One world two systems: Three areas of divide Culture, Technology, Internal trade
These daze it seems all that it bright and sparkly either is news from China or made in China. We not all is a shiny and bright at it may seem. And no this is not a blog on the crippling smog in China. It is about something much more subtle but equally damaging. Please note that I am not making an indictment for or against China’s position I am merely going to describe it so business persons can make informed choices about commerce in or with China.
Last week I attended a Salon hosted by Marc and Chantall a highly respected branding agency. The topic was the phenomenon of travel of Mainland Chinese. 100 million Chinese travelled outside the country in 2014 and the numbers go up and up. What is more interesting than the huge numbers wanting to travel outside the country is there reasons. The top reasons presented at the Salon was to see and be part of different cultures. A holiday was to truly “leave China”. A few of the sights from the salon are here. This in itself is not curious as many tourists look to alternative holidays to escape the common, but none as many as in China. Now the queer bit, this same week Beijing announced that textbooks that portrayed Western lifestyle would be banned from schools as reported by the Business Insider. So the curiosity is why so many Chinese are eager to leave “China” and the government is willing to let them then what exactly is the purpose of censuring textbooks?
Summary: Chinese are crazy to leave their country and experience new things. The marketing opportunity is to capture this opportunity. The home court advantage is where you can really shine.
The great “Firewall” of China has been in place since the beginning of Internet. It had been used to provide added benefit to China apps by limiting the effectiveness of other world apps. Baidu is the best example. For 10 years it was, for all intents and purposes, the only search engine in China. And with a business plan no more complicated than copy Google they still couldn’t find their ass with both hands tied behind their back. Some search engine. But Baidu was not built to be an effective search engine, it was designed to effectively filter and manage information. Google is now blocked in China including gmail and related apps. Instagram was the first app to have a native API to Sina Weibo, now shut down. Facebook has been shut out except for some rare opening that are more for show than use. Recently VPN traffic has been closed and now China is effectively isolated from the digital world. Many have placed hopes on WeChat to reach the mainland audience and businesses are flocking to China agencies to help them set up and run WeChat accounts. What most don’t know is that without a Mainland China Business Registration your WeChat account will NOT reach the Mainland users. It is restricted to “Rest of world”. So as RenRen, Sina Weibo and Alibaba reach out to the West with IPO’s eager for new revenue sources, the China government says “It is a one way street going out only!”
Summary: China is a world unto itself. The only way to effectively reach China is through engaging with China travellers or to develop a separate strategy in China based exclusively on its digital norms and apps.
Freedom of Trade in China:
It is often a struggle for rest of world business to compete inside Mainland China. More than ten Years ago my boss at IBM made the statement “I can buy all the market share you want, but I can not earn you a profit”. Whereas the finality of that statement might not have been completely true its message is clear and unchanged. Rest of world brands are finding narrowing margins and sliding sales as costs in China continue to rise and local brands enjoy better treatment and acceptance. An interview on Econsultancy with Clarins Head of Digital Julien Chiavassa describes clearly the challenges faced. The limited amount of sites to promote products form an almost monopoly that force ever higher tariffs as profits rise essentially neutralizing profit and incentive. From additional regulations, to limited sources for promotion and many other barriers, China systematically removes incentives to operate in China and it is getting worse not better. The direction China is taking is to replace rest of world brands with China brands. I have interviewed and talked to many rest of world brands, luxury, hotel, clothing, you name it and when I ask how are you “your company” doing in China. I am lucky if I get an “its ok”.
If you are doing business in China for anything other than export, good luck.