The Burden of the Past

MMACredit: Shanghai Daily

I posted a comment on a recent article in the New York Times.

The article titled “M.M.A. Fighter’s Pummeling of Tai Chi Master Rattles China” was published on May 10, 2017. To read it, click on Article. 

The reaction to the recent contest between the past (wushu) and the present (MMA) can be felt in China almost every day. Does the past define us, or should we consider the realities of the world we live in? 

Confucius, who lived 2,500 years ago, is advocated in China as the source of inspiration for the present, even if he had no constructive role for women, a high respect for the status quo and a belief in a highly hierarchical society. His philosophy is used by the current leadership to justify their approach on how to run China. 

TCM (Traditional Chinese Medicine) squares off against Western medicine, with the government heavily promoting TCM. Western medicine is heavily influence by the scientific method, while TCM believes in energy flows in the body that have yet to be proven scientifically.  

The 5,000-year old history of China might be a burden to the society as it excuses practices that should be questioned and in need of a scientific validation. The Age of Enlightenment has yet to reach China.  

This kerfuffle proves again the challenges of China to accept a scientific experiment against historical beliefs.

The extent of government centralization

As one endeavours to understand how the Chinese government operates, the word “centralization” will often come across in documents and discussions. All countries have a central government and to various extent regional political entities. The key question is, to what extent are the power relationship and the decision making process distributed between the various levels of government.

In China, there are 32 regional authorities (provinces, autonomous regions and municipalities) under the control of the central government. The provinces and autonomous regions are further divided into prefectures, counties, townships and villages.

In addition to the central government, there exists a range of national regulatory bodies which can issue directives that impact the lower levels of government.

Let us look at an article that was published in the Shanghai Daily on March, 7, 2017 as we try to understand the dynamic between the various levels of government.

_______________________________________________________________

Better toilets will help boost tourism

Shanghai Daily, Source: Xinhua, March 7, 2017

 Toilet at a Tourist Destination

CHINA plans to boost its tourism sector by upgrading infrastructure and giving the public easier access to travel information, a government document said yesterday.

The National Tourism Administration unveiled the plan in a development guideline for the tourism industry during the 2016-2020 period. It echoes the country’s national strategy to spur the service sector.

According to the document, roads to the country’s major tourist attractions will be renovated by 2020 to meet growing travel demand. Large tourist destinations will have easier internal transportation.

In the next four years, the country will add 20 inter-region bike lanes with a total length of 5,000 kilometers to boost zero-emission travel. More tour buses and recreational vehicle campsites will also open.

Toilets at tourist sites have long had a nasty reputation of being unhygienic. To address the problem, the country aims to install and upgrade 100,000 restrooms. Toilets at major tourist sites should apply stringent hygiene standards with environmentally friendly cleaning approaches at most facilities.

The document also outlines plans to build a more integrated information sharing system and provide visitors higher-quality services.

China’s tourism revenue totaled about 4.69 trillion yuan (US$689.7 billion) in 2016, up 13.6 percent year on year. Domestic tourists made 4.44 billion trips last year, an increase of 11 percent, official data showed.

Tourism plays a key part in the world’s second-largest economy as the country moves to build an economy driven by the service sector and consumer spending rather than trade and investment.

By 2020, the country will spend about 2 trillion yuan on the tourism sector, which will contribute more than 12 percent of GDP, according to the plan.

__________________________________________________________________

Here are some points to highlight in order to explain the context of the document:

  • The National Tourism Administration is a quasi-governmental body at the national level which issues directives that lower government levels must implement.
  • The tourism industry was identified as a key economic development sector as the national government tries to re-align the economy away from “investments in fixed capital” and “exports”, towards “household consumption”.
  • The “2016-2020” period is the timeframe for “The 13th Five-Year Plan for Economic and Social Development of the People’s Republic of China”. The year 2020 is stated again in the last paragraph.
  • A budget in capital investments for roads for 2017 was released on March 5, at the National People’s Congress, two days before the article was published.

We can clearly see in the article that the central government will immerse itself in the minutia of governing when it impacts national objectives. It will not hesitate to provide detailed guidelines that all levels of government must implement.

It also indicates that the autonomy of the lower government levels is limited by whatever the national government elects to get involved in. There are few areas of decision that are entirely at the lower levels. If any action is undertaken by the lower governmental level, it must be validated by the national government, unless a national directive has been issued on that topic.

This most probably reduces the level of initiatives that are taken at the lower levels by government employees as they await decisions and directives from the national government. This is clearly a top-down government structure, not a bottom-up approach to governing.

Not a good way to encourage the development of initiative that has been identified as vital for the future growth of China.

Pierre

Netflix, Not in China

Netflix is in every country in the world except North Korea, Syria and China. For North Korea and Syria, it is easy to figure out why, but for China it is more complex. Let us have a look at what has prevented Netflix from entering China.

Netflix Around the WorldCountries where Netflix was offered in early 2017. Source: Business Insider.

Early on, Netflix knew that they had to proceed carefully with their efforts to enter China. They communicated extensively with the national government, interfaced with the proper government departments and studied the business landscape. They were determined to try to find a way into China with its population of 1.4 billion. Unfortunately, they encountered challenges that could not be resolved.

The first hurdle was regulatory. The Chinese government, similarly to western governments established a series of rules that govern what cannot be shown in films, on TV and through on-line streaming. Topics related to health (smoking, drinking, etc.), and sexuality have been extensively regulated in a large number of countries, including Canada, Europe and the USA. China, through SAPPRFT (State Administration of Press, Publication, Radio, Film and Television) has established a more comprehensive series of regulations. Here are the categories of topics that are banned:

  • Does not meet the national conditions and social systems, to the detriment of national image, endangers national unity and social stability
  • Damages ethnic groups unification
  • Violates the state policies on religion
  • Promotes feudal superstitions contrary to science
  • Exaggerates terrorist violence, or shows ugly behaviors that potentially induce crime
  • Contains pornographic or vulgar content
  • Distorts ethnic cultural traditions
  • Harms public morality, adversely affects minors

For each category, comprehensive details were provided resulting is many topics normally covered in shows produced in the West coming into conflict with these rules.

Like so many regulations in China, there is substantial leeway in their interpretation, making life more challenging for companies that need to meet those regulations.

These guidelines were tightened in early 2016, and affected foreign companies like Disney and Apple who both had been able to develop a market for their online entertainment content. Both saw their online services permanently interrupted.

Netflix could not find a way around these comprehensive regulations.

Netflix Regulatory ChallengesNetflix faced regulatory constraints in China. Source: Bidness Etc.

The other challenge that Netflix encountered was the strong desire from the national government to support local champions. Over the years, China has endeavoured to develop local companies in support of a “Made in China” policy that it frequently advocates. This policy is applied firmly particularly if the foreign company has no capabilities to improve the Chinese society. In this area, Netflix was not able to demonstrate that it possessed technology that would be of value in the Chinese market. Even if it had, Netflix would have had to follow the challenging content rules in order to obtain an operating permit.

Netflix - AlibabaNetflix and Alibaba squaring off in China. Source: Bidness Etc.

So, as with many other foreign internet companies like Twitter, Google, Facebook, eBay; Netflix will not be operating in China. Netflix has elected to license in-house developed programs to Chinese companies. But these will bring only modest revenues compared to being able to serve this large market. Instead, Chinese companies, like Alibaba and Tencent will continue providing on-line video streaming services as Netflix had nothing to offer that was of interest to the government.

Pierre

Note: For further details on the regulatory requirements, refer to: https://qz.com/630159/chinas-new-television-rules-ban-homosexuality-drinking-and-vengeance/, or to the original site in Chinese where one can use Google translation to obtain it in English: http://www.gov.cn/flfg/2010-05/20/content_1609751.htm.

Economically, is China no. 1 or no. 2?

Is China the leading nation with its newly acquired economic might, or is the USA still the economic leader? The economic forces that we will briefly analyse are the size of the economy, the level of international trading, foreign investments, and the financing provided to other countries.

Over the last 30 years, the economic growth of China has been phenomenal. The most talked about measurement to assess the economic might of a nation is the GDP (i.e. creation of economic wealth). The challenge in comparing countries is that the value of the GDP needs to be converted from the currency of the country into a common currency, generally the US dollar. Often the number that is used is the GDP at CER (Current Exchange Rate, also called Nominal), compared to the GDP at PPP (Purchasing Power Parity).

GDP at CER is the GDP in local currency converted into US currency using the currency exchange rate at the time the two countries are compared. The challenge for this method is that the currency exchange rate is at times established artificially and is often subject to rapid fluctuation due to external factors.

For 2016, China’s GDP was 74.4 trillion RMB. For 2016, the value of the Chinese currency was on average 6.6 RMB to the US$, while in early March 2017 it was 7.0 RMB to the US$. Let us convert the Chinese GDP from RMB into US$, for these two values.

  Value in trillion
  In RMB In US$
 

Rate of

Rate of

 

6.6

7.0

Chinese GDP

74.4

11.1

10.6

Comparison of China’s GDP at two different exchange rates.

We note that the value of the Chinese GDP has shrunk by US$0.5 trillion (11.1 – 10.6), while in fact, the actual GDP value has remained the same.

The comparison of the GDP at PPP uses the actual wealth generated in goods and services, and the resulting power of consumption that is compared between two nations. It is for that purpose that for an end result that better reflects the reality, the GDP at PPP is used. In the CIA Factbook, one of the most comprehensive accessible database that covers all countries, comments on the GDP for China read: “Note: because China’s exchange rate is determined by fiat rather than by market forces, the official exchange rate measure of GDP is not an accurate measure of China’s output; GDP at the official exchange rate substantially understates the actual level of China.”

The following table presents the GDP converted in US$ at PPP for the G20 nations.

gdp-at-ppp              GDP of the G20 countries in US$ at PPP. Source: CIA Factbook

We see that the GDP of China at US$21.3 trillion is the largest in the world, even exceeding the combined current economic might of the 28 states in the European Union. It also exceeds the GDP of the USA by almost 15%. In fact, China’s GDP surpassed the US GDP in 2015. No other country approaches the economic might of these two nations.

A country can also impact or influence another country through trade. By using data from the CIA Factbook for exports and imports, we see that China’s Total Trade value marginally exceeds the numbers from the USA. For this analysis, we have added to China a portion of the numbers for Hong Kong.

 

Export value

Import value Total Trade
  US$ trillion US$ trillion

US$ trillion

China (partial HK)

2.2

1.6

3.8

USA

1.5

2.2

3.7

International Trade for China and the USA. Source: CIA Factbook

Another manner in which a country can economically influence another one is through FDI (Foreign Direct Investment). There are two types of FDI: Outward FDI where companies in one country invest in another country, and Inward FDI where a country receives foreign investments. This table illustrates both types of FDI. The Inward FDI value, for China (including HK) in 2014 (232 US$ billion) matched what the USA received (US$231 billion). For 2013, China trailed the USA by 15%. For the Outward FDI, the USA leads over China with China rapidly catching up.

outward-and-inward-fdiOutward and Inward FDI. Source: UNCTAD

Lastly, countries can influence other countries by lending them money. In this case, the USA has historically been the leader. Recently, China pulled off an amazing feat by launching a competitive institution that rivals the US. Since the Bretton Woods Agreement of 1944, the global framework for the world economy was dominated by the leading powers at the end of WWII. With the rapid growth of China, it came knocking at those doors, which remained closed. So China decided to introduce its own international banking organization. In 2014, China launched the Asian Infrastructure Investment Bank (AIIB) with the implicit goal of rivaling the World Bank, which is indirectly controlled by the USA. The USA encouraged western nations not to join the AIIB, but it failed. By the end of 2016, the AIIB already had 57 member nations, with 6 more aiming to join.

So overall, where does China stand? Let us tabulate the above information.

 

China

USA

GDP at PPP

+15%

 Trailing

Trade

Slight lead

 Decreasing

FDI

Catching up

Slight lead

Foreign Lending

Catching up

Solid lead

Comparative information. Sources: Various

There is no obvious economic leader, but what is clear is that over the last decade, China has nearly caught up with the USA in all aspects of what can impact the economic might of a nation. With a population of 1.38 billion compared to 0.32 billion for the USA (4 times smaller), it is a sure bet that in the near future China’s economic might will exceed the power of the USA, and in fact will easily surpass the USA by the middle of the 21st century.

So the answer to our question is: “It can be said that China has the largest economy. But in terms of economic might, the USA remains number 1, but only marginally. Within a decade or so, China will have taken over that position”.

Pierre

Round 1: China 1 – USA 0

In a previous blog, I discussed the China-USA dynamic in the Trump era. After the first month of the Trump administration, it is most interesting to see what is happening on the world stage in regards to the dynamic between these two hegemons.

walmart-in-china        Source: China Daily

In its rapport with the USA, China has built on its cultural strength based on its long history, and has come on top of this game. Over 2,500 years ago, a Chinese sage put in writing the fine art of power. Sun Tzu wrote The Art of War, which is required reading at military academies around the world.

The Chinese have put in practice this long rehearsed skill. No wonder the Trump administration was bamboozled.

A recent article in BBC News details the strategy and accomplishments of China over the last few months. The totally amateurish Trump administration could not stem the “charm” and “power” of China.

Welcome to the new world order where cunningness trumps strength and brashness.

Pierre

BBC News Link: http://www.bbc.com/news/world-asia-china-39061702

Air pollution – How bad is it?

Western media often show pictures or discuss the air pollution challenges facing China. Almost everyone has seen pictures of people with face masks walking in a grey haze. Are these rare occurrences? Is it as bad as it seems? Let us have a look at what is happening.

tiananmen-square-in-beijingTiananmen Square in Beijing. Source: Source: Reuters

The key issue for air pollution in China mainly focuses on small particles in suspension in the air. Unlike the West, which faced the acid rain challenge in the 1970’s, China faces a different problem, though it can be difficult to appreciate the extent of the challenges as pollution is not openly discussed in the Chinese media.

Let us understand what the PM2.5 standard is. PM2.5 stands for Particulate Matter of 2.5 micrometers (0.0025mm) or less. The World Health Organization (WHO) has established a guideline and a guide for PM2.5. The guideline stipulates that PM2.5 should not exceed     10 μg/m3 (micrograms per cubic meter) annual mean (i.e. similar to average), or 25 μg/m3 24-hour mean for it to be acceptable. The WHO guide on PM2.5 is as follows.

who-air-quality-guide-for-pm2-5World Health Organization Air Quality Guide on PM2.5. Source: WHO

It is to be noticed that China has set the PM2.5 at a higher acceptable level than the WHO standard. The acceptable annual mean was increased from 10 μg/m3 to 35, and the 24-hour mean from 25 μg/m3 to 75. In effect, China has tripled the level set by the WHO, which makes it less demanding.

Let us now look at the actual PM2.5 pollution over the years. The data was obtained from the US Embassy in Beijing, which has a monitoring station on its roof. An analysis of the data has provided the following table.

beijing-air-quality-2008-2015 Source: US Embassy in Beijing (www.stateair.net/web/post/1/1.html).

For example, based on the above graph, roughly 180 days a year (i.e. 49% of 365 days) in Beijing would have a PM2.5 that would be Unhealthy (i.e. between 151 and 200).

If we use the mid-point value in each category of the WHO Air Quality Guide, we arrive at an annual average of 163 μg/m3, which is 4.7 higher than the Chinese acceptable standard and 16.3 times higher than the WHO acceptable standard.

The PM2.5 pollution is not distributed equally across China and affects particularly the eastern regions which are large consumers of coal, with an even greater pollution level in the provinces adjoining Beijing.

provincial-distribution-of-pm2-5-pollutionProvincial distribution of PM2.5 pollution, 2008-2010. Source: NASA

We can therefore conclude that the air pollution issue is of serious concern in China. But how do the Chinese people feel about this issue?

In a survey in spring 2015, the Pew Global Survey found that nationwide 76% of Chinese view air pollution as a moderate (41%) or very important (35%) problem. If this survey would have been done in the provinces that are most affected by air pollution, the percentage would have been understandably higher.

coal-consumption-of-coalNational wide, the consumption of coal generate by far the largest percentage of the PM2.5 pollution. Source: AFP

In China, air pollution contributes to an estimated 1.2 million premature deaths annually through an increase occurrence of lung cancer, cardiovascular disease and respiratory disease.

The state has realized that this issue has impacted a large segment of the Chinese population. It has started to take action, but for some, it is too little. To a limited extent, people have taken to the street to protest. The state has reacted forcefully to any public display of disapproval as seen in the city of Chengdu in Dec. 2016, where protesters were arrested and a planned protest was prevented.

sit-in-protest-in-chengdu        The sit-in protest over problems of smog in Chengdu lasted for 10 minutes before the demonstrators were taken away by police. Source: Twitter@paleylin

In an upcoming post, we will look at the actions taken by the government and what could be done to address the fundamental sources of the PM2.5 problem.

Pierre

Note: An excellent article (Jan. 18, 2016) from the Council on Foreign Relations presents the environmental challenges that China is facing (China’s Environmental Crisis). It can be found at: http://www.cfr.org/china/chinas-environmental-crisis/p12608

An amazing feat

Over the last decades, China has achieved a drastic reduction in the number of people living below the poverty line. In 1981, 88% of the population was living below that line. That number now stands at 4%. The poverty line is defined as a person living on less than $1.90 a day, using 2011 $ at purchasing-power parity.

This amazing achievement has been accomplished since the economic restructuring that began in 1978, and has continued uninterrupted since. Per capita annual income has increased from $200 in 1990, to $5,000 in 2010, and has continued to improve.

Poverty reduction occurred in stages. The first stage happened in the rural areas with the introduction by the central government of the Rural Responsibility System which allowed families to produce more than their allocated production quota. The additional production was sold on the open market at market prices.

The second stage was the progressive opening of the Chinese economy to foreign direct investments (FDI) that created a multitude of enterprises geared towards exports, capitalizing on the low cost of labour. This had the impact of creating a large number of unskilled positions that brought many people into well-paying jobs in an urban setting.

poverty-level*Living below $1.90 a day, using 2011 $ at purchasing-power parity. Source: The Economist

In the early 1990s, the central government privatized small and medium size State Owned Enterprises (SOE’s) removing the rigid constraints of a centrally planned economy and placing these companies in a market economy. Once subjected to the forces of the market, millions of employees were laid-off, but within a few years many more jobs were created due to the innovative needs placed on the new owners.

In parallel, in 2001 China joined the WTO (World Trade Organization), accelerating the economic development of the country. Many more foreign enterprises elected to establish a facility in China, again adding a large number of jobs in an urban setting. By now, local entrepreneurs had also started creating employment opportunities.

By the turn of the century, at least 200 million people had been lifted out of poverty. In the next 10 years, another 200 million people would follow, as the economic expansion continued. By 2014, a total of 700 million people were lifted out of poverty, leaving only 4% in economic difficulties. These last 55 million people are now the focus of the government.

The efforts to continue reducing poverty is one of the key objectives of the government 13th Five-Year Plan period (2016-2020). The goal of the central government is to eradicate poverty by focusing on the 128,000 poor villages and 832 poor counties, predominantly in rural settings, in provinces located away from the coastal zones. In addition to focusing on economic conditions, the government is aiming to increase the quality of education, health services and housing.

The prime strategy to address these challenges is to encourage the development of competitive industries such as tourism and agriculture. In regions with limited economic development potential, residents will be moved. People will be relocated to areas which have greater economic possibilities. In addition, the government will introduce a guaranteed basic living standard for people unable to work.

gansuTourism features as a key economic tool in Gansu province, which has a GDP per capita at half the national average, and 4 times lower than the leading areas. Source: chinatouristmaps.com

In spite of these successes, different challenges were created as a result of this rapid economic growth. Probably, the greatest social challenge in China is the economic inequality that currently exists. In the 1970s, everyone had roughly the same economic level; more or less everyone was poor. As economic growth accelerated, and the economy moved from a centrally planned to a mixed economy (i.e. a combination of centrally planned and market economy), inequalities emerged. People who had post-secondary education were able to command higher salaries. Entrepreneurs were able to start businesses that rapidly flourished. Others were able to benefit from the privatization of small or medium size SOE’s. These groups of people raced towards reaping the benefits of rapid economic growth while the individuals with no or limited access to these capabilities progressed at a much slower pace.

Another challenge created by the central government relates to the partially deregulated liberty of movement. The Household Registration System (hukou) or similar methods have always been a cornerstone of the Chinese government’s desire to control the internal movement of its citizens. In the late 1980’s and early 1990’s people were given the opportunity to relocate but without establishing a permanent residency in their new location. This allowed this floating population of roughly 250 million people to move from rural areas to cities in search of better paid work. As these people did not have the hukou in the city where they worked, their children and at times their spouse had to remain behind. This has created a diaspora across China of broken families that are only reunited for 5 to 14 days, once a year during the Spring Festival (i.e. Chinese New Year) held in January or February.

Both challenges are being addressed by the central government but at a rate that will see these inequalities solved at a slower pace. By 2020, it is quite probable that the poverty issue will have been nearly resolved, but the problems caused by the substantial economic inequalities and the large floating population will probably take longer.

Pierre

Guokao time

Every year on the 4th Sunday of November more than a million people write the National Civil Service Examination (NCSE) required to apply to positions with the national government. This selection process launched in 1994 is modeled on the imperial examination, which goes back to the 6th century. The purpose is to provide equal opportunity to people across the country for desirable positions within the national government.

ncsvApplicants getting ready to write the China’s National Civil Service Exam. Source: Getty Image

In 2016, a record 1.5 million people from across China applied to write the common exam for 27,061 openings. Candidates are invited to apply to the positions that are of interest, with some positions garnering more than 10,000 applicants. At the same time, roughly 800 positions had no applicants as they are located in faraway regions or require particular training or knowledge.

Chinese citizen are eligible to register for this exam if the candidate is under 35 years old (40 for Master’s and PhD (age discrimination!)) and have a college degree as a minimum. People can apply as often as they want. In 2016, a woman wrote it for the 6th time.

The NCSE is a test that comprises two phases: the written test, and if you pass an interview. The written test comprises 130 multiple choice questions that need to be answered within 2 hours. These questions cover topics in language, math, logic, data analysis, politics, law, culture, etc. The following are two examples of questions that may be asked. The answers are provided at the end of the post.

  1. Observe the images below and pick out the right one that belongs to the blank or the group.

ncse-question

  1. The Indian Ocean earthquake and tsunami showed humans the power of the nature. Although we have islands and submerged reefs as natural barriers to tsunamis, we need to be prepared for potential dangers. Sometimes the earthquake in the deep ocean does not cause any loss as the epicenter is far from the land, but the tsunami generated by the displacement of the water can cause huge damage. Tsunami waves can move at 800 km per hour in the ocean and can be several meters high. The main argument in the paragraph above is
  1. Earthquakes and tsunamis warn people to pay attention to the ocean
  2. Earthquakes and tsunamis in the Indian Ocean warn us to focus more on oceanography
  3. Tsunamis generated by earthquakes can cause huge damages
  4. Natural disaster is cruel

If a candidate is caught cheating, the person is banned for life from applying for a government job, and for serious cases, a criminal charge can be brought against that person possibly resulting in a prison term of up to 5 years.

The second part of the written exam, of a 3-hour duration, is an essay writing on policies with topics covering social issues, civil disputes, etc.

Applicants often begin studying for the exam months in advance. A small industry has been created to respond to the needs of preparation material, which is not unlike what is offered in the West for GMAT, LSAT, and others. Books, online material and classes are sold to potential candidates.

ncse-study-material

Study material to prepare for the National Civil Service Exam. Source: JOJBuy

Once the results are available in January, the successful candidates are then invited to an interview. Once a further screening has been done, the results are shared with the respective government departments who have posted job openings, allowing these departments to invite candidates for further interviews and evaluation.

Numerous people are interested to work for the government as these jobs are for life. Unless a person abuses their position (i.e. corruption), the employee will not be let go, regardless of personal performance. A steady income is offered along with good benefits, and a work environment with limited stress.

In addition, public servants have a good reputation and are well respected. To work for the government implies that the individual is helping build a better society. The extended family of the employee will be proud to see that one of their own is now a public servant.

The other point that has to be taken in consideration is the job market. With 7.6 million college and university graduates a year, and a soft job market that is not able to absorb this number of graduates, students are pursuing all job opportunities.

Unfortunately not all is rosy. Generally jobs are paid at a much lower level than in the private sector. Middle managers in their 30’s will be paid around 120,000 RMB (C$24,000) a year, while in the private sector, they might be paid 3 to 5 times that amount. Job security comes at a high financial cost.

Government employees will generally work in a system that is not conducive to personal growth or development as there are limited opportunities for horizontal transfers or promotion. This will often lead to boredom and low motivation.

Also, as employees progress within the civil service, they will reach a level where being a member of the Communist Party of China (CPC) is often required. This might further curtail opportunities for promotion of non-CPC members.

In regards to the selection process, the high standards that are applied and the desire to apply a meritocratic process can only be lauded. China is a society that prides itself in being inclusive. Unfortunately, this system is rigid; offered only once a year and standardized (i.e. one size fits all) for all job types. There are no signs of nimbleness and capabilities to adjust to rapidly evolving situations. In an era where the government is pushing to realign the economic model of China, with a substantial emphasis on innovation and creativity, is this system preventing changes within the government?

Pierre

Answers

Question 1: From left to right, there’re increasing numbers of small shapes in each image. 1. One round 2. Two quadrangles 3. Three candle-shaped images 4. Four trapezoids 5. Five triangles. The image with six small shapes is the correct answer.

Answer: A

Question 2: Answer: B

Google; not in China

All large companies that target a broad spectrum of consumers and are active around the world need to be present in China. With a potential consumer base of 1.36 billion, this is an opportunity that no company can avoid. Not Google. Here is the story of what happened.

Created in 1998 by two students from Stanford University (California), Google is the leader in the search engine market with Google Search. It is the most widely used search engine in the US with a market share of 60%. Across the Western world, it has a similar market share.

In 2005, it established a fully owned subsidiary in China. In Jan. 2006, Google launched its China-based google.cn search engine, with results subject to censorship by the Chinese government.

google-china
Source: Google

By early 2009, its market share in China was 78%, with Baidu trailing at 18%. It was well positioned to capitalize on the Chinese market.

In March 2009 China blocked access to Google’s YouTube site due to footage showing violent images in Tibet. Access to other Google online services was also denied to users.

In January 2010 Google announced that, in response to a Chinese-originated hacking attack on them and other US technology companies, they were no longer willing to censor searches in China and would pull out of the country completely if necessary.

By April 2010, searching via all Google search sites in all languages was temporarily banned in mainland China, without affecting Google Map or Google Mail.

baiduBaidu is the Chinese market leader in search engine. Source: http://www.baidu.com

In November 2012, China had blocked access to Google. All Google domains, including Google search, Gmail, Google Maps, YouTube, etc., became inaccessible.

By 2014, in response to a series of terrorist attacks, China tightened its Internet censorship.

Google’s Gmail, Chrome, Map, YouTube and Google-based search inquiries have not been available to mainland China users since 2014. However, Google has maintained that it would continue with the research and development offices in China along with the sales offices for other Google products such as Android smartphone software.

youkuYouku online video service. Source: www.youku.com

By mid-2015, Baidu dominated the market of search engines with a share of 55%, followed by Haosou at 26% and Suogo at 10%. No western company had any meaningful market share in the search engine market in China. The same happened with online videos, where YouTube was replaced by iQiyi and Youku, which are key players in this market.

Pierre

The size and complexity of China

Often in the West, when China is a topic of discussion, often individuals do not realize its size and complexity. People generally know that China is the most populous country in the world (1.37 billion). They know that the economy is large and growing. But few know the extent of the challenges that the political leadership is forced to deal with.

China is divided in 34 political entities: provinces (23), autonomous regions (5), autonomous cities (4) and special administrative regions (2).

political-structureSource: http://www.wikipedia.com

Of these 34 entities, a total of 18 provinces have a population greater than Canada (35.4 million). If the Guangdong province with a population of 107 million were an independent country, it would be the 13th largest nation in the world!

One might say that ethnically, China has a relatively uniform ethnic structure with 92% of the population being of Han origin. But one must consider that 55 ethnic minorities are recognized by the government, with their own rights (e.g. not subjected to the previous one-child family limit, combined with additional advantages).

Linguistically, the situation is even more challenging. One might state that Mandarin is the official language of the country and that the written language is the same across China. But the challenges come from the fact that the verbal language can vary substantially from region to region where people are totally unable to understand each other. If we go back to the Guangdong province, the common language is Cantonese spoken by 70 million people. These people would not understand much from a Mandarin speaker. China has 270 living languages (i.e. with a sufficient number of people to carry on being spoken). This challenge is illustrated by the subtitles shown in all Chinese movies so that people of other languages spoken in China can follow the story.

When it comes to religion, the situation is also diverse. Officially, China is a non-religious state, as advocated by communist precepts. In spite of this approach, religions have always and continue to play an important role in China. The main religions are Taoism, Confucianism, Buddhism (6%), Islam (2%) and various Christian denominations (2%). Approximately, 40% of the population practices a religion.

religion

Buddhist ceremony. Source: Unknown

Cultural differences are also felt across the country. One can easily hear comments from a Shanghainese about the “laissez-faire” attitude of the southerners in Hainan. In the north or the west, they will criticize Shanghainese for their aggressiveness. People from Beijing will be perceived as snobbish since they live in the nation’s capital. People in parts of the country will prefer to work for State Owned Enterprises that are much more predictable, while in other parts of the country, their entrepreneurial spirit will lead them to start their own business.

Finally, the economic disparities compound the above diversities. The first level of differences is between the rural areas and cities, where the cities are much richer than rural areas. This results in service (education, health, etc.) in rural areas being at a lower level than in cities. Secondly, between provinces, where the spread between the lowest and the highest is in a ratio of 4 times (GDP of $30,000 per person compared to $7,500). This will draw residents in poor provinces and rural areas into richer provinces or cities, in spite of the strong effort of the government to curtail this movement.

All these represent potential centrifugal forces that the central government needs to address on a continuous basis. How can it succeed, is an important question for the economic stability of the rest of the world.

Pierre