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Summary

In 2015, President Xi committed to eradicating rural poverty by the end of 2020, and despite the economic distress brought on by the pandemic, China declared its momentous victory. While a mix of state policy and private sector support were key to the campaign’s success, digital technologies such as e-commerce played a pivotal role in improving the quality of life in rural areas and have brought China one step closer to realizing a moderately prosperous society.

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In a year overshadowed by the pandemic, a bright spot in human development has emerged in China. Last November, Beijing announced that it had eliminated rural poverty nationwide, lifting all rural citizens above the centrally-defined poverty line of CN¥2,800 per year, or roughly US$400. Eradicating extreme rural poverty has been a core initiative of President Xi since taking office in 2012. While the target sits below the international level of absolute poverty of US$700 per year, this has still been nothing less than a monumental feat, lifting almost 100 million rural citizens above the state-designated poverty line in a matter of eight years. …


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Michael Jordan and Bruce Lee have been making news in China’s trademark scene over recent years with cases aimed at protecting the legitimate IP rights of foreign persons and entities in China. Amendments to China’s trademark laws should provide broader protections to companies across the board; however, questions concerning whether owners of less well-known brands can find as effective enforcement as celebrities sporting household names remain.

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Intellectual Property (IP) is at the center of many of the most vexing issues besetting Sino-US relations these days. Forced technology transfers, rampant copyright infringement, and difficulty protecting trade secrets are all major concerns foreign businesses face in China on a daily basis. However, as maturing Chinese companies have started to clamor for better IP protections of their now valuable copyrights, trademarks, and patents, the impetus behind improved IP enforcement has grown. This heightened demand from companies for IP protection dovetails nicely with the efforts of the US and other nations pushing China to make good on promises of more effective enforcement, and near the top of any shortlist for improved IP protections is trademarks. Recent cases involving Michael Jordan and Bruce Lee illustrate the growing sensitivity and nuanced treatment trademarks are garnering in China. …


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Summary

Accounting fraud at two highly visible Chinese companies have shaken the confidence of global investors while prompting US policymakers and exchanges to push for stronger accounting requirements for overseas companies listed in the United States. Whether or not Chinese regulators will comply remains to be seen.

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While accounting fraud by Chinese companies is far from rare, two significant cases in the past year have especially unnerved the market. Fraudulent activity by Luckin Coffee and Joyy Inc. …


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At first viewed as an olive branch amidst a spiraling Sino-Australian trade war, the now finalized Regional Comprehensive Economic Partnership is unlikely to ease mounting tensions. The untested dispute settlement mechanisms within the deal and shallow provisions for reducing tariffs bode poorly for Sino-Australian relations and point to no end in sight for 2020’s series of new economic tariffs and sanctions.

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On November 15, 2020, a monumental achievement was penned into action as 15 member nations brought eight years of discussion to a close. As the world’s largest free-trade agreement, the Regional Comprehensive Economic Partnership (RCEP) is slated to reduce trade barriers and encourage economic collaboration. However, underscoring its inauguration are tensions between two of its largest participants, China and Australia, that pioneer new heights on a daily basis. …


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As Hong Kong’s economy continues to decline, retail, tourism, and foreign investment dollars have assumed a newfound importance to the Chinese economy. An up-and-comer is rising from the shadows to challenge Hong Kong’s regional stature in the form of an island paradise. The newly designated free trade port of Hainan and Beijing’s aptly named Master Plan strive to usher in a new center for global trade and investment for the island-province.

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One of the most widely trafficked tourist destinations in the world, home to the largest concentration of premier resorts of any Chinese city, host to some of China’s most prestigious events, and a launchpad for space exploration missions — with 930 miles of coastline, the island-province of Hainan is increasingly regarded as one of China’s most beautiful and bustling special economic zones (SEZ). …


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Summary

In the run-up to Ant Financial’s behemoth IPO, the fintech giant’s suspiciously light balance sheet triggered the release of draft rules by Chinese regulators that would significantly impact the firm’s operating model. Consequently, Ant’s IPO was delayed, and investors went home disappointed. While regulators’ concerns were not unfounded, the consequences of these new regulations resurface big questions about the future of China’s consumer finance industry.

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In October, at the annual Bund Summit in Shanghai, Jack Ma, the former chief executive of Alibaba, delivered a bold rebuke of China’s nascent financial system. In his speech, the 56-year-old billionaire sharply criticized the current system’s track record of underserving households and denounced President Xi Jinping’s quest to drastically reduce systemic financial risks. Regulators, he complained, are trapped by an antiquated “pawnshop mentality,” which requires borrowers to post collateral to access credit. What China needs, he declared, is a new way of thinking. In place of the global standard of asset-based lending, Ma painted a futuristic picture of a wholly credit-based system that would use intelligent algorithms and big data to accurately judge an individual’s creditworthiness. With such a system in place, “even the beggar,” he promised, “would be, and can be, creditworthy.” …


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Summary

Despite its history of strict regulation against the industry, China’s gaming market is flourishing. Chinese MMOs and RPGs are topping lists around the globe while high-quality cross-platform releases, along with creative marketing through films, eSport competitions, and livestreaming, have set the tone for China’s growing gaming market for years to come at home.

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In the “good ol’ days” of the early 2000s, China’s some 30 million gamers would take up their gaming interests in dark, seedy, and oftentimes illegal internet cafes. While many of these are still easy to find in metropolitan areas, the advent and subsequent spread of modern, high-powered smartphones and personal laptops have enabled China’s gamers to play both at home and on-the-go. …


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To achieve its goal of carbon neutrality by 2060, China needs to ditch coal-fired electric power plants for renewable alternatives. However, doing so will require dismantling an antiquated system of incentives that are in place for local officials and power producers. Whether Beijing can summon the political will to overcome powerful vested interests opposed to these changes will be an important indicator of China’s capacity for meaningful reform.

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On New Year’s Eve 1879, the modest town of Menlo Park, New Jersey, welcomed visitors to bathe in the unfamiliar light of Thomas Edison’s latest invention — the incandescent lightbulb. In the days preceding Edison’s grand unveiling, The New York Herald had published a full-page article dedicated to the newfangled contraption responsible for producing the “bright, beautiful light, like the mellow sunset of an Italian autumn,” that would take the world by storm. While the light bulbs themselves emitted no smoke nor foul odor, the commercialization of electricity spawned the construction of coal-fired power plants, which culminated in the environmental impact the world is now grappling to contain. …


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Summary

Following its first economic contraction since Mao Zedong held office, China has set precedent as the first major economy to return to growth. While the road to recovery has been riddled with bumps indicative of lopsided development, Q3 results, paired with well-targeted policy support, are painting a promising outlook for China’s development into Q4 and beyond.

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As the novel coronavirus emerged, mandatory government-enforced quarantine measures resulted in the closures of factories, shops, and corporations alike, and consumers curtailed spending to prepare for hard times. Ever since, both developing and advanced economies have been colored red by recession characterized by widespread layoffs and plunging stock markets. In June 2020, The World Bank forecasted that the global GDP would contract by -5.2% …


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Navigating the Chinese market had been challenging for international luxury fashion brands even before the pandemic, but shifting consumer trends in the world’s largest luxury goods market now threatens the bottom line for major brands worldwide. To remain competitive, luxury brands must identify the challenges within the market and restructure their China strategies around the culturally-charged consumer market.

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As the pockets of China’s upper class deepen and the size of its middle class grows, so does the world’s largest luxury goods market. In 2019, Chinese consumers accounted for 90% of industry growth in the global personal luxury goods market, leading growth models to project Chinese consumers to account for nearly 50% of all luxury goods by 2025. For now, however, prolonged social distancing and mandatory quarantine measures due to the pandemic have sent shockwaves through the cash-strapped global luxury fashion industry. …

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The China Guys

Stay in the know with TCG’s fresh perspective on China’s economy, business environment, and political landscape.

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