Sunday 13 July 2008

An insight from Asian airports

On a recent trip to India I had a meeting with a director of a leading Indian motor manufacturer. It gave many insights into relevant issues in the industry but the most striking was a much more general observation.
We were discussing - as is an inevitable topic of conversation with any foreign business figure - the deplorable state of Heathrow airport. This led to a discussion about the relative merits of various US airports which were considered preferable.
I remarked that I was suprised that he had not mentioned Singapore or Hong Kong, as these seemed to me superior even to the US airports he mentioned - or even Shanghai compared favourably to some he discussed. He replied: 'Well yes, of course, but you can't expect Asian standards in the US or Europe.'
Note the structure of the thought. He automatically considered the US and Europe on a lower standard of comparison than the most advanced Asian ones. Not that this applies, of course, to all Asian airports - Delhi or Mumbai themselves do not yet come up remotely to the best European or US standards. But he already internally judged that the highest levels set in Asia were on a far higher level than the US or Europe who had become 'poor cousins'. This from a leading business figure.
Thirty years ago such a view would have been inconceivable. Today few outside Asia understand it exists. But it confirms once again just how much globalisation is not a purely economic process. It will transform perceptions as well. Not only an economic but a cultural earthquake is developing.

The Chinese Blogsphere

Richard Edelman has an extremely informative post on his blog regarding the state of the Blogsphere in China which deserves the widest possible circulation - as does one of the comments on it. They reflect the real situation in China - the relevant post is for 13 June. http://www.edelman.com/speak_up/blog/

Richard Edelman's post is as follows:

State of the Chinese Blogosphere
I am at Edelman’s annual leadership meeting in Shanghai. We just heard from a group of Chinese bloggers, including Raymond Zhou, Isaac Mao, Steven Lin, Tangos Chan, Sam Flemming and Adam Schokora - disclosure; Mr Schokora works for Edelman China. Here are some of the most salient points:
1) Social media in China has two constant themes: the rich/poor divide and nationalism. According to Mr. Zhou, there is tremendous risk in ignoring blogs with “anti-China feeling,” such as those prompted by Sharon Stone’s recent comment about the earthquake in Sichuan Province caused somehow by Chinese behavior in Tibet. “Christian Dior did exactly the right thing in distancing the company from her and even making up an apology for her.” He noted that Carrefour didn’t respond to false claims that they supported the Dalai Lama, which spread like wildfire across Bulletin Board Systems (BBS) until they reported by mainstream media. “By playing the victim, being passive in the face of attacks, the company allowed the venom to go away.”
2) The large mainstream media, including China Daily, People’s Daily and CCTV is “a one direction world,” said Mr. Mao. “But we are now in a many to many world. Even though my parents get most of their information from TV, I send them text messages via the cell phone, so the world has become less hierarchical.” There was a text message alleging that one of the owners of Carrefour was financing the Dalai Lama. Then each person has to forward the text message to ten people, otherwise, you are not patriot.
3) Bulletin Board Systems (BBS) is the dominant form of social media in China, noted Mr. Flemming. For example, 200,000 women posted 1 million messages last month on cosmetics and 300,000 people put up 5.5 million messages on autos, he stated. There are vertical BBS options such as Xcar. Mr Tangus said that smart companies are now making it easy to grab video content on their web sites that can easily be sent via BBS. Mr. Zhou added that BBS is becoming highly segmented; “there are now micro-hobbies within each hobby.”
4) Commercialism has made blogs quite sensational. Mr. Zhou suggested that “in a world where performance is based on the number of page views, bloggers tend not to be the best journalists.” He provided a hypothetical example of a BMW running onto the curb and hitting a pedestrian as a perfect blog post that would be put onto the front page of Sina.com because it plays to the stereotypes of the rich person. Mr. Mao said that mainstream media often gets story ideas from bloggers; he suggested that Beijing residents will likely complain on-line during the upcoming Olympic Games about the traffic or impolite tourists. “Social media will portray this as the non-harmonious Games.”
5) BBS and blogs are amplifiers of stories in mainstream media. “The angry youth of China made their voices heard on-line after the torch relay incident in Paris,” said Mr. Mao, then the mainstream media reflected that feeling. After the recent earthquake, most of the bloggers had to rely on the Government for information, particularly CCTV, said Mr. Chen. “Then in the relief stage, there was lots of BBS discussion, giving us a more comprehensive picture of what was happening.” The blogs and BBS helped to raise money for victims while also “serving as a place for public grieving, to post prayers for the dead.” For a special report on how the Chinese blogosphere covered the earthquake, go to CICdata.com.
6) The best Chinese bloggers are from mainstream media, said Mr. Zhou. “They use social media because they are not as closely regulated as in their regular jobs.” He cited the reporter from Xinhua who blogged continually from Sichuan Province during the visit of Premier Wen Jiabao to catalyze the relief effort. Mr. Lin believes that “bloggers consider themselves reporters now; they dig out stories.”
7) Companies are getting serious about digital spend in China. Mr. Flemming said that brands can achieve awareness through TV advertising but “to tap into consumer passions, you need to go on line.”
8) The Chinese and English blogospheres are quite closely connected, said Mr. Mao. Some of the prominent Chinese bloggers such as Tangos Chan blog in English.
9) As in the US, there is huge attention paid to celebrities in the on-line world, according to Mr. Schokora. “But most blogs are about people’s lives,” he said.
These bloggers were incredibly impressive, committed to change, convinced that they were part of a new China where individual expression and frank speaking will win. They love the idea that in Mr. Zhou’s words,”We have moved beyond the propaganda posters as the voice of the people. Now we have a platform for ordinary citizens to give their views.” They also relish the high level of involvement in social media; according to Mr. Flemming, “98% of Chinese with access to the Internet have contributed to blogs or BBS.” I would appreciate your views as always.

The comment with information which should be widely absorbed to understand the scale of internet use in China is by Adam Schokora.
http://www.edelman.com/speak_up/blog/archives/2008/06/state_of_the_ch.html#comments

Thanks for the post Richard. Great info.
Allow me share a few numbers to help put a bit of context around the Chinese digital / social media landscape.
- 235 million Internet users; the largest Internet user population in the world
- Nationwide penetration of Internet usage is still quite low, at about 15%; a sign of tremendous growth yet to come
- 75% of these 235 million users are urban residents and educated
- 80% of these 235 million users are between the ages of 15 – 35 years old
- 60+ million active blogs- 80+ million active participants on BSS forums (bulletin board system, i.e. online discussion forums)
- Of these 80+ million BBS users, 36.3% spend 1 - 3 hours a day reading/contributing to different forums; 44.7% spend 3 - 8 hours, and 15.1% spend 8+ hours; 60% will login to at least 3 BBS forums more than 3 times a week
- 3 billion registered BBS users (a single netizen can register to different forums multiple times)
- Chinese BBS forums experience 1.6 billion page views and 10 million new posts daily(!)
- 600+ million mobile phone subscribers (in Q1 of 2008, Chinese mobile phones users sent nearly 175 billion text messages)
- China is consistently adding 5 - 10 million new mobile phone subscribers a month[The above figures are extracted from the January 2008 results of the China Internet Network Information Center's (CNNIC: www.cnnic.net.cn/en/index) biannual survey of the Internet in China. Some figures have been adjusted upward to account for inevitable increases over the last 6 months. CNNIC's mid 2008 survey results will be published in the very near future. Watch CNNIC for the latest figures.]
Thanks,
AjS
Posted by: Adam Schokora at June 22, 2008 8:23 AM

Friday 11 July 2008

Asia's developing academic and cultural challenge

Most companies and commentators in the US and Europe, except at the very top, still greatly underestimate both the form and the scale of challenge that is coming not only from the BRIC economies but from Asia more generally.
To some extent the economic power of Asia is understood - although even here there is still frequent underestimation of the scale of the shift taking place. But the way in which this will progressively spread into other fields is still not adequately grasped. This process is only beginning but it will continue to deepen.
Fortune on 11 July therefore carries a particularly illuminating article on the effect that is beginning in the academic field.
http://postcards.blogs.fortune.cnn.com/2008/07/11/business-schools-new-tests/
Linda Livingstone, dean of Pepperdine’s Graziadio School of Business and Management, notes in an interview the process that is beginning to occur in terms of salaries paid for recruitment of some academic staff:
'It used to be that students around the world, seeking a global business education, studied in the U.S. or Europe. Today, they sign up for MBA programs in China or India—or Abu Dhabi, Dubai or Qatar. “Hong Kong and Singapore are putting tremendous effort into their MBA programs,” Livingstone adds, “and hiring business faculty has become very competitive.” One professor she knows got an offer from a business school in Singapore for three times his U.S. salary.'
This concerns an academic area closest to business, MBAs, but sheer weight of money will make its way in the world. In the same way that, due to their dynamism, the Asian economies can outbid the US and Europe for oil they are able to outbid them for academic staff - greatly reinforcing their academic and cultural positions.
This process is only at its beginning and, except in Japan, it will take a whole period to raise the 'stock' of Asian academic excellence, including in this the facilities available for research, to the same level as the US and Europe. But a number of Asian governments are consciously preparing this process. One of the most groundbreaking pieces of research carried out anywhere in the last period was the 'cultural audit' carried out by Shanghai - which London under Ken Livingstone took as a model for its own research in the field.
http://www.london.gov.uk/mayor/culture/docs/cultural-audit.pdf
http://www.thisislondon.co.uk/standard-mayor/article-23451724-details/Ken%27s+move+to+boost+London+as+world+culture+capital/article.do
This audit evidently underlay a systematic plan by Shanghai to raise its academic and cultural investment over a prolonged period - with the short term focus being strengthening its position in creative industries. The conclusion of the audit was that to achieve this Shanghai must undertake large scale investment over a prolonged period. But China has entirely adequate resources for this.
In the cultural and academic fields, compared to the economic, the shift in favour of Asia is only just beginning but is consequences will be deep.

Thursday 10 July 2008

China and India – the economic gap is widening, not narrowing

One of the most expensive mistakes that can be made in emerging markets is to confuse business and politics.
The political pages of newspapers may attempt to point business decisions in one direction when this is contrary to real business and economic fundamentals. In Russia in the 1990s, for example, even George Soros, as well as many other investors, lost large sums because they became involved in supporting people who were viewed favourably in political newspapers, instead of paying sufficient attention to these business fundamentals. In addition large amounts of time were wasted in forging links with figures who were totally peripheral to real developments – therefore failing to position companies to take advantages of key openings.
A somewhat similar mistake has been made over the last period in comparisons between India and China. There may be political reasons for preferring India to China, but this has led to the mistaken view that India may be catching up China economically, or may even be a better economic bet for the future. This is not true.
China is increasing its economic lead on India – the gap is widening, not narrowing. This is shown clearly in the macro-economic data – where China’s growth rate continues to exceed India’s , which necessarily means that the gap in GDP and overall market size is increasing. But it is also clearly seen at a company level in more detailed examination of data from the FT Global 500 whihch were considered in a previous post. It should be recalled that the FT Global 500 deals only with publicly quoted companies but it is sufficiently comprehensive, and the differences are of sufficient magnitude. to show the situation clearly. http://keytrendsinglobalisation.blogspot.com/2008/07/financial-times-global-500.html
China has almost three times as many companies in the FT Global 500, including Hong Kong, as India (35 compared to 13) and twice as many excluding Hong Kong (25 to 13). Market capitalisation of Chinese companies is over six times that of Indian companies - $2,569bn compared to $421bn. Turnover of Chinese companies in the Global 500 is six and a half times that of Indian companies.
Strikingly both Russia and Brazil continue to be stronger than India at the large company level. Market capitalisation of FT Global 500 companies is Russia $820bn, Brazil $621bn, India $421 bn. In terms of turnover the figure for Russian companies is $295bn, Brazilian $178bn, Indian $87bn.
Evidently, strategically, India is a more important market than either Russia or Brazil. India’s population is much larger than Brazil or Russia. Its growth rate is second only to China’s among the largest emerging markets. The Indian market is therefore immensely important. But China’s economic lead over India is still growing not decreasing.

Sunday 6 July 2008

Key trends in the Financial Times Global 500

As always the publication of the Financial Times Global 500 conveys a great deal of information about the world's most important publicly quoted companies - FT rankings are by stockmarket capitalisation. http://www.ft.com/cms/s/0/e01aab98-40c9-11dd-bd48-0000779fd2ac.html
However the presentation of the material by the FT does not bring out some of the most important trends as a comparison to 1996 is carried out in terms of individual countries. Reorganisation and aggregation of the data shows key trends more clearly.
The most striking trend is the sharp decline in the weight of US and Japanese companies.
In 1996 US companies accounted for 40.6 per cent of the total number of Global 500 companies, and by 2008 this had declined to 33.8 per cent. The decline of Japanese companies was even sharper from 22.0 per cent to 7.8 per cent. A smaller decline took place for the UK.
Unsurprisingly the largest gainers were BRIC (Brazil, Russia, India, China) companies. These rose from 3.2 per cent of the total in 1996 to 14.4 per cent in 2008.
But Eurozone based companies also advanced significantly from 13.4 per cent to 19.8 per cent of the companies in the same period.
The weight of the traditional bloc of US, Japanese and UK companies declined from 71.8 per cent of the total to 48.6 per cent.
These shifts are magnified by the decline in the value of the dollar, but that in turn partially reflects overvaluation of the dollar in the previous period.
At the level of national economies the shift in the balance of the world economy is well recognised - the majority of world GDP growth last year being in China, India and Russia, and in terms of dollar devaluation the Eurozone, in current exchange rates, became the world's largest economic unit following the decline of the dollar. But this new data also shows strikingly the shifts in terms of companies.

Saturday 5 July 2008

Tourism resists the international recession

Highly interesting figures have been produced on the strong performance of world tourism in the early part of 2008 from the United Nations World Tourism Organisation (UNWTO) despite the overall international economic slowdown. http://www.unwto.org/media/news/en/press_det.php?id=2532&idioma=E
These figures are rooted in the well established trend that as personal incomes rise leisure services, of which tourism is a major part, are one of the few sectors of expenditure on which customers spend not only more in absolute terms but an increasing proportion of their income - clothing, health and education are others (although in many countries the latter two are in large part provided by the state).
Promotion of tourism, and suitable physical infrastructure for tourism, therefore has to be an increasing part of county and city economic programmes. However promotion of many tourism in a number of countries remains amateurish -an exception among emerging economies is India's 'Incredible India' campaign which is of extremely high quality. China in contrast continues to drastically underperform in professionalism of tourism promotion and this has doubtless contributed to lower than anticipated visitor numbers to Beijing for the Olympic Games.
World tourism rose by around 5 per cent in the first four months of 2008 compared to the same period in the previous year - one per cent above the long term trend. This was despite the pressures to slowdown in the world economy as a whole. According to UNWTO:
'All sub-regions posted positive results in the first months of the year. Growth was fastest in the Middle East, North-East and South Asia, and Central and South America. North-America is on track for a clearly positive year thanks to the strong inbound travel to the USA, while arrivals to the Caribbean started to rebound well on last year’s stagnant results. Growth was more modest in Europe, with best performances coming from Southern and Mediterranean destinations.A variety of destination countries all around the globe reported double-digit growth rates in the first three to five months of 2008, among which in Asia and the Pacific: China, Japan, Republic of Korea, Macao (China), Cambodia, Indonesia, Vietnam, Fiji, India and Nepal; in the Americas: the USA, Cuba, Jamaica, Costa Rica, El Salvador, Panama, Chile, Peru and Uruguay; in Europe: Sweden, Bulgaria, Latvia, Lithuania, Israel, Malta, Montenegro and Turkey; and in Africa and the Middle East: Bahrain, Egypt and Morocco.
'The anticipated softening of international tourism growth in 2008, yet still clearly at a positive level, follows four historically strong years. Between 2004 and 2007 international tourism grew at an extraordinary above average rate of 7 per cent a year, boosted by a buoyant world economy and pent-up demand after the challenges in 2001-2003... though consumer confidence indices show an increasing degree of uncertainty, international tourism has proven to be resilient in similar circumstances in the past and able to cope with various types of shocks, including security threats, geopolitical tensions or natural and man-made crisis.Accounting for these factors, coupled with a slower but still positive economic growth, international tourism is as yet expected to keep growing at a solid pace in the mid-term, broadly in line with UNWTO’s Tourism 2020 Vision forecast long-term growth rate of about 4 per cent.'
Within that framework, as would be expected the strongest tourism growth involves emerging market economies - although the top spenders in absolute terms remain the US, Germany, France and the UK. China overtook Japan and Russia overtook South Korea to rank ninth. http://www.ft.com/cms/s/0/12da54a2-49e4-11dd-891a-000077b07658.html
The UNWTO notes:
http://www.unwto.org/media/news/en/press_det.php?id=2462&idioma=E
'International tourism in emerging & developing markets has grown at an average rate of 6-8 per cent over the past decade. Twice the rate of industrialized countries.
'Tourism is a crucial contributor to these countries’ income - up to 70 per cent for the world’s poorest countries.
Development financing from global Trade; Poverty Alleviation and Climate Response should recognize the long term potential of tourism as a sustainable growth engine.
'With international travellers projected to almost double by 2020, the most significant increases are expected to take place in markets like China, India and destinations in South-East Asia. The Gulf States and emerging Eastern Europe complete this picture, followed by the Latin American and finally African markets.Many of these are becoming important outbound markets, backed by growing middle classes on the one hand, and liberalising policies promoting mobility on the other. Chinese tourists already spent about US$ 30 billion abroad in 2007, according to UNWTO figures.The domestic travel potential of emerging markets – in 2006 China registered 1.6 billion trips and India 461 million - is a further proof of their long term importance for international tourism.Between 1996 and 2006, international tourism in developing countries expanded by 6 per cent as a whole, by 9 per cent for Least Developed Countries, and 8 per cent for other low and lower-middle income economies. ' http://www.unwto.org/media/news/en/press_det.php?id=2462&idioma=E

Tuesday 1 July 2008

Globalisation and the creation of international financial centres

The rise of a limited number of ‘international financial super cities’ is a not an accidental but a necessary phenomenon in the modern globalised world economy. The two most striking examples of this development are London and New York – the world’s two largest international financial and business service centres.
Tokyo had the opportunity, in terms of the depths of its capital markets, to develop as an international financial centre to fully match New York or London. But it failed to do so due to mistakes in policy that will be examined in future posts. The result has been to create a space for an Asian financial centre to rival New York or London. The competition to settle which this will be is not yet resolved. The Chinese government is encouraging a number of its cities to develop projects to become such a centre. The objective possibilities of various Asian cities to become such a centre will be considered subsequently.
The similarities of New York and London illustrate that certain features of the development of an international financial centre are not accidental but intrinsic to their its nature. Their advantages compared to rivals will be considered.
A crucial feature is that while globalisation is rooted in the economy its effects cannot be confined to the economy. Any concept that countries will trade with each other more, and invest in each other’s countries more, but everything else will remain the same is entirely unrealistic and will decisively weaken the attempt to create a global financial centre. Globalisation has not only economic but major social, cultural and environmental consequences that an international financial centre must prepare for.
One of the key strengths of London compared to Paris in the last period for example was that Paris's attitude to international companies was 'your money is very welcome but please leave your culture behind you.' London, in addition to the much greater strength of its financial markets, adopted the approach 'your money is certainly very welcome and we assume you are going to bring your culture with you - which will help make our city more creative and dynamic.'
The cutting edge which London acquired in creative industries and culture, as well as its success in winning the Olympic Games, followed from that approach.