China 130419072533-phpapp01

Part # 1
Cities in China.
Part # 2
People living in China.
Part # 3
Some Chinese businesses and communities.

Urban clusters
and hub cities
in China
http://www.mckinseychina.com/wp-content/uploads/2012/11/Whats-next-for-China-Jan-22-v2.pdf

Hangzhou, a city of over 6 million inhabitants close
to Shanghai in East China and a long-renowned
destination for its historic pagodas and natural
beauty, is now also recognized on another score - as
“China’s e-commerce capital.”
There are more than 60,000 employees in Hangzhou
working in Internet and e-commerce companies such
as Alibaba and Panshi.
http://www.mckinseychina.com/wp-content/uploads/2012/11/Whats-next-for-China-Jan-22-v2.pdf

Langfang in northern China is emerging as an information
technology services hub with many big data centres
http://blogs.ft.com/beyond-brics/2013/05/15/langfang-chinas-cloud-computing-hub/

http://www.mckinsey.com/insights/economic_studies/th
ree_snapshots_from_chinas_next_chapter

Yinchuan, Chongqing and Chengdu in
the West of China have been given an
additional boost by the government's
Go West campaign.
https://globalconnections.hsbc.com/global/en/articles/chinas-second-cities-the-new-kids-on-the-block

Middle and affluent classes in China are rapidly
expanding beyond the coastal cities
http://www.bcg.com/documents/file47063.pdf
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http://www.mckinsey.com/Insights/Consumer_And_Retail/Mapping_Chinas_middle_class?cid=china-eml-alt-mip-mck-oth-1306
The geographic centre of middle class in China is shifting.
Share of middle class, by geography, %

Growth in city population
Million
people
http://www.wbcsd.org/DocRoot/rVDgBRKvPngUrqivMHNM/91719_EEBReport_WEB.pdf, page 32.

http://youtu.be/Zy6b0VdsReU
China’s government revenue and expenditure
as % of GDP, 2009

Part # 2
People living in China

http://media.cgd.swissre.com/documents/CGD_RDM_AgeingLongevity_DemographicRiskstoChina.pdf
The part of the
Chinese
population
above 65 years
of age will
increase

Percent of people aged 60 or above in Asia
http://www.ft.com/intl/cms/s/0/72e45ef6-bfcc-11e3-b6e8-00144feabdc0.html#axzz350JxBy4a

http://youtu.be/qR72RnEwl0M
http://translate.google.com/#en/zh-CN/person
Inputs to help you read Chinese

Further inspiration
https://www.youtube.com/user/sloppycheng/videos
http://issuu.com/frankcalberg/docs/languages

Power distance
Uncertainty
avoidance
Individualism Masculinity
http://geert-hofstede.com/china.html
Chinese culture

In group settings, in particular, the Chinese pay
much more attention than westerners to hierarchy.
Hierarchy is reflected in the way Chinese people
address and greet each other, who speaks during
meetings, and how decisions are made.
http://www.hbs.edu/research/pdf/09-076.pdf

To maintain economic growth, China needs technological
innovation, which it will never develop unless it abandons its
test-based education system, now controlled by gaokao, the
all-important college entrance exams.
China is accustomed to hierarchy and ranking, and the
education system delivers both. Chinese students regularly
win any competition that depends on test performance.
Where they fall short is creativity, originality, divergence from
authority.
http://www.nybooks.com/articles/archives/2014/nov/20/myth-chinese-super-schools/

Much of Chinese R&D investment is not
market driven but heavily state directed.
http://sloanreview.mit.edu/article/whats-next-for-the-chinese-economy/

Company decisions are typically reached in
a top-down manner, with only the very top
of the pyramid involved in decision-making.
http://knowledge.insead.edu/INSEAD-knowledge-ten-principles-for-business-in-China-120222.cfm

One of the tensions inherent in Chinese
business culture is autocracy vs.
empowerment.
http://viewswire.eiu.com/report_dl.asp?mode=fi&fi=767864861.PDF

As a consequence of the massive economic
transformations in China, new behaviours and qualities,
such as assertiveness and autonomy, are required for
achieving success, whereas characteristics that used to
be beneficial for adjustment, such as obedience to
authority, are perceived as problematic.
http://www.ratswd.de/download/RatSWD_WP_2009/RatSWD_WP_58.pdf, p. 2.

2/3 of big Asian firms are state-controlled or - often
family-run - “business houses”.
China’s drive to reform its state-owned firms is
meant to make them more responsive to customers.
Xi Guohua of China Mobile plans to give shares
to his staff.
http://www.economist.com/news/leaders/21603002-asian-business-reforming-its-emerging-multinationals-will-change-way-we-all-live-world

Some Chinese companies are crowdsourcing
product development.
Xiaomi, for example, has an online community of
fans whose recommendations for product
improvements are reflected in weekly software
updates.
http://www.mckinsey.com/insights/high_tech_telecoms_internet/chinas_digital_transformation

Economic development in China has been
linked to changes in work values with the
new generation of Chinese managers placing
a higher value on individualism and
less importance on Confucian values than
older generations of managers.
http://www.na-businesspress.com/jabe/coxweb12-6.pdf

Small units / teams at Li & Fung Ltd.
http://youtu.be/6OoFZG2s2E0
http://www.lifung.com/

Chinese society is collectivist in that individuals
identify with an “in-group” consisting of family,
clan, and friends.
Within this, cooperation is the norm. Outside it,
zero-sum competition is common.
http://knowledge.insead.edu/INSEAD-knowledge-ten-principles-for-business-in-China-120222.cfm

Instead of working in separate departments, like
most large corporations, Haier’s 80,000 employees
now work in some 2000 fluid teams.
Any employee can propose an idea and if it is voted
a winner then that person becomes the team
leader. The team manages itself and is responsible
for the profit or loss of the project.
http://www.destination-innovation.com/articles/meet-chinas-champion-innovator/

http://www.mckinseyquarterly.com/Strategy/Globalization/How_corporate_China_is_evolving_2159
The symbiotic relationship between the enterprise
and the state makes such CEOs sympathetic to
corporate social and economic goals beyond
maximizing shareholder value.

If you want to get something done in the West,
you have a meeting and you discuss the issues
and perhaps you vote.
In China, the meeting is usually the last step,
only a formality.
http://www.mckinsey.com/insights/leading_in_the_21st_century/developing_chinas_business_leaders

Further inspiration on meetings
http://www.slideshare.net/frankcalberg/facilitationmoderation-of-meetings

In the 1970s, China had an extraordinarily high level
of inequality. The state taxed 80% of the population
- the peasantry - in order to subsidize the 20% in
urban China.
1st generation private entrepreneurs in China tend
to come from humble and rural backgrounds.
http://sloanreview.mit.edu/article/whats-next-for-the-chinese-economy/

Many Chinese CEOs make decisions
instinctively, feel comfortable with rapid
and flexible responses to new industry
trends and shifts.
http://www.mckinseyquarterly.com/Strategy/Globalization/How_corporate_China_is_evolving_2159

Commercial success in China is often intimately linked
with tempo.
Innovation in this sense involves not the development
of brand new technology, but rather the introduction of
incrementally upgraded products with unprecedented
rapidity.
http://sloanreview.mit.edu/article/innovation-lessons-from-china/

The emphasis on speed in China can be seen in part as
a response to a particular kind of customer routinely
found in China.
This customer demands new functionality, low price
and rapid delivery. He/she wants the new product now
and wants immediate service when bugs arise.

Further inspiration
http://youtu.be/kqIzkmm-EZc
https://www.scribd.com/doc/35046140/How-do-people-handle-the-unknown
http://www.slideshare.net/frankcalberg/time-15259416
http://www.slideshare.net/frankcalberg/17-ideas-to-make-change-happen-195185

Part # 3
Some Chinese businesses
and communities

Gross domestic product of China from 1952 to 2005
http://en.wikipedia.org/wiki/Image:Prc1952-2005gdp.gif

http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=7933596&story_id=16834943
China’s share of global GDP is growing
Year

For hundreds of years prior to the West’s Industrial
Revolution, China and India together accounted for
about 50% of the world’s economic activity.
Then, as Western economies industrialized, China
and India fell behind - down to only 8% in 1970. This
trend began to reverse in the 1980s, and today,
these two countries account for just over 20% of
global economic activity.
http://www.strategy-business.com/article/09401?pg=all

http://www.mckinsey.com/insights/mgi/research/productivity_competitiveness_and_growth/the_future_of_manufacturing
Manufacturing labor costs in China and India are growing

Top 8 manufacturers by share of global
nominal manufacturing gross value added

In China, manufacturing share of GDP is large

http://qz.com/73463/trade-ties-between-china-and-africa-could-surge-25-this-year-and-thats-just-the-beginning/
China – Africa trade is growing strongly
USD
billions

In China, state-run companies and their
affiliates account for more than half the
country’s GDP and jobs, and of the 73 Chinese
companies listed in the 2012 Fortune Global
500, 65 are state-owned.
http://hbr.org/2014/01/the-new-rules-of-globalization/ar/2

http://www.acapital.hk/A%20CAPITAL%20DRAGON%20INDEX%20FY%202012%20Press%20Release%20ENG.pdf
Most Chinese investments are in European companies

http://www.acapital.hk/A%20CAPITAL%20DRAGON%20INDEX%20FY%202012%20Press%20Release%20ENG.pdf
Top10mostactive
Chineseinvestorsin2012

The Yangtze river is the longest river in Asia
Sources
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2568
http://www.travelchinatour.com/yangtze-river-three-gorges-dam/yangtze-river-three-gorges-dam.html

The Yangtze river flows 6,280 kilometers
from West China to the East China Sea at
Shanghai and provides China with 35% of
its fresh water.

The World Wildlife Fund (WWF) works with Coca-Cola, which
operates 39 bottling plants in China, to improve the water
quality of the upper reaches of the Yangtze river.
For example, WWF and Coca-Cola work with rural farmers to
reduce the runoff of animal waste into the river by turning
pig waste into biogas, a type of fuel that can be used for
cooking and heating.

Energy / natural resources have strong strategic importance for China

The about 16'000 chinese mines are the most
dangerous in the world.
In 2008, more than 3,000 people were killed in
mine floods, explosions, collapses and other
accidents in China’s coal-mining industry.
http://www.nzz.ch/nachrichten/panorama/china_bergwerk_unglueck_1.4047426.html
http://www.reuters.com/article/topNews/idUSTRE5AK08Y20091123?

China has become the world’s largest
market for wind power technology,
accounting for 35% to 45% of annual
installed capacity globally.

Sources
http://www.goldwindglobal.com/
http://www.sinovel.com/
http://www.mywind.com.cn/
http://www.dongfang.com.cn/
http://www.shanghai-electric.com/
Some suppliers of wind power technology

Beijing-based Goldwind acquired turbine
designs by partnering with, and later
acquiring, Vensys, a wind turbine company
based in Neunkirchen, Germany.

PetroChina spends 0.3% of its revenue on
IT and Sinopec spends 0.1%, both well
below the global industry average of 1.4%.

Online crowdsourcing platforms such as
www.specialchem.com, www.cheminno.com.cn,
and www.innocentive.com allow companies to
post R&D challenges.

Companies can build their own platforms, as Dow
Corning has done with its digital direct channel,
Xiameter, which focuses on SME customers and
now represents 40% of the company’s sales.

The major Chinese players for chemicals
include Alibaba, HC360, and Guangzhou
Chemical Exchange Center.

The “big four” banks in China
The Bank of China
http://www.boc.cn/
The Industrial and Commercial Bank of China
http://www.icbc.com.cn/ICBC/sy/
China Construction Bank
http://www.ccb.com/
The Agricultural Bank of China
http://www.abchina.com/

The big four Chinese banks mostly evolved from government
organizations into quasi-corporate, state-owned entities.
The Bank of China is publicly traded out of Hong Kong and run
like a banking corporation. However, the CEO of the bank does
not report to the shareholders and is not appointed by them.
The CEO is chosen by Organization department of the
Communist party which technically owns nothing. But the CEO
also holds a vice ministerial rank in the government which makes
Bank of China somewhat of a government ministry as well.
https://www.goodreads.com/review/show/998943997

The big four Chinese banks can function as an arm of the government into
the economy. When the central government wants to influence various
aspects of the Chinese economy, directing the lending of the big four banks
is their most direct tool. For example, they can increase lending to state-
owned enterprises and local governments and/or increase lending into
strategic industries and infrastructure.
In this regard, it is worth noting that the big state-owned enterprises to
which lending from the big four banks tend to go, account for just 20% of
the Chinese workforce. While small and medium enterprises employ 80%
of the Chinese workforce, they account for only 20% of bank lending.
https://www.goodreads.com/review/show/998943997

Tiantian Fund Sales Company Limited,
www.1234567.com.cn, is a leading information
portal and sales platform for mutual funds.

http://www.wacai.com/ is a personal
finance mobile app that allows consumers
to track and analyze their daily expenses
and receive investment product
recommendations.

Alipay, a leading Chinese third-party online
payment provider, served more than 845 million
registered accounts and facilitated transactions
worth more than $290 billion in 2012.
http://global.alipay.com
http://www.mckinsey.com/Insights/Business_Technology/More_bank_for_your_IT_buck

Yu’ebao, a money market fund linked to Alipay’s
online payment platform, had attracted more
than 80 million investors as of February 2014,
just 8 months after its launch.

Consumers can buy insurance from insurers’ websites,
online marketplaces such as www.taobao.com, and
specialized insurance marketplaces such as
www.hzins.com and www.xyz.cn.

Tencent is one of the participants in
Webank, which will focus on lending
to small firms and consumers.
http://www.ft.com/intl/cms/s/0/fa232b90-6fd5-11e4-a0c4-00144feabdc0.html

http://english.creditease.cn/
CreditEase launched the first P2P
banking platform in China.

Sources
http://www.360.cn/
http://www.baidu.com/
http://www.chinaso.com/
https://www.google.com.hk/
http://www.sogou.com/
http://www.youdao.com/

http://venturebeat.com/2014/01/14/chinese-search-revenues-grew-40-in-2013/

Sources
http://www.kaixin001.com/
http://renren.com/
http://t.qq.com/
http://weibo.com/

http://www.weibo.com/ has the same
140-character limit as Twitter, however
140 Chinese characters convey far more
meaning and information than 140
western characters.
http://dcbf.dk/Latest/From+DCBF/ca40/newsid/20181

Due to reasons such as government control
and censorship of state-owned media and
traditional trust in word-of-mouth in China,
Chinese people trust social media to a far
greater extent than traditional media sources.
http://dcbf.dk/Latest/From+DCBF/ca40/newsid/20181

http://www.ft.com/cms/s/2/1792f094-d493-11df-b230-00144feabdc0.html
People in China and the Middle East are the
busiest and most enthusiastic internet users, a
study of the world’s online habits has revealed.
Egypt, Saudi Arabia and China topped the list,
with about 55% “highly engaged”.

79% of Chinese Internet users send instant
messages, compared with 21% of U.S. users
https://www.bcgperspectives.com/content/articles/digital_economy_globalization_china_digital_3_0_online_empire/

http://im.qq.com/
http://www.tencent.com.hk/en-us/ps/imservice.shtml

Similar to the text messaging service WhatsApp -
with elements of Instagram and Skype tossed in -
WeChat has accumulated over 300 million users
in its first two years by embracing an entirely
different strategy from Weibo: going after the
international market head on.
http://www.theatlantic.com/china/archive/2013/07/wechat-not-weibo-is-the-chinese-social-network-to-watch/278212/

Android app stores
Sources
http://www.91.com/
http://android.myampp.co/
http://app.mi.com/
http://zhushou.360.cn/
http://www.ucweb.com/
http://www.wandoujia.com/

Sources
http://www.alibaba.com/
http://www.jd.com/
http://www.paipai.com/
http://www.taobao.com/
http://www.tmall.com/

Sources
http://58.com/
http://www.gome.com.cn/
http://www.qunar.com/
http://www.suning.com/
http://www.yihaodian.com/

In 2012, Walmart bought a 51% share in Yihaodian.
http://www.mckinseychina.com/wp-content/uploads/2013/03/MGI-China-Etail-full-report-March-2013.pdf

Marketplaces’ share of e-tailing in China is large

China’s e-tailing market has grown very fast since 2003
USD billions

China’s e-tailing market is highly concentrated

How China’s e-tailing market differs from the US market

A typical Chinese company spends only 2% of
revenue on IT versus international benchmarks
of around 4%.
As these companies struggle to bring
technology into the core of their operations,
they need massive amounts of help to do so.
http://www.mckinsey.com/insights/strategy/a_pocket_guide_to_doing_business_in_China

Sources and further inspiration
http://www.huawei.com
http://www.scribd.com/doc/136892832/Huawei
http://lenovo.com
http://frankcalberg.wordpress.com/2013/12/07/selecting-a-notebook-laptop/
http://www.xiaomi.com

Hon Hai / Foxconn Technology Group is partner for
joint-design, joint-development, manufacturing,
assembly and after-sales services to global
computer, communication and consumer-
electronics companies.
http://www.foxconn.com/

http://www.economist.com/blogs/dailychart/2011/09/employment?fsrc=scn/tw/te/mt/defendingjobs

The share of mobile phone handsets
manufactured in the Asia-Pacific region
doubled to more than 80% from 2001
to 2011, with more than 60% of
production now in China.

Xiaomi crowdsources features of its
new mobile phones rather than
investing heavily in R&D.
http://www.mi.com/
http://www.mckinsey.com/insights/strategy/strategic_principles_for_competing_in_the_digital_age

People at work making Lenovo products

Lenovo’s U.S. workers are cross-trained and
can perform different functions, whereas
Chinese workers are typically trained to
perform just one.

In China, buyers of homes are usually forced to pay
1 - 3% commissions for broker-facilitated purchases
of existing homes, and renters must pay up to one
month’s rent as a commission.
Online platforms such as www.fang.com and
www.anjuke.com can now match supply and
demand without commission fees.

Online sourcing platforms from
http://www.sohochina.com/ and
http://www.greentownchina.com/,
two of the top Chinese real estate
developers, are growing strongly.

http://www.economist.com/news/business/21591864-chinas-best-makers-construction-gear-are-now-world-class-digging-victory
The best Chinese firms have rushed to upgrade their technology
by buying, or entering joint ventures with, foreign competitors
and suppliers.
 http://www.sanygroup.com/ bought two German firms,
Putzmeister and Intermix, and entered a joint venture with
Palfinger of Austria.
 http://zoomlion.com/ bought CIFA of Italy.
 http://www.liugong.com/ and http://www.xcmgjc.com/
formed joint ventures with, respectively, America’s Cummins
and South Korea’s Doosan, to improve their diesel engines.

A few companies, such as http://www.cnfantasia.com/
and http://www.vanke.com/, have rolled out community
service platforms.
Examples of apps
 Colour life.
 ZhuZhe.

There's an increase in remote working in China. The
need for office space is expected to shrink by about
20% by 2020.
Remote working also allows companies to avoid heavy
traffic, high rents, and the high living cost in central
business districts.

Shangpinzhaipei, the made-to-order furniture maker,
has online storefronts where consumers design their
furniture themselves.
As a results, a typical Shangpinzhaipei store is only
200–400 square meters, while other brick-and-mortar
furniture retail stores usually need 400 - 1,000 square
meters to display a dozen or more showrooms.
Sources
http://www.spzp.com/
http://shangpinzhaipei.tmall.com/
http://e.weibo.com/shangpinzhaipei

The Chinese government allows a limited number
of foreign films into the country every year. In
2012, it increased the number of foreign-made
movies that could be shown on the mainland
from 20 to 34.

Of 493,000 pianos made worldwide in 2012, nearly
80% were manufactured in China.
More than 100,000 were produced by Pearl River,
the world’s biggest piano-maker.
http://www.economist.com/news/business/21591243-chopins-piano-maker-gives-up-others-are-fighting-
chinese-rivals-major-challenges-minor
http://xn--9swz3nih585i.com/

2 auto industries in China
http://mitworld.mit.edu/video/904

Some car manufacturers in China
https://www.mckinseyquarterly.com/Strategy/Strategic_Thinking/Applying_global_trends_A_look_at_Chinas_auto_industry_2643
http://mitworld.mit.edu/video/904
 Beijing Automotive Industry Group (Daimler partner).
 BYD. 10% owned by Warren Buffett.
 Chang’an Automobile (Suzuki partner).
 Chery Automobile Co.
 China First Automobile Works.
 Dongfeng Motor (Citroën partner).
 First Auto Works (Volkswagen partner).
 Geely Automobile Holdings.
 Great Wall Motor Company.
 Guangzhou Auto Group (Honda partner).
 SAIC (GM Partner).
 Shanghai Automotive Industry Group (Volkswagen partner).
 Tianjin Automotive Industry Group (Toyota partner).

Auto vertical websites like www.yiche.com
and http://www.autohome.com.cn/ are
growing rapidly.

The used car market in China is expected to grow more
quickly than new car sales, from 3 million vehicles sold
annually in 2014 to more than 20 million by 2020.
E-commerce platforms such as http://www.youxinpai.com/
and http://www.cheyipai.com/ can help dealerships source
quality used cars, help consumers find the right vehicle,
and increase the transparency of information in each
transaction.

The taxi app market in China is dominated
by Didi Taxi and Kuaidi Taxi - backed by
Tencent and Alibaba respectively.
http://www.reuters.com/article/2014/02/27/us-china-taxiapps-idUSBREA1Q03V20140227

Further inspiration on transportation innovation
http://www.slideshare.net/frankcalberg/transportation-innovation

http://www.haodf.com/ manages schedules
for hospitals and physicians. It is China’s
leading physician-patient consultation
platform. More than 50,000 doctors from
across China answer patients’ question at no
charge.

Doctors can turn to learning portals such
as http://www.dxy.cn/ to stay on top of
the latest research.

22 innovation hubs – similar to Silicon
Valley - have been created within the
life sciences and biotech industries
across China.
https://www.mckinseyquarterly.com/A_CEOs_guide_to_innovation_in_China_2919

To overcome its many challenges in China, Pfizer is taking a
3-pronged approach to alliances.
1. It has teamed up with a local company, Zhejiang Hisun, to
tap into low-cost manufacturing capabilities and a
generic drugs portfolio.
2. It has allied with China’s Jointown Pharmaceutical Group
to extend its reach to hospitals in the countryside.
3. It has invested USD 50 million in Shanghai Pharmaceutical
Industry, which has vast R&D capabilities.

Chunyuyisheng is a doctor’s consultation
app that lets users remotely consult with
physicians.
http://www.chunyuyisheng.com/
http://www.techinasia.com/doctor-consultation-app-chinas-biggest-investment-healthcare-startup/

http://www.mckinseychina.com/bringing-technology-into-chinese-healthcare/
Chunyuyisheng has more than 15 million consumers
registered along with 10,000 physicians and claims to
receive hundreds of thousands of queries a day.
More than 1 million members of the Chunyuyisheng
platform are paying USD 1-2 per month for the
opportunity to ask unlimited questions and receive
answers within the hour.

Thank you for your interest. For further inspiration and
personalized services, please feel welcome to visit
http://frankcalberg.com
Have a great day.

China 130419072533-phpapp01

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