China's Future Signals Looking 2-5 Years Ahead China Skinny
3/2013
Increasing Education Needs Disposable Income Growth versus
Household Education Spending Education spending will grow faster
than incomes overall creating a significant opportunity for tools
that capitalise on Finlands lead in education, tech and
gamification China's Future Signals Looking 2-5 Years Ahead China
Skinny 3/2013
Social Media-Integrated Rich Mobile Entertainment Figure
source: iResearch There are more than 500 million online smartphone
users in China. Of the 14.7% of Chinese smartphone users who paid
for an app in the first half of 2013, 63.7% paid for a game, more
than double the next highest category. Chinese consumers lifestyles
are ideally suited to mobile entertainment, with a high portion of
public transport users, and a low percentage doing out-of- home
evening activities such as sports and going to the pub. Over the
next 2-5 years, the mobile gaming industry will grow at a faster
rate than mobile penetration overall. China's Future Signals
Looking 2-5 Years Ahead China Skinny 3/2013
Soaring Staff & Operational Costs for Businesses Wage
Inflation in China Figure source: The Ministry of Labor and Social
Security for the PRC Labour costs in China are rising more than 10%
a year. Related costs such as office rental are also mounting, with
Beijing now the forth most expensive location in the world. Chinese
businesses are increasingly moving away from low-skilled industries
such as low cost manufacturing and focusing on higher value
sectors. The shift to efficient workplaces in China over the next
2-5 years presents significant opportunities for Finnish businesses
who provide technical solutions that meet the need. China's Future
Signals Looking 2-5 Years Ahead China Skinny 3/2013
The Trend Towards Wearable Technology Wearable Tech Expected
Uses by Chinese Figure source: Baidu A Baidu survey discovered 93%
of Chinese Internet users were aware of wearable technology, with
75% willing to purchase, although the industry is still in its
infancy. Whilst wearable tech is not a essential pressing need in
China, Chinas large population and love of gadgets presents a
significant niche well suited to Finlands tech and sporting
strengths. China's Future Signals Looking 2-5 Years Ahead China
Skinny 3/2013
In-Car Telemetry Integration with Everyday Lives China's Future
Signals Looking 2-5 Years Ahead China Skinny 3/2013 The China auto
industry has become the largest in the world. China is forecast to
buy half of the worlds new cars by 2020. Chinas smartphone usage
amongst the middle class who own cars is among the highest in the
world, leading to increasing consumer demand for integrated in-car
technology. New Vehicle & In-Car Telemetry Sales in China
(Millions of Units) Figure source: BAIH, NBS China, CAAM, IHS
Rising Independent Travellers China's Future Signals Looking
2-5 Years Ahead China Skinny 3/2013 Outbound Chinese Tourists
Figure source: CORTI, CNTA, CTA, CLSA More Chinese tourists are
going overseas every year. In 2012, 83 million Chinese travelled
internationally, growing to 94 million in 2013. Although Chinese
have traditionally joined tour groups on overseas trips, an
increasingly confident traveller wanting new and unique experiences
is travelling independently. The majority of these tourists will
have a smartphone, ensuring that there will be a significant market
for mobile tools that meet the unique needs of Chinese
travellers
The Worsening Likelihood of Ill Health China's Future Signals
Looking 2-5 Years Ahead China Skinny 3/2013 China's Worsening State
of Health Health is already an industry of primary importance in
China, and will continue to grow over the next 2-5 years based on
current trends, presenting significant opportunities for Finnish
companies. Health is the number 1 concern for affluent Chinese.
Saving money to cover future health issues is the top reason for
Chinas high saving rates. By 2019, increasing ailments and
awareness of health will create significant opportunities for
healthtech tools and products. Demand for proactive solutions,
online/app developers and smartphone accessories will also rise.
Cancer, diabetes, obesity, infertility, premature births and
antibiotic usage rates are all soaring, attributed to rising
pollution, food safety issues, increasingly stressful urban
lifestyles and an aging population.
Smarter Environmental Intelligence China's Future Signals
Looking 2-5 Years Ahead China Skinny 3/2013 Daily Average PM2.5
Pollution 2013 China's Worst 10 Cities Figure source: China's
Ministry of Environmental Protection, ALA, WHO Chinas environment
is among the worst in the world Just 1% of Chinas 700 million urban
dwellers breathe air considered safe by the European Union. 90% of
Chinas cities groundwater is polluted to some degree Rising
non-renewable electricity consumption and car usage will continue
to worsen pollution levels over the next 2-5 years. Tools that can
measure, monitor and address Chinas pollution at any level stand to
significantly benefit.
Food Production Corporatisation China's Future Signals Looking
2-5 Years Ahead China Skinny 3/2013 Food Consumption Trends in
China Figure source: SSBc As a key Government focus, there will be
significant investment into efficient farming in China, creating
large opportunities for synergies between heavy machinery
manufacturers and tech companies. Part of this shift will be the
trend moving away from small individual farmers to company-operated
farms, who will start to utilise connected technology to monitor
and produce food more efficiently over the next 2-5 years. Chinas
rising middle class are eating more food every year, with China
forecasted to account for almost half of the global increase in
food demand between now and 2050.
The Food Safety Movement China's Future Signals Looking 2-5
Years Ahead China Skinny 3/2013 China's Food Safety Issues &
Sentiment Figure source: PEW Research Finnish tech firms have
opportunities from both B2B standpoint, such as agricultural
technology and processes, and B2C such as tech developers and food
producers working together to create competitive advantages selling
to Chinese consumers through smartphone and web tracking of food
origins, to packaging. Chinas infamous 2008 melamine dairy scandal
brought Chinas abysmal food safety standards to light. Social
networks and state media have raised awareness further and as
consumers become wealthier, they are demanding safer food.
Macro view on manufacturing Shifting landscape from 1970 to
2009 Renewing manufacturing in China including the industrial
internet. China Materialia 3/2014.
Macro view on manufacturing Since 2010, China is first in total
value added from manufacturing Rank Country/Region (Millions of
$US) Year World 9,963,056 2010 1 China 1,924,961 2010 2 United
States 1,800,500 2011 3 Japan 1,091,175 2011 4 Germany 610,184 2010
5 South Korea 315,885 2012 6 Italy 306,196 2010 7 Russia 260,435
2012 8 Brazil 253,642 2012 9 France 253,608 2009 10 India 235,248
2012 11 United Kingdom 229,615 2010 12 Indonesia 210,176 2012 13
Mexico 198,199 2012 14 Spain 172,433 2009 15 Canada 169,120 2008 16
Thailand 124,345 2012 17 Turkey 122,743 2012 18 Australia 108,163
2012 19 Argentina 84,360 2012 20 Poland 76,421 2010
http://data.worldbank.org/indicator/NV.IND.MANF.CD/countries/1W?order=wbapi_data_value_2010%20wbapi_data_value&sort=desc&display=default
Renewing manufacturing in China including the industrial internet.
China Materialia 3/2014.
Various manufacturing sectors evolve differently The
manufacturing sector should be subdivided into various categories
when thinking about trends. Looking at China, we use the following
9 categories: - Aerospace and defense - Automotive and
transportation - Chemicals and process industries -
Telecommunications - Energy, Utilities and Mining - Forest, paper
and packaging - Metals - Information technology - Semiconductors
and electronics 1 2 3 4 5 6 7 8 9 10 2014 2016 2018 2020 2022 2024
GlobalCompetitiveness Year Aerospace and defense Automotive and
transportation Chemicals and process industries Telecommunications
Energy, Utilities and Mining Forest, paper and packaging Metals
Information technology Semiconductor and electronics Renewing
manufacturing in China including the industrial internet. China
Materialia 3/2014.
China goes from low-cost to high-quality manufacturer 5-Year
Plan contains clear direction. more emphasis on value added
manufacturing across seven priority industries: new energy, energy
conservation and environmental protection, biotechnology, new
materials, new IT, high-end equipment manufacturing, and clean
energy vehicles. It is thus a national economic imperative to move
up the value chain, and multinational companies have been quick to
grasp the opportunities that Chinas economic evolution provides.
The number of R&D centers in China funded by foreign companies
rose from one in the early 1990s to more than 750 by 2005. It is
not a question of if China will transition from low-cost to
high-quality manufacturing; it is a matter of how soon and to what
extent.
http://www.kpmg.com/cn/en/IssuesAndInsights/ArticlesPublications/Pages/Global-Manufacturing-Outlook-O-201206.aspx
Political will from the top
http://www.kpmg.com/cn/en/pressroom/pressreleases/pages/statement-20120604-manufacturing-outlook.aspx
http://www.accenture.com/SiteCollectionDocuments/PDF/China.pdf
China Academy of Social Sciences Bearing manufacturers Building
new competitive advantages should help to give China new
opportunities: Government should provide an environment which helps
to cultivate human capital. Enterprises should promote technology
innovation and research to upgrade their products and build strong
brands. The mass production cheap bearings markets have been pretty
much developed already. Further growth is possible only in a
direction of high quality medium and large size bearings, produced
in small and medium series for industrial applications machine
tools, energy, including wind power, mining, off-road machines,
metal and paper mills, aerospace etc. China goes from low-cost to
high-quality manufacturer
http://www.china.org.cn/opinion/2013-02/25/content_28049447.htm
http://www.bearing-news.com/chinese-bearing-manufacturers-are-aiming-for-of-high-tech-high-margin-and-
high-precision-bearings Bearing manufacturing in China is in
transition from growing in terms of quantity to its development in
terms of quality
Rise of active Unions Facing a PR nightmare that included
hunger strikes and threats of suicide by its workers, Foxconn has
been forced to allow its employees to unionize. With a Chinese
mainland workforce of over 1 million, the development may have
enormous ripple effects within Chinas secondary sector, which
accounts for roughly 45% of the countrys GDP2.
http://www.reuters.com/article/2013/02/04/us-foxconn-china-idUSBRE9130EM20130204
http://www.nytimes.com/2013/11/11/business/international/service-sector-gaining-steam-in-chinas-economy.html?_r=0
At present, The official All-China Federation of Trade Unions
controls all enterprise unions throughout the country But pressure
from Apple, as well as other major foreign firms, is projected to
yield substantive reforms, unlike past efforts.
https://www.wsws.org/en/articles/2013/02/13/foxc-f13.html
http://www.nytimes.com/2010/06/11/business/global/11strike.html?pagewanted=all
Pressure from Chinese government Strikes Foxconn public issues
Pressure from Western companies There were 1,171 strikes and
protests in China recorded by the Hong Kong-based labor advocacy
group from June 2011 until the end of last year. Of those, 40
percent occurred among factory workers, as Chinas exports suffered
a slowdown and its overall economy cooled. (The China Labour
Bulletin)
http://www.clb.org.hk/en/sites/default/files/Image/research_report/Searching%20for%20the%20Union.pdf
http://www.businessweek.com/articles/2014-02-20/behind-chinas-labor-unrest-factory-workers-and-taxi-drivers
Social security and other increasing costs In order to increase
Chinese household consumption, the Chinese social security system
is being implemented aggressively. Exact numbers vary per province
and cities, but the total percent of employee salary paid to the
system, including health insurance, unemployment insurance,
retirement insurance, maternity insurance, worker Injury, is often
above 30%.
http://www.chinabusinessreview.com/cost-of-doing-business-in-china-rises/
Other costs are also increasing, such as: - Cost of energy and
quality of the power, including power rationing. - Cost of safety
measures that need to be implemented. - Cost of environmental
regulations. - Import and export taxes on key commodities. Rise in
social security and other costs
RMB/USD exchange rate A currency move of (8.26 6.10) / 8.26 =
26% between the two largest economies in the World Rise of the
RMB
Death of the lowest margins Low-margin manufacturers, in
particular in the Pearl river delta around Shenzhen, did not
survive the first phase of RMB appreciation. To make certain the
smartest companies prosper and accelerate Chinas exit from
low-margin, low- pay, low-tech industries, Chinese regulators have
purposefully crafted a difficult corporate environment. They have
authorized a yuan to appreciate, aggressively enforced labor and
environmental regulations, and increased the typical minimum salary
in 24 provinces and cities by 18 percent in 2013. RMB/USD exchange
rate
Cost comparison various countries After a decade of nearly 20%
annual wage increases in China, companies are moving their
operations to countries with cheaper labor, including Asian
neighbors like Vietnam, Cambodia, and India, and describing it as a
matter of survival.
http://online.wsj.com/news/articles/SB10001424127887323798104578453073103566416
Competition from cheaper locales:
Cost comparison various countries Competition from cheaper
locales:
Increasing productivity Chinese wages may be rising fast, but
so is Chinese productivity. The precise numbers are disputed, but
the trend is not. Chinese workers are paid more because they are
producing more. http://www.economist.com/node/21549956 From Made in
China to Innovated in China Following the Asian tigers Like Japan
and the Asian Tigers Hong Kong, Singapore, South Korea, and Taiwan
China is trying to remake its secondary sector, shifting from
low-cost/low-value manufacturing to higher-quality/higher-cost
operations.
Consumption stable at 35% of GDP Source: National Bureau of
Statistics of China 39,7% 38,0% 36,1% 35,0% 35,3% 35,4% 34,9% 35,4%
32% 33% 34% 35% 36% 37% 38% 39% 40% 41% 0 5000 10000 15000 20000
25000 30000 35000 40000 45000 50000 2004 2005 2006 2007 2008 2009
2010 2011 Domestic Consumption (Billion RMB) GDP (Billion RMB)
Consumption/GDP (%) China is a global market. When you are dealing
with a population of 1.4 billion people, even a nominally wealthier
populace can translate into a disproportionate shift in demand for
higher-quality products and services. 2012 GDP - composition, by
end use: household consumption: 35.7% government consumption: 13.5%
investment in fixed capital: 46.1% investment in inventories: 2%
exports of goods and services: 26.9% imports of goods and services:
-24.1% Huge and growing Chinese internal consumption
More automation and robotics The International Federation of
Robotics tracked a 50 percent jump in purchases of advanced
industrial robots by Chinese manufacturers in 2011, to 22,600
units, and now predicts that China will surpass Japan as the worlds
largest market in two years.
http://www.kurzweilai.net/migrant-workers-in-china-face-competition-from-robots
Internet of things - Huawei Chinese companies like Huawei are
already articulating a vision for what the newly remade IoT world
will look like: Power companies read meters through tele-metering
systems instead of visiting houses; doctors remotely monitor the
conditions of their patients 24/7 by having the patients use
devices at home instead of requiring the patients to stay at
hospital; vehicle-mounted terminals automatically display the
nearest parking space; sensors in smart homes turn off utilities,
close windows, monitor security, and report to homeowners in real
time. Industrial internet becomes ubiquitous China has shown
strength in architectural innovation To prepare for integration and
maximum exploitation of IoT, companies need to focus on
architectural innovation, which, at its most basic level is the
idea that you can take an existing product or process, break down
its components, and modularize them. This might seem like mere
reverse-engineering and mimicry, but theres a crucial difference by
modularizing components you can also standardize them across an
industry. That means you can establish a robust supply chain of
components and produce goods on a massive scale incredibly quickly.
http://www.industrialinternet.com/blog/chinas-innovation-revolution/
Industrial internet is bigger in China A GE executive speculated
that with infrastructure in place its Industrial Internet network
in China would create about $3 trillion in accumulated growth
opportunities for Chinese companies by 2030.
China needs the smart grid more than any other country Chinese
power generation is still mostly based on polluting coal-fired
power plants. Smart electric grid
3D printing as a National priority The 3D printed parts market
alone shows enormous growth potential through 2025, as well as the
3D manufacturing equipment. Automobile parts are expected to
account for an increasing percentage of the 3D printed parts
market.
http://www.designnews.com/author.asp?dfpPParams=ind_183%2Cindustry_auto%2Cindustry_aero%2Cindustry_consumer%2Cindustry_ma
chinery%2Cindustry_medical%2Cbid_27%2Caid_262205&dfpLayout=blog&doc_id=262205&image_number=1
3D printing China has built the World largest 3D printers China is
already on the vanguard, building the worlds largest 3D printer,
and then beating its own record in 2014. The behemoth 3D printer
will be able to print out metal objects approximately 6 meters, or
18 feet in diameter. China will be able to manufacture and assemble
automobiles in fully automated facilities, going a long way towards
sating the hundreds of millions of domestic auto buyers over the
next handful of decades; with inexpensive, efficient domestic
vehicles instead of foreign imports.
http://3dprint.com/733/chinas-huge-3d-printers-soon-able-to-print-automobile-sized-metal-objects
