China is the world's largest car market, and Chinese leaders are notoriously sensitive to matters of face. So it was something of a shock when General Motors chief executive Mary Barra, during a visit to Shanghai Friday, publicly challenged the Chinese government's declaration that it intends to follow the lead of European economies including France and Britain in phasing out gas-powered vehicles.
Barra said that, while GM is moving at full speed to develop electric cars, consumers, not government should decide how cars are powered: “I think it’s best when, instead of being mandated, customers are choosing the technology because it meets their needs,” she said.
The statement was straightforward but brave. GM sells more cars in China than it does in any other market, including the United States. And yet GM's strategy for producing energy efficient vehicles is focused on hybrids propelled by a mix of electric and fossil fuels. That's because the U.S. auto giant needs to satisfy the needs of customers in China, where people use cars primarily for intra-city travel, and also the United States, where a large percentage of drivers use cars to get from city to city.
New York Times Shanghai correspondent Keith Bradsher, who covered the global auto industry from Detroit for many years before coming to Asia, hinted China's decision to ban gas-powered vehicles was motivated by mercantilism as much as concern for the environment. China, he noted, is "unenthusiastic about plug-in hybrids because most of the patents are owned by foreign automakers, particularly Japanese multinational companies [while] Chinese carmakers have been stronger in battery-electric cars."
That may be so. But it's also true that GM is among a growing number of Fortune 500 companies struggling to satisfy consumers in China and the rest of the world at the same time. Apple faces a similar dilemma as it rolls out the iPhone X. Not long ago, Apple was the top seller in China. But, as the Wall Street Journal notes, Apple's market share has fallen to about 7%, from an estimated 16.5% in late 2014, as Chinese rivals have improved their technology and proved more agile in offering models adapted to local tastes. Greater China, which includes the mainland, Hong Kong and Taiwan, accounted for 22% of Apple’s sales last year. As I've noted previously in this space, Chinese consumers are far less willing than global counterparts to pay a premium for Apple's operating system because they get all the services they want from the Internet via WeChat, which functions just as well on Android as it does on iOs.
Only a few years ago, it was widely assumed that large multi-national firms enjoyed an enormous competitive advantage in China and could succeed there by tweaking products developed for Western markets. But as China's economy matures, it's increasingly evident that what works inside China and outside China are different things. The experiences of GM, Apple and others suggest to me that more often than not global firms, distracted by operations in multiple markets, operate at a competitive disadvantage in China relative to more nimble local players who can focus on winning at home.
Politics and Policy
Next stop, Asia. President Trump has announced he'll make his first trip to Asia in November, with stops in China, Japan and South Korea en route to an appearance at the Asia Pacific Economic Cooperation forum summit in Vietnam. Trump's Asia foray will follow the conclusion of China's 19th Communist Party Congress. Express expect the US leader to use the visit to press Chinese President Xi Jinping for trade concessions and greater cooperation in containing North Korea's nuclear program. AFP
Singing Xi's praises. On a recent visit to Hong Kong, former Trump chief strategist Steve Bannon said he had never been "an anti-China guy" and praised Xi Jinping as the world leader Trump most respects. The turnaround came a day after publication of a New York Times interview in which Bannon compared China to pre-Nazi Germany. Guardian
Not even God. China has passed new rules to manage religious practices in the country, to prevent foreign infiltration and the spread of extremist ideology. The regulations, which further restrict citizens from practicing their faith outside state-approved organizations, will take effect in February. Reuters
Guo rapped for rape. A former aide to fugitive Chinese billionaire Guo Wengui has brought a lawsuit against him in the New York courts for sexual assault. The rape allegation comes just as Guo is reported applying for asylum in the United States. Guo fled China for the US in 2014, and has been unleashing torrents of graft accusations against top party officials on social media since. Caixin
The spy's the limit. New Zealand’s national intelligence agency is investigating a China-born member of parliament for being a potential China spy. Jian Yang, a naturalised New Zealand citizen who was elected in 2011, had previously spent a decade at leading Chinese military colleges known for training elite intelligence officers. Financial Times
Trade and Economy
Deal undone. Trump has blocked a Chinese-backed private equity firm from buying American chipmaker Lattice for $1.3 billion, as a signal to Beijing that US will oppose takeover deals that involve technologies with potential military applications. The tech-focused fund is partially backed by China’s central government and is indirectly linked to its space program. China, in response, has urged the US not to apply protectionist measures against corporate acquisitions in the name of security. Reuters
Eviction notice. China is setting up a new database to track and deter people from maliciously registering trademarks they have no intention to use. In addition to the blacklist of repeat offenders, authorities will also heighten scrutiny of new trademark applications, especially for filings linked to celebrities. Caixin
Driving clean. China has a set a 2020 target for its plan to incorporate the use of ethanol in gasoline nationally. The move will drive up demand for corn, which China has a large stockpile of, and clean up the country's polluted skies, but trade partners worry the promotion of biofuels will worsen the blow to major oil producers. Reuters
In Case You Missed It
China’s luxury car brand continues to fight for market share South China Morning Post
Living in China Takes 3½ Years Off Your Life Wall Street Journal
Is Shenzhen Losing Its Fight To Become China’s Silicon Valley? China Money Network
DJI Offers USD30,000 Bug Bounty For App Vulnerabilities China Tech News
Technology and Innovation
Ban on coins. China has asked regional regulators to outlaw all cryptocurrency online exchange trading by the end of September, prompting two platforms to announce their imminent closure. Ever since Chinese authorities issued a ban on initial coin offerings last week, citing high risks for users, Bitcoin's value has dropped by 30 per cent. Bloomberg
All worked up. American shared-office unicorn WeWork is suing Chinese rival UrWork for trademark infringement in the US, just weeks ahead of UrWork's first US launch in New York. WeWork, valued at about $20bn, claims UrWork's company name is "deceptively similar" and wants to block them from using it as a trademark in the US. Financial Times
Print on demand. The government of Chongqing, one of China's major cities, has made it mandatory for companies with 3D printing capabilities to register with the police. The move is to deter businesses from using the technology for criminal activities, such as producing illegal items or the digital blueprints for these items, state media said. South China Morning Post
Tencent and Alibaba's duet. Ahead of a rumoured $10b IPO, Tencent Music is signing a partnership with Alibaba to increase its dominance of the Chinese music-streaming industry. The deal gives Tencent the right to stream Alibaba's database of Chinese and Japanese music, in exchange for Alibaba's access to Tencent's catalogue from exclusive deals with global music labels such as Sony and Universal Music. The Drum