Blogginlägg med etiketten China

Last week China had its so-called golden week, in connection to the National Day Holiday (the other golden week is during the Chinese New Year around the end of January). When it was implemented in 2000, the original intention of giving a one week long holiday to the whole of China was to boost internal consumption as people are expected to travel, to spend money on presents, consumer electronics, food and so forth. Hence every year sell-side analysts and the investors’ community jump on the released official data and try to draw conclusions on the consumers’ mood and wallet. This year’s golden week results are probably under even stronger scrutiny amid rising concerns of a China’s hard landing, which we do not believe in. 

So what does the Golden Week’s statistics tell us? Domestic retail sales with no less than 700 bn RMB (82 bn USD) recorded a slightly slower growth than usual but were still up a healthy  17% year-on-year (vs 18.7% in 2010). This week, some of my colleagues are actually meeting a number of our retail holdings and will see whether the managements confirmed the trends in the holiday sales as well as third quarter results. Domestic tourism traffic increased 9% year-on-year, a more moderate growth than last year (+16%) that was exceptionally strong – partly explained by the Shanghai World Expo, but there were still 300 million people travelling during the week according to the National Holiday Office. Besides, an increasing number of well-off households chose to spend their holidays outside mainland China, and Hong Kong and Macau clearly benefit from this, as do other major tourist and shopping centers in Europe and the US.

As always one should not think of China as one single country as there are huge regional differences. As to me I spent the Golden Week in Yunnan (云南,a very poetic name meaning “South of the clouds”), also one of the provinces that reported some of the strongest retail sales growths. Yunnan is a fascinating province in the far southwest of the country, next to Tibet and north of Vietnam, offering fantastic sceneries and lots of cultural discoveries about ethnic minorities.

I also brought back with me two observations. First domestic tourism is really huge. I don’t think I’ve ever seen in my life such crowded streets as the ones of the beautiful old town of Lijiang, a UNESCO Heritage site, which became famous and wealthy thanks to the old tea horse road. Chinese tourists however concentrate on cities and easily accessible destinations, so up on the high hiking trail of the Tiger Leaping Gorge there were hardly any Chinese to be seen, which we were quite happy for since the trail next to 800 meters deep cliffs was sometimes extremely narrow and slippery….

Second, the countryside remains very poor. Yunnan is a relatively underdeveloped province with a strong agricultural focus. Spending a few days in a village, learning how to harvest rice and tea, walking every day to the market square give a very different perspective on China than the bustling Shanghai. One can understand why farmers still have very little discretionary spending, as their monthly income of 60 EUR will not allow it. However the rural incomes are now growing faster than the urban incomes, for the first time in more than a decade. So we can expect Golden sales in the countryside in the future as well.

This month the topics are;

• “Air travel in Turkey reflects the strong economic growth”
• “Forget talk of hard landing in China - growth easing as planned”

Read the Newsletter here: www.eastcapital.com/newsletter

Fast track 30 years forward: at the end of this month, China is also opening its high speed railway line between the country’s two largest cities, namely Shanghai and Beijing. There will be 90 trains daily, of which 63 will be running at 300 km per hour while the rest will keep a 250 km/h speed. The fastest trains will complete the 1,318 km trip in less than five hours, cutting by half the current time it takes with the “old” train. Long awaited information about ticket prices was released last Monday, prices will range from 410 (40 EUR) to 1,750 RMB, with the top prices still 1,000 RMB cheaper than the flight equivalents. That makes the train a real competitor to the plane, especially as domestic flights’ punctuality is notoriously bad. Five hours is actually what several of my colleagues on a road trip in China last week had to wait in the plane before take-off to Beijing. Luckily, it is not always that bad.

But the Beijing - Shanghai line is not the first one for China as the Paris – Lyon was for France. China has today the world’s longest network with 8,400 km of routes, that’s four times more than France which obviously makes sense because of the country’s size. As always with China, figures can make you feel dizzy: there is almost 1 million people on the railroads everyday…. The grand master plan is to introduce additional 17,000 km of high speed rail so that there will be 25,000 km by the end of 2020. Besides strongly reduced travel times, this has significant implications on the social and economic development of the Chinese regions, as well as impact on company level as new markets open up for instance for property developers, retailers, tourist sites. It also means that distance between cities are reduced, hereby promoting business which I could easily notice recently, comfortably sitting on the 7 am train to Nanjing in a wagon full of daily commuters. 

Chinese high-speed rail is entirely financed and managed by the government. Total investments for the whole program are estimated to be as much as 300 billion USD. Actually the pace of investments accelerated starting from 2008 in the overall effort by the government to offset effects of the global recession that was affecting other parts of the economy.

But what is striking me the most in the development of the high-speed railways is … its high-speed.  You might need to reconsider everything I wrote here, because the first railway line was not open to the public in 1981 like in France but in 2007! And the Shanghai – Beijing line’s construction only began in April 2008 and was completed one year earlier than initially planned. As the excited CFO of a Chinese company manufacturing railway-signaling systems explained to me, China has been able in 4 years to build a domestic network almost as large as the current world high-speed rail capacity and the Chinese also now start exporting their capability to neighboring countries. One understands why this company’s CFO gets excited….

Anyway I am already looking forward to my first train trip to Beijing and in case I do not have any good book to read I think I will do some counting: 244 bridges and 22 tunnels on the line would keep myself busy….

If you have not learnt this before your first exam, you will learn it when you get the exam back as a little dot here or a small hook there can make the entire character mean something totally different, which in turn can mean that you fail your exam. To illustrate this, see the difference between bei 贝, which means shellfish or cowrie, and jian 见, which means see or meet.

Hence, if you want to master your Chinese, you will have to practice writing by copying characters every day for many years. If you want to become a good calligraphist you need to do the same thing and in the Chinese bookstores you find books of calligraphy that you can copy until you write as beautifully as the master who wrote them originally. Good writing of calligraphy shows sophistication. Traditionally, if you wanted to become a good calligraphist and painter, only when you could copy the master’s bamboo stalks as beautifully as the master draw them were you allowed to draw your own bamboo stalks. (And painting bamboo stalks is difficult, trust me!)

With this in mind it is perhaps not strange to find a strong element of copying in the Chinese culture. As everybody who has visited China knows, the country is raft of pirate copies, some really bad and others so good that even the experts have difficulties distinguishing them from the real thing. It might seem harmless to buy a “Chinese Goose” jacket or a fake Gucci purse, but is not so harmless to the companies that have their brands infringed as they lose sales and get a tainted brand.

In the new Five Year Plan, China is set to become a country of innovation, which means that intellectual property rights (IPR) are becoming more important to protect Chinese innovations. Today, everything that is marketable seems to be copied, both foreign and domestic brands, from chocolate to medicines and cars, sometimes with lethal results. The last few months, Chinese media has stated that, in line with the 12^th Five Year Plan, protecting IPR is high on the government’s agenda, which shows the country’s determination to become a center for innovation.

One interesting trend in the copying culture in China is the shanzhai (山寨) culture. Shanzhai originally means mountain village, and refers to small factories in the Chinese mountains that produce pirate copies. But today the shanzhai copies have evolved and are not only Sung Ericssun mobile phones or dodgy Crocopolo watches (a mix of Crocodile, a copy of Lacoste, and Polo/Ralph Lauren) but rather improved pirate copies. For example, a shanzhai ipad use Windows or Android systems and has more USB connections compared to the real ipad. Or the product “Apple peel” which is something you put on your ipod touch with a SIM-card and voilà you have your own, cheap, iphone.

As I attended the Stockholm Innovation Growth Day a couple of weeks ago, I was impressed with Swedish innovators and their brilliant ideas. But I could not help thinking about China’s road to innovation and the shanzhai copies. Because what I find the most interesting about the shanzhai copies is the innovation lust, similar to the Swedish innovators, which seem to be inherent in these copies. Why stick with just the original when you can actually improve it? Given the fact that only when you can copy the master’s bamboo exactly as beautifully as the master draws it you are allowed to paint your own bamboo, the outside world should keep its eyes on China and its road to becoming the number one country of innovation. Perhaps China has now reached the stage where it is copying so well that it can yet again become the true innovator it once upon a time was inventing the art of printing and the gun powder?