ICYMI | 万一你错过了| 당신이 그것을 놓친 경우

Cathay ticketing error … again: first-class fares at tenth of original price – Is there problems in Cathay’s ticket algorithm?

NGT48 pop idol Maho Yamaguchi’s apology for home assault sparks outrage at Japanese victim-blaming | South China Morning Post – so reading between the lines management are scum bags connected to the criminal underworld, if not a yakusa family – not surprising

2019 Predictions | The Daily | Gartner L2 – no surprise on the Amazon predictions

Qualcomm CEO defends chip licensing business in FTC trial – CNETQualcomm’s “no license, no chips” policy is at the heart of the FTC’s case against Qualcomm, which lawyers are arguing before Judge Lucy Koh in US District Court in San Jose this month. Mollenkopf was among the witnesses who testified on Friday. Under the policy, companies must license Qualcomm’s patents before it will sell them chips. Qualcomm customers, such as Apple, don’t like that one bit.

Hong Kong-based online travel agent Zuji, now without a licence, unable to operate | South China Morning Post – just wow, I remember when Zuji was a hot start-up

Is it China, or western companies in a financial crisis? Part 1

I was talking to friends about Apple’s letter to investors on January 2. This was almost a month after Jaguar Land Rover had disclosed sales problems in China. The key question that came out was how much were Apple milking the Chinese situation? Was the bulk of their problems really down do China? Or was there a set of wider issues?

The balance maybe wrong, but there are challenges for Apple (and other western investors) in China. In the second part of the post I’ll point out the problems with Apple’s and Jaguar Land Rover’s story.

Where China is coming from

Before we talk about the current state of China lets look at where it has come from. Prior to the founding of the People’s Republic of China, the country had been through a lot:

  • Limited colonisation by Germany, the UK, the US, France, Russia
  • Invasion by Japan
  • Rampant drug problem fuelled by British opium grown in the Indian sub continent
  • A relatively weak government and strong warlord states
  • A largely agrian society living hand to mouth on land owned by feudal-style landlords

From Hong Kong’s Statue Square, the Bund in Shanghai and Tsingtao’s famous beer, one can still see the hand of western powers. Whilst the details of the British Empire’s workings have slipped from British memory, it is still keen in the collective consciousness of the Chinese Communist Party.

The Fairbairn-Sykes dagger on the badge of the SAS special forces unit is a case in point. William Fairbairn and Eric Sykes served during the inter-war period as Shanghai Municipal Police.

Day out at Duxford

A good deal of the work involved a lot of hand-to-hand fighting and shooting. They developed a particularly ungentlemanly form of fighting called Defendu that they taught to British spies and special forces. Sykes and Fairbairn designed the dagger based on their hand-to-hand fighting experiences in Shanghai. That probably tells you a lot about what colonial rule looked like in China.

Nothing illustrated the way China had fallen than the way the country was treated in the immediate aftermath of negotiations around World War One. Whilst European Empires might have fought the war, they depended on Chinese sailors in their merchant navy, dug trenches, maintained tanks, logistics and carried water in the deserts of Iraq.

Germany’s concession on China’s Shandong peninsula was handed over to Japan, rather than returned to China. China eventually got its land back in 1922, but Japan held control of strategic assets including the railways. Japan then pressed its claims again with the second Sino-Japanese war in 1937.

Whilst Shanghai in particular was a thoroughly modern city with:

  • Jazz
  • A lively domestic media industry
  • Commerce
  • Architecture
  • Education
  • Economic development

But it was literally a different world from the rural areas.

Joe Studwell in his two books How Asia Works and Asian Godfathers paints a good picture of the continent. In the immediate aftermath of World War Two, Asia rather than resource-rich Africa was the poorest area of the earth. And there were few poorer than peasants in the most barren Chinese provinces.

Revolutionary Times

Mau’s Communist party coming to power reduced if not, stopped many things that ailed the rural majority of the population. It got rid of landlords through class-based killings, entrepreneurs under the Three-anti and Five-anti campaigns. Opposition from remnants of China’s former ruling party was suppressed. The Communist Party tried to provide basic rule of law and healthcare for the peasants. Bare foot doctors brought them very basic health care. This all came at a cost, economic growth was slow, the middle class elites fled and people were universally poor.

Mau attempted to rectify this employing Soviet-style agricultural collectivism and industrialisation called The Great Leap Forward. This wasn’t successful in raising production and building the country’s industrial capability and a famine ensued.

Birth rate in China.svg
By Phoenix7777Own work Data source: National Bureau of Statistics of China: China Statistical yearbook 2014, chapter 2 Population. Stats.gov.cn. The data is no longer available in the China Statistical yearbook. See these articles which are citing the yearbook. p.615, [1], p.69, and p.12, CC BY-SA 4.0, Link

Mau then spent the next 20 years battling opponents within the Party through the Anti-Rightist campaigns and the Cultural Revolution. Whilst Mau managed to maintain power, many of the party cadres were punished in order to keep him there. Xi Zhongxun (father of Premier Xi) was purged and imprisoned a number of times. Mau died and a more pragmatic leadership stepped forward with Reform and Opening Up.

Reform and Opening Up

The move towards Reform and Opening Up under Deng Xiaoping was the start of modern China as we know it. The country went from a standing start to today’s economic power house. From 1976 to 1989, the country went through a painful process of restructuring building a dual track approach to communism:

  • The rural economic unit moved from being part of a collective to the individual family unit
  • Healthcare became privatised, which had major consequences for rural health and wellbeing
  • Foreign direct investment was welcomed
  • Gradual opening up in some sectors of the economy
  • Decentralisation and private / local government business ownership

The change gave rise to corruption, inflation and worker support for the Tiananmen Square protests of 1989. The protests posed an existential challenge to the party. Its suppression and subsequent ‘conservative’ party backlash put a clear line in the sand in terms of how far China would go. Deng was again able to push forward reforms in 1992 and the private sector share of GDP took off.

The Chinese Communist Party’s legitimacy benefited from the hundreds of million people that Deng-era reforms lifted out of extreme poverty.

Under the shadow hand of Jiang Zemin, the party became more conservative. Hu Jintao started to reel in a little of the laissez faire capitalism from 2005 onwards. Some of what Xi Jinping’s administration has done is keep on with that process. Unlike his father, Xi opposes many of the reforms put through by Deng. Presumably this is down to his opposition to shows of excessive wealth and attendant societal ills:

  • Corruption
  • Perceived social injustice through local government forced eviction
  • Diminished social contract with the poorest in society

The 2008 financial crisis adversely affected the credibility of western capitalism in the eyes of China (and its role in the hybrid model of Chinese economic reform).

Xi also differs from Deng in terms of his world view. Deng and his successors up to Premier Xi took a pragmatic don’t make waves attitude to foreign policy. There were bigger issues to deal with at a domestic level.

Things started to change with the US bombing of the Chinese embassy in Belgrade in 1999. One can trace a rise in Chinese nationalism from this point. Nationalism is one of the few political outlets acceptable within China. The government puts in controls only when it feels that the sentiment is excessive, otherwise it is a good escape valve. Nationalism has taken on an ethno-centric focus being equated with the Han race. The Han make up about 93% of Chinese people, but are one of 56 recognised ethic groups in the country.

The road to great rejuvenation

China saw the return of its last colonial occupied territory in 1999. The country grew and reflected their new-found status in the Beijing Olympics and Shanghai World Expo. Premier Xi saw this as a natural progression of The Chinese Dream – the great rejuvenation (or revitalisation depending how you read it) of the nation.

  • Sustainable development – in terms of the rate of economic growth and an increased focus on green technologies. Like in western countries that went through the industrial revolution, Chinese industrialisation at break neck speed has taken a terrible toll on the environment, in particular potable water. It also is against excessive conspicuous consumption from signature architecture to fast cars and high-class escorts
  • National renewal – Increase Chinese influence, power and prestige abroad. Become a cultural exporter, further develop its ability to project military power. Championing Chinese traditional culture including embracing traditional religious and ethical imagery
  • A strong linkage between individual and national aspirations – this is the key difference between American Dream aspirations and China’s ruling party vision
  • Urbanisation – Stewart Brand’s Whole Earth Discipline goes into detail about how cities make the population in aggregate better off and have less environmental impact
  • Reduction of economic bureaucracy – so long as this doesn’t threaten the primacy of the party in all aspects of life
  • Weakening the power of special interests

Urbanisation is seen to have a positive impact on economic growth and social conditions according to this virtual ‘fly-wheel’ model by AT Kearney. But it depends what parts of the economy the city supports.

China's growth eco-system

China managed to sustain itself during the 2008 crisis by focusing on increasing infrastructure spending projects such as its high-speed rail system. The country’s spending on infrastructure has meant that property development and state owned companies are highly leveraged. It also meant that private sector companies had to get creative in getting commercial loans and a shadow banking system outside government control existed.

In order to put in place his plan for national rejuvenation Xi has had to rein in economic growth from 13% per year to 6 – 6.5% predicted this year. This has also meant closing down industrial over-capacity in industry, so rust belt provinces like Hubei have fallen into full blown economic recession as older steel plants have closed down.

China has looked to build a domestic led consumption economy to limit its exposure to troubles in export markets. This consumption hasn’t increased as much as hoped for a number of reasons:

  • One child policy has meant one wage earner potentially supporting two sets of grandparents, their spouse and child. The recent move to a two child policy hasn’t seen the kind of pick up in birth rates desired
  • The one thing constant about China over the past century has been change. If you are a Chinese consumer, spending your disposable income doesn’t make that much sense. Sure people do try and own their own home. And 67% of consumer debt is mortgages. But they try to save money because the healthcare system is privatised and you never know what the future may bring. The last point I mean in a much more profound way than say buying an insurance policy in the UK
  • Automotive sales was driven by a consumer credit boom, but consumer credit has started to die down in lower tier cities leading to an aggregate 16% decline in automotive sales. The cost of running a car isn’t cheap. A car registration plate in a tier one city like Shanghai or Shenzhen could easily cost £30,000, which seems much more reasonable when the economy is growing at 13% rather than 6%
  • Consumers don’t feel rich – sentiment plays a key part in consumer spending
  • Government financed infrastructure projects have been built out far in advance of actual capacity required
  • Donald Trump looking to rebalance the trade relationship between China and the USA. This has been driven by a number of factors. China has played fast and loose with WTO rules since it has been a member. State sponsored violation of intellectual property rights. China’s future plans targeting American economic wellbeing and foreign policy

China’s Belt and Road initiative has been championed by Mr Xi has a number of functions:

  • It provides China an easier way to import raw materials
  • It provides China with a cheaper way to export products
  • It opens up middle income markets in Central, South and South East Asia
  • It provides leverage over these countries for mercantile trading policies
  • It keeps the state owned firms involved in infrastructure ticking over, especially after they’d scaled up for building out roads, railways and high-rise tower blocks across China

But the infrastructure deals done have started to have problems. Malaysia is renegotiating its railway line contract, a similar project in Thailand has run into trouble. In Pakistan the risk of terrorism on infrastructure project is real and in Sri Lanka Chinese infrastructure projects have become a political football.

More information

The Oxford Illustrated History of Modern China by Jeffrey N Wasserstrom

Strong Sales Growth In North America Offset By Ongoing Challenges In China – Jaguar Land Rover Newsroom and Jaguar Land Rover Implements Next Phase Of Transformation Programme

Letter from Tim Cook to Apple investors | Apple Newsroom

The forgotten army of the first world war – How Chinese labourers helped shape Europe | SCMP

Reconsidering the Campaign to Suppress Counterrevolutionaries | The China Quarterly

Wu, Harry (2012) “Classicide in Communist China,” Comparative Civilizations Review: Vol. 67 : No. 67 , Article 11.

Xi Jinping’s Chinese Dream | New York Times (paywall)

China plans to set a lower GDP growth target of up to 6.5% | Gulf Times – most accessible publication of the Reuters report that I could find

China’s Economy Slows Sharply, in Challenge for Xi Jinping | New York Times (paywall)

China’s two-child policy has already stopped working | Quartz

Women in playboy Ling Gu Ferrari death crash named | SCMP

China’s ageing population problem worsens as birth and marriage rates fall | SCMP

Consumer credit binge still racing along | Shanghai Daily – 67% of this is mortgages

China’s wealthiest generation — “dirt-poor,” and “ugly”? — Quartz

Belt and Road Is More Chaos Than Conspiracy | Bloomberg

Sino-Japanese cooperation thrown off track over Thai rail project| Nikkei Asian Review

ICYMI | 万一你错过了| 당신이 그것을 놓친 경우

Facebook Cannot be Deleted from Certain Android Phones – Search Engine Journal – pre-installs creating bloatware on phones like the PC industry did when profits got tight

‘I love my Mac!’ – Zoë Smith“My phone rang, and the video I was watching on the computer paused!” – when we are running computers hundreds of thousands of times the power of the entire NASA Apollo space programme computers, why wouldn’t this happen?

Chinese budget smartphone brand Realme has Southeast Asia, Africa and Europe in its sights after sweeping India | South China Morning Post – BBK expands its brand portfolio beyond Oppo, OnePlus, Vivo and Realme

This online tool can transform your black-and-white photos into color images | Abacus – interesting that it was launched to coincide with the 40th anniversary of Chinese economic reform

Selling extremism: Nationalist streetwear and the rise of the far right – interesting given the multi-cultural history of street wear

Five for Friday | 五日(星期五) | 금요일에 다섯 가지

Things that made my day this week.

China landed a space ship on the far side of the moon and is currently exploring it. The Chang’e 4 space ship is named after a Chinese goddess who reputedly lives on the moon. It carried the Jade Rabbit 2 rover. Chang’e was kept company on the moon by her pet jade rabbit.

This is a huge achievement. It has been fifty years this August since Neil Armstrong landed on the moon. NASA has plans for its Saturn rockets, but the actual knowledge to build that size of rocket is being relearned through its SLS programme. NASA engineers now marvel how 1960s era welders managed to manually create perfect long welds in the rocket motors with lost craftsmanship.

Secondly there is the context of the Chang’e project. China builds programmes thinking in terms of decades. It will be doing invaluable research and the space programme may spur Chinese innovation just like what happened in the US during the 1950s and 60s. You couldn’t have had Silicon Valley or many household goods without space programme knowhow. The Chinese would be much more open to harvesting resources from the moon and beyond. In the same way that the Apollo programme was a part of the cold war, Chang’e is part of a wider political context. Premier Xi is focused on China’s rejuvenation that includes

  • Ethnic based national(ist) pride. China’s Han ethnicity makes up over 90 per cent of the population. The Chinese government recognises 50 different ethnicities in the country
  • Pride in Chinese culture and elimination of inferior western culture in China
  • Technological supremacy
  • Social progress
  • Supremacy in hard and soft power

So it was with a certain amount of irony that the Chinese space program published a post on Weibo quoting Pink Floyd’s Breathe from Dark Side of The Moon album.

China's space program Weibo account celebrates Chang'e 4 and Jade Rabbit 2 by quoting Pink Floyd

Pepsi tried to tap into the space age excitement with its early entry into the pantheon of this years adverts celebrating Chinese New Year. This is a seven minute long film that’s part of an integrated marketing campaign around the theme of ‘Bring Happiness Home: Reach for the Stars’

Talking of Chinese New Year adverts, Singtel is another one who is rolling out their campaign a bit earlier than most other brands this year. It follows on from last years advert that focused on the family reunion dinner. You can see the best of last year’s Chinese New Year adverts here

This afternoon I have been listening to the this glorious homage to 1980s R&B. Lizzo’s Juice is a great pastiche of TV tropes together with a great song. I discovered it via Matt Muir’s Web Curios. Whilst you’re listening to the song go over and sign up for his weekly newsletter right now. (Don’t worry I’ll here until you come back).

This week has been CES in Las Vegas, which explains why the magazine type stories in news programmes have been about gizmos or robots. I found the show pretty disappointing this year. The biggest news was more of a business story. Apple has managed to get iTunes movie and TV series store on Samsung TVs. In addition several brands signed up to support Apple’s Air Play standard for video and HomeKit standard for your internet of things. Quite what all this means for Apple TV sales is another thing. What I found far more interesting was exploring the Consumer Electronics Hall of Fame – IEEE Spectrum. Going through it is instructive. Zojirushi’s Micom Electric Rice Cooker from 1983 brought early artificial intelligence into the home with its use of fuzzy logic to cook rice to perfection. Fuzzy logic then went into image stabilisation and auto focus on cameras and camcorders. Fuzzy logic sold on the benefits and concealed the technology from western consumers. Machine learning techniques are likely to become common in a similar way rather than the current hype. I still lust after the Wadia Digital 170i Transport. 46 years after launching the Technics SL-1200 turntable, they rolled out the SL-1200 Mk VII. This is particularly interesting as they originally stopped production a decade ago and scrapped the tooling. At the time, there wasn’t considered to be enough interest to keep production going in Osaka.

ICYMI | 万一你错过了| 당신이 그것을 놓친 경우

Are Douyin and TikTok the Same? | What’s on WeiboChina’s Netcasting Services Association (中国网络视听节目服务协会), an association directly managed by the Ministry of Civil Affairs, issued new regulations that online short video platforms in China should adhere to. One of the new guidelines requires all online video service providers to carefully examine content before it is published. Tech China reports that the new stipulations require that all online video content, from titles to comments and even the use of emoticons, has to be in accordance with regulations, which prohibit any content that is ‘vulgar,’ is offending to the Chinese political system, puts revolutionary leaders in a negative light, or undermines social stability in any way – interesting dive into the differences between TikTok and Douyin which seem to run off separate systems

Snap Business | Apoposphere – how the apps you use impact your daily life and emotions – usual caveat emptor considerations apply. Sample size is 1,005. Research is sponsored by Snap

Facebook culture described as ‘cult-like’, review process blamed | CNBC – can’t work out if there is a lot of employee adulting required or if the culture is reminiscent of peak Microsoft circa 1995

Major WeChat trends brands can’t ignore in 2019 | Digital | Campaign Asia – WeChat and global traveller connection particularly important

Major WeChat trends brands can’t ignore in 2019 | Digital | Campaign Asia – WeChat and global traveller connection particularly important

The perfect plan for the couch potato | Trendwatching – Bilibili and Ele.me partner to provide hybrid content streaming and free food delivery

Brands should give up control to reach Gen Z | Creativepool – this says more about how marketing hasn’t changed over the past 15 years than gen-Z. This tells me that brands and agencies haven’t been listening. It also tells me that I can recycle decade old platitudes and essays with a Ctrl+F gen-Y and Ctrl+V gen-Z

Samsung’s Supreme Copyright Spat | The Daily | Gartner L2Chinese consumers weren’t fooled by the “Supreme” partnership, eviscerating Samsung on social media following the launch. Its Greater China digital marketing manager responded to the uproar by posting on his Weibo account that the decision to work with Supreme Italia was made because it had obtained the authorization to use the brand in China. Samsung later backtracked as he deleted the post and Samsung’s official Weibo account announced it was “re-evaluating” the partnership – gosh I can feel the heat from the burn on this from half way around the world…

Apple’s China Problem : 12 Reasons – Counterpoint Research – covers more of the points that I would have hit

Move over, millennials and Gen Z – here comes Generation Alpha | Society | The Guardian is defining generations useful? “You have to be careful about it,” says Karen Rowlingson, professor of social policy at the University of Birmingham. “But we shouldn’t ignore generational divides. Younger people are, on average, facing many more challenges. And, certainly, inequalities within that generation [millennials] are greater.”

Apple is putting iTunes on Samsung TVs – The Verge – makes you wonder about the future of the Apple TV?

Should we think of Big Tech as Big Brother? | Financial Times – That also used to be the view of Sergey Brin and Larry Page, Google’s founders, who presented a paper in 1998 highlighting the perils of advertising. “We expect that advertising-funded search engines will be inherently biased towards the advertisers and away from the needs of consumers. This type of bias is very difficult to detect but could still have a significant effect on the market,” they wrote.

When Ad Breaks Get Weird: Branded Content in Chinese TV Dramas Is Ruining It For the Viewers | What’s on Weibo 

Internet rightists’ strategy of provocation gaining traction in Japan | The Japan Times – Japan starts to see western style internet wars with personal attacks (paywall)

Chinese coffee startup Luckin: We won’t be the next ofo | HEJ Insight – interesting read that reminded me a lot of the reporting on the original dot com boom in the UK and US

Amazon says 100m Alexa devices sold – usage figures remain a mystery | The Drum – and in the second part of the headline is the rub

Masayoshi Son wants Arm’s blueprints to power all tech – Armed with a crystal ball | The Economist – I have a lot of respect for Son-san but this reads like bubble-level BS. There are so many variables such as China 2025 that make this inadvisable. Secondly its not like ARM is the only micro-computer core design that’s low power and available. Thirdly, we’ve hit peak smartphone, other devices won’t offer the same business opportunity

Opinion | Is This the End of the Age of Apple? – The New York Times – This is a big issue not only for Apple but also for all of tech. There is not a major trend that you can grab onto right now that will carry everyone forward. The last cool set of companies — Uber, Airbnb, Pinterest and, yes, Tinder — were created many years ago, and I cannot think of another group that is even close to as promising

Understanding the Emerging Era of International Competition: Theoretical and Historical Perspectives | RAND – great read

Startup founders say age bias is rampant in tech by age 36 – There’s a scourge in tech that apparently runs even deeper than sexism or racism: ageism. In a wide-ranging survey of US startup founders polled by venture-capital firm First Round Capital, 37% said age is the strongest investor bias against founders, while 28% cited gender and 26% cited race.

The liberating thrill of a slender book | Quartz – Let’s keep this short. We’re busy. We want to read but don’t have time for deep dives, and that applies to books as well as articles

China says its navy is taking the lead in game-changing electromagnetic railguns – Chinese warships will soon be equipped with electromagnetic railguns that fire projectiles with “incredibly destructive velocity,” and that the underlying technology was based on “fully independent intellectual property,” rather than designs copied from other nations.

Burberry Zhao Wei and Zhou Dongyu CNY Campaign | HYPEBAE which ended up to be a bit of a mess: Why Burberry’s Chinese New Year campaign doesn’t quite hit the spot | The Drum