Phew, it is such a relief that a tumultuous 2020 is finally behind us! Like many of you, I have learnt to appreciate the little things in life during this extraordinary time and feel truly grateful for what I have, which are my health, family & friends, and of course, Flying Sesame, which has certainly brightened my lockdown days and hopefully yours too.
So I would like to say hello to the new year with the latest edition of our bi-weekly China newsletter, Sesame Express #3.
1. Victims of the internet age: China’s young professionals facing mass eviction after failure of home rental platform Danke Apartment (蛋壳公寓)
2020 has been a bleak year for China’s young people. With the pandemic wrecking job market and study plans, many took to online buzzwords such as “working man” (打工人) and “involution” (内卷) to vent their frustration. Recently, many got another slap in the face as they were made homeless overnight by the liquidity crunch of Danke Apartment, one of China’s largest long-term home rental platforms listed on the New York Stock Exchange.
Nikkei Asia/Caixin’s has an excellent in-depth coverage of the debacle which I recommend for a read (“How China apartment rental giant Danke saw its business crumble”).
It is not hard to apprehend Danke’s downfall once you grasp its business model.
- The company leases properties from landlords on a long-term basis, refurbish them and then sub-let to tenants. The model is underpinned by Danke making a profit by charging tenants a premium, except in reality they actually sublet at a loss in a relentless pursue for growth.
- The tenants are strongly incentivised to pay rent upfront for a year which is then financed by taking out a loan from Danke’s banking partner. Crucially, instead of setting these money aside as reserve for future rental payment to landlords, the company funnelled the fund to finance its aggressive expansion. Hence the liquidity crunch when the pandemic hit, which left Danke with no choice but to halt payment to the landlords, who soon responded by forcing the tenants out via changing the locks or cutting the electricity and water supply.
It is worth highlighting that Danke’s key banking partner is WeBank (微众银行) affiliated with China’s tech giant Tencent (腾讯). Reportedly it did not set strict control of how Danke uses the upfront rental payment and is now under pressure to help tenants in debt as well as to save Danke from collapse.
To me this is yet another alarming case study pointing to why the Chinese regulator is honing in on the big tech. Crisis like this reaffirms the government’s fear about financial risks associated with out of control Fintech/Tech businesses and its de-stabilising impact on social order. It is precisely this concern which spurred recent drama around Alibaba which I am going to talk about next.
2. What’s next for Alibaba (阿里巴巴) and China’s big tech?
2020 upended plans for most people, and China’s richest man is of no exception. Shortly following the disastrous last-minute halt of IPO of the Ant Group (蚂蚁集团), the government ordered the company to restructure its business in compliance to new regulation (“China plots ‘rectification’ drive to bring Jack Ma’s Ant Group to heel”, Financial Times). On the same day, the government also announced an anti-trust investigation against its parent company Alibaba (“China rethinks the Jack Ma model”, Financial Times).
There are lots of talks about the party wanting to teach Jack Ma a lesson about who the real boss is. The fact that Jack Ma has not been seen in public since the withdrawal of the Ant Group’s IPO further added to the speculation. However, I don’t see the party pursuing Jack Ma personally.
- China’s big tech has grown to such an extent that they have become inseparable from everyday life. You cannot live in China for a day without using the likes of WeChat (微信), the super app developed by Tencent, Alipay (支付宝), Ant Group’s dominant payment service, or Taobao (淘宝), Alibaba’s flagship e-commerce platform. Over time the tech titans flex their financial muscles to build up even more powerful internet empires by either buying up or crushing other internet start-ups. In fact, you can almost divide China’s entire tech scene into the Alibaba ecosystem (阿里系) and Tencent ecosystem (腾讯系).
- More recently they all moved into the fast growing and lucrative Fintech space. Ant Group, for instance, offer loans online pretty much like any other high street bank but are not subjected to banking regulation. What is currently in the eye of the storm is the consumer loan part of the business. The ease of getting a loan together with pervasive marketing tactics plunged many of China’s internet-savvy into debt. A few high profile suicide cases under the spotlight are likely attributed to the controversial debt collection practices (“Small debts, big problem”, Rest of World).
Well, if there is one thing that the party highly prize and will protect at any cost, it is the social stability. So the government’s primary concern is to address monopolistic behaviour and strengthen regulation so as to prevent the next Danke fiasco, P2P or micro-lending scandal, not Jack Ma himself.
The outside world sometimes underestimate the pragmatism of the Chinese government. Economic prosperity is the main pillar supporting social stability and the tech sector, dominated by the big tech, is an important driver of the economic growth. So it is in no one’s interest to bring down the sector or these national champions.
3. Remember Ezra Vogel and his legacy “Deng Xiaoping and the Transformation of China” (邓小平时代)
2020 is a year of brutal losses. Before the year end, I was further saddened by the passing of another inspiring figure, Ezra Vogel (“Ezra F. Vogel, Eminent Scholar of China and Japan, Dies at 90”, The New York Times).
He was fondly known as 傅高义 in China. His masterpiece “Deng Xiaoping and the Transformation of China” resonated a lot with me and I would highly recommend to all for a read.
So why should you read the book?
- Well, in Mr. Vogel’s own words in the preface of the book, “the biggest issue in Asia was China, and the man who most influenced China’s modern trajectory is Deng Xiaoping. Moreover, a rich analysis of Deng’s life and career could illuminate the underlying forces that have shaped recent social and economic development in China”.
- Or in other words, I would not have been here typing this article in my London home if it were not for him. While he is no saint (and no politicians are), billions of Chinese including myself owe what we have to his economic reform in the 80s which truly transformed China to modernity.
- What I particularly like about this book, which took Mr. Vogel a decade of painstaking research to write, is his scholarly objectivity, which I often find lacking in many American writers when approaching the topic of China. While as Chinese I am more familiar than most about Deng’s life and the historical context, I am still delighted to learn many things which I would have not known otherwise, such as his formative years as a student worker in France, how he was influenced by the National Economic Policy implemented in the USSR in the early 1920s (which was effectively a market economy under communist leadership), as well as his generous offer at reconciliation with Dalai Lama at the time.
So hats off to Mr. Vogel: thank you for giving me the opportunity to inspect my own country’s recent history and RIP.
4. One of China’s best vocalists Tan Weiwei (谭维维) lending her voice to taboo about domestic violence
In the past few weeks, China’s internet has been electrified by Tan Weiwei’s latest album “3811”, and what struck most is one of the songs named “Xiao Juan” (小娟). Xiao Juan, a generic name authorities sometimes give to domestic violence victims, made a roaring protest against prevalent victim blaming and systematic flaws in protecting women against violence in China.
“Erase our names, forget our beings, same tragedy continues and repeats,” “Our names are not Xiao Juan… Know my name, and remember it.”(Lyrics from “Xiao Juan”)
- Domestic violence is a very thorny issue in China. Law enforcement has been patchy given many still consider it as a family’s issue which is better dealt with quietly within the family and the harmony of the family should be prioritised over everything else.
- A few recent high profile cases, including a Tibetan vblogger Lhamo being burnt alive by her ex-husband in the middle of her streaming session, and a Hangzhou woman being dismembered by her husband (both referenced in Tan’s lyrics), led to public outcry, finally bringing the horror of these crimes to the spotlight (“The angry pop song calling out China’s domestic violence problem”, BBC).
So thank you Tan weiwei for amplifying the voice of the women who need to be heard the most and shedding light on this uncomfortable topic that tends to get swept under the carpet.
FYI for those who don’t know, Tan Weiwei from Sichuan Conservatory of Music is, in my view, one of the best vocalists of her time. She first made her name as the runner-up in the Season III of China’s Super Girl (超级女声) singing contest. Since then she has forged her own path as the queen of folk-rock. My all-time favourite of her performance is Ulaanbator Nights, a touching remake of a well known Mongolian folk song.
5. Ding Zhen (丁真), a Tibetan herder who captured the heart of a nation
It may sound crazy, but the truth is that a 20-year-old Tibetan herder Ding Zhen has beaten all celebrities and influencers to be the most liked and talked about personality of 2020.
The whole country cannot stop talking about him for a whole month. So much so that all sides now fight to have a piece of him including the tourism boards of Tibet and Sichuan Province. (Just so you know that while Ding Zhen is Tibetan, he lives in Sichuan as his home town Garze Tibetan Autonomous Prefecture, while bordering Tibet, is actually in Sichuan (“Who is Ding Zhen, the Tibetan Boy Who Has Dominated the Chinese Internet for a Month?”, Radii China).
While his sudden rise to fame is allegedly due to his exceptionally good looks (yes, he is claimed to be the best looking man of China), I think the real reason behind the Ding Zhen craze is the fact that he offers many of us, who are exhausted from the 996 working culture and urban rat racing, a different perspective to life.
Well, I wish the unexpected icon of 2020 the best of luck for 2021 – I hope all the buzz from the media won’t change who you are.