Category: Commercial development

CHINA AND SMART ENERGY

Smart energy solutions must be discussed when one tries to understand the current Chinese economic environment. In three of our publications already, we described Chinese engagements in electric cars, green buildings and renewable energies, and we showed the challenges that the Chinese authorities faced to fulfill these commitments.

In this April article, we offer you a critical synthesis of different reports by the National Reform and Development Council of China (NRDC), the World Bank, the US Trade Ministry and other global players. Indeed, we noticed that all these reports coincide in three points: China needs to develop an efficient management system for its energy distribution and consumption, AI technologies can be of some help (see VVR’s article from last month), and whatever happens in China will most probably be of global importance in the domain of energy.

China, a global leader in reducing carbon emissions?

With the Paris Agreement, China definitely took a leading role in the fight against carbon emissions. This strategic choice in terms of international relations, was also dictated by its internal situation, namely the alarming atmospheric pollution rate. China is thus becoming a laboratory of the energetic transition for developing countries: indeed, in 2016, coal was still amounting for 62.6% of China’s energy mix (US Trade Ministry). Besides, Chinese energetic challenges are typical of developing countries: a fast-speed urbanization rate and the development of rural zones, both increasing the country’s needs in energy. These latter increased by 6.6% in 2017, compared to 5% the year before (Global Energy Statistical Yearbook). Overall, China’s energy consumption could increase by 40% on the next 15 years (World Resources Institute).

An unefficient electric grid

Large Chinese investments have been announced in renewable energies, but worldwide analysts agree on the assessment that nowadays Chinese production in renewable energies is overly wasted because it is not connected to the country’s grid. This grid is a monopoly of two State-Owned enterprises, so it is hardly accessible to foreign businesses. Nonetheless, it is interesting to know that the State Grid Corporation, responsible for 80% of the national distribution system, has published large investments targets in smart meters (they plan to install 280 million of them by 2022) as well as automatization and distribution systems (investments worth USD 7billion by 2020).

Source : International Finance Corporation (World Bank)

Building, work in progress

Thus, green building is a priority of the 13th Five-Year Plan; in theory, half of the new constructions should be “certified” green. However, higher costs and delay in getting the certifications often deter private promoters for engaging in green building. As such, the clients looking for smart grid technologies are often the local authorities: the China Daily reported that 290 cities already launched a smart city project, amounting to 95% of the provincial capitals. These projects are likely to have a global impact: Kuala Lumpur already showed some interests in the Hangzhou’s City Brain (a project launched together with Alibaba and Foxconn). Some nuance needs to be done here: most of the projects we read about are located on the East coast, and especially in Shanghai, Zhejiang, and Jiangsu, as these provinces dispose of the suitable development and urbanization state for such projects as well as financial resources.

70% of the energy in China is going to the buildings today, 60% of which (around USD 100 billion) is wasted because of outdated or broken equipment (China Economic Review). And it just happens that 70% of carbon emissions come from cities, one third of them from the electricity consumed by buildings (NRDC).

The International Finance Corporation (World Bank) identified green buildings as the sector that will receive the most investment by 2030 in China: an amount estimated at USD 12.9 trillion.

All in all, to solve the gap between electricity offer and demand in China, the central government, local authorities, and State-Owned enterprises all turn to smart grid and other smart energy solutions. Both public and private actors in China seek to attract innovative start-ups around events such as Arup’s forum on green building (Shanghai, April 2 and 3) and the Smart Energy China Fair (focusing on IoT) and the Energy Storage China Fair (both in Tianjin, on September 19, 20 and 21). The first one claim to be the locus of discussion on public policies in Shanghai while the other two invite government officials to speak at conferences.

Which place for European companies?

Able to produce equipment at low costs, China is now looking for smart energy and smart grid technologies, which often come from the West. Some American start-ups are thus already present on the market.

Some challenges to the entry of foreign businesses in this sector should be pointed out. Firstly, there is an overall preference for local actors. One reason for that might be the fact that energy is strategic for any country’s government. Secondly, also due to national security concerns, Chinese authorities increasingly require that the data processed in big data technologies should not leave the Chinese territories, obliging foreign businesses to develop facilities in China. Solutions exist to these challenges, one of them is to find a Chinese partner. Lastly, another obstacle might be the lack of unification in urban policy, making this environment complex for a foreign actor not acquainted with the Chinese system to understand. Besides, policies are not always implemented. For instance, the objective to reduce carbon emissions as a part of China’s GDP by 40 to 45% between 2005 and 2020 had to be lowered. In China, terms such as “green” or “environmental” are mostly political or used for communication purpose, and they rarely fit with the European definitions.

Owning innovative technologies, European and French are fit for the Chinese smart energy market. During the Smart Mobility Forum which happened in Marseilles last February, French businesses showed their dynamism and innovative spirit in the domain of smart energy (although the focus of the forum was mostly transportation). Besides, France already stepped in the Chinese market: in 2016, EDF launched a smart energy project with Changfeng Energy for the city of Sanya, to reduce the carbon emissions of this town.

By Manon Bellon

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ON THE CHINESE ROAD TO ARTIFICIAL INTELLIGENCE

Much has already been written on China’s plan to become an Artificial Intelligence (AI)’s world leader by 2030. These two trendy words also appear almost daily in the Chinese media and political communication. Thus, based on the analysis of governmental plan and the reading of the relevant press, this article seeks to depict today’s actual picture of AI in China; leaving aside announcement effects and articles looking for a mediatic buzz on a topic that both fascinates and worries.

What exactly do these plans contain? How do they impact Chinese society and economy? And which opportunities for foreign – particularly French – companies can be identified today?

At the Barcelona World Mobile Congress this year, Huawei was showing the world the first car entirely driven by a smartphone, using AI. This smartphone, issued last fall, was qualified as the first smartphone truly using AI. Besides the world reactions to the announcement that a smartphone effectively drove a car on ten meters and avoiding all obstacles on the road, it is interesting to note that China has today become unavoidable in discussing the advancements of AI technologies in the world. As such, Huawei was the first company to appear in a news story broadcasted by a European channel about the World Mobile Congress.

Become a major worldwide leader in AI in 2030

In the last past years, China issued several plans to structure its transition from the world workshop to the world laboratory. Innovation is a central part to the three following plans: Made in China 2025 (2015), Internet + (2015), and the 13th Five-Year Plan (2015) and is further developed in last July’s National Strategy for the development of AI.

The official target is to become a major world player in AI by 2030, with two middle-steps in 2020 and 2025. Eluding the numerous political and strategic objectives, we here explore the economic ones mentioned in the strategy. Indeed, this paper puts forward the figure of a 150M CNY (19,2M EUR) direct contribution to the Chinese economy by 2020 and of 1bn CNY (128M EUR) by 2030. The audit cabinet PwC were more optimist about these figures, forecasting a global contribution of AI to the world economy as large as 16bn USD (13bn EUR) by 2030 with half of it for the Chinese economy.

Privileged sectors for AI applications mentioned in the strategy and in the overall Chinese political communication are production, urban planning, agriculture, renewable energies, robotics, intelligent cars, medical care and national defense. However, the concrete encouraging mechanisms are still not known.

How much AI and which kind of AI is used in nowadays China? We seek here to understand where potentials for further development lie in China; knowing whether China or the US is leading the AI race is a topic for another discussion.

Governmental political and financial support

According to the global media reports and analysis, Chinese assets are: a supportive government in terms of financing and legislation (data protection is almost absent in the Chinese law as it is practiced), wide data resources thanks to a large, diverse and connected population, and scientific talents (20% of the world’s currently trained scientists in AI are Chinese). An interesting feature is that China is apparently better placed thanks to its talent in research on translation and language, due to the complexity of the Chinese language.

Proactive big players

In terms of data, China disposes of its own produced data (thanks to Baidu, Alibaba and Tencent, also called BAT). These data are sufficiently numerous and available thanks to a non-fragmented environment. Indeed, the pervasive application Wechat now counts more than 800 millions of accounts and is used by Chinese people to chat, but also to pay, localize themselves, rent taxis, bikes, order foods… Half of the Chinese smartphones are also equipped with online payment (see VVR article on this topic) and many observers comment on the general Chinese affection for connected objects. All in all, owning these data is a decisive asset nowadays as AI is merely a sophisticated calculating tool which improves through the processing of huge number of data. In other words, data are AI’s food. However, some scientists say they are today able to develop AI systems using simulated data. This would thus reduce in the long-run the advantage of American and Chinese groups who dispose of large sets of data.

China also owns strong calculus systems

Baidu’s image recognition is now more reliable than Google’s (by 0.3%) and Huawei’s last smartphone is equipped with microchips made in China. Yet, Chinese vocal recognition is still not as efficient as the American one; large investments are spent on it.

Investments

Capital is indeed the last trump in that game, and Chinese hand is full of it. BAT all recently made public their development roadmaps for AI. Baidu is investing 3bn EUR in image recognition, augmented reality, and deep learning while Alibaba announced the opening of 8 research centers for AI and quantum computing, an investment worth 15 bn USD (12,7 bn EUR). Baidu is also engaging in the development of self-driving car and made public in that context their will to put their data in opensource, contrary to American uses.

On the governmental side, Beijing made public their intention to invest in universities, incubators, and start-ups for an amount up to 150bn CNY (19,15bn EUR) with the objective of developping Chinese AI systems. More specifically, they announced beginning of this year the creation of a professional park dedicated to AI (focusing on big data, biometric identification and deep-learning) located in Beijing and gathering some 400 companies, an investment worth 13,8bn CNY (1,8bn EUR).

What about foreign companies in China?

Reading these facts, it appears that China is increasingly competitive in AI and intelligent technologies. Nevertheless, opportunities for foreign and French businesses also arise from this evolution: available investments, possibility to come to China, soon available trained manpower, efficient Chinese AI technologies and large data sets if these data are indeed put in opensource. Foreign and French businesses could also play an intermediary role between Chinese products and European business in that sector as The Economist describes the difficulty for Chinese AI to export itself. The coming China International Import Export Exhibition might thus be an interesting opportunity as an entire hall will be dedicated to high-end technology and intelligent equipment. It will take place in November 2018.

To sum up:

The various governmental publications lead us to expect a rise in the already abundant public and private investments for AI. The target of these investments are the development of AI technology and its applications in the following sectors: production, urban planning, agriculture, renewable energies, robotics, intelligent cars, medical care, and national defense. France made known its will to cooperate with China specifically in AI and according to the rhetoric used in governmental publications, China doesn’t wish to restrain this domain to its national businesses. Today, we can mostly assess Beijing favorable policies for the coming of foreign talents. Besides, research centers announced by private and public actors are not operating yet. Therefore, immediate opportunities for foreign and French businesses mainly lie in the needs that Chinese companies might have in terms of AI, or on the contrary, in the technologies that these companies might have developed.

By Manon Bellon

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THE CHINESE EMBARGO ON FRENCH BEEF WILL BE LIFTED WITHIN 6 MONTHS

Chinese people are getting ready for the dog’s year, French President Macron offered a horse to his Chinese counterpart, yet another Chinese sign is drawing the attention of French exporters to China: the beef. During his official visit, Emmanuel Macron announced the total lift of the Chinese embargo on bovine meat “within six months”. The Beijinger wrote that this decision was welcomed by the F&B industry in China as well as all the meat lovers.

Origin (and end?) of the embargo

In 2001 while Europe was facing the crazy cow outbreak, China decided to shut its market to all European beef importers, then American, as a protection measure. In March 2017, the Chinese market slightly opened itself to French beefs: only deboned meats coming from beefs under 30 years old could be imported in China. Eventually, Emmanuel Macron announced a total lift of the embargo during his visit to China in early 2018, in a speech punctuated with some sentences in Cantonese, much appreciated from the Chinese audience.

An expanding market

This decision comes at the right moment. Many studies emphasize the current evolution in the habits of the 1.4 billion Chinese consumers, especially regarding the consumption of meat. As a result, the market is booming (it was multiplied by 10 between 2010 and 2015) while the French beef market is decreasing by 5% per year. Pork meat still makes the bulk of Chinese meat consumption, accounting for 60% of it. Yet, beef consumption is increasingly growing mainly because of the growth of the middle-class: in 2016, a Chinese would eat on average 4 kilos of beef when it was only 3 kilos in 2005, according to OECD figures. For comparison only, French consumption of beef is four times higher than the Chinese one.

The meat market is all the more attractive for exports that prices have been quadrupled in 15 years (3.5 euros per kilo today). Chinese growing middle class is now looking for quality. Thus, according to a note from the Dutch bank Rabobank, they tend to prefer to import meats despites the price.

Opening of the Chinese food sector to importations

If the Chinese food market used to be difficult to access, this situation changed since the 13th Five-Year Plan (2016–2020). Indeed, the Chinese government officially opened China to the international food markets to ensure its food security. Today, China is a net importer of food with a deficit of 34 billion euros in 2015, according to Chinese custody. Every year 1.7 million tons of meat are imported to China, accounting for 20% of total food imports, as a result of the Chinese thirst for imported products in this domain. Food is also the third-largest sector for French exports to China, although meat only accounts for 9% of all exports. As China is about to become the largest importer of beef worldwide, before the United States, meat’s share in French exports to China is expected to increase in the future Franco-Chinese trade balance.

A high level of foreign and local competition

This decision is following the lift of the embargo on American beef last June. In Europe, France is the third country benefiting from it, after Ireland and the Netherlands. The lift regarding French beef was actually decided on March the 3rd. 2017 but it was in a stalemate because of Chinese health requirements.

For the 150,000 French farmers raising beef (a sector worth 6.6 billion euros), the lift is a real opportunity, yet not a given one. Indeed, about 90% of the Chinese beef market is owned today by Australian, Brazilian and Uruguayan importers, and Chinese beef cattle is about 10% of the world cattle, five times more important than the French one.

Yet, unique French assets

French exporters are expecting about 50,000 tons of beef to be exported at first, which would amount to one fifth of all nowadays French beef exports. The market targeted in China is the high quality and high standing food market, but there is also an opportunity in the sale of unwanted meat pieces in France, such as beef tails, a piece mostly appreciated in China. In the 6 months needed for the lift to be effective, France has the opportunity to promote its French beef for its quality (sanitary traceability), for its specific cattle breed, or as a part of the French art de vivre.

Will poultry be next on the list? Discussions are still undergoing for a lift of the embargo that was imposed by China in 2015 following a bird flu outbreak.

To sum up

The beef market in China has been multiplied by 10 between 2010 and 2015, and still increasing. Both consumption and prices are on the rise in China, due to a growing middle-class. On this market, Chinese people particularly prize imported beef. Within 6 months from January 2018 on, it will be possible to export French beef in China.

By Manon Bellon

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“SINGLE DAY” IN CHINA

New sales record for Chinese giant Alibaba

Alibaba hit a new sales record on November 11th, 2017 or Singles’ day. The Chinese e-commerce giant reported that sales during what has become over the last decade the world’s biggest shopping day amounted to $25.3 billion, a 40 percent jump compared to the same period last year. Additionally, the retailer set a record $18 billion in just 13 hours on Saturday, eclipsing last year’s record of $17.8 billion in 24 hours. Sales from the Chinese e-commerce’s one-day holiday are nearly double those from Black Friday and Cyber Monday in the U.S. combined.

Just like U.S. versions of shopping holidays, Alibaba offered discounts on 15 million products from 140,000 brands. To celebrate the kickoff of this event, Alibaba founder Jack Ma held a gala at the Shanghai Mercedes Arena, with celebrities like Pharell Williams, Nicole Kidman, and Jessie J in attendance. On stage, a countdown was running on a huge screen, where a billion dollars in revenue from Tmall (B2C) and Taobao (C2C), Alibaba’s platforms, was reached within two minutes. The show was aired on both Alibaba’s video service and on three Chinese TV networks, and was covered by hundreds of Chinese and foreign journalists.

A waning interest

Singles’ Day was created at China’s Nanjing University in 1993 by four friends as a version of Valentine’s Day for people without romantic partners. The college students came up with the idea of celebrating singles on November 11th (11.11) because all four digits for this day are the lonesome “1”. At first, only men partook in the festivities, whereas now both sexes do. The first Singles’ Day sale was organized in 2009 by launching a massive marketing push and offering special “Double 11” deals.

But if Singles Day’ may be the most important timing to achieve annual revenue goal for retail companies, interest seems to be already waning in the country after just eight Single Days. According to the Chinese marketing data technology firm Admaster, only 65 percent of interviewees said they would attend the festival in 2017, compared to 84 percent in 2015. These figures highlight changing consumption trends among middle-class shoppers. If Singles’ Day is renowned for the deep discounts offered by retailers, more and more Chinese are looking for better quality products and services. And for that, they are willing to pay.

JD.com is now taking advantage of this trend. This direct online sales company, Alibaba’s main competitor in the domestic market, has a major advantage: better logistics management. Alibaba’s platforms put sellers in direct contact with customers, while JD.com works more like an online supermarket. The company buys products, stores them in its own warehouses and delivers them through an army of delivery men, who also provide customer support. Its “Double 11” lasts 11days, from November 1 to 11, allowing for more flexible operations.

More international brands

Facing this competition, Alibaba wants to lure more international brands onto its platforms, combating Taobao’s bad reputation for offering counterfeit products. It seems to be paying off. According to Alibaba, out of 100,000 retailers who attended Singles’Day last year, 10,000 were foreigners. This year, out of 140,000 sellers, 60,000 came from abroad, 250 of which were French.

Alibaba is also trying to be more innovative. This year, the giant retailer used an online-to-offline strategy to streamline sales between its e-commerce platforms and the merchants with bricks-and-mortar stores selling on them. For example, Alibaba took the Pokemon Go augmented reality game idea and applied it to Tmall, but with cats (Catch the Tmall cats). Chinese consumers were then able to find discount coupons in different stores, such as the French cosmetics brand L’Occitane. L’Oréal set up an interactive mirror at its Shanghai store where shoppers could try on virtual makeup using augmented reality and then order products on a touch screen linked to an Alibaba platform.

But the blockbuster sales of Singles’ Day create an enormous amount of waste. According to Greenpeace, the manufacturing, packaging and shipping linked to the event produced 258,000 tons of carbon dioxide emissions last year. It would take about 2.6 billion trees to absorb it all. This year’s online shopping frenzy is about to leave an even larger carbon footprint, warned the environmental activist group.

The cosmetics market in China in 2025: consumers and trends

The cosmetics market in China in 2025: consumers and trends The cosmetics and skincare market in China reached a value of €69.7 billion in 2024. In 2025, the market is proving resilient despite an economic climate marked by low consumer confidence due to concerns about employment and the property market. Are e-commerce and social e-commerce...

Agri-food in China: a market between dependence and diversification

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Dog or cat? Preferences change in China and the market adapts

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THE ACQUISITION OF CHINESE SMES IS GETTING POPULAR AMONGST FRENCH COMPANIES

VVR International’s CEO Camille Verchery speaks for Classe Export

Since 2013, a susbstantial number of French firms of a certain size have been willing to acquire Chinese SMEs or ISEs (Intermediate-Sized Enterprises), whose turnover is between 5 and 50 million Euros. This trend is creating a basis of a true bilateral evolution of the market. On the one hand, French managers are now understanding the limits of Joint-Ventures and WOFEs (Wholly Owned Foreign Enterprises). On the other hand, Chinese SME entrepreneurs are questioning their management approaches, which were based, until now, on the perspective of a promising future. From the 1990s to the 2000s, Chinese State companies, which became collective, encouraged their managers to be richer by becoming the owners of their own factories. The results turned out to be quite disastrous. In the next decade, managers gave their employees the opportunity to benefit from shares in their companies, or to split profits. But from 2010 to 2015, profit redistribution remained quite opaque.

Today, Chinese SMEs promise additional compensation for to stock exchange valuations reaching 5 to 10 times turnover, which is becoming unreachable. This is due to their company size itself, but also due to employees’ lack of tech-savvy knowledge and management ability. The only solution these companies have is to play the globalization game and accept to be re-acquired by international firms. But the international firms must face their own challenges (i.e. identifying these SMEs or ISEs, and persuading them to collaborate). This is the mission of VVR International/BNP PARIBAS TRADE DEVELOPMENT.

Download here the full version of this article in French.

The cosmetics market in China in 2025: consumers and trends

The cosmetics market in China in 2025: consumers and trends The cosmetics and skincare market in China reached a value of €69.7 billion in 2024. In 2025, the market is proving resilient despite an economic climate marked by low consumer confidence due to concerns about employment and the property market. Are e-commerce and social e-commerce...

The aeronautics sector in China in 2024: growth and business opportunities

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RENEWABLE ENERGIES

China bites off more than it can chew

When it comes to renewable energies, China seems to be insatiable.

In a decade, the country has become the world leader in renewable energy production, surpassing the United States last year, according to the latest BP Statistical Review of World Energy. China is currently contributing about 40 percent of the global growth (more than the entire OECD), providing the main source of world growth in hydro and nuclear power. In 2015, China has become the world’s largest investor in renewable energy, spending a total of $103 billion and currently account for 36 percent of the world total according to the United Nations Environment Program’s annual report on global trends in renewable energy.

In order to meet 20 percent of China’s needs by 2030, China wants to invest about three times more (around $370 billion) in solar, wind, hydro and nuclear power generation by 2020, creating 13 million jobs in the sector, announced the National Energy Administration (NEA). China added 35 gigawatts on new solar generation in 2016 alone, which is almost equal to Germany’s total capacity. Every hour, China erects another wind turbine and installs enough solar panels to cover a soccer field, according to Greenpeace Beijing. And if it complies to the 13th Five Year Plan, by 2020, China is expected to install 340 GW of hydropower, 200 GW of wind, 120 GW of solar power, as well as 58 GW of nuclear capacity and 15 GW of biomass. The country has, thus, become a major manufacturer and exporter of renewable energy technology, supplying about two thirds of the world’s solar panels and producing nearly half of the worlds’ wind turbines.

Too much clean energy wasted

This commitment aims to reduce the role of coal, China being the largest emitter of carbon dioxide in the world, and to ease the severe air pollution that kills an estimated 1.1 to 1.6 million of its people every year. However, the country needs to overcome important issues to no longer rely on imported fossil fuels.

China is, in fact, is finding difficult to use all its new electricity, to the point the National Energy Administration (NEA) has to ask the local authorities in six Chinese provinces to stop authorizing the construction of wind turbines on their territory. In 2016, China’s wind curtailment rate – which means that wind energy that could have been generated and used but wasn’t – reached 17%, i.e. more than double what it was two years before. Meanwhile China’s solar curtailment rose by 50% in 2015 and 2016. This is a serious challenge for China. A considerable amount of clean energy that should be replacing coal-generated power is wasted.

A more flexible grid

One can justify this trend by the fact that currently wind turbines are mostly installed and connected to the grid in the sparsely populated northwestern provinces in China. And because of a lack of transmission lines, diffusing this energy to the highly-populated coastal areas is problematic. But it does not explain it all. For the NEA, China’s electricity grid needs to be more flexible for the power grid to operate properly. The amount of electricity that is supplied must perfectly match the load on the system. Improving flexibility would help the grid to manage the variable renewable energy due to different wind speeds or sunlight levels for instance.

It is crucial to identify new uses for the renewable energy produced in China’s northern provinces as well. One promising approach would be to use wind energy to help fulfill the region’s extensive heating needs. The NEA encourages natural gas production and pumped hydro storage as an ancillary service and cleaner and more efficient substitute to coal-fired powered plants. In addition, the NEA supports the creation of direct markets for renewable energy. Renewable energy generators would then be empowered to sell electricity directly to those who need it. That would provide an additional outlet for their electricity if the grid cannot take it all.

Image credits: Michal Strba

The cosmetics market in China in 2025: consumers and trends

The cosmetics market in China in 2025: consumers and trends The cosmetics and skincare market in China reached a value of €69.7 billion in 2024. In 2025, the market is proving resilient despite an economic climate marked by low consumer confidence due to concerns about employment and the property market. Are e-commerce and social e-commerce...

Agri-food in China: a market between dependence and diversification

Agri-food in China: a market between dependence and diversification A strategic market at the heart of global food tensions In 2024, China imported 188 billion euros worth of agricultural and agri-food products. This impressive figure reflects a structural reality: despite its desire to move towards self-sufficiency, China must rely on imports to feed its population...

Dog or cat? Preferences change in China and the market adapts

Dog or cat? Preferences change in China and the market adapts In China, pets are particularly popular with young urbanites in search of affection, home comforts and new landmarks. This craze for dogs and cats is driving sustained growth in the pet food and care market of over 13%, reaching an impressive 300 billion yuan...

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CHINA’S AMBITIONS FOR A NEW SILK ROAD

Restoring the Silk Road. On May 14th and 15th, China held its first international forum devoted to the One Belt, One Road (OBOR) project, bringing together some 100 country representatives in Beijing. Launched by Chinese President Xi Jingping in late 2013, the initiative aims to revive the ancient Silk Road, a huge network of land and sea trade channels used by China to connect with Europe, the Middle East and Africa via Central and Southeast Asia. China, the second – biggest world economic power, wants to further develop commercial activities and relations between Eurasia and Africa through the construction or modernization of energy and transport infrastructure.

A Far-Reaching Project

The initiative is titanic, including within its scope more than 68 countries with 4.4 billion inhabitants and around 40% of the world’s GDP. Nearly USD 1 trillion of investment has already been pledged by development banks such as the Asian Infrastructure Investment Bank (AIIB), to finance roads, rail, energy and port projects, including a railway linking London to East China, and a string of sea ports connecting Southeast Asia to North Africa. China, for its part, made available USD 40 billion of initial capital through its “Silk Road Fund”, to which should be added a supplement of about USD 15 billion, as announced by President Xi at the Summit.

Geopolitical and Economic Risks

In addition to outlines yet to be defined and benefits yet to be determined, the initiative also presents risks. According to a report published on April, 10th 2017 by the Chinese Academy of Social Sciences (CASS) and the rating agency “China Bond Rating”, the development of OBOR could be notably influenced by geopolitical events. Indeed, disturbances linked to terrorism, corruption and independence movements along the trade corridors constitute risks for OBOR. Furthermore, the implementation of the initiative depends on the application of good governance practices in the countries where OBOR infrastructure is being constructed. CASS experts are also concerned that protectionist trends in the United States and Europe will affect other parts of the world and weaken the whole project.

In its report of January 2017, the rating agency Fitch warned of risks in the financing of OBOR projects for Chinese banks. In addition, while acknowledging that these investments will improve and modernize infrastructure in the various Asian countries involved in OBOR through China’s technical funding and expertise, Fitch had doubts about the ability of Chinese enterprises to adapt and operate in the countries concerned. To reduce these risks, Fitch advocated greater EU involvement in the initiative to reassure the international community of the business logic of OBOR projects.

Jean-Pierre Raffarin, former Prime Minister and representative of France at the OBOR Forum in Beijing, along with several other notable experts, will discuss these issues regarding the Belt and Road initiative on June 12th, 2017, from 8:30 am to 10:30 am, at the MEDEF premises (Main employers’ organization in France) in Paris.

The cosmetics market in China in 2025: consumers and trends

The cosmetics market in China in 2025: consumers and trends The cosmetics and skincare market in China reached a value of €69.7 billion in 2024. In 2025, the market is proving resilient despite an economic climate marked by low consumer confidence due to concerns about employment and the property market. Are e-commerce and social e-commerce...

Agri-food in China: a market between dependence and diversification

Agri-food in China: a market between dependence and diversification A strategic market at the heart of global food tensions In 2024, China imported 188 billion euros worth of agricultural and agri-food products. This impressive figure reflects a structural reality: despite its desire to move towards self-sufficiency, China must rely on imports to feed its population...

Dog or cat? Preferences change in China and the market adapts

Dog or cat? Preferences change in China and the market adapts In China, pets are particularly popular with young urbanites in search of affection, home comforts and new landmarks. This craze for dogs and cats is driving sustained growth in the pet food and care market of over 13%, reaching an impressive 300 billion yuan...

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China’s growing electric vehicle market

Foreigners hit speed bumps.

China is expected to reach 7 million new energy domestic vehicle (NEV) sales by 2025, according to Beijing’s 13th Five-Year Plan, finalized in 2015. Chinese NEV sales – the term China uses to refer to battery-electric vehicles, plug-in hybrids and fuel-cell cars – totaled 951,477 units between January 2011 and December 2016. These figures, which include passenger cars and heavy-duty commercial vehicles, have already made the Middle Kingdom the largest electric vehicles (EVs) market in the world, with 37.7% of global sales in 2016.

To address China’s dependence on oil exports and severe air pollution due to an overuse of coal as a main form of electricity production, the government announced in 2010 a trial program to provide monetary incentives for NEV automakers in five cities. The amount of the subsidies stood at 30 billion RMB (USD 4.4 billion) in 2016.

To further boost NEV sales, the government is luring Chinese consumers to adopt electric vehicles by promising charging stations. Beijing plans to install 400,000 charging points in the capital city by 2020. NEV consumers also benefit from central and local governments via cash subsidies, free parking spaces and free license plates.

Sales down in early 2017

After several car makers were fined for defrauding the subsidy program, Beijing enacted a new subsidy policy in August 2016, where only qualified manufacturers are eligible to receive NEV subsidies moving forward. More than a third of Chinese manufacturers, which fail to meet the policy’s qualification standards, are expected to be left out. The Ministry of Industry and Information Technology (MIIT) also recently announced a restriction on the granting of licenses to new electric vehicle (EV) startups, limiting the number to just 10 per year.

Reduced subsidies and new policies caused he stock of EV sales to slump in January 2017, compared to a year earlier. Sales of NEVs dropped 74 percent to 5,682 unites, according to the China Association of Automobile Manufacturers (CAAM).

The downsides of China’s supportive policies are emerging in the form of overcapacity and imperfect competition. More than 200 Chinese NEV manufacturers have thus entered this market to date, producing more than 4,000 licensed NEV models. Another hurdle to a mature market is that low-cost, low quality NEVs dominate. Sixty percent of China’s NEV market share belongs to low-cost cars, whereas less than 20 percent of the market share belongs to high-end ones.

Domestic suppliers in favor

One can only wonder what opportunities foreign eco-friendly carmakers have left in a very protectionist country, where the Chinese automotive brand BYD has been topping the segment sales for several years. Surprisingly, some do exist. Volkswagen recently signed a joint-venture agreement with Chinese manufacturer JAC Motor to mass produce 8 new EVs in China by 2020. Tesla Motors also is in talks to set up a factory in Shanghai.

Opportunities exist in power battery manufacturing as well. This key component of EVs has begun a period of rapid growth and strong demand for lithium-ion batteries. Last year, changes to Chinese legislation allowed foreign firms to set up wholly-owned electric vehicle battery manufacturing plants in free-trade zones in Shanghai, Guangdong, Tianjin and Fujian.

On a less positive note, while China seems to gradually open-up its EV battery market to foreign companies, conditions still favor domestic suppliers. In June 2016, MIIT left some prominent foreign companies off a list of battery manufacturers approved to receive government subsidies, including Samsung and LG, which have been manufacturing batteries in China for many years. Exclusion from the list means that from January 20 18, manufacturers of EVs using batteries made by manufacturers not included on the approved list will not be eligible for government subsidies.

Even if still booming thanks to government subsidies, the future of China’s NEV market remains uncertain and challenging.

The cosmetics market in China in 2025: consumers and trends

The cosmetics market in China in 2025: consumers and trends The cosmetics and skincare market in China reached a value of €69.7 billion in 2024. In 2025, the market is proving resilient despite an economic climate marked by low consumer confidence due to concerns about employment and the property market. Are e-commerce and social e-commerce...

Agri-food in China: a market between dependence and diversification

Agri-food in China: a market between dependence and diversification A strategic market at the heart of global food tensions In 2024, China imported 188 billion euros worth of agricultural and agri-food products. This impressive figure reflects a structural reality: despite its desire to move towards self-sufficiency, China must rely on imports to feed its population...

Dog or cat? Preferences change in China and the market adapts

Dog or cat? Preferences change in China and the market adapts In China, pets are particularly popular with young urbanites in search of affection, home comforts and new landmarks. This craze for dogs and cats is driving sustained growth in the pet food and care market of over 13%, reaching an impressive 300 billion yuan...

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CHINA LEADS IN GREEN BUILDING

China is the world’s largest green building market. With more than 1 billion square feet of certified green, sustainable building space, China has now surpassed the United States. It only took China half the time – about 10 years, compared to the US. China aims for a 50 percent commercial green building rate by 2020, as part of its pledges under the Paris Climate Agreement. If it reaches that goal, about half of green building space in the world will be in the Middle Kingdom.

For green building certification, China uses one domestic and two major Western standards : the China Three Star Standard, the Leadership in Energy and Environmental Design (LEED) standard from the US, and the Building Research Establishment Environmental Assessment Method (BREEAM) standard from the United Kingdom.

The Value of Sustainability

Those three competing standards have their limits. With increasing urbanization – 300 million more Chinese people are expected to live in cities in the next 15 years – more green buildings will be needed. What is crucial now is thinking of green buildings in terms of sustainability.

Construction decisions made in China are often based on short-term costs instead of long-term savings from energy efficiency. Despite initiatives to improve energy efficiency, such as the Chinese Ministry of Housing and Urban-Rural Development’s building energy efficiency label, these programs are still voluntary for the majority of buildings and will unlikely reduce energy consumption in China on a large scale.

Furthermore, the standards should develop new indicators on responding to climate change, such as total CO2 emission reduction or the carbon footprint of one building. The standards should take into account China’s vast territory and differentiated climatic zones. It is difficult to apply standards without considering the local situation.

The cost of green building techniques can represent between 10 – 30% in extra building costs. This remains a significant barrier for further adoption. Even if the Chinese government intends to subsidise around 40 – 50% of the additional building costs through a series of regulations and policies, most of the time, subsidies go straight to public buildings and (Chinese national) buyers of residential units. It is often faster for public buildings to get certification than for private construction. As a result, more than 70% of green buildings in 2013 were public buildings.

The Need for Western Technology

Besides the adoption of green building techniques, China has also seen a surge in ‘eco-city’ development in recent years. One of the best known is an area near the port city of Tianjin. Built in partnership with Singapore’s sovereign wealth fund, the project plans to transform a former uninhabitable swamp into a residential area for more than a million people, as a satellite ‘eco-city’ of the municipality.

More than 100 such eco-projects are scattered throughout China, mainly aimed at establishing new cities of 250,000 to 500,000 people. These cities do create potential showcases and opportunities for Western technologies in a country hungry for foreign know-how. Yet, since green buildings are closely defined by standards, only materials and solutions that contribute to the certification score will have the chance to enter the Chinese green building market.

The cosmetics market in China in 2025: consumers and trends

The cosmetics market in China in 2025: consumers and trends The cosmetics and skincare market in China reached a value of €69.7 billion in 2024. In 2025, the market is proving resilient despite an economic climate marked by low consumer confidence due to concerns about employment and the property market. Are e-commerce and social e-commerce...

Agri-food in China: a market between dependence and diversification

Agri-food in China: a market between dependence and diversification A strategic market at the heart of global food tensions In 2024, China imported 188 billion euros worth of agricultural and agri-food products. This impressive figure reflects a structural reality: despite its desire to move towards self-sufficiency, China must rely on imports to feed its population...

Dog or cat? Preferences change in China and the market adapts

Dog or cat? Preferences change in China and the market adapts In China, pets are particularly popular with young urbanites in search of affection, home comforts and new landmarks. This craze for dogs and cats is driving sustained growth in the pet food and care market of over 13%, reaching an impressive 300 billion yuan...

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HOW TO PREPARE THE DISTRIBUTION OF ONE’S PRODUCTS IN CHINA?

The current economic situation is pushing the organizations to designate export as the leading way to save the country. SME’s are considered as the spearhead of this strategy of external development.

In this context, some developing countries with high growth rate have become the targets for export and China is obviously a part of it. Indeed, its 300 million people with an European level of life have worth dreaming number of export managers.

Too many companies will take the plunge of exporting as soon as an opportunity will arise and will prefer to go ahead rather than trying to organize their approach of the market. The problem is that this strategy very quickly reaches its limit, especially in China. And this, no doubt, is one of the reasons of the French companies’ lack of success in exporting to China.

A methodical approach shall consist to firstly ask oneself some questions:

Am I ready to export to China?

Nowadays, some companies propose what is called “an export diagnosis”. This tool works by asking some questions to potential exporters and according to the given answers, it will determine if the company is ready to export or not. These questions will be about the company’s production capacity, the financial situation, international experience of the employees…

Regarding to exporting to China, we can take out some important and typical questions:

  • Have you already exported your products to some countries?

It is indeed important that the company, who wants to export to China, has already an experience in exporting to near countries or even better, to Asia. The return on experience (ROE) and the fact that the company counts some people used to communicate with other cultures in foreign languages… will be a very big added value and will give the possibility to go quicker on the market .

  • What are the real motivations for you for exporting to China?

We constantly hear about the huge consumption market in China and its high growth rate. Basing its strategy only on this fact will necessarily lead to disappointment. Some information must be collected because in reality some sectors are already spread among a lot of actors, some others are regulated by Chinese law, some are protected by Chinese Government with high import taxes…

  • Is your company in growth and is your financial situation healthy?

Developing his strategy, especially in far countries like China, requires a real investment for making market study, sending there a team several times a year… Without it, it will be impossible to understand the market, to develop a real local network based on long term cooperation and to control the local partners (distributors, agents…).

  • At what step of your product development are you?

Some companies may want to develop their products in China to sell in China. This strategy, taking into account, that a local production will be an advantage to develop its business, is smart but can be very risky if the company has not been able to learn and cumulate its experience. In that case, instead of managing selling issues, you will have to be focused on solving production problems.

  • What norms/standards do your products comply with?
In a country, where your products will often be in competition with local and cheaper products, the “Made in France” can be revealed as a key success factor. It can be an advantage in your future selling and you would have to concentrate your communication on it.-
  • Is your company able to develop and adapt its products to local needs?

No matter what anyone says, far countries, such as China, have different cultures, consumption behaviors, organizations… and it is quite likely that you will have to adapt your products in terms of packaging, design… Even, in some sectors, China shall be approached as a group of many small markets with for instance the difference North/South, City/countryside, Hong Kong/China mainland… If your company doesn’t have the ability to adapt its products, it may be necessary to find some local partners who will collaborate with you on this matter.

  • What is the situation on the market?

After the questionnaire regarding internal capability of the company to export, it is interesting to see what the situation on the market is.

  • Is the Chinese market interested by your products?

Even if this question can be seen as obvious, however it has to be the major focus in the strategic thoughts. SME often are very innovative and they are persuaded that their revolutionary products will get the interest of the Chinese market, believing that this product doesn’t exist in China or that the local products are lower, technically speaking. Based on it, these companies will often not loose time in analyzing the market needs. But, the reality is that Chinese manufacturers, traders, distributors… are aware of what happens and exist in foreign markets and know well the western technologies. Thus, it is not rare that some industrials or intermediaries will contact directly some European companies, to propose them cooperation by selling their products in China or by setting up a joint-venture. These contacts are a very good indicator of interest for your products.

Indeed, there is nothing better than Chinese people to know what Chinese market needs.

  • Who are the competitors and how are they organized?

The presence or not of competitors on the market will also contribute to determine if China is a good target and if yes, what would be the best strategy for your development. The problem will consist in getting information on these international and local companies.

It is very delicate and even sometimes impossible for a company to gather information on its competitors especially if the said company desires to be discreet about its interest for Chinese market, or if it doesn’t have any local employees to make this job. That is why the best solution is to outsource this analysis to an external company who is used to collect information in the field and giving clear recommendations based on real figures and best practices observed.

  • Do my products have to comply with local regulations?

China is protecting some sectors with, for instance, high import taxes, especially for equipment. These taxes or sometimes registrations fees and procedures can put a strain on the interest of your project by considerably increasing the cost of your products delivered in China. A deep study of the norms and local regulations will have to be included in your approach of the market and be a part of the calculation of your selling price. Some will tell you that China is the country of pragmatism and that it is necessary to jump on all the opportunities. It is true. But, we would add that pragmatism should not be confused with incoherence. Even if the market can be considered from outside, as completely disorganized, various and open, it is however, essential to approach it with methods and structure. If not, you will begin to sell in China, but your sales will stay at the lowest level, you will not be aware of prices and you will not control your partner (distributor/agent). In the better cases, you will “only” lose time (sometimes 2-3 precious years), but in worse cases, you will contribute to create a new competitor who will control the market. The only way to guarantee the success of your sales development in China is to move forward by benefiting from some people’s methods and experience.

The cosmetics market in China in 2025: consumers and trends

The cosmetics market in China in 2025: consumers and trends The cosmetics and skincare market in China reached a value of €69.7 billion in 2024. In 2025, the market is proving resilient despite an economic climate marked by low consumer confidence due to concerns about employment and the property market. Are e-commerce and social e-commerce...

Agri-food in China: a market between dependence and diversification

Agri-food in China: a market between dependence and diversification A strategic market at the heart of global food tensions In 2024, China imported 188 billion euros worth of agricultural and agri-food products. This impressive figure reflects a structural reality: despite its desire to move towards self-sufficiency, China must rely on imports to feed its population...

Dog or cat? Preferences change in China and the market adapts

Dog or cat? Preferences change in China and the market adapts In China, pets are particularly popular with young urbanites in search of affection, home comforts and new landmarks. This craze for dogs and cats is driving sustained growth in the pet food and care market of over 13%, reaching an impressive 300 billion yuan...

Read More