Industries

Changing Tastes: China’s Imported Wine Industry

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By Harry Handley

China’s taste for wine is growing rapidly, and the country is set to overtake the UK to become the world’s second largest wine market by 2020, reaching a value of US$21 billion. According to VINEXPO research, the market is anticipated to grow by an average of seven percent each year over the next four years, with 6.1 billion liters of wine expected to be sold in 2020. Each year a growing percentage of the wine sold in China is being imported from abroad; last year this figure passed 10 percent for the first time.

Customs data shows that in 2016, 638 million liters of wine were imported into China, with a total value of US$2.4 billion – a year-on-year increase of 15 percent in volume and 16 percent in value. This growth is expected to continue, as popularity for imported wine filters down to China’s lower tier cities and wine consumption becomes a more common pastime.

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How China is Becoming a World Leader in Artificial Intelligence

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By Weining Hu

On March 5, at the opening meeting of the National People’s Congress, China’s top legislature’s annual session, Premier Li Keqiang announced that China will accelerate research and development (R&D) in new and emerging industries, such as artificial intelligence (AI). It is the first time that China’s highest national meeting has included AI in the Government Work Report. The report’s singling out of AI indicates Beijing’s prioritization of the industry in its economic agenda, and therefore its determination to support its growth.

In recent years, China’s leadership has been increasingly thinking about how to ensure their competitive edge in the AI industry. The acceleration of China’s policy efforts to advance AI development began in 2014, when President Xi Jinping called for innovation and breakthroughs in science and technology, including AI, at the opening ceremony of the 17th Congress of the Chinese Academy of Sciences.

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Understanding China’s Lifted Regulation for e-Commerce WFOEs Operating in Free Trade Zones

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By Tongyu Zhang

In June 2015, the Ministry of Industry and Information Technology (MIIT) published the Notice on Removing Restriction on Foreign Equity Ratios in Online Data Processing and Transaction Processing Business (Operating e-commerce), which allows foreign investors to hold up to 100 percent equity in an e-commerce company. However, it was not until one year later that the first wholly foreign-owned enterprise (WFOE), Heiwado (China) Co., Ltd, a Japanese company, obtained an operational internet content provider (ICP) license from the MIIT. While the Chinese government provides considerable policy support to the e-commerce sector, the specific definition of e-commerce is vague and can lead to a series of problems in practice. For instance, relevant authorities hold a more reluctant attitude towards e-commerce for services than towards commodities transactions.

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A Supplement to China’s Health Food Market

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By Giulia Daverio

According to a 2016 study by the Hong Kong Trade Development Council (HKTDC), China’s health foods market is worth more than US$144.2 billion. As of June 2016, the China Food and Drug Administration (CFDA) had approved a total of 16,573 health food products, of which 15,822 were domestic and 751 were imported.

Due to its impressive growth and to the numerous food scandals which have played a key role in driving consumers towards imported products, this market presents enormous opportunities for foreign businesses. There are several factors, both social and economic, contributing to the industry’s rise:

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At Your Fingertips: Approaching China’s Mobile App Store Market

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By Zolzaya Erdenebileg

According to a notice released by the Cyberspace Administration of China (CAC), all mobile application (“app”) stores in the country are required to register with the government. Effective since January 16, 2017, the notice cites the dangers of illegal information, user rights violation, and security risks that can be spread through mobile apps. By requiring app stores to register, the notice clarifies that legal responsibility for app and app store content lie with the app store. This latest attempt by the Chinese government to increase regulatory control over the mobile information and services underscore the growing importance of the industry.

China is gaining center stage in the so-called process of ‘appification’, where webpages are translated onto mobile operating systems for ease of access and use on smartphones. In other words, the mobile app is becoming the main user interface, and in the process, changing the ways in which people consume and businesses sell.

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Study Buddies: Investing in Sino-Foreign Higher Education in China

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By Harry Handley

In 2010, China introduced the National Plan for Medium and Long-term Education Reform and Development (2010-2020) to improve Chinese education standards to match international levels. To do so, the government further opened the higher education sector to foreign investment, allowing foreign universities to enter the higher education sector through joint ventures with local partners. Seven years down the line, the increased support, both financial and regulatory, has led to an influx of Sino-foreign joint education programs and institutions.

Enrollment in universities has increased from 15 percent to 40 percent in the last ten years, and is expected to increase by a further 50 percent by the end of the decade. In 2016, 450,000 of those enrolled in higher education studied at one of the increasing number of Sino-foreign joint institutions around China, such as the University of Nottingham Ningbo China (UNNC), a joint venture between the UK’s University of Nottingham and Zhejiang’s Wanli Education Group. In recent years, there has been a shift in how Chinese students perceive these joint institutions. Originally, they were seen as an easy route to studying abroad in the West, but now some have earned strong academic reputations in their own rights.

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Curtain Call: Prospects for Foreign Investment in China’s Culture and Entertainment Industry

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By Tongyu Zhang

The Chinese government recently published a series of official measures to boost the development of the country’s culture and entertainment industry, including the Opinions on Promoting the Upgrade of Cultural and Entertainment Industry and the Film Industry Promotion Law (effective on March 1, 2017). China has seen rapid growth in the culture and entertainment industry in recent years, owing to government support as well as a growing middle class consumer base. According to a recent report on the Entertainment & Media (E&M) industry by PwC, China’s E&M market has increased by 50 percent since 2010 and is forecast to rise at a compounded annual growth rate (CAGR) of 8.8 percent over the next five years. The internet advertising, film, and video game segments will be the main intra-industry dynamics that will drive growth, with a projected CAGR from 2015 to 2020 of 13.9 percent, 18.9 percent, and 7.4 percent, respectively. However, as the Chinese government aims to use the cultural sector as a ‘soft power’ tool, such political intentions will inevitably lead to a certain extent of sensitivity for foreign participation in China’s culture and entertainment industry.

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Navigating Cross Border e-Commerce Regulations in China’s Pet Food Industry

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By Weining Hu

Cute cat and funny dog eating foodOn April 8, 2016, Chinese authorities released an updated “positive list” for goods imported through cross border e-commerce (CBEC). Pet food, specifically dog food and cat food, are included on the list for the first time. This new regulatory update presents a substantial e-commerce opportunity for foreign pet food companies, as pet food can now be imported more easily via one of China’s 13 free trade zones or sold directly on business-to-consumer (B2C) or consumer-to-consumer (C2C) e-commerce platforms such as Tmall and JD.com. However, uncertainties and risks accompany these new opportunities, as new integrated tax policies for CBEC and the pre-existing “negative list” exert impacts on foreign investment.

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