The Foreign Correspondents' Club Hong Kong

The war for China’s wallet is being won through consumerism as industries like manufacturing and finance find it increasingly difficult – and costly – to do business there, according to the founder of a top market research group.

Shaun Rein gave insights into how to do business in China at the FCC club breakfast. Photo: Sarah Graham/FCC

Additionally, protectionism and nationalism are driving mainland Chinese consumers to buy domestic goods rather than foreign made products, said Shaun Rein, author of the new book The War For China’s Wallet which aims to help companies understand how to profit from China’s outbound economic plans.

At the centre of this domestic boom is President Xi Jinping, who has consolidated Communist Party power by taking firmer control of business and overseas investment. The world’s largest or second largest trading partner for most countries, China is seen as the obvious destination for foreign investment. But President Xi’s campaigns, such as the crackdown on corruption, and the economic punishment of countries that speak out against China, has created an environment of mistrust among those trying to do business in the country.

“I think it’s clear that not everyone will make money in China,” said Rein, managing director of CMR China, adding: “If you’re on the consumer side, there’s lots of money.

“China is no longer a cheap place to do business. The cost of doing business is crazy high,” he said at the December 12 club breakfast.

Rein pointed out that foreign brands including KFC and Starbucks make a huge profit in China. But he warned that multinationals were increasingly adhering to the political goals of Beijing in order to operate there. Publicly backing the One Belt, One Road initiative – President Xi’s development strategy to establish trade routes between Eurasian countries – is one way of staying in favour with the Communist Party. Those who speak out against China, said Rein, risk economic punishment or outright banishment. He gave the example of the Philippines, whose mango imports to China were blocked after an international tribunal on territorial disputes ruled in favour of the Philippines. The block was lifted once Rodrigo Duterte came to power in the Philippines and declared allegiance to China over America.

“The theme of the book is that China punishes and rewards countries,” Rein said. But he added that now China has also started punishing foreign companies for the actions of their countries’ governments, citing South Korea’s Lotte Group, which provided land in South Korea for the U.S. THAAD missile system.

Rein said the “methodical, systematic plan” to garner support for the One Belt, One Road initiative was the result of a “divide and conquer” strategy on the part of the Chinese government.

He predicted that multinational financial services would continue to suffer in China, but that foreign insurance companies would flourish, as would wealth management.

Filipinos support controversial President Rodrigo Duterte despite many fearing that his bloody war on drugs could target them, said an expert on politics in the Philippines.

Mark R. Thompson shared insights into the presidency of Rodrigo Duterte. Photo: Sarah Graham/FCC

The tough talking president and former lawyer has drawn criticism from human rights advocates for his open encouragement of the extrajudicial killings of drug users in the country. Prof Thompson said it the number of deaths so far is unclear but that it is certain to be more than the 3,000 killings that took place during the last year of Ferdinand Marcos’ presidency. Human Rights Watch puts the number at more than 12,000. Duterte offers cash rewards to police who carry out the executions which human rights groups like Amnesty International have pointed to as an economy of murder.

Duterte swept to power in 2016 because he was straight talking, and his pledges to clean up the country’s drug problem resonated with so-called ABC voters – the elites, upper and middle classes. His election came after a succession of tumultuous presidencies in predecessors Ferdinand Marcos (1965-1986), Corazon Aquino (1986-1992), Fidel Ramos (1992-1998), Joseph Estrada (1998-2001), Gloria Arroyo (2001-2010) and Benigno Aquino III (2010-2016).

Mark R. Thompson, professor and head of the Department of Asian and International Studies (AIS), told the November 7 club lunch that Duterte’s approval rating was currently at around 80% – much higher than his American counterpart Donald Trump’s 35%. Unsurprisingly, this was not the only comparison between the two men. “Duterte out-Trumps Trump in terms of his language,” he said. “He’s willing to say things as they are and this gives Filipinos a sense of authenticity.”

For many Filipinos, this state violence has created a sense of political order amidst weak institutions, he added.

Duterte famously called former U.S. President Barack Obama the “son of a whore”.

When he took office in 2016, Duterte openly broke with liberal reformers to declare his violent crackdown on drugs. Estimates at the time put the number of drug users in the country at 1.8 million of the 100 million population. Duterte later revised this figure to 3 million.

Prof Thompson, author of The Anti-Marcos Struggle, said most of the drugs are likely to come from China, and that in a recent case the Chinese authorities tipped off the Philippines to a smuggling ring that it was claimed was linked to Duterte’s son, Paolo.

Relations between China and the Philippines have in the past been strained amid court actions over the sovereignty of islands in the South China Sea. However, Duterte was quick to publicly realign himself with China as he cooled his relationship with the United States.

Despite moves to intimidate his opponents at home and abroad – the Commission on Human Rights has become a target, with Duterte threatening to abolish the Philippines’ National Human Rights Institution (NHRI) – Prof Thompson believes that the country is not yet an authoritarian state. “The press is largely uncensored,” said Prof Thompson, co-author of The Vote in the Philippines: Electing a Strongman. “Courts are not yet officially gagged but they are intimidated.”

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Duterte’s Violent Populism: Why Filipinos support the man who “out-Trumps Trump”