ASIABIZBLOG

Pay close attention to this marketing technique, used brilliantly and shamelessly by Rep. Patrick Kennedy, a Democrat from Rhode Island:

Ironically, Kennedy said that the day before Bhutto was killed, he found himself chatting with Pakistanis about the assassination of his uncle. The subject came up when the congressman handed out Kennedy half dollars, as he often does when he travels, to thank various officials for their "good will."

For those of you who have never seen it, the Kennedy half-dollar is an American coin currently in circulation, but which no one uses in daily commerce. Representative Kennedy's famous family, once considered a political dynasty, provides the brand. The coin sells Mr. Kennedy as a member of a tribe powerful enough to have had the profile of its representative leader imprinted upon the nation's legal tender.

I note also in passing that the distribution of 50 cents to a foreign government official does not likely rise to the level of a violation of the Federal Corrupt Practices Act.

Sony seems to have shipped PCs with new filtering software, with interesting instructions to consumers.

[Editor's Note: Much has been made of China's potential for a consumer, rather than export, driven economy. The potential has caused marketers to salivate in expectancy for centuries. However, estimates of 40 to 50 million Chinese consumers with sufficient disposable income equate China to roughly the size of the Italian market. But has the equation finally begun to change with the latest generation of Chinese to enter the workforce?

Today's post has been graciously contributed by Lin Bai, who, as a professional analyst of trends, writes from the perspective of that new generation of Chinese. Ms. Bai, born and raised in China, is a New Ventures Analyst for Metan Development Group. Prior to that, she was with Trimtabs Investment Research and International Data Corporation. Ms. Bai was educated at the University of San Francisco and the University of London.]

The Gold Mine: China’s “Post-80s” Generation of Consumers

As one of China’s post-80s generation (aka Generation Y), I still remember my glory days in high school. A pair of Nike Michael Jordan sneakers, a Motorola pager, or a Giant-brand mountain bike – and you were the most popular kid in your class. In Mainland China, the post-80s generation refers to those born after 1980 and before 1990. According to China’s census yearbooks, 200 million children were born during this time period. This generation is gradually becoming one of the most lucrative segments ever coveted by marketers, the so-called China “gold mine”.

Our “post-80s” generation has more disposable income and a greater appetite for consumption, partly driven by international ties. We are addicted to the Internet and video games and constitute the majority of online shoppers. We are more receptive to new things, follow latest fashion and trends, and are quickly becoming the face of China.

As a result of China’s one–child policy, this generation is cursed with the “me” factor. With no siblings to compete with, we are considered the “little emperors and the little princesses” of the family. And unlike children in the US or in the other countries, this generation is fully financially supported by their parents well into their twenties or, at the very least, until they graduate from college (many of them still rely on their parents even after they get a job). In fact, according to the China Research Center on Aging, a surprising 30% of working age employees in China are supported by their parents.

The post-80s generation has a markedly different behavior in consuming than their parents. This generation believes that money is something to be made and not saved. We are confident that we can (and will) make big “bucks” in the future - especially after an intensive education starting at primary school. We also believe if we cannot afford a high-rise apartment or a Mercedes Benz with our current salary, why not spend and pretend that we can. Thus, an introduction to the so-called “Moonlight Group” (people who live paycheck to paycheck, spending it all by month’s end). We also focus less on a product’s usefulness than on its appeal. Purchases are heavily based on appearance, popularity, and what I like to refer to as the “flash” factor—how much attention they would get from the others if they own it.

In the next few years, the post-80s generation will constitute (as some of them already do) most of China’s entire middle-class. Not only are we better educated and start earlier at making substantial money than previous generations, we are doing this across all industries including sports, entertainment, IT and business. Piano prodigy Lang Lang, world champion hurdler Liu Xiang, NBA basketball players Yao Ming and Yi Jianlian are some of this generation’s celebrities – who are also representatives of this new generation of China’s “gold mine”. In fact, in Forbes’ 2009 annual “Top 10 Chinese Celebrities List”, 50% of those listed belong to the post-80s generation.

This generation’s product consumption was a key factor in China's retail growth in 2008 - representing 20% of all spending (China Market Research Group).

As a part of this lucrative member of this post-80s generation, I’m actually quite excited to see what the future holds in China. I can proudly boast that I’m making history and changing China as an economic force. Whether it’s for the better (or for the worse), I’m a proud part of that change. So, the next time you decide you want to tap into the largest group of consumers in the world – think of this “spoiled, egotistical, self-centered, and rebellious” crowd. Think China and join the gold rush!

“Media is always a losing proposition in China.”

I was thrilled to read Anne Stevenson Yang's forthright and accurate assessment of foreign involvement in Chinese media. Finally, a non-Chinese within China is willing to state the obvious to a public audience. Brava!

And what elicited the comment? Google's threat to pull out of China because of cyberattacks, originating in China, leading to theft of company intellectual property and instrusion into Gmail accounts, ostensibly belonging to users with connections to human rights movements. Don Clarke's post on the topic is worth reading.

Perhaps 30 years ago, I came into possession of a 1960's US Department of the Army treatise on China, entitled, "China: Ruthless Enemy or Paper Tiger?" It may still sit on the shelf in my library. Is Google a Paper Tiger?

Note: the company announced it was "considering" quitting the market.

These attacks and the surveillance they have uncovered--combined with the attempts over the past year to further limit free speech on the web--have led us to conclude that we should review the feasibility of our business operations in China. We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.

What does Google hope to gain announcing a mere possibility of "withdrawal" from China? Surely, by now, the company has accumulated enough wisdom to know that they have been on the losing end of a hopeless battle with the Party. Furthermore, the abrupt decision to end compliance with government censorship requirements is a direct assault on the leadership, akin to the jester throwing down the gauntlet at the Black Knight -- within his castle. The company cannot hope to alter the activities of its massive and muscular propaganda organ, it's vast surveillance functions, all freely exercised. Party leadership will be incensed and take appropriate action, as one might expect of them. I do not see any way back from this precipitous decision.

On the other hand, business has been tough for Google in China, partly because of the business model which they had hoped to transplant, dependent upon substantially greater freedoms of expression than the Party is willing to tolerate, even from foreign entities with clout. As a result, Baidu -- with its hand-in-glove relationship with media censors and administrators -- has eaten Google's proverbial lunch. This seems as good a reason as any for Google to surrender while appearing to save face.

Google has announced a delay in China of the launch of mobile phones using its Android software.

One must question this move as simply more Google shadow boxing. Despite its threat to remove web filtering, Google does not appear to have done so. Similarly, a postponement is simply that. The delay of a marketing expense will have no effect on top-level cadres, other than to demonstrate weakness of resolve. Why?

Because Google can't extricate itself from China. Think of the likely effect "leaving China" on the introduction into world markets of the Nexus, the new Google phone. After all, the product itself will be manufactured in China (where else?). Apple must be jumping for joy.

(Even were Google to leave, Chinese authorities would still welcome revenues resulting from the contract manufacturing of the Nexus, but the threat of being cut off from supply would remain.)

If Google's Board believes its announcement serves to generate public pressure from foreign investors, I think it is much mistaken. Could they suffer from grandiose notions of its importance in Chinese affairs? China can do very well without Google. After all, China has its own Google: Baidu, modeled in its image.

Google is vulnerable, and in China the strong prey upon the weak without mercy. American manufacturers and even end-users, including the United States armed forces, now plainly see how vulnerable they have become to the agglomeration of manufacturing resources in China, the purported need to sell in China and the compromises that must be made to do so.

Breaking news at WSJ:

Google CEO Schmidt at Davos: 'We like what China is doing in terms of growth ... we just don't like censorship. We hope that will change and we can apply some pressure to make things better for the Chinese people.

Uh oh.

This is worse than merely shooting oneself in the foot, is it not? Direct foreign criticism of Chinese "internal affairs" declaimed to the world's elite political leadership.

More hollering about the value of the Yuan. This is simply Washington window dressing on the more profound problem to which none of the "best and brightest" supposed to be leading this country seems to care deeply enough about to create a solution for. Are there any newly instituted and significant incentives aimed at encouraging American business to bring manufacturing back onshore? (That was a rhetorical question.)

Richard McCormack, editor of Manufacturing & Technology News, writes:

The United States is not a desirable place to build a new semiconductor wafer fabrication (fab) plant. Such plants are massive, costing upwards of $8 billion and generating thousands of direct and indirect high-paying jobs, spinoff revenue for local communities and massive investments in research, equipment and materials. Semiconductors sit at the top of the electronics industry pyramid. The United States invented the technology, but it's become a small player as measured by global production.

In 2009, 16 fabs began construction throughout the world. One of them was in the United States, according to Daniel Tracy, senior director of industry research and statistics at Semiconductor Equipment Materials International.

...

China led the world last year in new semiconductor factory construction, with six fabs, followed by Taiwan with five, and Korea, Japan, the European Union and Southeast Asia, all with one apiece.

...

The United States does lead the world in one category, however: closures. In 2009, 27 fabs closed worldwide, with 15 of them in the United States (followed by four in Europe, four in Japan, two in China, one in Korea and one in Southeast Asia). The number of closures last year almost doubled from the previous year, when 15 fabs were shut down worldwide, again, with the largest number in the United States (at four).

Why is the United States losing out on the next phase of the semiconductor boom? "It's not direct labor," says George Scalise, president of the Semiconductor Industry Association. "It's not materials -- they cost the same everywhere. If you go down the list of expenses, every-thing is the same, except for tax policies and subsidies." [Emphasis added.]

Read the rest here.