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INSIGHT
The Journal of the American Chamber of Commerce in Shanghai - Insight March/April 2021
THE NEXT
www.amcham-shanghai.org
BIG WAVE
IN SPORTS
How the surge of growth in esports
and skiing is paving the way for big
business opportunities in China
Also in this issue:
how supply chains and consumer
behaviors have shifted in China’s
post-pandemic era
FEATURES P.10 POLICY P.22 POLICY P.25
Join our WeChat:
Dong Tao on the global and The EU’s relationship with A look into the National
Chinese economies China and the US Security Review
FEATURES
INSIGHT
The Journal of the American Chamber of Commerce in Shanghai - March/April 2021
AMCHAM SHANGHAI
President FEATURES
KER GIBBS
VP of Administration & Finance
HELEN REN 05 The Evolution of Supply Chain in China’s Post-Pandemic Era
PwC explains how effective, data-driven decision making and omnichannel marketing
and sales will win wallet share
Directors
Committees 09 The World Economy in 2021
JESSICA WU Dong Tao, Greater China vice chairman at Credit Suisse Private Banking, makes his forecasts
Communications & Publications 12 Esports in China: Influencers for a Digital Age
IAN DRISCOLL More people now watch esports in China than in any other country, and brands are capitalizing
Corporate and Commercial
KAREN YUEN
15 Taking to the Slopes
China’s ski industry is expanding quickly, as the country prepares for the 2022 Winter Olympics
Government Relations & CSR
VEOMAYOURY "TITI" BACCAM 18 Consumer Trends in FMCG
Trade & Investment Center Kantar’s Jason Yu discusses how the pandemic has shaped consumer mindsets and which
LEON TUNG areas have untapped growth
INSIGHT
POLICY PERSPECTIVES
Editor in Chief
RUOPING CHEN
22 The European Union, China and America: Clinging by Their Fingernails
Editor
MERICS’ Hanns W. Maull delves into the complicated bilateral relationships between the three regions
KATE MAGILL
Content Manager 25 National Security Review of Foreign Investments into China
IRIS FU Zhong Lun Law Firm provides an explainer on the policy’s scope, term and procedures and offers
Design compliance suggestions
GABRIELE CORDIOLI
Printing
SNAP PRINTING, INC.
MEMBER NEWS
INSIGHT
SPONSORSHIP 28 Videos and Podcasts
(86 21) 6169-3000 Catch up on recent episodes, with expert opinion on economy, tech and policy
Story ideas, questions or
comments on Insight: Please contact 29 Healthcare Committee Expert Council Con-Call Summary
Ruoping Chen
Executives review their 2020 performances and discuss key strategies and top priorities
ruoping.chen@amcham-shanghai.org
Insight is the bi-monthly publication of
30 Event Report
The American Chamber of Commerce in Highlights from events of the past two months
Shanghai. Editorial content and sponsors'
announcements are independent and do 32 Month in Pictures
not necessarily reflect the views of the Selected photos from the past two months’ AmCham events
governors, officers, members or staff of the
Chamber. No part of this publication may 34 AmCham Shanghai Welcomes New Members
be reproduced without written consent of
the copyright holder.
Here are the companies and individuals that recently joined our community
Special thanks to the 2021 AmCham Shanghai President’s Circle Sponsors
March / April 2021
27F Infinitus Tower
168 Hubin Road
Shanghai, 200021 China
tel: (86 21) 6169-3000
www.amcham-shanghai.org
3
PRESIDENT’S Continuous improvement is the hall-
mark of any good business or organiza-
section since early January 2021, but the
member survey feedback also confirms
LETTER tion. For that reason, AmCham surveys
members annually and asks about areas
our decision to form a Covid-19 task force.
We will continue to use these channels to
in which we can improve. I want to thank keep members informed of any develop-
everyone who responded. Members are ments in vaccine distribution, quarantine
busy, but this year more members re- restrictions or vaccine passport arrange-
sponded than in any year in recent histo- ments in the months ahead.
ry. Here are a few things we are going to I’m happy to report that 81% of respon-
change or improve as a result of member dents described themselves as either
feedback. “satisfied” or “extremely satisfied,” with
Members want fewer emails, in fact their AmCham Shanghai membership,
71% want only one email per week. While with another 17% calling themselves
that goal may not be realistic due to the “somewhat satisfied.” Just 2% of respon-
volume of programs and information the dents selected “somewhat dissatisfied” to
Chamber produces, we are striving to re- describe their Chamber experience. We
duce the noise level and provide more will carefully review and work to address
information in fewer emails. Most mem- any concerns that members noted in their
bers (93%) say email remains the primary survey responses.
method they use to stay informed, ver- Also notable was that 88% of respon-
sus WeChat (47%) or our website (30%). In dents said that they were “likely” or “very
2020 we managed to reduce the number likely” to recommend the Chamber to a
of emails by 10% compared to 2019, and in colleague, friend or business contact. A
2021 we will continue looking for ways to similar percentage were “likely” or “very
reduce that number further. likely” to renew their membership.
Second, we learned that only half of Regarding membership fees, we
our members are aware of our AmCham learned that this is not a major source
Shanghai video series and “China Voic- of dissatisfaction. On the contrary, 90%
es” podcast, despite growing listenership of members said their investment in the
KER GIBBS
and viewership numbers. We plan to build Chamber was “fair” or “more than fair.”
President of The American Chamber of
greater awareness of these two platforms This came as no surprise, as fees have not
Commerce in Shanghai
this year, but I encourage members who changed in more than three years. Obvi-
have not yet listened to or watched these ously, 2020 would have been the wrong
series to visit our website and search for year for a fee increase. The staff will talk
them under the Content tab. with the Board about continuing to pro-
According to the survey, members vide high-quality programs and services
want to see more high-level speakers. while keeping fee increases to a minimum.
The Chamber takes a great deal of pride Members’ feedback has been helpful
in our ability to attract highly sought-af- and constructive. With so many changes
ter speakers from business, academia, and challenges facing our businesses in
and government. This past year members China, the role of the Chamber has nev-
heard from former Australian Prime Minis- er been more important. Members have
ter Kevin Rudd, the Biden administration’s been extremely proactive in helping one
“Asia czar” Kurt Campbell, and California another and the community at large, using
State Treasurer Fiona Ma. the Chamber as a platform to do so. Our
We have taken this advice to heart and – government engagement and commit-
travel and quarantine restrictions allowing tee level participation has been excellent,
– we will look to attract more senior busi- thanks to members who have stepped up
ness and policy figures to the Chamber in to make their voices heard. We look for-
2021. However, Zoom calls and webinars ward to continuing to serve members this
www.amcham-shanghai.org
may remain the best available option until coming year and beyond.
international travel restrictions are lifted. Thank you, and happy year of the
As for topics of interest, members said hard-working ox! I
the two most important subjects for 2021
are US-China relations and China’s econ-
omy. Covid-19 information, naturally, is
the third most requested topic. Our web-
site has included a dedicated Covid-19
4
FEATURES
THE
EVOLUTION
OF SUPPLY
CHAIN IN
CHINA’S POST
PANDEMIC ERA
By Phil Lai
Increase in e-commerce Effective, data-driven decision or region. Many economies, in-
penetration making and omnichannel marketing cluding China, experienced vary-
As Covid-19 has accelerated the and sales will win wallet share. ing degrees of disruption to their
convergence of online and offline raw material supply due to factory
platforms, the purpose of physi- Supply chain shutdowns at the onset of the pan-
Phil Lai has
cal stores will likely transition from reconfiguration demic. The stress of the pandem-
over 19 years a purely point of sale location into Covid-19 has exposed the vul- ic and the increased digitization it
of consulting interactive spaces designed for nerability of the global supply brought has spurred companies to
and industry consumers to experience a brand’s chain and accentuated the draw- implement more agile and efficient
experience
products, vision and values. backs of having a supply chain that supply chain solutions and tools
driving opera-
Brands that thrive in the is over-reliant on a single market covering the full-service cycle,
tions and digital
transformation post-pandemic world will capture
programs. He consumers with their robust online E-commerce platforms’ advertising revenue mix (China, 2018-2022E)
is part of the presence while also re-defining the 5%
management 12%
purpose of their remaining brick and 16% 18% 21%
consulting Livestreaming ads
practice at PwC
mortar footprint. They will become 9%
25% 10%
and focuses more consumer-engaging via e.g., 11% In-feed ads
12%
on consumers, touch screens, in-store apps and 22%
markets and 18%
customer and loyalty programs, etc., 16% 14% Display ads
luxury retail. Phil
that allow consumers to interact
earned his Ma-
ster of Business
with product and mix possibilities
Administration and other benefits. 56%
and Bachelor Store design and fit-out, more 53% 51% 48% 47% Search ads
of Science than ever before, will need to inspire
March / April 2021
in Electrical
consumers to seek and adhere to
Engineering
from Queen’s
brands that more closely align with
University in their preferences and values through 11%
7% 7% Other (Affiliated marketing,
5% 5%
Canada. a broader and deeper showcase of content marketing, etc.)
2018 2019 2020E 2021E 2022E
what that brand represents.
Source: iResearch, PwC analysis
5
for big data companies to lever-
Data flow and
system integration Customer age omnichannel and custom-
Sales offer Supplier eCom
with OMS system er data to improve operations.
More than ever, brands and re-
Multiple channel requirements
tailers in China are looking for
real life use-cases to apply ma-
Smart pricing Order execution Usability analysis chine learning and artificial intel-
ligence to optimize forecasting
Abnormal issue Invoice & Order / and planning accuracy.
warning Delivery logistics visualization In one instance, a world-re-
nowned brewer in China imple-
Order management system
mented a new AI-driven forecast-
ing tool in combination with a sales
Warehouse Transport and operations planning (S&OP)
Finance
Management System Management System system, which shortened its mar-
ket response from 30 to 7 days and
Source: PwC analysis improved the average forecast ac-
curacy from 70% to over 85%.
including sales enablement, plan- staff to react faster to changing The brewer established a mutu-
ning & forecasting, smart manufac- circumstances including price ally trusted demand plan to drive
turing and warehousing and distri- fluctuation and new sales tactics, back-end procurement, inventory
bution networks. depending on inventory positions. and production planning, logis-
To process
Sales enablement orders across
Data input and output in sales forecast modelling
Online platforms such as Dou- multiple and
yin and Kuaishou are driving new fragmented sales
INPUT OUTPUT
trends in e-commerce sales chan- channels, lead-
nels. A prime example of this is ing brands and Seasonal
livestreaming, which was esti- third parties are factors Sales
Promotion Forecast
mated to have 122% year-on-year investing in up- events Modelling
growth in 2020, driven by key opin- grades to their Operational System VS
models &
ion leaders (KOL), with an estimat- order manage- SOP
Historical Actual
ed market value in China of $137 ment systems sales Sales
billion. As a result, many brands (OMS) and plan- Geographic
factors
are building closer connections ning solutions.
between their livestream and sales Upgraded OMS Test & Learn
...and other factors
teams with fulfilment operations. will allow order
Source: Forrester,
Source: PwC analysis
Predictive Analytics This will allow the KOL and sales visibility across
and Machine Learning all distribution
in China, 2020 Q4
channels, optimize procurement tics etc., thus avoiding the risks of
forecasts, reduce inventories, avoid bickering, gaming and opaque de-
store stockouts and ultimately de- cision making among various de-
fine the best supply chain strategy partments.
from across the value chain. With the help of the S&OP
structure, the brewer established
Planning & forecasting a standardized forecast process.
In the world of increasing digital Sales personnel across all the
commerce and constantly evolving branches will now report predict-
consumer preferences, the accuracy ed values on a unified platform
of planning and forecasting is a key for a collaborative forecasting
www.amcham-shanghai.org
factor affecting the response efficien- process that provides market in-
cy of a supply chain. This is even more formation from the bottom to the
important during a global pandemic top of the organization. When the
when demands are highly volatile and headquarters holds S&OP meet-
companies must actively manage in- ings, they can use the platform to
ventory positions to minimize risk. clearly show the forecasts of each
China’s data-rich environment branch and newly acquired busi-
has provided an ideal sandbox ness divisions.
6
FEATURES
Source: Alibaba
Brands that OEM factories are currently cooperating with
Main 3 OEM factories co-operating Other prestigious cosmetics brands shar-
with Perfect Diary ing the same OEMs
Kesimeite Dior, Loreal, Lancôme, YSL, Chanel, Mac
Yingteli Dior, Lancôme, Amarni, Gucci, Lamer
Shanghai Zhenchen P&G, Olay, Loreal, Estee Lauder
Source: PwC analysis
Alibaba Rhino factory
Smart manufacturing (SKUs) from 2017 to 2020 in China’s would have been previously held by
Accelerated adoption of OEM cosmetics registration system. To retailers.
Model due to Covid-19 keep up with trends and increase The C2M market is projected to
Perfect Diary is one of the lead- production efficiency, Perfect Dia- exceed $6 billion by 2022. Despite
ing Chinese professional cosmetics ry recruited factory representatives being a relatively new field that
brands and made its debut on the stationed in supply sources. As soon takes up only a fraction of China’s
US stock market this past fall. It is as there is a new product or packag- e-commerce market, C2M is in-
also the first Chinese brand ever to ing material, the representative will creasingly used by retailers.
lead in beauty sales for Alibaba’s have first-hand information and can In September 2020, Alibaba’s
Double 11 shopping festival, beating react quickly to bring the product to Rhino smart factory was officially
other world-renowned brands. market. launched in Hangzhou and utilized
One of the key success factors the C2M model. After sharing data
for Perfect Diary is its smart man- C2M model with Taobao and Tmall, the Rhino
ufacturing strategy, leveraging The Consumer-to-Manufacturer factory will achieve “customized
Original Equipment Manufacturers (C2M) model is when consumer de- clothing mass production” using
(OEMs) to incorporate customer mands connect directly with manu- sales-based production, fashion
feedback and iteratively improve facturers to buy a product via digi- trends prediction and quick devel-
on products to launch in the mar- tal platforms. The model bypasses opment of “best-sellers.” The Rhino
ket. Perfect Diary offers products traditional intermediaries, such as Factory is a digital factory, relying on
at an affordable price point while distributors and agents, and re- a small batch, fast-response sup-
still maintaining a similar quality to duces unnecessary costs, allowing ply chain that minimizes trial costs,
those products of big-name brands. consumers to purchase high-quality reduces inventory costs and pro-
This is made possible due to the products at lower prices. vides stronger resilience for small
extensive capabilities of OEMs in By producing on demand, fac- and medium-sized enterprises with
China – which have benefited from tories can eliminate the invento- weak anti-risk capabilities. By com-
years of manufacturing for other ry-sales ratio, which alleviates in- bining cloud computing, IoT and
foreign cosmetics brands. ventory risk. The key differentiator is AI, its operation efficiency reaches
By cooperating with dozens of highly competitive pricing for cus- four times the market average, and
OEM factories, Perfect Diary record- tomers, while factories gain access a minimum order of 100 pieces can
ed nearly 1,000 stock keeping units to customer data and insights which be produced and delivered within
seven days.
Warehouse &
distribution network
JD’s unmanned automation
JD’s unmanned warehouse
achieves the entire process of ware-
housing, storage, packaging and
sorting completely by smart de-
vices. This enables the company to
March / April 2021
increase its supply chain efficiency
and handle 200,000 orders per day.
Traditional model
vs C2M model In 2014, JD implemented its
“Shanghai Asia No. 1,” logistics
Source: PwC analysis plan, the highest level in intelli-
7
counties,” which focused on devel-
JD’s unmanned
warehousing oping a warehouse and logistics
smart devices network in lower tier cities. By the
end of 2020, it had covered 92% of
China’s counties.
JD Logistics has invested in
twelve “Asia No. 1” warehouses, all of
which are oriented towards second-
to sixth-tier cities, including capital
cities such as Harbin, Shenyang,
Changchun, Taiyuan and Zheng-
zhou, as well as logistics hub cities
Source: JD such as Langfang, Guanghan and
Chuzhou. In the past, JD Logistics’
gent logistics in China. After three sibility effort, JD Logistics has also delivery period in these cities was
years of practice and application, incorporated low carbon and ener- 5-7 days. However, during the “618
“Shanghai Asia No.1” has become gy saving designs in the unmanned Shopping Festival” of 2020, after JD
the pillar of JD Logistics, relieving warehouse. It uses a smart algo- Logistics expanded, more than 91%
the pressure brought on by soaring rithm to recommend packaging of the warehousing and distribution
orders from the 618 and Double 11 materials, which can accurately integrated service orders are deliv-
shopping festivals. The unmanned package items without wasting a ered the same or next day.
warehouse is a bold innovation in centimeter of material.
intelligent warehousing, and its Conclusion
order processing and comprehen- JD logistics network’s footprint The Covid-19 pandemic has
sive matching capacity are indus- expansion to lower-tier cities brought unpresented challenges to
try leading. In addition, the ware- As lower tier cites play a larger brands and retailers, but it has also
house has 100% coverage of its role in the growth of e-commerce, provided motivation for companies
automated and intelligent equip- many e-commerce and logistics to innovate and streamline their
ment, so it can cope with the flex- platforms have deployed warehous- supply chains. More companies are
ible and changing business nature es and logistics networks in these building leaner and more agile sup-
of e-commerce orders. locations. ply chains by embracing digital op-
Data shows that China’s express In August 2019, JD Logistics erations enabled by machine-learn-
delivery industry consumes more launched a nationwide logistics ing, AI and automation. I
than 10 billion cartons a year. As time-efficiency improvement plan
part of its corporate social respon- called “24-hour delivery of thousand
JD’s Superior
Services through
Nationwide
Logistics
Network
www.amcham-shanghai.org
Source: JD
8
FEATURES
FROM COVID
TO COMEBACK
CHINA & THE WORLD’S
ECONOMIC RECOVERY
A conversation with Credit Suisse economist Dong Tao
I
n late February, Insight sat down with remove social distancing restrictions, Balance sheets
Dong Tao, Vice Chairman Greater transportation and logistics will return and stimulus
China for Private Banking Asia Pacific and economies will bounce back rel- Repairment of balance sheets
at Credit Suisse. This is an edited tran- atively quickly. That happened in the will take longer – repair of consum-
script of his commentary on the glob- third quarter of last year, when we saw ers’ wallets, and repair of compa-
al economy and China in the wake of a spectacular rebound in most coun- nies’ wallets. In the pandemic many
Dong Tao is Covid. tries. But during the second wave of people lost their jobs, maybe some
a managing the pandemic, things started to go will be permanently lost, and when
director and the
vice chairman
The global down again – in Q4 [of last year] and some people get new jobs, their sal-
Greater China economy Q1 of this year. aries may be lower. If you can borrow,
for Credit Suisse and China I would imagine a very strong re- things will be okay. But borrowing is
Private Banking There are two key words for the bound on the supply side, when pro- for large companies. In the US, smaller
Asia Pacific. He Chinese economy in companies got a check
has published
2020/2021: one is recov- from the government,
more than ten
books in his ca- ery, and one is transfor- but it’s only for survival.
reer. Tao joined mation. China had much The smaller companies
Credit Suisse in better control over the cannot access the bond
1998 as the chief pandemic. China led the markets.
regional econo-
world’s economic recov- The US government
mist for non-Ja-
pan Asia, with a ery. It is the only major has dropped a check-
focus on China. economy in the world to book from a helicop-
He moved from post positive growth, and ter, but the stimulus is
the investment there is still understate- not going to last. What
bank to the
ment about what it can the government did in
private bank in
July 2016. Prior achieve this year. terms of printing money
to joining Credit I would describe the and emergency rescue
Suisse, he was global economic re- checks will hold up bal-
with Schroders covery as a two-phase ance sheets from col-
Securities Asia as
project. Phase one is the repairment ducers realize that demand is still there lapsing, but it will not give sufficient
senior regional
economist and of the supply chain; phase two is re- and production inventory is very low. I upward momentum. This is an artifi-
head of China pairment of balance sheets. In human think that has started already. So that’s cial source of growth. The Trump and
March / April 2021
research. history we have never seen this type phase one of the recovery: the repair- Biden packages alone equate to 1.4
of cliff fall in industrial production. ment of the supply chain. It will shoot up percentage points of GDP. That is very
Damage to economies everywhere like a rocket. You will see a V-shaped re- big, to secure a strong growth figure,
was traumatic, and it has shown in bound, but this V-shaped rebound may nonetheless an artificial one, to keep
the statistics. But a supply chain re- only go to maybe 80 or 90%, not 100% the US economy above water. I don’t
covery is relatively easy. Once your – it will depend on the country. see the US government doing this
9
thing that re- we call this the reflation trade – the
mains unclear is economy is bouncing back, the job
how large a per- market is bouncing back, perhaps in-
centage of peo- flation is bouncing back.
ple in the West I am reasonably optimistic about a
will refuse to global recovery story, but there may
take a vaccine. be future mutations of the virus. If
In China, a some of those mutations occur in crit-
similar number ical areas [of the virus], that could lead
of people will to acceleration of infection again by
have received possibly making the vaccine entirely
a vaccine, but irrelevant. The frontier of the pandem-
Credit - Gage Skidmore China’s popula- ic could move from the community to
tion is larger. In individuals. That is one of the key risks
His “unknown
the major cities for the global economy.
unknowns” went
forever, and Europe has done a third you will probably see herd immunity, Inflation is also coming back, and
viral too
of what the US has. Getting back to but the other parts of the population that could undermine monetary poli-
pre-pandemic levels will take a long will gradually receive the vaccine in cy – look at what has happened in the
time – the ‘last-mile’ jobs will be dif- the following years. But starting from US treasury market lately. And look at
ficult. the middle of this year to the end of China – the market is volatile because
Maybe will we see two-thirds this year, a chunk of the global indus- the market is worried that the Central
of a V-shaped recovery and then a trial base will achieve herd immunity. Bank is tightening monetary policy.
U-shape. We need to see the econ- What does that mean for recovery?
omy by itself to have organic growth. Using Rumsfeld’s famous words: China’s economic
This will be a long and painful process the virus is an unknown unknown: recovery
with ups and downs in the middle. we don’t know when it will pop up, Industrial production recovered
[People think] This is how I portray the picture of or when it will mutate. But if herd in China. As for the second thing I
that if they the global economy, but it will largely immunity is somehow achieved, we mentioned – balance sheet recovery
know when the depend on the progress of the pan- move from an unknown unknown to – China is still better than the rest the
virus is going to demic. a known unknown. The process of re- world because the Chinese people
disappear, then
covery is still unknown, but we have have a lot of savings. When the fear
they know when
there will be a
The Covid factor – seen recessions before, and we have of the virus has disappeared, con-
global economic
immunizations much better knowledge to quantify sumption returns quickly. Just look at
recovery. But the and mutations the risks of the business cycle. the box office figures over the Chinese
market is running The threat of the virus will slow by We know how the labor market New Year – they exploded. So, there
ahead of reality. the middle of this year. We probably behaves, and we know how mone- is a base for the Chinese economy,
will see somewhere between 200- tary policy behaves, so it gives us a especially Chinese consumption, to
250 million people in the US gain im- chance to quantify risk. This is why do much better than the rest of the
munity. Half will be people who have the market is moving ahead of the world.
had the shot, the others will have economic recovery: [People think] But China still has to run the last
antibodies. Europe and Japan will be that if they know when the virus is mile and get above the pre-pandem-
a little slower, but by the end of the going to disappear, then they know ic level. China’s emergency package
fourth quarter – if things go smoothly when there will be a global econom- was a lot less than other countries’ and
– 70-75% of the population of Western ic recovery. But the market is running a lot less than that in 2009. In the rest
economies will have immunity. One ahead of reality. In economic terms of the world, the burden of rescue has
www.amcham-shanghai.org
10FEATURES
fallen on the shoulders of government. taking lessons on AI, blockchain, 5G vate sector participation in the econ-
In China, it’s companies that need to ... I have never seen leaders of other omy].
write paychecks to staff – companies major powers doing this. This is genu-
cannot lay them off. So, the balance inely impressive. Dual circulation
sheets of businesses, especially small The early exit from the pandemic In the past China has had dual cir-
SMEs, are stretched. Some may have also gave China a head start in the culation but with a heavy emphasis
to sell or have already sold. The coun- race to compete in the data era. Chi- on export circulation. In the future,
try still faces challenges. na is lagging the US in basic research, China’s growth will shift from exter-
Another thing China is doing is but it is running way ahead in appli- nal-oriented to domestic-oriented.
de-emphasizing its GDP fig- Today, after the pandem-
ure. Of course, internally they ic, fewer tourists will travel to
While most of still have a controlled target, Singapore or Paris – they will
the economic but the government is no travel to Hainan Island. Tech
powers were longer making GDP [growth] companies importing their
burdened by the a life and death matter. This machinery will look for do-
virus or saying is a permanent change. It mestic sources before they
that the virus doesn’t mean the govern- search for an international
was nothing, ment does not care about supplier, if they can.
the Chinese GDP; it means that the gov- This is massively different,
leadership
ernment does not want to be and other countries must not
was taking a Credit - Gage Skidmore
held hostage by a GDP tar- count on China to bail them
group lesson
get. You don’t want a growth out. What happened in 2009
on quantum
computing. target to undermine your long-term cations and perhaps the market. The is not going to happen this time –
Before that, stability target. leadership is very keen to advance most orders, if possible, will go to the
China’s politburo that. domestic market.
was taking Economic
lessons on AI, transformation Chinese private Globalization
blockchain, 5G…I The difference between China sector investment What made the world great over
have never seen and the rest of the world this year is Two things are needed [to spur] the last 70 years was globalization.
leaders of other not growth, but the advancement of Chinese private sector investment: re- That’s why we have seen the fastest
major powers
China’s economic transformation. The spect for the property rights of private productivity gains at any time in hu-
doing this. This
old model – the housing boom, the companies and respect of market man history; that’s why we have seen
is genuinely
infrastructure boom – has run out of rules. We have seen SOEs taking larg- the fastest trade growth at any time;
impressive.
steam. China wants to get to the next er shares in the economy in terms of that’s why more people have bene-
stage of development. The 14th Five- ownership. Labor costs are no longer fitted from globalization than at any
Year Plan is important – it will not be cheap, while oversupply in the man- time in human history.
about how fast China will grow, but ufacturing sector is quite severe. And Globalization seems to have been
about how China aims to change it- on the credit side, private companies undermined. This is not just about
self. are having some troubles. China and the US. Look at what hap-
While most of the economic In the old economy, the share of pened with Europe and the UK, look
powers were burdened by the virus private ownership is coming down, at what happened with Japan and Ko-
or saying that the virus was nothing, but that might not necessarily be a rea, and let’s look at the supply chain
the Chinese leadership was taking a bad thing. The private ownership in problems. We are going to see poten-
group lesson on quantum comput- the new economy is quite high, so I tially slower growth as globalization
ing. Before that, China’s politburo was am not entirely pessimistic [about pri- reverses I
March / April 2021
11ESPORTS
IN CHINA
INFLUENCERS FOR A DIGITAL AGE
By Ruoping Chen
L
ast October, Shanghai hosted estimated that China would reap in hotel specifically for visiting teams
the League of Legends (LOL) $385.1 million last year, followed by and spectators will also be attached
World Championship, one of all of North America at $252.8 million. to the center.
the most-watched global events in By 2023, China’s esports market is
esports. Teams were flown in from all expected to reach revenues of $540 Government and
over the world to compete and, after million. big tech funding
submitting to a strict 14-day quaran- More people here watch esports Much of this boom in infrastructure
tine, played 114 games over a five- than in any other country, according spending stems from government
week stretch. Due to Covid-related to the same report, with China audi- support, despite contradictory policy
restrictions, the final unfolded before ences reaching 162.6 million in 2020, signals. In 2000, the Chinese govern-
a limited live audience of 6,300, with while in North America viewership is ment announced a 15-year ban on
millions more following the competi- less than half that at 57.2 million. And gaming consoles. As recently as 2018,
tion online. although estimates on the number of it froze new video game releases for
Shanghai’s Nanjing pedestrian people involved in esports – either eight months over concerns of inter-
street was bedecked in LOL team through watching or playing a core net addiction, and a year later, cracked
crests, and metro stations displayed esports title – vary widely, the totals down on gamers under the age of 18.
a panoramic history of esports. Chi- often cited range from 350 to 450 At the same time, however, the
na has been the only country to host million esports fans in China. government has eagerly expanded
a live esports competition since last Chinese cities are also competing the esports industry, handing out sub-
March as the global pandemic con- to be the next esports capital of the sidies for building venues and hosting
tinues. This fall, the championship world. Hangzhou unveiled its $280 tournaments. The Ministry for Human
will again be played here, with teams million “Esports Town” this past sum- Resources and Social Security esti-
traveling to a host of different Chi- mer and plans to invest $1.3 billion mated that esports would fill 2 million
nese cities before arriving in Shen- more in esports-related projects by jobs over the next five years, quadru-
www.amcham-shanghai.org
zhen for the final. 2022. Likewise, Shanghai is position- ple the size in 2019 of 500,000. It has
The choice of venue is not solely ing itself to become a global hub for also recognized “esports operator”
a pandemic-related decision. China esports. It has started constructing a and “esports professional” as legiti-
has become a hyper-lucrative mar- state-of-the-art $898 million esports mate university degrees.
ket for esports, as is evident from the center in Minhang district spanning Coupled with government back-
numbers. It is now the top market by 500,000 square meters, designed so ing is the fact that much of esports in
revenue – an early 2020 forecast by that esports teams and companies China is run by tech giants. Tencent,
esports analytics company Newzoo can base their operations out of it. A for example, owns Riot Games, which
12FEATURES
produces League of Legends, and tural penetration and the awareness speeds, 5G internet capabilities and
has a 40% stake in American-owned of esports is very high relative to other increased graphics cards, and engag-
Epic Games. Tencent also publish- markets. In the US the number of peo- ing games that require lower internet
es China’s top mobile esports game ple who actually know what esports bandwidths. The “mobile-first” gener-
Honor of Kings, which claims to have is represents maybe a quarter of the ation that grew up alongside internet
100 million daily users, and has in- population. But in China, recent re- cafes has accelerated esports adop-
vested in Huya and Douyu, livestream search puts it at closer to three quar- tion and growth and transitioned it to
platforms popular with gamers. ters,” says John Oliverius, president of gaming on the go.
NetEase, China’s second-largest
gaming company after Tencent, has
partnered with American developer
Blizzard Entertainment for Chinese
publishing rights of its top esports ti-
tles including Hearthstone, Overwatch
and World of Warcraft. In 2019 NetEase
also announced plans to build and op-
erate a $710 million “Esports Park” in
Shanghai’s Qingpu District.
Beyond building up the esports
ecosystem in China, it’s the sponsor-
ship deals that are making headlines,
denoting esports’ broadening influ-
ence over culture and society. Glob- Verius Ventures, an esports- and me- The native media for esports is
ally, sponsorship makes up about dia-focused consultancy. “Its grip on online, adds Oliverius, which gives it
60% of all esports revenue streams, youth culture makes it a potent mar- an advantage over traditional sports
and in China, it’s huge as well. keting channel. If you’re a marketer, es- in the era of streaming. Contrast this
In 2019 Nike announced its first ports can be a great way to build your with football and basketball, which
leap into esports sponsorship by ink- brand association with young people – are structured – via their timeouts and
ing a four-year deal with the League of to get mindshare of that demographic.” commercial breaks – around broad-
Legends Pro League (LPL) in China to “In China, more people play or en- cast television.
provide the uniforms and shoes for all gage with esports casually [than com- “Young people are basically
If you’re a
16 squads in the league. A year later, pared to Western markets]. Especially trained to consume media online,
marketer, esports
Mercedes-Benz became the league’s because of the higher mobile penetra- from Youtube or Twitch or Bilibili, and
can be a great
way to build your exclusive automotive sponsor. Far from tion, you see more young people play- that’s really where esports resides,”
brand association the days when endemic sponsorships ing esports or watching professional es- says Oliverius. “So how esports gets
with young comprising gaming gadgetry were the ports streamers on their smartphones monetized and commercialized is go-
people – to get norm, sponsors now span categories to pass the time such as during their ing to be in sync with how content is
mindshare of that from skincare to insurance. lunch break or while on the subway,” monetized in the future.”
demographic
CREDIT: ARTUBR / FLICKR
Cultural penetration says Joseph Krassenstein, director of Because of esports’ proliferation
For many, esports represents a Marketing for MORE Sports, a mobile into mainstream culture, top esports
unique opportunity to capture the at- app and video platform that works with players in China have become celeb-
March / April 2021
tention of and engage with an entire professional athletes and esports clubs. rities and KOLs in their own right. In
base of young people. In China, es- Krassenstein notes that elevated contrast with other markets, it is not
ports is seen as young, hip and cool. mainstream attention and advance- unusual to see esports players fea-
“The really interesting thing about ments are because of China being a tured in fashion shoots, decked out
China as an esports market is the cul- mobile-first nation with higher mobile in Dior or Hermes. When Chinese es-
13CREDIT: LOL ESPORTS PHOTOS / FLICKR in-game performance – as well as an offline activity, a racetrack for exam-
connect with esports’ youthful de- ple, or paintball,” says Krassenstein. “We
mographic. will pair a Chinese Olympic boxer with
Hoang says the first step his the team and have him go through a
company took was to identify the day of training with them to learn their
specific esports game that they gaming craft and have the esports
wanted to enter. Herbalife chose players go through a day of boxing with
Overwatch, a team-based first-per- him to learn his craft. It’s not only fun for
son shooter game developed by the esports teams but also makes them
Blizzard Entertainment, which is more relatable to potential new fans
Some of these teams and leagues popular in China. The company unfamiliar with esports gamers.”
command top dollar [in sponsorship value] was attracted to the game’s “live” “It’s the type of lifestyle content that
component and its similarities to fans are looking for,” Hoang adds. “They
traditional sports leagues, which want to know what’s going on when
Herbalife already had experience players are not playing. What are they
ports team FunPlus Phoenix won the sponsoring. doing in their daily lives? Esports teams
League of Legends World Champi- A year-long search then began for are like content houses in that way.”
onship in 2019, they took home the a team that would fit with Herbalife’s Newzoo’s Esports Trends to Watch
trophy and a luxury high-tech trophy sponsorship strategy. It was important in 2021 report writes that the industry
case designed by Louis Vuitton. for the company that teams believed will continue to diversify beyond the
in their brand and used their products. model set by traditional sports struc-
Opportunities in “We want to show that there is a tures, “putting a large focus on other
sponsorship linkage with your performance if you initiatives, like positioning their com-
The intersection of luxury and es- use our product, or from the coach- pany as a lifestyle brand or moving
ports is a targeted move. According ing, training and guidance from us,” toward content-creator strategies.”
to Boston Consulting Group, 78% of says Hoang of the type of discussion For all of the growth and opportuni-
Chinese luxury consumers are under he had with the team. ties around esports, there is also vola-
35. A separate report by Nielson es- In addition, Guangzhou Charge’s tility in the industry that sponsors need
timates 80% of esports fans in China owners, Nenking Group, a financial to assess. Compared to traditional ath-
are in that same age bracket. and entertainment conglomerate that letes, the lifecycle of an esports player
“Some of these teams and leagues also owns a basketball and football is very short, with stars often peaking
command top dollar [in sponsorship club, better understood the impor- around age 20. This leads to constant
value],” says Eric Hoang, director of tance of physical assessments. They turnover, where one year’s team roster
Strategic Planning and Business Trans- agreed to let Herbalife design the will not be the same as the next.
formation at Herbalife Nutrition for gym and pantry for a state-of-the-art “You’re in the spotlight for one or
China. “It’s actually not that far off from esports facility currently being built in two years and then either you are re-
traditional sports and could be even Foshan, their headquarters. placed by a younger player who has
more expensive, particularly in China.” While Herbalife has a constant quicker brain-to-finger coordination,
For Herbalife, there was also an presence in the team’s online streams, or you cap out. You no longer have
opening in health and wellness that the company is also keen to produce the patience, the mental wellbeing,
was untapped. Last summer the more branded lifestyle content with the personal health to continue at
company entered esports for the first Guangzhou Charge this season. Ho- the top level,” says Krassenstein.
time, signing a three-year sponsorship ang references a video his company Oliverius adds that the long-term
deal with Chinese team Guangzhou produced with one of its players mak- future for esports is not 100% clear,
Charge, a club that plays in esports ing a healthy milkshake recipe using and while it is young and growing, one
league Overwatch. The aim was to Herbalife products. of the recurring questions is whether
provide its players with nutrition sup- or not a valuation bubble exists.
port and fitness advice, something Driving content “Right now China is trying to fig-
that while more prevalent in Western Content production is becoming ure out what the outer edges of the
teams, was lagging in Asia. a big part of sponsorship branding in esports industry are. You have es-
www.amcham-shanghai.org
Just last year, China’s most famous esports, as esports stars increasingly ports hotels, you have Honor of Kings
esports player, Uzi, announced his re- overlap with the entertainment world. lipstick. You have TV shows, books,
tirement due to ill health, prompting With an active audience already heav- tourism packages. And there’s a lot of
industry-wide reflection on the men- ily engaged in streaming, companies money going into land development,”
tal and physical wellbeing of esports like MORE Sports are taking the op- he says. “It seems to me that esports
players. Herbalife wanted to improve portunity to produce targeted lifestyle in China has these ripples that travel
Guanzhou Charge’s fitness and nutri- content that appeals to esports fans. very far, and I’m curious as to how far
tion – and thereby elevate the team’s “We’ll take an esports team out for those ripples go.” I
14FEATURES
I
n what feels like nearly every cor- and counting, according to the 2019
TAKING
ner of the market, China has moved China Ski Industry White Book. The
from playing catchup to surg- number of skiers and snowboarders,
ing ahead. Now, it’s taking on snow typically measured by visits to an in-
sports. The country has pledged to door or outdoor ski resort, has sim-
TO THE
put 300 million of its citizens on snow ilarly ballooned. In 2014, there were
and ice ahead of the 2022 Winter about 10.3 million visits; five years lat-
Olympics, catapulting itself to the er it had reached 20.9 million.
SLOPES
top of the global winter sports mar- The industry’s impressive growth is
ket. due to several factors, including Bei-
China’s winter sports ambitions jing’s endorsement, but it’s also due in
were put on the political agenda in large part to the expansion of China’s
the Winter Sports Development Pro- middle class. Families and millennials
gram for 2016-2025, part of a broad- now have money and time to spare,
er government plan to make China and they want to spend it on new ex-
By Kate Magill healthier. While 300 million skiers periences – including active outdoor
and skaters may seem outrageous- activities like skiing, said Calvin Lin,
ly ambitious, Chinese are taking up director of International Government
winter sports at impressive speed. Relationships at Trip.com Group, which
The country is aggressively pushing actively tracks the industry’s rise.
skiing and snowboarding ahead of Foreign hotel brands like IHG,
the 2022 Winter Olympic Games, set Marriott and Club Med have put
to be hosted in Beijing and neighbor- down roots in ski areas in north-
ing cities. eastern Chongli and Changbaishan
The push has worked – in the last as well as Chengdu and Zhangjiak-
decade skiing has moved from a ou, offering luxury services within
fringe, elite activity to a popular fam- walking distance of the slopes. In
ily affair. The market is rising to meet Chongli, IHG opened a Holiday Inn
demand, with ski resorts emerging in 2018, and has five more resorts
across the country and plans for planned for its brands including
more. Foreign snow sport apparel Holiday Inn, EVEN, Crowne Pla-
brands are vying for consumer atten- za, Intercontinental and Kimpton,
tion, with stores in major cities as well hoping to offer something for each
as popular shops on sites like Tmall. type of traveler. The ski slopes
Perhaps unique to China, indoor and are often operated by local com-
simulated ski facilities are also rising panies, but through the growth of
in popularity, giving city skiers easy the resorts, hotels are looking to
access to the activity. offer branded, luxury experiences
For years, dedicated Chinese and create returning customers,
skiers flew to Japan, North America even after borders reopen and the
and the Alps to get their ski fix. But Olympics has passed.
the increased domestic ski resort Lin noted that the majority of ski
offerings, compounded this year by resort hotels that he sees are owned
pandemic-induced border closures, by overseas brands, an example of
have spurred a wider spread interest the foreign corporate dominance that
in Chinese ski spots. With the Win- exists thus far in the industry.
ter Olympics less than a year away, As the future host town of the
China is reaching a major milestone Olympics, Chongli in particular
in the evolution of its snow sports in- has become a popular resort spot
dustry, as brands clamor for a share easily accessible from Beijing, only
in what may soon be the world’s larg- a two-and-a-half hour train ride
est ski market. away. Many resorts hope to tap into
the “weekend getaway” market,
March / April 2021
World-class resorts said Eric Swanson, general manag-
The nation’s ski industry statistics er of IHG’s Taizicheng Resort Com-
speak for themselves. Twenty years plex including the EVEN Chong-
ago, there were just 56 ski resorts li, InterContinental Chongli and
in China. By 2020, there were 770 Kimpton Chongli, which is push-
15ing to open before the Olympics. thing from ski equipment and appar- Like many ski brands, Decathlon
While trips to popular ski resorts el to resort bookings. has forged lucrative partnerships
in Japan and the US require lon- The consumers driving this de- with ski resorts and operators to
ger international travel, Swanson mand tend to be younger and hail from offer pop-up shops near the slopes.
is hoping to draw families looking tier-one cities, with interest in skiing of-
In Shanghai, it has partnered with
to ski multiple times a season for ten spread on social media between Snow51 to put a pop-up shop at
shorter stays. friends, according to Lin. Winkler and one of the indoor ski operator’s
The ability to enjoy the sport at a Lin both noted that for many Chinese downtown locations. Snow51, es-
resort for a short stay is enticing more consumers, skiing stands out as a tablished by Shanghai entrepreneur
families. A growing number of resorts unique, status-driven trend. Kai Ye and Italy-based ski promotor
have arisen within a short drive or While most Chinese skiers are Snow How China, has focused its
train ride of major metropolises, in- new to the sport, that is shifting, as China efforts on the indoor skiing
cluding in the areas surrounding the first “second generation” young market, hoping to bring the moun-
Shanghai, Hangzhou and Ningbo. In skiers take it up, taught by parents tains to the city.
Pudong, Lingang City will become who have learned in the past sev- At one of Snow51’s six Shanghai
home to one of the world’s largest in- eral years. When French sporting facilities, skiers can try out the sport
door ski resorts – Wintastar Shanghai goods company Decathlon entered in a coached session on what Win-
Snow51 estimates
that in the coming is on track for a 2022 opening, bring- the China market in 2003, the com- kler called a “ski treadmill” – skiing
years, China ing 227,000 square meters of skiing pany estimated that more than 90% largely in place on a rotating track.
will reach 40-50 to the city center. of its ski customers were beginners; The goal, Winkler said, is to create
million annual Backed by Beijing’s push into win- by 2015 it had dropped to 80%. Now, more return customers to the sport.
ski visits, on par ter sports, industry consumer players Decathlon estimates it’s down to Since many Chinese don’t live near
with the world’s see huge potential ahead. Hermann half. a mountain, their first ski experience
“big three” skiing Winkler, co-founder of indoor ski Decathlon is one of several can often be a disappointment, one
nations – Austria, operator and educator Snow51, be- foreign apparel brands vying for they’re unlikely to repeat, according
France and the
lieves the coun- to Winkler. His
United States.
try will become goal is to change
the world’s larg- that through
est ski market, Snow51’s mem-
surpassing even bership-based
the Alps. Snow51 ‘ski gyms,’ of-
estimates that Twenty years ago, fering skiing
in the coming there were just education and
years, China will a workout, mak-
56 ski resorts in
reach 40-50 mil- ing sure skiers
lion annual ski China. By 2020, are prepared the
visits, on par with there were 770 first time they hit
the world’s “big and counting the real slopes.
three” skiing na- While much
tions – Austria, of the skiing in-
France and the dustry is hop-
United States. ing to expand
“China will be beyond the
the biggest al- elite urbanites
pine skiing market in the world very Chinese skiers’ wallets, alongside with cash to burn, this is the de-
soon – before 2030,” Winkler said. companies like The North Face, mographic Snow51 is courting.
Arc’teryx and Burton Snowboards. Memberships can cost as much as
Enthusiasts in Foreign brands still dominate in 27,888 RMB a year, and the com-
the making China, where domestic brands have pany also offers trips to send ski-
Companies continue to rev up been slower to offer the same high ers to the Alps for a European ski
www.amcham-shanghai.org
their offerings in advance of the win- quality, often highly priced, snow experience. Snow51’s strategy to
ter Games, and consumers are fol- sport equipment and clothing. De- build a seamless bridge between
lowing suit. The market is expected cathlon carved out its niche as a Chinese skiers and an Alpine skiing
to expand from 4.8 billion RMB in more moderately priced option experience is one example of how
2016 to 26 billion RMB by next year, aimed at beginner- to mid-level foreign companies are driving Chi-
according to market research group skiers, said Tingjiao Zhu, marketing na’s ski ambitions, hungry for the
the EU SME Centre. The growth is manager of winter sports at De- consumers that come with China’s
thanks to increased sales on every- cathlon. growing role in the industry.
16FEATURES
The world’s
number one market
While it’s still unclear if China will
reach its 300 million skiers by next
year, it has succeeded in expand-
ing the market and popularity of
snow sports. The year following an
Olympics often brings a dip in the
market as interest dissipates, said
Swanson, who was previously the
general manager of IHG’s proper-
ties in PyeongChang, South Korea,
site of the 2018 Winter Olympics.
However, he said he was optimis-
tic that the China market will keep
growing after the Olympics are over
and border closures end.
Examples of industry growth tive snow sports, are in their infan- “China has the potential to double
abound. Ski schools and apparel cy, with massive room for growth the global winter sports market,” said
companies are tailoring to Chinese and foreign market involvement. Winkler. I
needs with gear and lessons spe- The passing of the Olympics,
cific to the harder artificial snow Winkler notes, will mark the end of
found on many Chinese slopes. the beginning phase of China’s winter
Resorts are brainstorming how to sports industry; now as a vast swath
stand out and offer world-class lux- of the population sees skiing as an
ury. And more niche markets, like affordable activity, firms can jump
cross-country skiing and competi- into the market.
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WeChat now
March / April 2021
Committed to Global Education
17CONSUMER TRENDS
IN FAST-MOVING CONSUMER GOODS
Q&A with Kantar’s Jason Yu
By Ruoping Chen
Jason Yu was appointed as managing director of Kantar Worldpanel China in Jan 2008. He has more than 22 years of consumer research
experience, working with senior executives in the CPG industry. Previously, he served as account development director in Asia and
consumer insight director in the UK. Under Jason’s leadership, Kantar Worldpanel was recognized as one of the “Great Place to Work”
organizations in Greater China in 2015 and 2016. Yu is also a frequent speaker at various industry forums and regularly featured in the
domestic and international business press.
You describe in Kantar’s 2020 China Shopper across different categories in FMCG. Health cannibalization to traditional channels, but
Report that the COVID-19 pandemic caused and hygiene are growing very substantially at the same time, provide new growth op-
dramatic shifts in consumer behavior. Could along with products that help consumers portunities for FMCG companies in China.
you highlight what major changes occurred? with “in-home stay” – such as seasonings,
products related to cooking, instant noodles, Do you think these are permanent shifts
Primarily, there have been three chang- frozen food, etc. Meanwhile social and lei- in consumer mindset, or will people revert
es. First is that consumer market growth was sure are growing more slowly. to previous behaviors once the worldwide
substantially lower in 2020 than in the previ- Thirdly, consumer shopping behaviors pandemic has been contained?
ous year. There has been volume growth, but are getting more digitalized. Consumers are
pricing has been under quite severe pressure. continuing to move from brick-and-mortar In the next six to 12 months, I believe that
www.amcham-shanghai.org
This indicates that consumers are facing pres- stores to digital channels. In 2020 that trend these trends are here to stay, as the pandemic
sure in terms of their disposable income (only accelerated with consumers increasingly is not over yet. The sporadic outbreaks in dif-
a 1.2% increase according to the latest gov- using not only e-commerce to purchase ferent parts of China means that consumers
ernment statistics). Although trading up is still their daily necessities, but also emerging are probably still going to stay more at home
happening in China, consumers are increas- channels like O2O (home delivery) and and consume more home-related products.
ingly looking at value propositions. community group buying channels. Pur- But when things go back to normal, we will
The second change is that there is a chases from livestreams are also growing see more categories linked with social plea-
greater level of divergence in performance substantially. All these channels pose some sure go up as consumers return to normal
18You can also read
