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Over the past couple of years, there’s been no shortage of Western brands in the Chinese Government’s dog box. Some of the market’s highest profile foreign players such as Apple, KFC, Starbucks, Nike, P&G, European carmakers and milk powder brands have been singled out for their ‘misdemeanours’ by state-run media.

Although Chinese consumers aren’t always trusting of what they see and hear in the all-present state media, there’s no disputing the negative effect the bad press can have on sales.

Last week, another well-known achiever was singled out by the state media, this time it wasn’t a foreign brand, but the local success story WeChat. People’s Daily and a slew of other local rags criticized WeChat for not being as “pure” as before.

In the past, almost all of the coverage of WeChat in China’s state media has been unequivocal praise, so it will be interesting to observe if this criticism continues.  The negative press for Tencent won’t do any harm for its most formidable competitor, Alibaba, so close to its IPO, and the day before Tencent announced that more WeChat accounts can sell goods online.

WeChat has been treading a relatively fine line in China. Although the Government works closely with Tencent to track inappropriate content, the network’s closed nature can make it more difficult to identify and suspend communications than the open platforms such as Weibo. Other features such as WeChat’s QR-scanning mobile payments have been suspended following lobbying from state-run banks. The service has also cannibalised the state-run telecommunication companies’ revenue streams.

There is no shortage of Chinese tech companies that have had to toe the line for not aligning with the Government mandate. Negative press is often followed by new laws. China’s successful taxi apps, which skirted around the state taxi regulation, have had all sorts of rules imposed. Laws threatening jail for spreading rumours on Weibo also affected usage on the network. WeChat has already reduced the maximum number of friends allowed on a personal account to 5,000, and it’s likely there’ll be other new rules imposed.  We can be certain that Tencent will be working especially close with the Government right now, as anyone operating on scale in China should be.

We hope you enjoy this week’s Skinny.

Consumers,: Chinese Consumers

China Online Spending Power UnmaskedChina’s retail spending for the first four months of 2014 were up 12% from a year ago. Online shopping grew at 52%, with growth expected to continue at 20-30% over the next 3-5 years. China’s per-capita retail floor space was 0.6 square meters in 2013, compared with 2.6 in the USA, 1.3 in the UK and 1.3 in Japan.

Consumers’ Outlook Brightens in MayWestpac Bank’s latest Chinese consumer sentiment indicators shows rising confidence as personal finance and job conditions pick up. The measure rose to 121.2 in May from 117.3 in April. Similarly, Nielsen’s Chinese consumer confidence index remains at a record high for the first quarter. 

Wildlife Consumption and Conservation Awareness in China: a Long Way to Go52.7 % of Chinese agreed that wildlife should not be consumed, compared to 42.7 % in 2004. Nevertheless, the proportion of respondents who had consumed wildlife only decreased slightly from 31.3 % down to 29.6 %

Online: Internet, Mobile, Social Media & eCommerce

Tencent Criticized by China State Media as Some Accounts LimitedInteresting coverage in China’s state media that isn’t singing WeChat’s praises.

Top Chinese Messaging App Makes Big eCommerce Leap with Opening of WeChat StoresFollowing a trial with major brands and retailers, verified service accounts can now set up stores on WeChat with transactions processed through the WeChat Payment platform.

Weibo CEO: Clutter is Good for Us, and Microblogging Can Thrive Alongside Messaging AppsWeibo knows it can’t compete with WeChat head-on for communications, so it is focused on challenging the traditional media channels for news, information and gossip. Weibo sees key opportunities coming from the integration with Alibaba, adding value for its users through music, video and games and attracting new users from China’s lower-tier cities and rural areas.

Crocodile on the Yangtze: An Insiders Look at Alibaba16 min vid interviewing former Alibaba VP, Porter Erisman about his Alibaba documentary. The biggest lesson from his time with Alibaba was the importance of localising the Internet, and not just the advertising or packaging. Some great footage of Jack Ma belting out the Lion King. China Skinny was at the Yellow Dragon Stadium for Taobao’s 10th birthday celebrations last May and we can attest that Jack Ma is quite the performer in person.

Wellness, Health & Beauty

Estee Lauder First Day Tmall Sales Data LeakedEstee Lauder launched its official Tmall store on 21 May, and within 24 hours had clocked 7,941 transactions averaging ¥339 ($54). The day’s takings totalled ¥2.7 million ($430,000), more than the average offline store does in a month.

One in Every Two Cigarettes Will Be Smoked by Chinese Consumers by 2018Of the ten biggest markets for cigarettes, China, Indonesia and Vietnam are the only ones not in decline. Their increase in volume will more than offset the declines in the other markets, adding a combined 60 billion cigarettes in 2013.

In China, There’s Now a “Xiaomi of Condoms” Startup. And it Just Got $5M in FundingOnline condom brand Daxiang, meaning “big elephant”, has $5 million to spend on developing more features such as the one-handed application. It is planning to constantly launch new products based on user feedback. A trial is currently aiming to deliver condoms in a Beijing neighbourhood in under 45 minutes.

Overseas Chinese Tourists

Hong Kong Mulls Curbing Tourist Arrivals Amid DiscontentWhile most countries are falling over themselves to attract more Chinese tourists, Hong Kong is considering following Taiwan in restricting numbers. 75% of the city’s 54.3 million tourists in 2013 were mainlanders, who accounted for more than a third of the territory’s entire retail sales.

Premium Food & Beverage

Wine: New Roads to ChinaCase studies from Australian, French and German wine businesses approaching China in different ways.

Instruments and Music

Middle Class Status Symbols: Beyond Cars and WatchesPianos are becoming a new status symbol of wealthy Chinese families, partially because there is prestige associated with those who have homes large enough to house them. They are also an investment in a child’s future as talented young musicians have a greater chance of getting into the top universities. In Europe about 40% of Steinway grand pianos are bought for amateur player use, whereas it is over 65% in China.

Premium and Luxury

Economist: China Luxury Slowdown ‘Short Blip’ in Big PictureThe Economist Intelligence Unit is predicting a bright future for luxury goods in China given rising wealth and an appreciating RMB. The number of Chinese households earning more than $150,000 a year will grow from 384,000 currently to 10.3 million in 2030. By 2020, there will be 61 Chinese cities with more than 100,000 residents that have an income greater than ¥150,000 ($24,500) a year, up from just Beijing and Shanghai in 2012.

China: Luxury Fashion Still in DemandDaily search volumes for luxury brands on Baidu increased 36% between 2013 and 2014, with Chanel becoming the most searched-for brand. Fashion searches on mobile increased 110% versus 26% on desktops.  Mobile searches for jewellery were up 60%, versus 10% on desktops.

Kooky, Weird & Wonderful

The Sphinx: Didn’t the Egyptians think to Trademark it in China?China has just created one its most monumental fakes: a bogus $1.3 million Sphinx 50% taller than the original. On the subject of imitations, Starwood Hotels is opening a faux Bavarian castle in Dalian later this year.

That’s The Skinny for the week!  We’d love to discuss how we could help with your marketing, online initiatives or research to take advantage of China’s opportunities.  Just email us at info@chinaskinny.com or call us at +86 21 3221 0273 so we can learn more about your objectives and let you know how we can help.

If you’ve missed earlier news or need to learn more, there’s a library of information about Chinese consumers in prior China Skinny Weekly’s right here. You can have this delivered to your inbox each week by subscribing for email updates, or if social media is more your thing, please follow us on Twitter, Facebook, Linked In or Google+, or subscribe to our RSS feed.  If you have any feedback or suggestions for future articles, please let us know.