What To Expect in The Year of The Dragon - From Ogilvy Public Relations Worldwide
What To Expect in The Year of The Dragon - From Ogilvy Public Relations Worldwide
What To Expect in The Year of The Dragon - From Ogilvy Public Relations Worldwide
On Sunday evening, January 22nd, at the stroke of midnight, we will hop out of the Year of the Rabbit and into the Chinese New Year of the Dragon. For the Chinese, the Year of the Dragon is the most desirable year to give birth to a child, because Dragons are believed to be natural leaders - gifted with courage and wisdom. All of us at Ogilvy PR hope your Year of the Rabbit was a successful one. In what has become a tradition for us, we have worked to make sense of all of the predictions, rumors, hearsay and forecasts to share with you our views on what to expect in the Year of the Dragon. It is common knowledge that the dragon is a symbol of power, closely associated with Chinese emperors past. When the worlds geomancers write about the Dragon year, words commonly used include wealth, strength, power, magical and unpredictable (difficult to see the head and tail of a dragon at the same time). Common themes among feng shui experts for the year include change, renewal and mixed feelings of joy and sorrow. Although the 2009 science fiction film 2012 portrayed this to be a year of Armageddon, we dont see that happening. However, like the film, we do believe China will figure prominently in the world in 2012. A leap year, many predict 2012 will be transformative, highly energetic and full of changes. This paper explores many of the economic, political and social themes dominating discussion in China and offers our views on what to expect in the coming year. We also examine the implications of the upcoming U.S. elections and the ongoing Eurozone crisis on bilateral relations between China and these strategic partners.
The remaining positions on the Standing Committee are set to be filled with a balance of leaders representing loosely labeled "factions" representing more market-oriented or society-oriented mandates. While the specifics of selection will determine the final direction and strength of the mandate, expert voices have begun to portray leadership by Xi Jinping as favoring economic growth and the market economy, while taking a stronger stance internationally that will protect and promote China's interests.
Personalities to Watch
People to watch for in the opening months of theYear of the Dragon include Governors of key provinces - Wang Yang from Guangdong and Bo Xilai from Chongqing - who are each promoting unique approaches to balancing economic and social development while reducing tensions arising from rapid growth. Also involved in the transition will be a number of key players in Party organizations. In the Year of the Dragon we are predicting anything but predictability, but there are some things we can say with reasonable certainty. In the first quarter, we do not expect any surprises. We know that the leadership is putting great emphasis on what one insider describes as "an uneventful transition." The speculation and tension surrounding the leadership change has kept many people waiting on the sidelines to see who is selected and what the future will hold. From April through October of this year, the leadership transition will turn from discussion on what legacy the outgoing leadership hopes to impart, to what the new leadership hopes to create. In whatever form it takes, we will see a continued focus on stability, balance, and new growth opportunities for a nation that is, in many ways, still a resource-limited developing nation. While the 12th Five-Year Plan will guide the way, and domestic issues will be at the forefront, emerging issues in the international environment, not least the U.S. elections, will throw new challenges and opportunities at this leadership class. We're certain that the Year of the Dragon will have its share of surprises, transitions, and fireworks, and we will keep you well-informed as events unfold.
But while slowing economic growth from more than 9% in 2011 to 8.5% or even 7.8% in 2012 may be dramatic on the percentage scale, a number of local financial experts argue it still represents growth more than three times faster than the other major global economies.
2010. While the numbers suggest the rapid emergence of an enormous middle class with strong spending power, income inequality remains a serious problem. According to the Global Wealth Report by Credit Suisse, wealth inequality has been rising strongly, due to the increasing wealth of successful Chinese entrepreneurs, professionals, and investors. Newspapers report that the number of Chinese billionaires has doubled in the past two years, and now China has more billionaires than the rest of the world, excluding the United States. While the speed of wealth accumulation is staggering, China still has 150 million people living at or below the United Nations poverty line of one U.S. dollar per day. According to data released by the China Development Research Foundation in February 2011, 85% of Chinas poor live in rural areas, with about 66% concentrated in the west. While the per capita total income of urban households was RMB 6,472, the per capita cash income of rural household was only RMB 2,187, according to 2011 data from the National Bureau of Statistics. While the rich in China continue to accumulate wealth faster than ever, their insecurity is growing as well. According to a survey conducted by China Merchants Bank and Bain & Co., almost 60% of Chinas high-net-worth individuals with more than RMB 10 million in investible assets are either considering emigration or have completed the process. According to the same report, 27% of those with RMB 100 million or more have already emigrated and 47% are considering it. The stunning results confirm Hurun Report data released in November 2011 that 60% of Chinas wealthy plan to live in another country. The Year of the Dragon is likely to feature an increasing number of wealthy Chinese seeking investment opportunities outside of China. In an article published by the Chinese State media Global Times in March 2011, economist Zhong Dajun was quoted as saying: We have been working hard to develop the economy in the past 30 years, but now these elite members of society are fleeing with the majority of the wealth. The loss may be even higher than all the foreign investment we have attracted.
significantly lower than that of technologically advanced countries such as South Korea and Japan. Social media is exploding. According to the CNNIC report, China has 244 million users of social networking sites, which is 47.6% of the entire Internet population. For every social networking platform type in the Western world, China typically has two or three. For example, the platform equivalents of Facebook in China are Xiaonei, Renren and Kaixin. With Facebook and Twitter being credited with having accelerated many of the uprisings in the Middle East, we dont expect these companies to be operating in China anytime soon. What has transpired, however, is the rapid rise of Weibo, a Chinese twitter-like platform, which has become a powerful channel for communication. As of 2011, more than half of Chinese Internet users (48.7%) are Weibo users, up 296% from 2010. Many of the crises of 2011 originated via Weibo, and the platforms content, much like the global Internet community, contains a lot of rumors, hearsay and general chatter. That is not to discredit the fact that Weibo has also been an effective tool allowing Chinese netizens to voice their opinions, expose wrongdoing, report grievances and more. Given the power of Weibo and its following, in late 2010, Sina Weibo, Chinas leading micro-blogging platform, established a rumor control department to address the issue of false information on Weibo. According to China Daily, the team has 10 staff members who maintain a 24 hour watch over the site. On December 16th, 2011, Beijing Municipality issued a notice requiring real-name verification for Weibo users. According to the new policy, only users who have verified their identities can post comments; anonymous users can only view posts. In 2012, we expect to see an increase in government efforts to utilize Weibo as a critical social management tool. Rumor Control will remain a top priority on Beijings agenda. In late November, Wang Chen, head of the State Information Office and a deputy minister of the Central Propaganda Department, published an article entitled Actively Carrying out Microblog Public Opinion Guidance in Peoples Daily, stressing the importance of managing Weibo sentiment. Due to the breakneck pace of Weibos growth in 2011 and increased government involvement, we expect Weibo to grow at a lower rate in 2012. In the commercial space, Weibo will continue to play an important role as a channel for brands. Currently, many Weibo celebrities with strong followings have been offered
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payment to tweet about their benefits. This phenomenon is a growing concern and we are watching this space. Paid tweeting works against Ogilvy PRs view of authentic communications and our advice is for brands to work to find their way into tweets in authentic ways.
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For example, urged by the public, Beijing will officially release data on PM 2.5 (air particulates with a diameter of 2.5 microns or less) before the Chinese New Year begins. Currently, Beijing uses PM 10 to measure the air quality. According to a China Daily report, the public debate on PM 2.5 and PM10 first began when netizens realized the differences between air-quality monitoring results released by the Beijing Weather Forecast Station and those transmitted hourly via Twitter by the U.S. Embassy in Beijing. According to Chinas 12th Five-Year Plan, the country will prioritize environmental issues involving air pollution, drinking water, heavy metal pollution and soil pollution. We expect to see a continuation of internal grassroots protests on various environmental issues in 2012. We will also see more Chinese officials and interest groups pushing the agenda of environmental protection, simply because nobody is left off the victim list of environmental degradation.
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war of words, could well set the frame for how the world views China over the coming decade.
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Financing, international management, safety and branding issues continue to be mentioned as some of the top concerns Chinese companies face when investing abroad. Chinese companies fear a lack of understanding about their product by consumers in foreign markets. They are unsure how to communicate the advantages and added value their products may bring. Chinese consumers and Western customers often view different aspects of products as important, so Chinese firms are often unsure how to communicate the value proposition of their merchandise. We expect this trend to continue and have set up a dedicated China Practice in the United States, staffed by Chinese speaking professionals to help serve Chinese FDI in the West.
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The Obama White House in January published a 12-page document outlining the new strategic focus. It said the U.S. would continue to project power despite antiaccess and area-denial threats from states such as China and Iran. Beijing has not greeted the attention -- and proximity to Iran in the same sentence -- with much enthusiasm. The accusations leveled at China by the U.S. side in this document are totally baseless, Chinas Ministry of Defense said in a statement. We hope that the United States will flow with the tide of the era, and deal with China and the Chinese military in an objective and rational way, will be careful in its words and actions, and do more that is beneficial to the development of relations between the two countries and their militaries." The U.S. has long accused China of developing military capabilities far beyond what is necessary for defense purposes. And many on the U.S. side accuse China of regularly targeting the U.S. with cyber-attacks, accusations denied by Beijing. As the jousting suggests, the relationship between the U.S. and China is complex. And that relationship is more important than ever to the world, especially as nations struggle to recover from economic malaise.
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However, there are many more trade-related issues that the U.S. is acting on including one that could put a strain on the relationship. President Obama recently began pushing for a Trans-Pacific Partnership (TPP), which is ambitious and has intriguing implications for the U.S. business community. The TPP is clearly a major plank in the Obama Administrations plan to increase its presence in Asia. It would create NAFTA-style trading structure across the Pacific and, thereby, open up a range of new markets. But can this be done without China? How will China react to the U.S. entering into a trade agreement with eight nations including Australia, Brunei, Malaysia, Peru, Singapore, Vietnam and, eventually, Japan while China is excluded? The Obama Administration has said that the proposed Partnership which would need to be on a very fast track if it is to be completed by its target date at the end of 2012 is not an action directed to isolate China, but does that clarification matter? Jagdish Bhagwati, a professor of economics and law at Columbia University in New York, said that the TPP is also a political response to China's new aggressiveness, built, therefore, in a spirit of confrontation and containment, not of cooperation. Hovering over all of this is the 2012 Presidential election in the U.S. Before the election year even began, leading Republican candidate Mitt Romney had published a blistering critique of Chinas currency and economic policies in The Wall Street Journal. While this was no doubt done to outflank his more conservative opponents, it was a clear signal that China will be a key issue in the presidential election. With the U.S. economy continuing to sputter and the Chinese economy continuing to grow (albeit more slowly), there will be a natural tendency for candidates to blame China in the heat of what is likely to be a closely contested election. These political pressures will mean that the Obama administration will be under heavy scrutiny for any policies seen as tilting toward China or Chinese interests. As a result, the growing criticism in some quarters of Chinas increasing investment in the U.S. will almost certainly increase and could become a significant political issue in the election.
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This will lead to even closer examination by the Administration of Chinese investment efforts in the U.S. Chinese companies investing in the U.S. should expect greater scrutiny and increased use of the CFIUS (Committee on Foreign Investment in the U.S.) process to determine final approvals of investments in a range of industries beyond traditionally sensitive areas such as technology and aerospace. Given these dynamics, the Year of Dragon shapes up as a challenging one for the worlds most important bi-lateral relationship.
Despite the headline-grabbing trade battles, comments by EU leaders and the Chinese government indicate concurrence on one key point their economies will become more interdependent. They agree there is a need to enhance
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dialogue in order to uplift trust and mutual understanding, thus potentially boosting cooperation. The year provides myriad opportunities for diplomatic discourse via the regular EU-China Summits, the EU-China High Level Economic and Trade Dialogue, the High Level Political Party Forum, the High Level Strategic Dialogue and the existing 50 plus sectoral EU-China exchange and dialogue mechanisms.
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Neighborhood Movements
While Chinas leadership is focused inward on a generational transition, the world is increasingly looking to China to play a role as an emerging great power. World events in 2011 showed how quickly tides can turn, and how easily governments can be caught unawares. Chinas leaders have so far proven adept in handling themselves on the world stage, but the coming Year of the Dragon is fraught with challenges old and new from near and far.
Some experts who have followed the North Korea relationship closely believe China hopes to leverage its influence inside North Korea to sell a gradual transition to the China model of reform and opening up, which they tried for years to promote to former leader Kim Jong-Il through state visits and a muchcelebrated border development zone. This model of China as teacher would allow slow but accelerating change, while keeping the DPRK inside Beijings sphere of influence, allaying ROK and U.S. suspicions, and landing a soft power victory for the China Model to nations around the world. Despite Chinas committed interest in improving the day-to-day life of North Korean citizens, it is uncertain that they are earning much recognition in return. This is one relationship we will continue to watch in the year ahead.
Taiwan Elections
Closer to the domestic front, but still a short flight or boat-ride from the mainland, Taiwan continues its rapprochement with China, anchored by strong economic and cultural ties. With the recent re-election of President Ma Ying-Jeou, both sides could come out winners, as trust and acceptance of the status quo leave room for Taiwan to address its own domestic economic concerns, while China finds more constructive avenues for engagement. Mas insistence on his Three Nos: No Military Action, No Independence, and No Reunification, is rooted firmly in the changing economic dynamic between the two countries, with Taiwans investors increasingly looking for opportunities on the mainland, while restructuring and moving up the value chain on the home front. Behind all the talk of partnership and cooperation, its important to bear in mind that in an open market, Taiwans workers are as much competitors to the mainlands workers as they are compatriots. ###
In this paper we have tried to capture many of the main themes dominating discussion as we begin the Year of the Dragon. We hope we added to your reading pleasure this Chinese New Year, and may the Dragon Year prove to be magical and powerful for you and your business. On behalf of everyone at Ogilvy PR, Happy New Year. ###
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