World Bank’s 2012 Enterprise Survey, Chinese SMEs received less than 25 percent of the loans extended by Chinese banks even though SMEs accounted for over 60 percent of China’s GDP and 80 percent of urban employment. This discrepancy in bank lending was attributed to the lack of qualified collateral and credit histories among SMEs.

FinTech firms, noticing the surplus of underserved individuals and SMEs, stepped in to fill the void. FinTech can play a significant role in helping close the gap between the financing needs of private enterprises and banking products at the time when banks might become more reluctant to address this issue amid downward pressure, according to experts and officials.

Historically, the traditional banks in China focused more on serving the state-owned enterprises (SOEs), leaving the financial needs of consumers and SME’s overlooked.

As China’s economy enters the ‘new normal,’ a mostly investment-and-SOE-led economy is no longer sustainable, and thus, consumption and SME growth are becoming more pivotal drivers. With that macro backdrop, the government and regulators have explicitly expressed support for financial innovation and internet finance since 2013 and imposed far less regulatory constraints initially.

Ant Financial (an Alibaba affiliate) applies AI technologies to its lending business and explores blockchain technologies to build a more transparent platform. The FinTech firm provides small loans to effectively support the fragmented credit demands of China’s massive population of SMEs and individual entrepreneurs who find it difficult to obtain loans under the traditional banking system, to help them to grow and innovate. Based on big data and internet technologies, Alipay has been able to offer its 310 loan services to rural consumers and small business owners without collateral guarantees. It takes three minutes to make an online application, one second for a lending assessment, and zero manual intervention in the whole process (Hence the name ‘3-1-0’ lending). Not only FinTech firms strive to grab a slice of this lucrative pie, but also Chinese traditional financial institutions are concentrating on adapting legacy systems to data analytics and mobile technology, to catch up with the advancement of the industry. According to PWC, data analytics, artificial intelligence, and mobile technology top the financial institutions’ list of investment priorities.

What are the most relevant technologies for the business to plan to invest? [Source: PWC]

Investment on emerging technologies centered on customer service

Emerging technologies, heavily leveraged by FinTech and BigTech firms have created a paradigm shift in customer experience that eliminates multiple pain points across the customer’s life cycle. According to the survey of PWC, China’s financial institutions are planning to pour 32 percent of investment on the technology – more than double the level of their global peers. However, the customer should be the focal point of their corporate strategy instead of clear laboratory focus. The rationale is that advanced technology tends to be easily replicated or even adapted by imitators. Whereas customer retention contributes to a promising prospect, which is a lasting cash cow for the company. Therefore, alignment with customer goals, the creation of the trust, and delivery of digital, agile, and efficient processes are catalysts for success.

Design-based thinking and simple-to-follow user-interfaces are making the customer journey quick, convenient, and seamless, while insights driven through data-focused technologies are ensuring relevant, personalized offerings.

Through innovative use of technologies, FinTech firms are delivering low-cost personalized products and are having a significant impact on raising customer expectations while also increasing pressure on traditional firms.

How are regulations affecting the FinTech industry in China?

Regulating the FinTech industry is a dynamic balancing act and regulations may constantly evolve through trial and error. Due to the nascent nature of the business model and the public-private collaboration, it is difficult to anticipate future policy directions. Thus, we believe it is essential to track the development of how a few early initiatives unfolded, as it could have broad implications for regulating the rest of the FinTech industry. According to the report of Goldman Sachs, here are some significant regulations imposed by the Chinese government from 2016.

2016: Chinese government laid out a comprehensive policy framework for regulating the internet finance industry across all verticals, namely lending, insurance, crowdfunding, payments, fund distribution, consumer finance.

March 2017: Established centralized clearing house (Wanglian) for all third-party payments, enabling regulatory oversight on fund flows, which were previously circumvented by FinTech players. What is unique here and very different from most of China’s infrastructure is the involvement of private capital (Ant Financial and Tencent each own 9.61% of Wanglian).

May 2017: Central bank set up a FinTech committee to act as overall coordinator of all FinTech efforts and policies.

Overwhelmingly, the most significant factor that limits the mass application of financial technologies is regulation. Regulation in this sense can either be classified as lack of regulation clarity or over-regulation of technological development.

Regtech (short for ‘Regulation and Technology’), coming along with FinTech, is gaining momentum globally. RegTechs is the innovative application of technology and new business concepts to the challenges firms face in managing regulatory risk and compliance. It aims to mobile adoption of big data, AI, cloud computing and other technology to improve cross-industry/ cross-market risks identification/prevention. In addition to the technology-driven developments in its retail banking business, CNCBI sees RegTech present numerous solutions which can simplify processes and reduce costs. In the field of commercial and corporate banking, new developments in blockchain applications, and account opening and account management processes, also promise new opportunities.

Contact us for any question on the Chinese market

What is the future of FinTech in China?

Disruptors and competitive landscape

40% of the retail consumption today in China is done via third-party payments. Alipay and WeChat Pay now dominate the space with 84% market share, but sizeable players from other industries are joining the race. They are planning to develop the locked-up system facilitating their ecosystems, and thus fierce competition in the sector would last in the expected future.

Future monetization, concealed in their own ecosystems, will likely come from targeted advertising, consumer financing, and wealth management.

However, it’s proper to have a glance at the payment field, probably unveiling the steepest competition. We expect fee competition to intensify and wait to see more M&As in the payment space, as players in adjacent industries scramble for payment licenses to close their loop, and banks themselves catch up in innovation.

Fee competition: With the introduction of Wanglian, the already fierce fee competition will likely get more intense, when more banks and UnionPay join the battleground. Part of the current fee charged on offline merchants can be as low as 0.38% from many payment companies, while the 0.6% official guideline.

M&A: Due to owing the license itself is still valuable, many cash-rich players from other industries are looking to close their loop. Among the suitors, there are not only traditional industry magnates who seek to keep their competitive advantages in the digital age but also rising tech stars in the online-to-offline service industry. Therefore, the demand for a payment license continues to increase, especially from tech start-ups with early success. They either want to close the loop with their supply chains, or are incentivized to expand onto the adjacent growth area to boost their respective valuations. In either case, the fact leads to new, significant, private entrants not likely being ruled out of the current landscape or ecosystem.

China FinTech ecosystem is the high level of integration, both with offline businesses and along the entire finance supply chain, Alibaba, Tencent, JD, Baidu, for instance.

We believe the conglomerate structure and the ‘integration’ mindset will continue to shape how Chinese business leaders think about their overall strategies, or how they evaluate the specific business lines return – always in a context of the whole ecosystem, and rarely by individual lines. This probably explains why companies invest heavily in the payment businesses, although the profit profile is rather unattractive.

Utilizing FinTech in B2B models

B2B tends to move very slowly given the significant time and cost required to change the technology infrastructure. Plus the adoption of electronic payments (such as bank transfers) was much higher, to begin within the B2B area. We could see a significant shift in the long run, especially in international B2B payments. But for now, most disclosure on payment company TPV (冠捷科技) includes only B2B payments related to e-commerce, and the growth has been relatively slow.

After Alibaba, Pony Ma, the chairman of Tencent, has shifted the corporate strategy onto serving the upper side of the value chain – suppliers. Utilizing FinTech in B2B model, he ensures the next explosive growth in the prospected China’s business lies in big, medium or small companies, given that Chinese consumers have been well educated.

Daxue Consulting insights: Behavior-based customer analysis

AI seems already to have the capability to gather, analyze and anticipate human behaviors in most cases. For example, they can move from the traditional segmenting of customers by geographic location and demographic factors, such as gender, age, occupation, and financial parameters. A more sophisticated segmentation method, psychographics, helps banks define them based on their personalities, lifestyles and social classes; thus providing a better understanding.

Behavioral segmentation extends this subtler differentiation further, for example, distinguishing between those customers in a specific segment whose preference is still to use cash for payments and those who opt for debit and credit cards. Appropriate marketing campaigns can then be devised for each section.

As a core engine of Alibaba’s financial affiliate Ant Financial, the world’s largest third-party payments platform, AI has been used widely in the company’s businesses, including intelligent customer service, transaction risk control, marketing, virtual damage assessment for car insurance, loan approval and anti-fraud processes.

Besides, AI could effectively improve the construction of the social credit system which is now pursued by the Chinese government. Government officials are willing to further stabilize the society via advanced technology. Fan Yifei, deputy governor of the People’s Bank of China, said on the Fintech and Construction of a Social Credit System Forum that with the innovations in technology he is confident that China’s social credit system will be a success. However, innovative development and risk prevention are fundamentally intertwined and to meet the demands of people for a better life and for the system to be successful, both must be considered in equal measure.

While it is now widely accepted that the effective collection and utilization of data is becoming crucial to future business success, sophisticated and systematic analysis of data helps us to formulate new insights about customers, thereby driving new products and services. It also facilitates us to adjust our risk appetite and enhance our fraud monitoring capabilities.

How can foreign companies harness FinTech to gain a competitive edge in China?

For international companies operating in China, there is undoubtedly the ability to leverage FinTech to gain a competitive edge – if they are dynamic enough to navigate the Chinese market. The Chinese FinTech industry is developing at a breakneck pace – primarily driven by massive central & private investment, a STEM-heavy pool of talent and favorable regulation. “China has focused on promoting widespread adoption of key emerging (primarily applied) technologies, which inherently drives development and consumption within the technology sector,” observed by Stephen Hopkins, the former Director of Strategy at Clipper Coin Capital, an expert in the FinTech area. Firms then have access to capital, a skilled workforce, governmental support, and the world’s 2nd largest economy – which means that carving a niche in the market is plausibly attainable for firms with marketable products that solve real market problems. Hopkins suggests that depending on the nature of the firm, they could then use their technology or product to disrupt the traditional financial industry (with the goal of reaching economies of scale or being acquired) or leverage their success in the Chinese market to attract foreign institutional partners seeking to expand into the Chinese market.

In this early stage, the ROI for implementing FinTech solutions varies greatly amongst organizations. For large financial conglomerates (banks, brokerages & insurance agencies), FinTech is seen as more of an insurance policy that future-proofs their operations while also providing incremental value for preexisting products & services. Large banks see FinTech as an industry disruptor, but through strategic acquisitions of startups, they can either incorporate or kill technologies that could disrupt their core operations. While for SMEs, FinTech is everything – it’s how they differentiate themselves from competitors and make money. Most FinTech companies nowadays would likely consider themselves more “tech” than “fin,” with the technology simply being applied to the financial services industry.

The challenges in the Chinese market that await FinTech applications

The possible danger is that FinTech may upset business models that serve the greater good without providing viable alternatives. In response to the growing competition they face from technology startups, traditional banks may take more risks to cling to a shrinking market share. And the rush to overhaul business models, or to adopt unfamiliar and rapidly evolving technologies, may weaken internal processes, creating another source of potential loss. While financial institutions and FinTech companies are willing to increase partnerships, challenges need to be addressed. IT compatibility and differences in business models top the list among certain risks.
More broadly, the rapid rollout of new technologies gives lower-skill workers little time to adapt, and may ultimately cost some of them their jobs. Individuals might gain as consumers but lose as employees. Smart investment systems in Wall Street have caused unemployment in some big firms and, this issue expects to expand worldwide shortly. The balance of these two effects will differ across segments of society, potentially leading to greater economic inequality.

When there is a danger, there is a possibility for the human being to progress, and that’s how history evolves all the time. The dawn of FinTech, on the one hand, brings challenges for traditional financial institutions; on the other hand, unveils the precious timing for banks to revolutionize their business models. Pains are deemed as upside, though it will take some time to adapt to the new era. As for the unemployment, it’s trickier to tackle it since the stereotype in people’s mind needs to change to catch up with the upcoming trend. Don’t settle, to quote Steve Jobs, quite relevant to this situation. Except for employees continually learning, the governments need to take account for taking care of their people, to maintain society stable in the long term.

Foreign opportunities in China’s FinTech scene

In conclusion, FinTech must play a vital role in the future business world. In China, FinTech is still a blue ocean, and hence, foreign companies may leverage the already-existed-broadly-adoption mobile payment among Chinese people; and also, international players should emphasize on technology which is expected to create synergy in the financial scenes, such as more transparent and efficient transactions, further acknowledgment of domestic companies as well as local customers, etc. As we stated before, BankTech, PayTech, InsurTech, WealthTech, and Regtech are all different yet interrelated dimensions for foreign corporations to consider.

Related Reading:

Green China: Fintech – tech giants fueling green technology and green finance

Author: Will Qian

Daxue Consulting helps you get the best of the Chinese market

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

This article What companies must know about China’s FinTech scene | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

Programmatic advertising has paved its way in China’s advertising market, with rapidly growing market size and revenue. This article will be focusing more on real-time bidding (RTB), which is one of the methods to achieve programmatic ad buying, in order to provide a better picture of the role and influence of personal data in China’s programmatic advertising market. Real-time bidding is achieved by the interaction of demand-side platforms, real-time bidding exchanges, supply-side platforms, and ad publishers, to be explained in more details later in this article.

Key findings:

• China’s programmatic advertising market is at a starting stage yet fast growing compared to that in Canada, the US, and UK
• The programmatic ad landscape is more blurry in China, where internet giants BAT dominate the DSPs, SSPs, while also serve as large ad publishers
• Personal data is both the driver and inhibitor of programmatic advertising under China’s unique tech landscape
• This market in China is less transparent, which requires collective efforts from all of the players

What is programmatic advertising?

Programmatic advertising is “the use of software to automate the process of online ad buying and selling. It can be done either through Real-Time Bidding (RTB) on open exchanges or private marketplaces or by the direct purchase of guaranteed or fixed-rate deals”. Firstly, RTB is the process where publisher inventory is placed into an Ad exchange and many buyers will enter an auction and bid in real time for the impressions they choose.

 In a private marketplace, publishers can control the buyers they allow to bid in a smaller auction; this gives both seller and buyer more exclusivity and control. Finally, publishers and buyers can also enter a one-to-one agreement, determine a price upfront and see set allocations of inventory earmarked for one buyer. This is called programmatic direct.

Compared to traditional manual buying, where advertisers need to negotiate with human salespersons for advertisement prices and placements, programmatic buying allows advertisers to use data analytics and technologies to decide where and when mobile advertisements are placed. This digital, automated and systematic approach in China can greatly enhance the efficiency of advertising transactions, expand the transaction scale and optimize the effectiveness of advertising. It is advantageous for advertisers, who can better segment audiences and reach target audience more accurately. For the media, they can price the same advertising differently according to various time and regions and sell to different advertisers. Besides, advertisers who purchase advertising positions and run advertisements through programmatic buying will also receive effective feedbacks from media platforms.

Contact us for any question on the Chinese market

Programmatic advertising is growing rapidly in Mainland China

The development of programmatic advertising in China still lagged that in the US and UK. Compared with the US and UK, the number of publishers in China is also limited, which could restrain large-scale competition and spending.

Nevertheless, programmatic buying has already nestled its way into the advertising industry in China, whose market size and revenue have both been growing disproportionately. The market size of programmatic buying ads is expected to reach RMB 67.09 billion in 2019. With a 7-year CAGR of 98.63%, programmatic ad buying market is growing rapidly. According to iResearch, in the long run, China’s programmatic buying market has promising prospects. Medium to high growth rate is expected to continue (iResearch, 2016). This is owing to rapid growth of the number of internet users and the amount of time they spent on the internet, as well as the continuous improvement of the online advertising industrial chain and the increasing maturity of advertisers, agents, and media.

China’s Programmatic Buying Market Size (RMB Billion), 2012-2019

As shown in the figure, the revenue of programmatically purchased display ads was also growing fast for the past 5 years and is expected to reach RMB 26.3 billion in 2017. Likewise, the proportion of programmatically digital display ads in a total amount of display ads is 60%, as shown by the red line. Though this number is still quite low compared to those in Canada, the US, and the UK – where 81%, 78%, and 77% respectively, of digital display ads would be traded programmatically, the growing proportion shows a promising Chinese market.

Spending of Programmatically Purchased Display Ads in China

Digital display ads include everything from publisher-erected APIs to more standardized RTB technology; includes ads on e-commerce platforms, advertising that appears on the desktop, mobile phones, and other internet-connected devices.

The process of programmatic ad buying through RTB

As mentioned, programmatic advertising can be done either through real-time bidding (RTB), private marketplaces or direct purchase. However, the rest of this article will be focusing more on RTB since it better demonstrates the role of personal data in programmatic advertising in China clearly.

In recent years, real-time bidding has become an important way to achieve programmatic advertising – in 2017, programmatic digital display ad spending through real-time spending in China account for 36.5%.

Distribution of programmatic digital display ad spending in China in 2017

Programmatic ads buying process

Real-time bidding is achieved by the interaction of the demand-side platform (DSP), real-time bidding exchanges (RTB exchanges), and supply-side platform (SSP). SSPs enable web publishers (online/ mobile advertising) to manage their advertising space inventory, fill it with ads, and receive revenue. SSPs send impressions (advertising traffic) to Ad exchanges, where DSPs purchase them on marketers’ behalf, depending on marketers’ advertising needs.

Firstly, as shown by the left side of the figure above, the data management platform (DMP) gets raw data from marketers/advertisers and through other channels, such as internet companies or data crawling. Through data analysis, DMPs find target users, analyzing their natural attributes (e.g. ages, gender, occupations, income, and etc.) and social attributes (e.g. social interaction, hobbies, location, purchase intentions), then draw accurate user portrait based on data analysis results. Specifically, users’ behavior and preferences are analyzed and based on that, they are given different data labels (e.g. “keen to travel”; “makeup lover”). After that, when the real-bidding begins, DMPs can supply labels or tags to DSPs and RTB exchanges immediately.

On the right side of the picture, the process of how publishers show specific ads to specific users is shown. It is common nowadays that big internet giants in China like Alibaba, Tencent, and JD analyze their own users and draw user portrait based on various things from browsing history, device data, consumption behavior to their interests and preferences. For instance, Tencent gives each user over 300 data labels. Users are often identified by their unique device ID, to be shared among different platforms without violating their privacy or disclosing personally identifiable attributes.

For instance, take real-time bidding on Tencent AdExchange (owned by Tencent) to explain the actual real-time bidding process in China; when a user sends an access request to the publisher (eg: a request to watch a video on Tencent Video (video streaming platform owned by Tencent)), the publisher will transfer this user’s device ID or cookie immediately to Tencent AdExchange. Knowing the user behavior and data labels represented by the specific device ID, Tencent AdExchange sends bidding requests to DSPs whose advertising demands are in accordance with these data labels. Through a matching of labels on the demand side (marketers/advertisers) and supply side (users), the DSP who responds with the highest bid will get the right to expose its advertisement to a specific user.

The whole process of real-time bidding only takes about 100 milliseconds, which means as a user, when you click on a video, after 100 milliseconds, an advertisement based on your preference or the things you may be interested in is displayed to you. This also explained why some Chinese consumers complain that after they browsed something on the website, later when they shop in an e-commerce platform, similar content or products are promoted to them on their homepage.

Programmatic advertising landscape in China dominated by big players, mainly internet companies

DSPs – the programmatic buying market in China is mainly dominated by 3 giant internet companies — Baidu, Alibaba, Tencent, which collectively known as BAT. To be specific, Alibaba alone accounts for about 60% of all programmatic advertising. When counting Baidu and Tencent in, the BAT companies take up about 90% of the market. Their dominance position is expected to continue. For example, with regard to net digital ad revenue (net ad revenue is revenue after companies pay traffic acquisition costs (TAC) to partner sites), BAT represent 62.4% market share in 2017, and is expected to increase to 69% in 2019. BAT serve as main DSPs in China; beyond them, major independent DSPs include iPinYou, Limei, and AdSame.

Net Digital Ad Revenue Share in China, by Company, 2016-2019

SSPs – similarly, since China is a mobile-first country in terms of internet access, most SSPs are major apps, such as Youku and Tencent Video both providing video services and live streaming services. There are few independent SSPs in China because large publishers prefer building their own SSPs to sell traffic at the highest price possible, while small publishers typically sell their ad inventory to big ad networks like the BAT.

Domestic ad exchanges

Alibaba, Tencent, Sina, Baidu and other domestic internet icon companies have built their own Ad Exchange platforms, which on one hand, provided plentiful high-quality biddable resources, and on the other hand, had relatively rich and complete functional modules and connected with a number of third-party DSPs in the market. Below are 2 biggest Ad exchanges, owned by Alibaba and Tencent.

Taobao Ad Network and Exchange (TANX)

TANX is owned by Alibaba, and is one of the earliest and largest real-time online advertising exchanges in China. Publishers, merchants and DSPs are participants of TANX, as well as third-party data and technology companies, who serve as DMPs, enabling participants to identify potential customers.

With the help of DMPs, TANX leverages rich consumer data collected from China retail marketplaces and utilize its proprietary algorithms to select online advertising inventory automatically for participants. It also makes a prediction on click-through rates and conversion rates of advertising. Apart from increased consumer targeting efficiency, TANX’s transparent pricing of advertising inventory upgrades marketers’ ROI. Alibaba has sizable revenue from advertising, most from providing ads services to merchants on Taobao and Tmall (both owned by Alibaba) to improve performance. In 2016, Alibaba began to expand its business. Cooperating with AdChina, an advertising technology company who serve as both SSP and DSP in China, Alibaba provides programmatic advertising services to brands. They have also built an enterprise-level DMP, allowing a number of large advertisers and agencies to have a chance to tap into Alibaba’s user data, under the management of Alibaba and AdChina. They are expected to build the largest mobile ad exchange in the China market.

Tencent Ad Exchange (TAE)

The staggering scale of Tencent’s audiences paves the way for its Ad exchange platform – Tencent Ad Exchange (TAE). Since Tencent dominance in social media platforms, 25% of Chinese mobile internet users are involved in Tencent’s platforms, such as WeChat, QQ, Tencent Video and Tencent News, which allows Tencent to have a wide coverage and insight into user behaviors. With 871.6 million monthly user accounts on WeChat, it has become the most popular social networking platform among all age groups. The ads can be presented on WeChat within seconds, which is equal to Facebook’s news feed. In terms of monetization, however, Tencent tends to take a slow but safe way. Concerned about user experience, it currently only shows one ad per user per day on WeChat.

The role of personal data in China – driver and inhibitor of programmatic advertising

On the one hand, personal data drives the development of programmatic advertising market. As aforementioned, users’ personal data is the cornerstone in drawing user portrait and forming data labels. Thus, plays a vital role in programmatic advertising. Through matching of data labels between demand side and supply side, customized advertising and precision marketing can be achieved and real-time bidding can be realized in such a short time.

Nowadays, both DMPs and DSPs own abundant data sources. For example, iPinYou (Chinese name: 品友网络公司), a leading DSP in China, has more than 3,000 user attribute labels, and Adsme (Chinese name:传漾科技), the forerunner of Chinese intellectualized digital marketing, collects one billion cookies and divides them into 33 large classes, 168 medium classes, and 857 small classes. Based ownership of large-scale data then through data mining and big data analysis, these companies are able to extract in-depth data (e.g. consumer behaviors, lifestyles) from mass and trivial data (e.g. content contact marks, consumer behavior data), achieving the overall portray of target consumers.

On the one hand, RTB exchanges also need user data and through big data analytics, user behavior is analyzed in order to understand which companies with advertising needs are most suitable for each spot from advertising publishers. Then, those suitable companies can enter the bidding. On the other hand, the unique tech landscape in China inhibits data sharing and aggregation thus can somehow hinder the development of programmatic advertising.

Since China is a mobile-first market for internet access, digital advertisers have followed consumers by investing in mobile ad formats. In 2017, 79.9% of programmatic outlays were dedicated to mobile advertising. According to iResearch, mobile programmatic purchasing has become and will continue to be the main development accelerator of programmatic purchasing in China. The share of programmatic purchasing via mobile surpassed that via PC and will continue to grow in a higher growth rate. This gives BAT huge opportunities to leverage their advantage in the mobile market into programmatic advertising. BAT has a huge advantage in the mobile market since they have developed, invested and acquired companies in various industries, providing apps ranging from transportation, entertainment, mobile gaming, to mobile payment and etc.

To sum up, consumers spending more time on their digital platforms, they get hold of the larger scale of aggregated data in various industries and rich dimensions. These data have become valuable assets and competitive advantage for BAT and other big service providers, thus, consumers are not keen on sharing data outside of their own ecosystems. Even within their own ecosystem, data sharing is very strict and limited. This means small players have difficulty gaining large-scale data. According to iResearch, in the short term, substantive action is still difficult to be implemented with regard to data opening. This trend will probably help BAT to maintain their dominant position yet inhibit the development of programmatic advertising in China.

Alibaba’s ecosystem

Tencent’s ecosystem

Potential challenges of programmatic advertising in Mainland China

Contact us for any question on the Chinese market

Lack of high-quality, large-scale, and integrated user data in China

Generally, advertising companies or various platforms can obtain data from several channels. Internet enterprises, mobile network operators, Ad exchange, advertisers, and third-party data management companies are common data sources for advertising companies. However, in the Chinese market, it is difficult for an advertising company to get high-quality, large-scale, and integrated user data. As aforementioned, although giant internet companies like BAT hold large-scale data, other companies have no chance to acquire it from them even for those in cooperative relationships with BAT. Mobile network operators (MNOs) in China operate their business in their own particular regions separately, resulting in dispersed data. In addition to data from internet enterprises and MNOs, data from advertisers and third-party suppliers also tend to be scattered. This opens opportunities for relevant companies such as MNOs to monetize data in a legal and acceptable way that is visualized and organized without violating users’ privacy.

The lack of transparency in pricing can be costly for Chinese marketers/advertisers

The second obstacle for programmatic advertising in China is about transparency. Traditional ad networks make money through arbitraging. They buy low and sell high, which is not the way DSPs are supposed to work, most of whom should charge a transparent service fee. Though ad tech players that buy low and sell high also exist in the U.S., it is more non-transparent in China.

The main reason is that the Chinese market lacks third-party validation. According to Digiday, big Chinese publishers typically do not allow external measurement companies to access their inventory.

In addition, China has a different tech landscape – the line between a SSP and a DSP (or even a DMP) is blurry in China. According to Accenture, China’s DSPs, due to its initial resistance to transition into an exchange inventory, adopted a hybrid model, DSPAN, where it is common for companies to own a DSP and an ad network. This type of model allows picking from a fixed ad network publisher list to fulfill the needs of an advertiser, while also buy inventory through the exchange for performance-oriented advertisers. As a result, DSPs were given preference to sell their own ad network inventory to buy on the exchange, undermining brands’ interests and yielding financial losses. ADBUG’s 2017 Q1 China Media Report states that “…out of 12 billion impressions verified in the Real Campaign, China saw an average of 29.5% invalid traffic and only 25.5% viewability rate on personal computers and mobile websites”. The role of programmatic advertising is to reach out to target customers at the right time and place. However, the above numbers show that the effectiveness of programmatic advertising is not high in China; consequently, the profit and brand reputation of companies with investments in digital advertising in China can get impacted.

Daxue Consulting leverages unique experience and data extraction capabilities to support your advertising strategy in China

PR and Advertisement businesses in China require strong and reliable knowledge on the overall market and on the culture and custom of its customers. Daxue Consulting conducts all the market research and consulting services you might need to develop your PR and advertisement business in China. To know more about digital advertising in China, do not hesitate to contact our project managers at dx@daxueconsulting.com.

This article The programmatic advertising landscape in China: how personal data and user portrait come into play is the first one to appear on Daxue Consulting - Market Research China.

Identity data includes basic information of a person, such as a name, gender, mobile phone number, and identity card number, which are mainly applied to authenticate users’ identities. For example, when logging in WeChat for the first time, users are required to register with a phone number as phone number can be traced to national ID in China.

Network data contains location data, log data, and device information, supporting fraud detection and account security.

When users browse websites or Apps, those behaviors are recorded to extract user behavioral habits, which generate behavioral data. Taking food orders as an example, when one customer orders spicy food at high frequency, the system will know his flavor preference and then recommend similar spicy food the next time he opens the menu.

These three types of personal data help companies create substantial business value, such as increasing sales through precision marketing, which is based on the analysis of user behavior data. However, some challenges in personal data usage and collection exist. The main ones are personal data leakage, people’s concern of privacy infringement, and data dispersion.

Personal data leakage has brought a great deal of damage

As online shopping has become prevalent in China, its consumers have boosted their online purchases. E-commerce and mobile payment involved a large amount of personal data, thus, they became the gathering place for personal data leakage. The typical case happened in JD, in 2016, where a data package counted 12G was revealed from JD to the black market, and those data came from a system security. The revealed data package included usernames, passwords, mobile phone numbers, identity card numbers, and other important personal data. What’s even worse is that hackers attempted to log into other websites with the personal data obtained from the black market, and some hackers even broke into financial accounts, stealing capital from these accounts. Numbers of personal data leakage incidents have also occurred in Alipay, Dangdang and yhd.com, as well as some online ordering platforms, such as Ctrip and 12306 (a Chinese railway ticket ordering platform), and those problems were caused by system security bugs or internal employees’ betrayal.

Personal data leakage can occur when people perform a transaction at the bank, purchase a pair of shoes on Taobao, register on a mobile phone app, or other trivial things in daily life. It has triggered attention among customers and caused massive damage. Based on the results of Chinese Internet Users’ Rights and Interests Protection Survey Report, 2016, published by Internet Society of China, 54 percent of Chinese internet users thought personal data leakage was a severe issue in China, among which 21 percent thought it was significantly serious in China. It was estimated that 91.5 billion RMB ($14.5 billion) cost by internet information leaks and fraud in 2016, and the average amount of capital loss per internet user was 133 RMB, indicating the serious damage caused by personal data leakage.

Privacy infringement was the No.1 concern among online shopping consumers and also the focus of the Chinese government’s legislative work

Increasingly prominent problems of personal data leakage have given rise to public concerns. “Online Shopping Integrity and Consumer Recognition” questionnaire designed by the China Consumer Association has shown that leaking personal data was the No.1 concern among online shopping consumers. 25.1% of respondents thought online shopping services had problems of revealing personal data, which topped total problems listed on the questionnaire. Increasingly severe situations of personal data leakage and the concern of personal privacy from Chinese people call for the action of the Chinese government on data protection. The Chinese government has introduced 2 regulations and laws to standardize personal data collection and protection, Cybersecurity Law and “Information security technology—Personal information security specification”, which indicate China’s increasingly reinforced legislative work on data protection.

Cybersecurity Law, which took into effect in June 2017, clearly states that user consent must be obtained before data collection have the consent from users, and individuals have the right to request network operators to delete personal information if they violent the provisions of laws. Information security technology—Personal information security specification sets a requirement on data storage, regulating de-identified process must be implemented after data collection, as well as separately store of data. It also poses a limitation of minimal amount and frequency of data collection, and data collected from users must be directly related to providing products and services.  It is said by the Center for Strategic and International Studies (Samm, 2018) that the law of new national standard on personal information protection coupled with Cybersecurity Law contains more burdensome requirements than the European Union’s General Data Protection Regulation (GDPR), and GDPR is one of the largest-scale and the most punitive privacy laws in the world. 

High-quality, large-scale, and integrated user data is currently under-supplied

According to the insight Daxue Consulting drew from interviews, high-quality, large-scale, and integrated user data is currently under-supplied. Generally, giant internet companies, such as Baidu, Tencent, and Alibaba, have their own data ecosystems, and they gain large-scale and aggregated data from their auxiliary products and services. However, other companies only possess a small amount of data, and data sharing hardly happens across different companies, making it hard for some companies to advertise or improve their products and services. For example, when doing precision marketing, users’ behavioral data are analyzed to draw user portrait. Specifically, their preferences are analyzed and based on that, they are given different data labels (e.g. “keen to travel”; “makeup lover”). Then, companies with advertising needs show specific ads to potential customers based on the matching of labels. Apart from precision marketing, data analysis permeates to various industries, driving companies place a higher value on personal data. Companies tend to keep their own data confidentiality, thus, large-scale and integrated user data cannot be easily accessed by most of the companies.

Although the challenge of personal data leakage, people’s concern of privacy infringement, and data dispersion have brought some setbacks and negative effects on Chinese society, it can not stop the advent of the era of data. Facing those challenges, Chicness government, enterprises, and civics are determined to pool efforts together to greet the prosperous future of big data industry.

The extra article can be interesting to the international companies, presented in the Chinese market, is about the abilities of companies to predict future using Big Data in China.

Daxue Consulting can help with the analysis of any market in China, including the personal data industry

Daxue Consulting, as a market research company, provides the adapted data in one of the most challenging markets in the world, China.  We have a wide range of services to deliver a competitive market research. To know more about the personal data market in China, do not hesitate to contact our project managers at dx@daxueconsulting.com.

This article Personal data is under-supplied for small companies in China is the first one to appear on Daxue Consulting - Market Research China.

On 22 September 2016, Chinese officials announced that the embargo instituted after an outbreak of “mad cow disease” (also called bovine spongiform encephalopathy, BSE) in the United States in 2003 was partially lifted. Some American beef is making a comeback onto the plates in China, which now consumes 28% of the world’s meat supplies. But why did the Chinese authorities take such a decision after a 13-year ban?

Chinese meat consumption grows steadily every year, and beef meat is increasingly popular among Chinese people, especially in the middle class that keeps expanding. This trend reflects in Chinese beef meat importations that have increased by more than a factor of 186 between 2003 and 2016.

At the moment, beef meat consumption per capita is low in China compared to the United States, Brazil, Australia or Canada. However, overall consumption in China is expected to reach 5.34 billion kilograms in 2016. To put this figure in perspective, it is already more than the half of Brazil annual production, more than twice the Australian production, and more than four times the Canadian production. More alarming, Chinese people could consume nearly the half of the world’s beef by 2030 according to NGO WildAid. Importations from Brazil, Australia, and Canada may be insufficient to meet the Chinese demand.

Beyond a potential shortage due to supply issues, the domestic production of beef meat in China grows slowly. From 2014 to 2015, it only increased by 1% and will not be ready to complement the imports to meet Chinese people’s demand in the future. Thus, it is only fitting that China has resumed some American beef imports.

It remains to be seen how American beef meat will compete against Brazilian, Australian, Canada and British products in the Chinese market, and whether the ban will be entirely lifted by Chinese authorities in the future.

This article [Infographic] The beef meat industry in China is the first one to appear on Daxue Consulting - Market Research China.

On 22 October 2016, the Italian former professional football player Marcello Lippi was appointed coach of the Chinese football team. This decision is further evidence of the new dimension Chinese authorities want to give to the Chinese soccer. The former Italian national team head coach, who led Italy to win the 2006 FIFA World Cup, should help the Chinese national team, also called « Guózú » (in Chinese国足), to move to a new level.

This appointment is part of the Chinese plan to democratize football. Indeed, Xi Jinping wants to shake the Chinese football out of its torpor. Currently, the Chinese team occupies the 84^th position in the FIFA World Ranking, behind South Korea (44^th) and Japan (51^st). The presidential ambition is to become the best team in Asia by 2030, before reaching the top of the FIFA World Ranking by 2050. In comparison, the well-performing Chinese women’s football team occupies the 13^th place in the FIFA World Ranking. Certainly, there is less competition in women’s football than for men’s football, but the Chinese women’s team is ahead of the European big football nations like Spain, Italy or Portugal.

To make China a serious contender for the world title, authorities would like to develop football practice at all levels, from amateur to professional level. That is why significant investments are made to develop football infrastructures. To reach 250 million of football players by 2025, the Chinese government plans to build 50,000 new football academies and 60,000 of new football pitches. All of this would be spread over more than a million amateur clubs.

While the will to develop football in China mainly comes from the Chinese authorities, which has made football compulsory in all Chinese schools for two years, more and more Chinese people are seduced by soccer. According to a Nielsen report, 31% of the Chinese are interested in football and this figure is growing steadily. This attraction for football can offer a promising outlook for the football-related markets.

The growing interest in football in China will allow new markets to emerge. The market of football learning is estimated to USD 20 billion, while sports equipment market could reach USD 25 billion. Competition promises to be tough for equipment manufacturers to achieve the top position in this market.

This article [Infographic] China Football Industry: Trends and Opportunity is the first one to appear on Daxue Consulting - Market Research China.

China is the world’s largest textile producer and exporter, with 39 percent market share in 2016, according to l’Économiste. In 2015, exports reached $ 284 billion dollars, mainly for the American market. However, this situation is changing, because China is expected to become the world’s largest apparel market in 2017, ahead of the US. According to PwC study, the Chinese market, run by middle-class expansion, will account for one-third of the total Asian demand. That is the equivalent of the European market or North America market.

The significant growth of the apparel market in China and textile market is due to the vitality of e-commerce in China. In 2013, China surpassed the US as the world’s largest digital retail market, and clothing is the first product categories sold online.

Even if the American apparel market and the Chinese one continue their growth, their pace is totally different.

Since 2011, the American apparel market growth has averaged around 3% per year. In comparison, the Chinese market seems to be more dynamic. Over the last five years, the average growth of the market is 10% per year. Some years the growth jumps, like on 2014 where its rate reaches 18%.

At this pace, China has caught up quickly the American market. In 2012, 91 billion dollars separated those markets. It is estimated that the American advantage will be above 10 billion in 2016. Following these dynamics, the American market is going to lose his first place in2017.

The Chinese apparel market tremendous growth is based on the infrastructures development. Those infrastructures are making the sales development possible on the internet. The growth is also maintained by the emergence of a Chinese middle class, which support the Chinese consumption.

This digitalization is the true growth lever of the Chinese apparel market. According to the forecasts, in 2016 the share of online sales will be 40% of the global Chinese apparel market. On the American market, this share will represent only 20%.

The growth rates comparison of the domestic apparel markets in the US and China from 2012 to 2016 is particularly informative. The American market growth over this period is just 22.5%, whereas Chinese growth amounted to 187.5%.  Even when taking into account the absolute value, the American apparel market is beaten by the Chinese market. In 2015 the total online apparel sales amounted to 64 billion dollars, while the Chinese market achieves 115 billion dollars. On 2016, the forecasts expect the Chinese online apparel market to be twice as big as the American market.

Contrarily to the American market, the Chinese one will be able to support this growth level for several years thanks to the economic trend and the Chinese demography.

Stay Up-To-Date, Follow us on Twitter:

[Infographic] #China’s future #football industry revealed. Despite poor performance, #PRC football has a glorious future pic.twitter.com/zD9Z9CbWDr

— Daxue Consulting (@DaxueConsulting) November 16, 2016

This article China is about to surpass the USA as the world’s largest apparel market is the first one to appear on Daxue Consulting - Market Research China.

The online food delivery in China has witnessed explosive growth during the past two years. Online food ordering is the fastest growing sector of all mobile applications in China, and competition in this market has become tougher and tougher. Here is an infographic realized by Daxue’s team with key figures and information you need to know about this booming industry in China.

Online food delivery in China: Ordering and delivery services

The online food delivery industry in China is booming: in only six months, the number of users has grown by 32% from 114 million to 150 million between December 2015 and June 2016. Among the Chinese users, the largest consumer group is the white collars users, aged 27.7 on average. They account for 63% of online food delivery app users. Many of them are Chinese millennials who spend a decreasing time cooking for themselves. Students are the second largest consumer group and account for 30.5% of these service users (Chinese Millennials Behavior)

A high-potential market in which competition grows fierce

The online food delivery industry has a bright future. The number of Chinese mobile internet users keeps increasing: according to the China National Network Information Centre (CNNIC), 656 million Chinese people use cellphones to go online, accounting for 92.5% of all Chinese internet users. This is 37 million more than at the end of 2015. Undoubtedly, the online food delivery market that relies on mobile ordering has high growth prospects. Also, the significant ease of paying for food through mobile payment systems such as WeChat Wallet and Alibaba’s Alipay can only push the market in this direction.

However, the market has already become a brutal battleground. The three leading players are Ele.me, Meituan Waimai, and Baidu Waimai that represent respectively 37.5%, 30.5%, and 15% of the total market in May 2016. Launched earlier than its competitors in 2009, Ele.me is still ahead but its advantage over Meituan Waimai and Baidu Waimai is narrowing, especially since they all offer quite similar services.

How can Daxue help its clients: End-consumer survey in China

A client who wanted to test a new smartphone application contacted Daxue Consulting team. The application would provide a service that allows people to order and to sell homemade dishes. To meet the client’s demand, Daxue Consulting selected 500 qualified respondents, administrated a face to face survey to them, and delivered recommendations about possible improvements and market acceptance of the mobile application.

See our service: China Market Entry

This article Online food delivery infographic: A fast-growing and highly competitive market in China is the first one to appear on Daxue Consulting - Market Research China.

As an ancient country rich in its culture, Chinese people has been thought highly of the culture of diet and food. China’s food industry has developed rapidly these years, however, in the eyes of some westerners, they may still have a small picture of it. This article is aimed to offer the latest shot of the processed food industry in China.

Imported Food and Processed Food Industry in China

While in the today’s China, the category of food brands are abundant not only the local ones but also with a huge variety of many imported products. It is generally referring to food from other countries and regions, including the food which is produced in other countries and regions and packaged in China. To some degree, Chinese consumers prefer the imported products than the local ones due to the impression of the product’s reputation of  foreign brands and dismay of some local food safety issue. Quality control specialist Asia Inspection said that 48% of the “several thousand” inspections, audits and tests conducted in China in 2014 failed to meet the requirements stipulated by some of its clients -Western food trading companies and retailers. Recent food safety scandals have overshadowed the enjoyment of eating, by putting people’s health at risk, which has irritated most consumers and cause the popularity of healthy and imported food products. According to the statistics of Daxue Consulting, the import of food industry in China was $8.83 billion in 2013, including $5.19 billion of dairies, followed by $2.07 billion of sugar. From January to August in 2014, the import of food industry in China was $7.38 billion, including $5.34 billion of dairies, followed by $910 million of sweet products.

Research and Development in Processed Food Industry in China

Whatever the variety of the type of production, there is a bottleneck in research and development for the innovation of new kind of  products. It also will be a tendency for the future of China processed food industry. Chinese producers similarly pay very little attention to creating and make new products. Indeed, a young college graduate in China who majors in Food R&D says that he has to struggle to find a job that well-matched his major. According to the data in the employment direction among Food R&D major graduates, most of these students get their jobs through the transition from marketing officer to reserve researchers.

Marketing and Distribution become the Key to Success

For the thirst of marketing workers, we can infer that in China’s market, much attention on marketing and advertising has been  paid to win more segmentation. Also, some data shows that most of the products that have no difference in design and packaging show a difference in sales value when having a Chinese celebrity in the add. In addition, another factor induced the difference in sales amount of likewise products is where the products are sell. A Chinese customer can easily purchase different kinds of food products in a supermarket, but he can only find one or two kind are in the 7-11 convenience store or in another brand such as Family Mart. The specificity of China, with the 24-hour-work store, even opened during the national holidays and that are very popular in big, convenient stores are vital to some giant producers.

To sum up, the main battlefield of the producers are located in Chinese Marketing and Distribution strategy, which could be attributed to the less reliable legal system in  intellectual property rights and the trend of copying the competitor’s new products to save the R&D expense. In another word, it is more effective to hire a business agency than a team of researchers.

Contact us at dx@daxueconsulting.com for more insights about China’s market.

Follow us on our Social Media, here is our latest infographic posted in Twitter:

What are the main types of pine nuts available in China, and why? https://t.co/Ww8fGn73gr pic.twitter.com/dwphayATb1

— Daxue Consulting (@DaxueConsulting) December 30, 2015

This article Processed Food Industry in China is the first one to appear on Daxue Consulting - Market Research China.

Until last year, video game consoles and games were banned from entering the Chinese market.  Since 2014 regulations have been cut down offering the possibility, for foreign companies to produce and sell video game consoles and games in China under the condition of passing the Chinese content review process of the administration and foreign companies are required to partner with a Chinese company operating in the foreign-trade zone. While most local companies are focusing on developing mobile video games, some others are still making sure they are ready to compete.

Console game in China facing a new market dynamic 

Video games multinationals leaders have grabbed the opportunity revealing different strategies to pierce the large and diversified Chinese market. The three major console manufacturers Microsoft, Sony, and Nintendo announced plans reflecting their heavy interest in entering the Chinese market. Microsoft formed a joint venture with the Chinese company BesTV investing $237 million ends of 2013. The new Xbox One was released in 37 Chinese cities and 4,000 retail sites last year in China. The Japanese company, Sony also joined the market, competing directly. Two joint ventures were formed with Shanghai Oriental Pearl in order to focus on console hardware and on software separately and are preparing to sell PlayStation 4 video game in China. Nintendo opted for a more targeted approach towards China; new devices more adapted to the emerging market will be developed during this year to make a noticeable entry. Regulations are currently being analysed closely to a probable release of “iQue player”. The CEO of Nintendo declared, “We want to make new things, with new thinking rather than a cheaper version of what we currently have, the product and price balance must be made from scratch.”

However foreign companies aren’t the only companies with ambitious plans. A joint venture between ZTE, a Chinese telecommunication equipment supplier and a Chinese video game company The9 Ltd. are planning to release a Chinese gaming micro-console called “FunBox”. Android and Huawei will be sharing the market too. The Android console and a controller will have a price advantage since it is half the one of the Xbox One and the upcoming PlayStation 4. Huawei recently presented its new console, called the ‘Tron”, that is scheduled to be released during the summer. Its price will be about the same as Android’s. At a longer term, the Chinese electronics makers TCL will be launching their own video game console too.

A lucrative market for console games in China

Video game console market in China will result from the huge confrontation of the world’s most successful console multinational and local companies. Microsoft, Sony, Nintendo, Huawei, Android and the local companies ZTE corp., The9 Ltd and TCL will all be entering and position themselves over the same market. This desire to capture a large market share in China comes from the idea that a successful launch in the console market could bring more Chinese buyers to pick up the company’s phones, tablets and software, at the same time and would enable to build a lucrative ecosystem in the most populous country on Earth at a long-term. By becoming the main platform for China, developers will be entangled to pass through the service before launching a new game representing a great source of income to the platform. Conviviality and experience of users should be analyzed carefully in China, but most of all game platform service must focus on the service they provide to independent stores for after sales service and support for the utilisation of the product. A strong customer presence can restrain the habit of cracking games and bring customers to purchase officially with authorized resellers. Up to now, the entry of console games in China’s market didn’t generate huge sales. For example, only 0,1 million units of Xbox were ordered in China. This is explained by the very high price of the devices that must be coupled with the purchase of the actual games sold around $65 in China, those amounts are rarely spent as the game can be found for free online. What explains better the poor sales performance of consoles in China is in 2012 more than 4 million video game consoles were sold despite the Chinese ban.

The Chinese console game: OTT

In China, people prefer keeping previous versions of console games going with endless amounts of cracked games available at a very low price than purchasing the expensive latest console version and its games. To address this trend, Alibaba, China’s biggest online commerce company has invested $10 million in another kind of product: the OTT TV box. These are small devices which connect to a TV enabling to expand its functions. It would enable to go online, watch in HD and play games from a cloud, all from the TV set. Alibaba chose OUYA to supply inexpensive consoles powered by Android’s latest technologies, one of the most popular operating systems in China.

The adaptation of console video games in the Chinese market throughout OTTs is a great opportunity that could trigger most households to purchases becoming a product with mass consumption. However its growth may be significantly slowed down since those devices require home high-speed Internet connection of 30 Megabits per second, but 9 Megabits per second is the average in China’s provincial cities.

Daxue Consulting Expertise

Daxue Consulting can provide you support in entering the growing market of video games market in China. We conduct all the market research and consulting services you may need, such as potential analysis, cost analysis, implementation feasibility etc. To know more about the Chinese video games market, do not hesitate to contact our dedicated project managers by email at dx@daxueconsulting.com.

Follow us on Twitter to learn more:

Don’t miss our #Insights from the #AR industry in #China and the world [interview] https://t.co/2YCWiDo51o @youArProject pic.twitter.com/vGxK41t2MW

— Daxue Consulting (@DaxueConsulting) September 11, 2017

This article Console Games in China – The Next Level Up? is the first one to appear on Daxue Consulting - Market Research China.