5% growth, China's welcome wave, and Temu's unorthodox path to success

China’s Two Sessions: 5% GDP growth Target

What’s the background?

China confronts economic hurdles amid global scrutiny and internal challenges. Premier Li Qiang's announcement of a 5% growth target for 2024 signals a cautious strategy to address issues like a property crisis and waning consumer confidence.

Fact 1: Premier Li Qiang sets a growth target of approximately 5%, maintaining continuity from the previous year.?

Fact 2: The fiscal deficit remains steady at 3% of economic input, indicating a prudent fiscal approach.

Fact 3: Notably, the government pledges new funding for artificial intelligence (AI) and research initiatives, highlighting a commitment to technological advancement as a potential driver of growth.

There’s been a considerable amount of expectation for this year’s Two sessions. As we move into 2024,? it's apparent that we'll likely witness a continuation of the trends from the previous year. Despite signs of increase of consumer price index (inflation for the first time in the past 6 months), it remains relatively low compared to previous years;? Rebuilding business and consumer confidence will be a gradual process, especially amidst ongoing security and geo-political concerns for businesses operating in China. However, China’s annual meeting did shed light on areas of opportunity, particularly in AI, science, and technology, offering hope for potential new players and continued investment in these sectors. Additionally, positive strides towards environment-related regulations and laws provide further encouragement for sustainable growth. Rachel Tsang , BritCham Managing Director

China's Welcome Wave: Visa-Free Travel and Transaction Ease Boost for Visitors

What's the background?

China encourages foreign bank card acceptance, facilitating mobile payments for international visitors. Recent policies aim to boost tourism, improve payment accessibility, and enhance privacy measures, including raising transaction thresholds.

Fact 1: WeChat and AliPay now allow verified users to connect international credit cards, improving payment accessibility.

Fact 2: Mastercard's joint venture in China gained approval to process domestic payments after a four-year wait, signalling improved access for foreign financial services.

Fact 3: Beijing opens a payments service centre for foreigners, focusing on cash exchange, card acceptance, and mobile payment support.

We are pleased with the Chinese government's response to our advocacy for easier transactions for international visitors. We've submitted materials on this issue, and very happy to see progress, particularly regarding mobile payments and foreign bank card acceptance. We have been welcoming increasing visits from our member companies' headquarters and other offices to China since early 2023, and have been approached by them around difficulties for international visitors' day-to-day travel in the country. This firsthand feedback underscores the importance of initiatives to simplify transactions and improve payment accessibility for foreign visitors. It's encouraging to witness tangible progress in response to such concerns, reflecting a concerted effort to address the evolving needs of the international business community operating in China. Yiyi Jing , BritCham Advocacy and Government Affairs Manager

Coffee Break Read

Why we like it?

This article explores how brands in China are redefining International Women’s Day celebrations by prioritising self-expression, empowerment, and creativity over traditional product promotions. Initiatives like Aesop's Women’s Library, Neiwai's female artist program, and SK-II's documentary on embracing natural beauty resonate with Chinese women, fostering emotional connections and meaningful discussions on femininity and empowerment. We like it for shedding light on innovative approaches that prioritise authenticity and empowerment, reflecting a broader shift towards more profound and meaningful engagements with female consumers in China.

Podcast of the Week: Chinese cranes in the US

Why we like it?

The Wall Street Journal’s “The Journal” podcast on “ship-to-shore cranes” presents an American viewpoint on the little-discussed issue of the use of Chinese cranes in US ports. Around 80% of cranes used in US ports are currently made by ZPMC, a Chinese state-owned company. The podcast measures this issue alongside ongoing geopolitical tensions over China’s growth in some sensitive sectors and a perceived risk to the US. It also discusses some of the logistical issues in the transport of cranes between the US and China.

And finally...

FT has released a thoroughly interesting 25-minute documentary available for free on YouTube about the rise of Pinduoduo’s Temu and its potential to disrupt industry giants. Here we discuss some eyebrow raising findings.

What is Temu? Although founded in Boston, Temu was created by Pinduoduo (PDD) and operates as an online marketplace offering discounted goods by connecting manufacturers directly with consumers. Compared with rivals such as JD.com and Alibaba, Pinduoduo, like Shein, is extremely asset light, employing only 13,000 people in mainland China, compared to Amazon’s 1.5 million. Despite this, PDD’s Temu has an expected $17 billion gross merchandise value in 2023, rivalling Shein. PDD’s Chinese, domestic business generated an estimated $25 billion of free cash flow this past year.

Without too many spoilers, PDD’s Temu has had numerous controversies, one being its highly convoluted ownership structure. When listing on Nasdaq, it was said that founder, Colin Huang, had always owned the company; in fact, the company that became PDD, was held by a woman in her late 60s who owned 90 percent of the company, a technique known in China as using “white gloves”. It also has dubious office locations. Temu moved its HQ from Shanghai to Dublin to take advantage of Ireland’s alluring low corporate tax rates, but when a journalist visited the small, unassuming office on the highstreet, there was no one at reception to talk with. Temu has been extremely secretive and reluctant to disclose company financials; this culture of secrecy is suggested to also run deep within the parent, PDD, with employees saying they don’t know their colleagues real names, only their nicknames.

Temu is also wrapped up in geopolitical debates within the US and environmental concerns over its business model. Nevertheless PDD and its subsidiary, Temu, are rewriting the rules of e-commerce, leaving investors and observers alike captivated by its unorthodox path to success.

Thanks for reading China in 5! Have thoughts about what you'd like to see, suggestions for our coffee break reads, or a favourite podcast you want to share? Let us know below, or reach out via our website at britishchamber.cn.