China Insights

GCiS shares a mix of China economy and business observations, industry articles based on recently published multi-client reports, infographics composed with public statistics and annual reviews of China demographics.


Populations and Pre-school

Great Expectations

A long time ago in rural Thailand a friend of mine was surprised the fact that I did not yet have any children, already being over 25 years old. He was 24, and had three. I countered with the usual western reasoning that having kids is a big decision, one needs to have a good job, be married, etc. He could not understand this though, as no one in his village had a good job. I told him that I did not even know if and when I would have children, and in disbelief he then asked, “but who will carry your water?” This was meant literally, as the well was some distance from his hut, and up a hill.

I’ve never been asked this question in my years in China, but would not be surprised if some farmers out in China’s poorer provinces think the same way. Kids are a good source of chores, which includes water-carrying, and can provide support later in one’s life. Move closer to the Eastern Seaboard and larger cities, though, and I doubt that you will get meet with the same attitude. The fact is that in larger cities like Shanghai, or Nanjing or Ningbo children are now seen more of a net expense than value added.

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Hedging on Hedges

There has been much talk recently of a study by China Merchant’s Bank and Bain claiming that a surprisingly large number of China’s wealthier citizens have been moving assets overseas, purchasing property, and obtaining foreign passports. A portion of this is also supported by official government figures. For the most wealthy, the destinations are the Anglo-Saxon countries, as well as Hong Kong and Singapore. Some, according to the report, are even decamping to Russia.

In the ensuing analysis of this, many have put forth the idea that this represents a very troubling brain and wealth drain for China, while others think many of these new rich are merely hedging their assets and keeping their options open, and not really leaving China. And certainly one does not have to leave China to move assets and get another passport.

Both arguments are valid, and it’s probably hard to isolate a single motivation. A good number of high net worth persons from diverse countries have properties in more than one country, and often have more than one passport. Countries like Canada, the US and Australia are immigration cultures with sizable Chinese communities, and it’s not difficult for a Chinese to fit into these societies- especially for those who had attended university or previously lived there.

At the same time, it is also true that some new HNW Chinese may feel more secure with their assets diversified. I doubt there will be a big exodus only for this reason though. Many Chinese can do well in other societies, though likely feel most comfortable on their own turf, speaking their own language, with their network of family and friends around. Furthermore and importantly, China is where their income is generated.

But maybe we need to look at another angle in all this. There was another much-discussed report that came out in early 2011, from McKinsey, on the potential of China’s luxury goods market. The report basically argues that Chinese consumers will spend a lot more money on luxury items in the coming years- Swiss watches, French wines and bags, and art collection, etc. No doubt this is true, and the trend is already visible. 

This notion is also deceptive- not on McKinsey’s part, but on the idea or implication that Chinese wealthy are going to direct a good amount of their money to luxury items, or “things” in general. Or that such things, however attractive, can capture the imagination or aspiration of this group. The definition of wealthy or high net worth is variable, but even including the lower strata of this group there is a limit that one can spend on luxury items, and while tangible and glamorous these are not the priority.

So what is the priority? Where are China’s new wealthy going to spend their money? Many are now just facing this issue, priorities vary, and this period of sorting-out will take some time. Charity is also slowing coming into the picture- slowly. However, there are several early indications of where aspirations lie, which we can roughly label quality of life and children (not that these are mutually exclusive….).

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China's Market for Cryogenic Equipment: Trend, Drivers and Inhibitors

This article is based on a GCiS multi-client report: China Cryogenic Equipment Market Research Report.

China’s market for cryogenic equipment is in its early stages of development, spurred on by investments in the country’s Liquid Natural Gas (LNG) handling capacity and the general expansion of its industrial base. While LNG is the most high profile application for cryogenic equipment, it is not the only one. A number of other markets, with wide customer bases, have also flourished in recent years.

By value, roughly 95 percent of cryogenic equipment falls under one of four product categories. The largest type by revenues are storage tanks, which are made from carbon steel, nickel alloy and pre-stressed concrete; second, cryogenic valves which are made from austenitic stainless steel and copper alloy; third, vaporizers, made from high-tensile stainless steel; and finally, pumps, which are typically centrifugal or reciprocating and are made of austenitic stainless steel and specialized plastic sealants. Other parts of a cryogenic system include the pipes and flanges. A typical system configuration for 200 cubic meters of LNG will have one tank, around 15 valves, one pump and one to two vaporizers.

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US - China Wind Power Spat: Unintended Consequences

The US and China could fall out over China's domestic wind turbine market as the US files a complaint with WTO over frustrations stemming from Chinese governmental subsidies and non-transparency in the market. This article examines the background of the complaint, China's wind energy market, the structure of OEM and component markets, and offers a forecast of these conflicts and trends in China's wind power market.

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Li-ion's Share of the Market

China’s electric vehicle future and the development of its battery industry.

This article is based on a GCiS multi-client report: China Lithium-ion Batteries Market Research Report.

Safe, high density batteries are needed to drive the electric vehicle revolution to the next level. However, in the country that leads the world in lithium-ion battery output, and now also automobiles, how close is a viable solution and which players are closest to bringing it about?

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