Category: China

Huawei’s attempt to shape the cloud

For the last two days Chinese network equipment vendor Huawei has been holding its first Huawei connect conference in Shanghai.

There’s alway plenty to announce at these conferences and Huawei had consultancy partnerships with both Accenture and Infosys, their IoT strategy and their big push into cloud computing.

Ken Hu, the company’s current CEO, even had a new word – cloudification – to describe how business processes are going onto the cloud. Although during the segment on their relationship with SAP, the Huawei executives were at pains to emphasise that in their view most enterprises are a long way from going to a public cloud and will be hosting their own services for some time yet.

Despite the clumsy buzzwords, Huawei does have an interesting selling point in the market with its tie up with telcos giving it both a strong sales channel and a unique selling point. How well they execute with telecommunications companies that are notoriously poor at selling these services remains to be seen.

Huawei’s internet of things services are a similar proposition. Being close to the carriers means the company is well positioned to compete in the market, particularly in M2M applications, but again that closeness to telcos could be a hindrance.

The big message from Huawei Connect is that Chinese companies are genuine competitors to European and North American companies like Ericsson and Cisco, something illustrated on Tuesday when Tencent previewed their new head office in Shenzhen that will act as a live R&D lab for their IoT offerings.

Overall Huawei Connect was a good example of the Chinese government’s efforts to shift the nation’s economy up the value chain.

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Autodesk and the China manufacturing challenge

China’s focus on R&D is changing the country’s manufacturing outlook which has major consequences for the rest of the world.

At the recend Autodesk University event in Sydney I had the opportunity to talk with Pat Williams, the company’s senior vice president for Asia Pacific.

Williams’ beat covers all of Asia and he’s based out of Shanghai where he’s been based for the last eight years and prior to that he spent a decade in Japan.

Having spent so much time in North East Asia, and heading to the PRC the following week myself, it was interesting to hear Williams’ views on how industry is changing in China and ther country’s attitude to American software companies.

“There’s a lot of noise that gets made in China about their local IP and the local vendors and what I say is ‘the Chinese companies are competing in a global market and they are under the same competitive pressures as everybody else in the world so when they find a better tool they use it. Despite all the noise, business is quite good there.”

For the Chinese economy, the aging and increasingly expensive workforce presents a problem, something addressed by the China Manufacturing 2025 plan which sees the country increasingly competing in high tech sectors such as aerospace, telecommunications and biotech fields.

“China’s kind of an anomaly,” says Williams of the country’s immense growth rates. “From a government perspective there’s a lot of horsepower behind the things that they do – China 2025, their manufacturing initiative, you’ve got what they’ve been doing with Building Information Modelling (BIM) and our architectural tools.”

They’ve really kind of spearheaded what we’ve been talking about on things like 3D printing of houses. China on its own is just this mushroom that’s happening.”

While the industrial shift in China and the rest of Asia is promising opportunities to companies like Autodesk, that change is affecting their workforce as well with the company announcing plans to lay off ten percent of their workforce earlier this year.

Those cutbacks are part of the adjustment to a new market reality says Williams, “it was part of right sizing the business.” He observed “we realised our margins were going to be compressed as we move to a subscription model.”

Autodesk’s shifts illustrate how the opportunities in the new economy don’t come without costs even for the companies that seem to be winners in a shifting marketplace.

In China, American companies are finding they have to a unique proposition – companies like Apple and Autodesk are good examples – and as the country moves its economy further up the value chain all foreign businesses are going to have to show how they add value.

Succeeding in a changing economy isn’t without uncertainty. And it certainly isn’t without risks.

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China ramps up support for the tech sector

Faced with a transitioning economy, China looks to boost the tech sector

China’s President Xi pledges increased support for technology firms reports Reuters.

While that will be welcome for Chinese tech and manufacturing companies, the question is just how effective top down initiatives like this are in building a vibrant industry.

As the country’s debt balloons and state owned corporations find themselves trapped with legacy businesses and massive inventories, the pressure is on the PRC’s government to find new ways to stimulate the economy, this is a start but it’s hard not think the Politburo will have to find ways to boost small business investment and startups.

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Interesting times as the global steel glut bites

The global steel glut marks the start of interesting economic times

For all the talk of digital disruption, who would have thought the old fashioned steel industry would be the industry causing the greatest upheaval in today’s economy?

Globally the steel industry is in trouble. In China, the UK and Australia steelmakers are facing a painful time as chronic overcapacity bites.

Beyond the immediate domestic problems of having a major part of its manufacturing industry shut down, Australia faces an added problem as the nation’s economic policies were based on a never ending Chinese demand for iron ore and coal.

OECD “Excess Capacity in the Global Steel Industry" (2015)
OECD “Excess Capacity in the Global Steel Industry” (2015)

The impending collapse of Bohai steel shows the Chinese industrial boom is now in the past and the onus on Beijing’s rulers is to stimulate a domestic services economy.

For the UK, the collapse of their steel industry adds further uncertainty to a nation that’s already putting its global role at stake with the referendum to move out of the European Union.

Should Britain turn away from Europe, they will need to find some compelling reasons to be competitive in the global economy. Fantasies of some sort of Anglo-centric Commonwealth of Nations won’t be enough to sustain the Little Englanders and their high cost of living.

In fact, the British problems of high costs and decades of underinvestment are common across the English speaking world – although Canada, New Zealand and Australia are particularly at risk in the current economic climate given their dependency on commodities and Chinese markets.

That Chinese curse of may you live in interesting times is proving true again, we are about to enter a fascinating economic period. Our business and political leaders, along with our resilience, are about to be tested. The steel industry is the first test.

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Building the internet of rice cookers

Chinese smartphone manufacturer Xiaomi hopes an Internet of Things ecosystem can drive the company’s growth

Are domestic appliances the next wave of connected devices? Chinese smartphone manufacturer Xiaomi hopes so.

Xiaomi is best known for its cheap smartphones aimed at third world markets and the company’s move into connected kitchen devices marks an expansion into broader areas.

Smartphones being the centre of Xiaomi’s product offerings seems to be the common factor in the expanded range of devices, with the company hoping their ecosystem will be a compelling point of difference in a crowded market.

The idea the smartphone will be the centre of people’s connected lifestyles isn’t new but Xiaomi’s bet on low margin home appliances to drive smartphone sales and subscriptions to cloud services seems a brave move.

It may work however, the business models of tomorrow look improbable today.

 

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China’s rocky economic pivot

China’s workforce problems shows an economic pivot is rarely smooth.

As the Chinese economy adjusts to new economic realities, some of the costs are beginning to be felt.

In China’s North-East where the economy is dominated by state owned enterprises in staid heavy industries, workers are moving to more promising regions and local leaders are worried.

However with the Chinese economy pivoting, things aren’t doing so well in the more laissez-faire South Eastern provinces either with workers giving up their precious New Year’s holidays to protest unpaid wages and unfair treatment.

For the Chinese government, this worker unrest is a serious problem. How the country’s leaders try to address the causes could well have global ramifications as the world’s economy faces the reality of massive economic overcapacity.

Out of the box thinking is needed, but it may not be enough to overcome the fears and needs of ordinary, angry workers. What is clear is that an economic pivot is never smooth.

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The risk of misunderstanding China

The West is underestimating China warns veteran investor Mike Moritz, but the misunderstanding run further than just business

In the early 1990s I was working for a British company in Hong Kong and regularly commuting to Taipei. On a Cathay Pacific flight back from Taiwan one Friday afternoon, I found myself on the same flight as the organisation’s Asia-Pacific director who graciously got me into the lounge for a beer.

Over that beer he told me how earlier in the year he’d been asked by one of the pukka English directors why he was bothering spending so much money in business development for ‘third world countries’ like Taiwan and South Korea.

Jeff, as we’ll call the director, laid down a challenge to his board. “Come out and have a look for yourself,” he told them.

Some of the UK based directors took Jeff up and flew out to Hong Kong, first class on BA of course, and then continued on to Taipei where they suitably amazed to be greeted by a first world city.

“They genuinely believed they were going to fly in a DC-3 and be met by a bunch of rickshaw wallas,” laughed Jeff, a long standing English expat. “The Brits don’t get East Asia.”

It seems things haven’t changed much as veteran venture capital investor Mike Moritz made a similar point at a speech in London yesterday that the West doesn’t understand China, particularly Europe.

“People underestimate China, especially in Europe,” Business Insider quotes Moritz as saying. “They have very little sense of the size, strength, and scale of ambition of the leading Chinese technology companies.

Moritz pointed out the fund he leads, Sequoia Ventures, is now placing over half its money in non-US companies with Chinese businesses being high on the list.

The West’s misunderstanding of China goes beyond business, with The Economist warning that many nations are soon going to have to choose between the PRC and the United States as Beijing sets up its own network of global alliances and trade accords.

So far the United States has responded to this with clumsy efforts like the Trans Pacific Partnership, an attempt to quarantine China’s influence in the Western Pacific that actually gives PRC  based businesses a competitive advantage over nations that enter the deal which does little more than strengthen US corporate interests.

Already in Africa, the results of China’s economic efforts are being seen. A good example is the new Ethopian Railway where the Chinese were quick to fund a project that EU and World Bank lenders had dragged their feet on.

Just as English businessmen in the 1990s misunderstood what was going on in East Asia, it seems ignorance of Chinese growth and intentions are even more widespread today. There may be some shocks coming for countries like Australia who assume today’s realities are tomorrow’s.

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