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The new leader of the global superpower must deal with pressing issues at home and abroad. Can he rise to the occasion and meet the expectations?

By Putro Harnowo, Senior Content Manager, China Business Knowledge @ CUHK

Donald Trump has returned to the helm of the world’s largest economy. The 47th president promised to make America great again, and his policies would impact beyond the border. Looking at his first term, which was quite controversial, the world watches whether his new term will lead to disruption or pave the way for unexpected progress.

“When analysing someone’s behaviour through the lens of economic mindset, we shouldn’t listen to what they say but pay attention to their actions and, more importantly, to what they care about,” says Dr. Andrew Yuen, Director of EMBA Programme and Principal Lecturer of Department of Decisions, Operations and Technology at the Chinese University of Hong Kong (CUHK) Business School. “We are lucky to have a historical record of Trump’s previous term to see what he has done and gain some insight into what he would do.”

Dr Andrew Yuen CUHK — Dr Andrew Yuen shares his insights during the masterclass.

In February’s EMBA masterclass titled Navigating uncertainty: Where is Trump leading the US and the world economy? Dr. Yuen suggests that the answer to the topical question can be seen from his most important appointments: the vice president and the secretary of state. Vice President JD Vance has a presiding role in backing up and taking over the role if the president is unable to perform his duties, while the Secretary of State Marco Rubio is the principal advisor in all foreign affairs.

Including Vance and Rubio, the Trump 2.0 administration is manned by those in their mid-40s, while the Trump 1.0 cabinet was filled with older members, including the 59-year-old vice president and 65-year-old secretary of state when elected.

“As Trump now has more experience, he is more confident in leading the team to govern the country,” says Dr. Yuen. “It seems that Trump is looking for something beyond himself and thinking about succession by appointing younger staff and cultivating them to make his legacy sustainable.”

On the other hand, known for his hawkish stance on China, Rubio is currently on the list of sanctions by the Chinese government for his role in proposing and supporting sanctions on China when he was a congressman. “The relationship between China and the US will be challenging in the next few years,” Dr. Yuen adds.

One of the key highlights of Trump’s campaign is his stance on imposing hefty tariffs. After all, it was during his previous term that the trade war against China broke out. During his campaign for the 2024 election, he promised tariffs of as much as 10 per cent on global imports and 60 per cent on Chinese goods, plus a 25 per cent surcharge on Canadian and Mexican products. Many worry that this move will lead to higher prices and, eventually, inflation.

Can tariffs make America great again and again?

“Tariffs could, but not necessarily, lead to inflation,” says Dr. Yuen. In his first term, Trump had increased tariffs yet inflation was mild, around 2 per cent, and even almost dropped to zero in 2020. After Biden became president in 2021, inflation increased to more than 8 per cent before falling to around 3 per cent by the end of 2024, likely due to the pandemic relief and the central bank’s policies, among many other things.

“The basic understanding of inflation is the year-over-year price change. After tariffs are introduced, inflation will only happen in the first year,” he adds. “After the following years, the impact will be diminished as tariffs only have a one-off impact on inflation.”

“It seems that Trump is looking for something beyond himself and thinking about succession by appointing younger staff and cultivating them to make his legacy sustainable.”

Dr. Andrew Yuen

A 2021 academic paper published in American Economic Review analysed the impact of the 20 per cent tariff on consumer inflation in the US and found no significant effect. The study discovered that Chinese manufacturers increased their prices after the tariffs, but American importers did not pass through the costs to their consumers. The US firms lowered the profit margin and practically paid the tariff, cushioning the impact on consumer inflation.

However, inflation could rise due to unprecedented factors. As Trump pledged to deport illegal immigrants, which stood at 8.3 million in 2022 or five per cent of the 170 million US working population, having this significant workforce left will have a negative unemployment rate, where the demand exceeds the supply of labourers. “Consequently, when companies cannot hire people, they need to increase salaries, which would trigger higher inflation,” says Dr. Yuen.

Putting caps on inflation and debt

As inflation rises, the central bank often responds by increasing interest rates to encourage saving, which reduces consumer spending and business investment. Trump has demanded that interest rates drop immediately to drive investment and consumption in January 2025. However, there are clear regulations about how the central bank issues its monetary policy.

triple-down economics — Trickle-down economics involves less regulation and tax cuts for those in high-income tax brackets and corporations.

The US Federal Open Market Committee decides the interest rate policy, and the president can appoint seven or 60 per cent of its members. Nevertheless, the president cannot replace anyone in the committee or the Federal Reserve Board of Governors unless they resign or retire. “Although Trump wants to lower interest rates, the institutional arrangement forbids him from influencing the central bank,” says Dr. Yuen.

Wasteful spending by the previous administration, as Trump blamed many times, allegedly led to a record high of US$36.22 trillion in outstanding borrowing by the US federal government. “The US has a high 124 per cent debt-to-GDP ratio as of December 2024, while the international benchmark for a healthy level is 90 per cent,” says Dr. Yuen.

Yet, there is much confidence in the US government bonds being not default. Such a faith may also be reasonable as the Wharton School of the University of Pennsylvania analysed that the threshold for the debt-to-GDP ratio to default the government bond is about 200 per cent. “Although the US Government is not likely to go ‘bankrupt’, we need to pay attention to the crowding out effect and US dollar dominance in the global economy.”

In addressing wasteful spending, a celebrated businessman, Elon Musk, was tasked to lead a new Department of Government Efficiency to cut expenditure by US$2 trillion from the US$6.4 trillion federal budget. As a result, the department decided to freeze international aid and dismantle the US Agency for International Development, in addition to laying off tens of thousands of federal workers.

The true face of Trumponomics

Despite the fanfare of the masterplan for a radical reformation, Dr. Yuen sees Trump’s ideas as not new. “In the past, US president Ronald Reagan had his ‘Reaganomics’, or what the economists call the supply-side economics. What Trump is doing with Trumponomics now is exactly what Reagan did before.”

There are four major areas of supply-side economics, Dr. Yuen explains, namely cutting government spending, tax reduction, trickle-down economics, and deregulation. In 2017, Trump signed the Tax Cuts and Jobs Act into law, significantly lowering corporate tax rates from 35 to 21 per cent. The general idea is by lowering taxes, the company will be more profitable and then could pay more profit tax for federal revenue. Trump proposed a further tax reduction of 15 per cent for businesses focused on US-based operations.

Trickle-down economics involves less regulation and tax cuts for those in high-income tax brackets and corporations to make them spend more, trickle down the money to the broader population and stimulate the economy. Unfortunately, many studies and analyses have shown that tax cuts and trickle-down concepts never materialised as intended.

Deregulation is the same song that Trump played in his first term by removing several regulations in finance, environmental protection, and healthcare. A couple of weeks after moving to the White House in January, Trump signed the executive order to withdraw the US from the Paris Climate Agreement.

However, a new pattern emerges. Trump currently aims to eliminate 10 regulations for each new regulation issued, or the so-called 10-to-1 deregulation initiative. This is a dramatic change from his previous 2-for-1 deregulation in his first term. “In the past, Trump’s major objective was to remove old regulations,” Dr. Yuen says. “This time, he wants to minimise the new regulations so that significant changes can be made to the technology and artificial intelligence industries.”

Supply chains find new routes amid trade war

Keeping the legacy alive

Since the new industries have no regulations to remove, Trump is not intended to over-regulate them. Similar hopes can be seen in digital assets and cryptocurrency. Trump has announced that five digital assets will be included in a new crypto strategic reserve. “Many Bitcoin holders like Trump because he’s a friend of digital currency and is open-minded about the strategic positioning of digital currency at the national level.”

Overall, Dr. Yuen sees that Trump is leaning more toward pro-business, emphasising small government, lower taxes, deregulation, and government downsizing while promoting protectionism through tariffs and immigration control. “The possible impact is a short-term economic boost,” he adds.

“However, deregulation raises concerns about whether the market has enough protection during economic downturns, but if not, it will lead to an economic crisis. This could result in high inflation and high interest rates, as well as deglobalisation and weakening the US dollar’s international status.”

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Using no-brainer approaches is normal in daily routines, but adding a little bit of thought could go a long way in personal finance

By Putro Harnowo, Senior Content Manager, China Business Knowledge @ CUHK

A good decision requires critical thinking and time but many of us don’t have enough privilege or patience to ponder sometimes. To illustrate, if you ever bought a sale product right after seeing its before-discount price, then you have carried out a fun heuristic exercise or mental shortcut.

Heuristic refers to a mental process when individuals seek to reduce complex tasks to simpler operations to process information with less effort. Although the results may not be optimal, heuristics can be good enough when solving problems with limited timeframes in routine minutiae.

In peer-to-peer lending platforms, this pragmatic method is not uncommon among borrowers. The most conventional one is using round numbers. This is not surprising as when dealing with precise numbers like 29 or 15.15, people tend to round it up or down to get simple figures. Putting round numbers requires less thinking and is associated with feeling-based decision-making.

“Consequently, the use of round numbers may lead to suboptimal decisions,” says Michael Zhang, Wei Lun Professor of Business Artificial Intelligence at the Department of Decisions, Operations and Technology at the Chinese University of Hong Kong (CUHK) Business School. “When using the round-number heuristic, decision-makers may sacrifice accuracy for convenience.”

In a study titled Numerological heuristics and credit risk in peer-to-peer lending, Professor Zhang, along with Maggie Hu of the City University of New York, Li Xiaoyang of the Hong Kong Polytechnic University, and Shi Yang of Deakin University, found that loan applications on Chinese lending platform using round amounts have lower success rates and are more likely to be overdue.

Heuristic often mingles with superstition. A notable example in China is applying for loans by incorporating number eight as the word sounds like “wealth”, and surprisingly, loans incorporating this lucky number are more likely to get funded and have lower delinquency rates. “Borrowers who use lucky numbers make more effort to understand the lenders’ preferences and make their loan applications more attractive,” he adds.

As digital finance grows, lending platforms are likely to integrate behavioural data into their artificial intelligence-driven risk assessment tools. Professor Zhang suggests platforms leverage the study by tailoring loan recommendations based on users’ financial behaviour and heuristic tendencies.

“By identifying borrowers’ tendencies to use heuristics like round or lucky numbers, businesses can segment their customers into different risk profiles.”

Professor Michael Zhang

Finding the right mental shortcut

The researchers gathered data from a leading Chinese peer-to-peer lending platform from October 2010 to January 2016. Before submitting a loan application, borrowers must register and provide information on their gender, age, education, and income. A registered borrower can submit loans in multiples of 50 Chinese yuan (US$7.62), ranging from 1,000 to 3 million Chinese yuan, and the lenders will decide whether to bid or not.

The researchers obtained a sample of 611,079 successful loans, with 64.85 per cent of them using round numbers like 1,000, 5,000, 10,000 and the like. Only 9.45 per cent used lucky numbers containing the number eight, such as 8,000, 28,000, or 88,000, etc., but not number four as it sounds similar to “death” in Chinese.

The analyses show that round-number loans have a 73.79 per cent lower chance and take 1.05 hours longer to get funded with a 6.37 per cent higher chance of being overdue than non-round numbers. Conversely, loans with lucky numbers are 42.12 per cent more likely to be funded and spend 0.19 hours less on bidding time with a 1.80 per cent lower delinquency rate. For borrowers who have never used round and lucky numbers, adopting round numbers would drop the chance of securing loans by 66.73 per cent, but lucky numbers would raise their odds by 69.47 per cent.

To test the repayment performance, the researchers used 5,948,938 monthly repayment records from 217,237 funded loans. The results confirmed that borrowers with round numbers have lower funding success rates and higher delinquency, but those with lucky numbers have the opposite results. Borrowers who resort to round numbers are also more likely to experience difficulties in budgeting or make negligent mistakes when repaying the loans.

Implication for fintech businesses

Professor Zhang highlights the importance of peer-to-peer lending platforms in understanding user behaviour. Platforms can create loan packages or promotional campaigns that align with user preferences as superstitious borrowers may be more responsive to offers incorporating the number eight or avoiding the number four, especially in cultures where these numbers have significant meanings.

Financial technology or fintech firms can incorporate user preferences into marketing strategies to strengthen customer engagement and trust. They can also offer more personalised tools, educational content, or artificial intelligence-powered suggestions for borrowers submitting round-number loans, which may indicate less financial planning.

machine learning — Fintech firms can incorporate user preferences into marketing strategies to strengthen customer engagement and trust.

“By identifying borrowers’ tendencies to use heuristics like round or lucky numbers, businesses can segment their customers into different risk profiles,” says Professor Zhang. “This segmentation could guide marketing efforts, such as offering lower interest rates or faster approval processes for borrowers using lucky numbers, who are more likely to repay loans on time.”

The study could also help lenders enhance risk assessment models by incorporating heuristic preferences as indicators of creditworthiness. Stricter underwriting criteria (e.g., additional income verification) may be applied for loan applications with round numbers to mitigate potential risks. On the other hand, lenders can prioritise applications with lucky numbers for faster approval or offer preferential terms, as these borrowers are more likely to repay on time.

“By incorporating heuristic usage data into machine learning algorithms for loan performance predictions, this additional layer of information can improve the accuracy of delinquency forecasting and help lenders allocate resources more effectively,” he adds.

Forecasting the future

Professor Zhang sees that traditional credit scoring models may evolve to incorporate non-financial indicators, including heuristic-driven behaviours, as proxies for financial responsibility or sophistication. “As alternative lending models expand globally, platforms will need to adapt their practices to local cultural contexts, leveraging insights like superstitious number preferences or other decision-making heuristics.”

Furthermore, platforms could gamify loan application processes and encourage borrowers to move away from mental shortcuts by offering rewards for more precise financial planning. For regulators, fintech platforms may be required to disclose how heuristic-driven behaviours influence lending decisions, ensuring transparency in how borrowers are assessed and treated.

Sustainable ways to grow cash-burning marketplaces

Considering cultural and contextual differences, Professor Zhang believes that the findings can likely be applied to other forms of crowdfunding. Given the influence of numerology is strong in some Asian markets like China and Japan but less prevalent in Western countries, other types of heuristics may play a more prominent role. Crowdfunding platforms should adjust their strategies based on local norms.

“While the specific numerological preferences may vary, the broader principle—heuristics influence decision-making—can be generalised across different cultural and economic contexts,” he adds. “Platforms worldwide can use these insights to better understand user behaviour and improve decision-making frameworks.”

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You have probably heard the old adage, “Don’t put all your eggs in one basket.” It’s sound advice, but knowing where to place your eggs is just as important

By Pan Jingyi, Principal Writer, China Business Knowledge @ CUHK

The Chinese economy has relied on real estate investment as a surefire path to wealth in the past decades. As real estate developers race to meet demands, especially before the market downturn, it is very common for them to spread operations and investments across different regions or cities. At first glance, this geographic diversification seems like a no-brainer. However, there is an ongoing debate about its benefits.

“High exposure of operations and investments to the more developed regions almost completely eradicates the benefit of diversification.”

Professor Desmond Tsang

Chinese real estate firms historically favoured investing in developed areas. Many highlighted advantages like better access to resources, while others mentioned drawbacks such as high operational costs and fierce competition. What is often missing from the discussions is that they often overlook the differences in economic and institutional development across various regions when making investments.

To address this discrepancy, Desmond Tsang, Associate Professor of Real Estate at the School of Hotel and Tourism Management at the Chinese University of Hong Kong (CUHK) Business School, conducted a study titled Geographic diversification and real estate firm value: Where firms diversify matter, joined by Chu Xiaoling of the University of Macau and Wong Siu Kei of the University of Hong Kong. This research seeks to investigate the association between geographic diversification and real estate firm value, and whether regional development gaps could heighten the cost of diversification.

“We found that the location of geographic diversification significantly impacts firm value, and a higher exposure to the developed Chinese cities reduces the benefit of geographic diversification,” says Professor Tsang, emphasising the importance of considering local institutional differences when assessing the expected benefits of diversification. These benefits include increased value, higher returns, and risk mitigation in case of economic downturns in certain areas, among others.

Developed regions aren’t always the best choice

The team conducted an empirical investigation by collecting data from the annual financial statements of 81 Chinese real estate firms between 2008 and 2018. These companies’ geographic diversification strategies are evaluated through their portfolio asset allocations to get to know which cities they had operations in and how many projects they had in each city. After discovering an initial positive relation between geographic diversification and real estate firm value, the researchers further explored the impact of differences in regional development.

To measure regional development, the researchers used the city momentum index (CMI) developed by a global real estate services firm, Jones Lang LaSalle. This index identifies “momentum cities”, where urban economies and real estate markets are undergoing rapid growth and development. Over the span of the sample period, 12 Chinese cities, including Beijing, Shanghai, Shenzhen, Guangzhou and Nanjing, were included in the index.

The analyses reveal that when firms invest or operate in developed regions with higher momentum, which means regions experiencing faster economic growth, the expected benefits of geographic diversification are significantly reduced. “High exposure of operations and investments to the more developed regions almost completely eradicates the benefit of diversification,” Professor Tsang says.

The reasons may lie in the intense competition for resources in these well-known urban hubs. “Despite the glamour, well-known superstar cities have highly competitive real estate markets, which sometimes offer lower returns,” he adds, underscoring that where firms choose to diversify their portfolio matters.

Driving factors for the negative returns

To further understand why diversification into developed regions fails to deliver anticipated benefits, the team break down the CMI into two components: socioeconomic and industry-specific factors. Socioeconomic factors involve aspects like gross domestic product, population growth, and foreign investment. Industry factors include changes in office space, rents, hotel occupancy, commercial real estate investments, and transparency.

climate-change — it is very common for real estate developers to spread operations and investments across different regions or cities.

The findings indicate that both factors contributed to the negative revenue of real estate firms that operated and invested in more developed cities. “We argue the growth of socioeconomic factors should enhance the demand of real estate but also engender institutional environment, while the growth of real estate industry factors might lead to more opportunities but at the same time more competition,” Professor Tsang says.

A strong institutional environment can provide stability and support for the real estate market but can also introduce challenges like increased competition and higher barriers to entry, i.e., obtaining permits, adhering to zoning laws, meeting environmental standards, and the like. The team then identified a more substantial negative impact of real estate firms investing and operating in cities that appeared on the CMI frequently, e.g., Beijing, Shanghai, Shenzhen, Nanjing, Wuhan, and Tianjin. The reduced benefits of geographic diversification were also more noticeable in cities with fast-growing real estate prices.

“These cities have gone through a prolonged period of rapid growth and development, which possibly led to market saturation and high competition that resulted in diminishing returns for the firms,” Professor Tsang adds. “Moreover, these cities are known to have better transparency and infrastructure, which could imply that firms might have greater difficulties in utilising nonmarket means, such as political connections and contributions, to secure resources.”

Less developed regions, higher returns?

Professor Tsang summarises that investing across different regions is beneficial in most parts of emerging economies like China, but competition for resources among firms in major cities begins to outweigh the advantages as some regions experience rapid growth, even surpassing rates seen in mature economies.

“Diversification into the less developed regions remained a viable option to enhance firm performance,” he says, “Despite higher transaction costs associated with these regions, we showed diversified firms could reap the benefit of diversification.”

Decoding property booms following corporate relocations

Higher transaction costs translate to more uncertainty regarding contract enforcement, inadequate infrastructure, and a lack of legal protections and enforcement mechanisms. Professor Tsang notes that companies can succeed by efficiently shifting their resources in places with weak institutional environments and minimising transaction costs through nonmarket means to influence policymakers to retribute resource allocations in their favour. As a result, transaction costs in these regions might not necessarily be higher compared to those in more developed regions.

In addition, real estate firms should be more prudent in their investments regardless of their chosen location or diversification strategies. “Firms can consider other initiatives, such as the inclusion of green and well buildings in their portfolios, which would be more apparent for investors of the developed regions,” Professor Tsang suggests.

“We believe different regions could offer different benefits, and there are comparative advantages in offering a more diversified property portfolio across different regions, instead of chasing only the ‘superstar’ cities such as Shanghai and Shenzhen.”

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Smarter allocation of agents with different performance levels to sales teams could boost returns for real estate firms facing challenging market conditions, a new study finds

By Lisa Kennedy

Boosting productivity by building high-performing teams is a key survival strategy for companies in tough economic times – and few sectors have faced tougher conditions over recent years than the real estate industry. But how exactly do you mix and match staff with different characteristics and performance levels to create more effective teams, especially when managers have to assign jobs on the spot or have no effective way of assessing the qualities employees possess that are critical to teamwork, such as soft skills?

A new study has introduced a quantitative approach for making the best matches between real estate agents with widely differing latent characteristics and performance levels to build teams with the greatest likelihood of completing property deals.

Entitled Heterogeneous complementarity and team design: The case of real estate agents, the study was conducted by Mandy Hu Mantian, Associate Professor of the Department of Marketing at the Chinese University of Hong Kong (CUHK) Business School, in collaboration with Yan Xu of Virginia Polytechnic Institute and State University, Chu Junhong of the University of Hong Kong, and Andrew Ching of Johns Hopkins University.

team building — Matching the lowest and highest performing agents doesn’t improve team performance.

It found that real estate firms could boost the number of deals they successfully conclude on sales and rentals if they restructure the agent teams following the quantitative approach. As real estate agencies typically earn a commission based on a percentage of the property’s sale price, even a small increase in successful deals can translate into significant revenue.

“Given that the average value of a property in mainland China is 2.16 million Chinese yuan (US$324,000), this translates to a financially significant improvement,” says Professor Hu, underscoring the practical implications of research findings in team restructuring to boost sales. “Furthermore, this restructuring strategy does not incur any additional hiring costs and, therefore, the expected output gain translates to profits directly, which is especially valuable for firms facing staff shortages or hiring freezes.”

A large evidence base

The study applied the proposed quantitative model to the context of 484 sales agents at Lianjia, one of mainland China’s largest real estate brokerage companies, from 2011 to 2017. The agents all worked across 17 stores in the Beiyuan subdistrict, a business zone in Beijing, and their income came primarily from commissions on successful deal closures. During the period, they worked on 56,146 properties and successfully closed 17,842 deals.

“Store managers make team assignment decisions when a property owner first visits a Lianjia store to list the property for sale or to rent,” says Professor Hu. “The first agent to interact with the owner automatically joins the property’s sales team. In addition, the manager might assign extra agents who are available at that moment to the property’s team. The management also prioritises maintaining workload fairness among all agents.”

“The findings suggest that we may want to pair up agents who show moderate differences in their working ability.”

Professor Mandy Hu Mantian

The researchers were given the complete team assignment history of every agent and detailed characteristics of all the properties assigned to them. They analysed the performance and collaboration data of all teams with one or two members, which jointly accounted for 94.4 per cent of properties handled over the period. They found that by dividing the agents into six types based on their solo performance and teamwork effectiveness in completing deals—where agents with the lowest success rates are labelled as type 1 and the highest performers as type 6—it is not necessarily the case that pairing a low-performing agent with a high-performing one in two-agent teams would increase the success rate.

Next, the researchers developed a quantitative model with a cutting-edge technique to figure out the latent compatibility of agents to work with each other. The model also incorporates observed data on agents’ gender, home province, education level and age, which was used for further team performance analysis.

The best team players

The study found that the agents with average solo performances (latent type 4) are the best team players. For all agent types, except the best solo performer (type 6), the probability of closing a deal is greatest when paired with type 4. Pairings involving another type 4 agent have the highest chance of success, followed by matches with a type 5 and type 3 agent, respectively.

Type 6 agents always performed best when working alone. Teams that combined a low-performing agent of type 1 or 2 with a high performer from type 5 or 6 were less productive than when type 5 and 6 agents worked on their own.

“Teaming up agents of the same type generally does not yield superior performance compared to pairing two agents of different types, with the exception of type 4,” says Professor Hu. “On the other hand, pairing up agents of very different types also hurts performance. These findings suggest that we may want to pair up agents who show moderate differences in their working ability.”

The researchers found that working in a multiple-agent team often requires coordination and may be more suitable for agents with certain work styles. Type 6 may be very independent but not very adept at coordinating with others, while type 4 is better suited to a collaborative work environment. Restructuring all teams within a company using the above formula is found to increase the number of successful deals struck by agents by 26.6 per cent.

Gender and education also matter

Taking into account demographic factors of gender and education level, the researchers found that the likelihood of closing a deal would be higher if teams included at least one female member and the members were older or had more education. However, the age or education gap among members should not be too large.

Changing the gender mix of teams to the optimum level would raise total expected output by 2.3 per cent, while assigning all agents with the same education level increased overall performance by just one per cent. Compared to the 26.6 per cent increase following the proposed method, the common practice of paring agents based on observed demographic information may not achieve optimal results.

What kind of conflict can spark creativity?

Professor Hu says the main results show how managers can utilise the proposed model and historical teamwork performance data to reassign existing employees in a more effective way that enhances overall performance, which will lead to better results than using demographic information.

“When new hires join the company, managers can consider using observed demographic information to create teams with gender diversity or assign agents with similar educational backgrounds or ages to the same team,” says Professor Hu. “Once the new hires have been working at the company for enough time to assess their sales performance, managers can then gauge which type they belong to. With this information, team assignments can be further optimised.”

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A new study finds fiscal stimulus transformed China’s bank lending, increasing shadow banking and exposing strategic shifts under regulatory pressures

By Putro Harnowo, Senior Content Manager, China Business Knowledge @ CUHK

Something lurking in the shadow may sound vicious but believe it or not, “shadow banking” is a legitimate business. Also known as non-bank financial intermediation, shadow banking refers to entities like money-market mutual funds, hedge funds, and private credit that offer financial services similar to traditional banks but with less regulation and oversight.

According to a 2023 report from the Financial Stability Board, the total financial assets of the shadow banking sectors by the end of 2022 was US$217.9 trillion globally, almost half of the total global financial assets in the same period at US$461.2 trillion. In China, the shadow banking industry reached US$12 trillion in 2019, according to a report published by the China Banking and Insurance Regulatory Commission (CBIRC).

The maturity mismatch between the investment and the assets can lead to serious problems, particularly during the recent real estate crisis to which many funds are heavily exposed.

Chinese banks operate shadow banking as a wealth management product while other Chinese financial institutions offer it as a trust product, offering interest rates higher than traditional bank deposits. This has driven substantial demand from investors. However, such appeal has been approached cautiously as many prominent players faced devastating fates, such as Xinhua Trust, which collapsed in 2023, followed by Zhongzhi Group and Sichuan Trust in 2024.

Su Yang, Assistant Professor of Finance at the Chinese University of Hong Kong (CUHK) Business School, observes that wealth management products mature in three to six months, but the raised funds are used to finance long-term projects like real estate. Therefore, fund managers need to roll over or renew the products frequently. “To delay default, fund managers will use proceeds from new investments to repay maturing obligations, creating a Ponzi-like game, eventually bursting at a higher cost for investors,” he says.

“The maturity mismatch between the investment and the assets can lead to serious problems on the asset managers’ side, particularly during the recent real estate crisis to which many funds are heavily exposed,” Professor Su adds. “Fund managers will find it difficult to repay maturing debt when the property price falls a lot, and the secondary market of properties becomes illiquid.”

In a study titled Fiscal stimulus, deposit competition, and the rise of shadow banking: Evidence from China, Professor Su, along with Viral Acharya of New York University, Jun Qian of Fudan University, and Yang Zhishu of Tsinghua University, looked into the dynamics of wealth management products issued by Chinese banks and how the competition among banks has fueled such products.

The year of shadow banking rises

The researchers looked at quarterly wealth management activity statements submitted to the CBRIC by 25 major and medium-sized banks in China from 2007 to 2014, as well as wealth management product balances from 135 banks from the CBRIC and individual wealth management product information from the Wind Economic Database.

The analyses found that less than 500 wealth management products were launched annually before 2007, but the number grew to more than 1,170 in 2007 and 4,080 in 2008, then rose to over 55,910 in 2015. The demand for wealth management products increased significantly after 2010. The government stimulus and competition among banks propelled the increase of wealth management products.

“The maturity mismatch between the investment and the assets can lead to serious problems on the asset managers’ side, particularly during the recent real estate crisis to which many funds are heavily exposed.”

Professor Su Yang

Specifically, when the 2008 Global Financial Crisis caused a sharp decline in exports, the government introduced a four trillion Chinese yuan stimulus plan. The Big Four banks, the Industrial and Commercial Bank of China, the China Construction Bank, the Agricultural Bank of China, and the Bank of China, played a crucial role by providing the lion’s share of the funds for the investment projects associated with the stimulus, leading to a large increase in loans and credit.

The Bank of China has been positioned to handle cross-border transactions since its inception. The weakening exports in 2009 threatened its deposits more than other banks. Meanwhile, the bank was also much more aggressive in lending money than other banks to support the stimulus plan. As a result, it became much more aggressive in attracting deposits.

Frequent rollover of shadow banking products leads to more liquidity pressure and can lead to liquidity distress in bad times.

After 2010, the average deposit rate premium offered by the Bank of China was significantly higher by about 0.2 per cent compared to the other big three. Small and medium-sized banks operating in the same region as the Bank of China felt intense competition and experienced lower deposit ratios, forcing them to issue more wealth management products.

“The effect of such deposit competition lasted until at least 2019,” says Professor Su. “Banks that were more exposed to Bank of China’s competition not only issued more wealth management products but also more modes to raise funds from the bank-to-bank lending market.”

The rollover risks of short-lived products

The central bank dictates how much money banks have to keep in their vaults and the limit of money being lent out compared to the bank’s deposits, prohibiting banks from lending more than 75 per cent of their total deposits. Wealth management products circumvent these rules and serve as a substitute for deposits without price control from the central bank.

After analysing information on wealth management products from the Wind Economic Database from 2007 to 2014, the researcher found significant clustering of products maturing exactly on the last day of the quarter. This timing coincides with the CBRIC’s inspection of the deposit ratio, indicating a deliberate setting of maturity dates so the issuing banks can boost total deposit balances on the inspection days.

When wealth management products mature, banks transfer funds from the investors’ accounts to their savings or deposit accounts, temporarily boosting the bank’s deposit balance. However, if a large amount of wealth management products mature on a particular day, banks will have to raise capital within a short window by rolling over new products. With the increasing scale of products to renew, banks would have to offer higher interest rates on new products to attract enough investors quickly.

Closing the capital gap in China’s banks

“Increased reliance on shadow banking has two main problems compared to formal banking,” says Professor Su. “First, unlike deposits, which are the most stable source of funds for banks, shadow banking products are typically short-term and need to be rolled over frequently. Frequent rollover leads to more liquidity pressure and can lead to liquidity distress in bad times.”

“Second, bank depositors are protected by insurance and will not run on banks. However, shadow banking products are not insured in any way,” he adds. “When the shadow banks fail to deliver expected returns or investors lose confidence in them, investors will run on the shadow banks, and bank runs can sometimes force bankruptcy of even financially healthy institutions.”

To prevent unnecessary bank runs, Professor Su suggests strictly implementing information disclosure for transparency between shadow banks and investors. Investors should also realise the underlying risks of investing in wealth management products. “However, this needs to be built on the premise that the shadow banks themselves do not guarantee the investment return in the first place,” he adds.

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The new normal prompts a shift to virtual working arrangements and a new study finds that remote auditing may become a lasting trend

By Aaron Woolner

The pandemic has changed the world for the better or worse. While the borders have been opened and lockdowns have lifted, the new normal dictates that attitudes to remote work may stay. However, many businesses remain undecided on this issue.

Corporates that embraced remote working during the pandemic have now shifted the practice, with more than 80 per cent of senior executives surveyed by KPMG for its 2024 CEO Outlook expected to see a full office within the next three years. On the other hand, employees are less keen to return, and debate over this issue has been hampered by a lack of clear data showing whether working from home or in the office is more productive.

The unprecedented scale and speed of the pandemic does, however, also offer the opportunity for researchers to test out the impact of the efficacy of remote work in specific industries and locations. According to Xin Xiangang, Associate Professor at the School of Accountancy at the Chinese University of Hong Kong (CUHK) Business School, China’s auditing industry is one such example.

The timing of the outbreak of COVID-19 in January 2020 coincided with the busiest part of the 2019 audit season, and combined with the swift imposition of lockdowns by Chinese authorities, Professor Xin says this provided the opportune background to test the quality of remote auditing. “As a result of the imposition of lockdown and travel restrictions by the local governments, a significant portion of firms were audited remotely in China,” he adds.

“In addition, the audit profession in China is the first to respond to the pandemic by remote auditing. Without precedents to follow, auditors in China undertook different audit practices to improve remote auditing. We can thus observe these practices and evaluate their effectiveness and efficiency in remote auditing,” Professor Xin explains.

Before the pandemic ended, the Chinese Institute of Certified Public Accountants set out a four-year development plan in 2021 for the sector that called for firms to apply “frontier information technology” — big data, artificial intelligence, cloud computing and blockchain — to the audit process.

Some audit firms had been using remote-auditing procedures before the pandemic, but social restrictions brought by it have jump-started the digital transformation process, enabling the switch away from the office during the pandemic, which shows no sign of slowing down.

“The views of the auditors in the field suggest remote auditing, triggered by the pandemic, becomes an irreversible trend in the auditing industry.”

Professor Xin Xiangang

Weighing between challenges and benefits

In a recent paper titled, Remote auditing and audit quality: Evidence from the field, Professor Xin and his colleague from the same department, Professor Wu Donghui, who is also the Director of the CUHK’s Centre for Institutions and Governance, along with Tian Gaoliang and Jin Yige of Xi’an Jiaotong University, evaluated the quality of audits conducted remotely in China during the pandemic.

The researchers first interviewed four partners of international Big Four audit firms in China, two partners from local top-10 audit firms, and two chief financial officers of Chinese listed firms about the challenges that auditors face in remote auditing, the advantages and disadvantages of remote auditing, adjustments made in remote auditing, measures taken to improve quality in remote auditing, and the possible ways to improve remote auditing in the future.

“Several senior auditors shared the view that auditors face great challenges in remote auditing, such as heavier workloads, higher audit risk, and lower communication efficiency,” says Professor Xin. “However, they also believed remote auditing may not necessarily lead to lower audit quality.”

One of the auditors suggests that remote auditing is as efficient as onsite auditing as all the necessary audit procedures have been completed. Another auditor discloses that remote auditing saves 70 million Chinese yuan (US$9.7 million) in one year of travelling expenses, accounting for 15.7 per cent of revenue in their audit firm.

Based on the interviewees’ responses, the researchers then developed 36 questions for a survey of 3,508 auditors of 3,639 listed firms in China. The survey received 2,275 usable responses and found that, similar to the interview with senior auditors, the respondents admitted the benefits of remote working, such as saving time and reducing costs through lower travel expenses.

The transition to remote auditing indeed posed challenges that affected audit quality, mostly due to communication issues with clients and team members, as well as evidence collection issues. However, the survey found solutions to address them. Almost all respondents in the survey answered that exploiting information and communication technologies could tackle the common issues raised in remote auditing.

The survey also found that remote auditing will account for approximately 86 per cent of auditing practices in the future, suggesting a strong expectation that remote auditing will become the dominant method of conducting audits. “The views of the auditors in the field suggest remote auditing, triggered by the pandemic, becomes an irreversible trend in the auditing industry,” says Professor Xin. “Given the increasingly important role of remote auditing during the digital transformation age, our study is timely.”

Does guanxi among auditors defeat the purpose of auditor rotation?

Remote auditing is here to stay

The researchers then further corroborated their results by running an out-of-sample test based on data from Shanghai’s February 2022 lockdown following an outbreak of the omicron variant. The out-of-sample test result also found that the adverse effect of remote auditing can be mitigated by adjusting audit procedures timely, adopting risk-based approaches, emphasising the sufficiency and reliability of digital evidence, and greater use of information technology.

This provides useful information to the audit sector on adopting digital technologies in practice. “Our paper findings on good practices in remote auditing included things such as relying more on audit risk evaluation and data analysis, emphasising the sufficiency and reliability of digital evidence, and exploiting information and communication technology,” says Professor Xin.

“The advantages of remote auditing can be reflected in these good practices. Securities regulators, accounting or auditing standard setters, and financial-statement users should be aware of how remote auditing may influence audit quality when making their decisions.”

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Online video platforms often favour star creators to highlight, but a new CUHK study shows boosting small creators is essential for diversity and keeping loyal viewers

By Putro Harnowo, Senior Content Manager, China Business Knowledge @ CUHK

If you ask teenagers nowadays what they want to be growing up, don’t be surprised if many of them answer: influencer. Social media encourages youngsters to be famous. While the popularity of platforms varies from place to place, short videos have gained significant traction, with TikTok, Instagram Reels, and YouTube Shorts continuing to attract viewers.

“Viewers access the partner platform freely to consume extensive video content spanning entertainment, education, sports, lifestyle, and other interests,” says Philip Zhang Renyu, Associate Professor of the Department of Decisions, Operations and Technology at the Chinese University of Hong Kong (CUHK) Business School. “A portion of the platform revenue gets shared with creators, incentivising them for continued content production.”

The brain behind the success is the algorithm that suggests unlimited videos on the recommendation page to viewers, displaying a seamless scrolling feed appealing to their interests. However, these recommendations often prefer popular creators with massive followers while neglecting less-known creators, putting the glass ceiling on small and emerging talents trying to seek a name for themselves.

Highlighting content from popular creators may maximise user engagement, but viewers may later find platforms no longer attractive to fulfil their wide spectrum of tastes. As algorithms play a crucial role in driving content and user engagement, which directly impacts the platform’s ability to attract advertisers and generate revenue, video platforms have to tread carefully.

In a study titled Viewer traffic allocation for small creator development: Experimental evidence from short-video platforms, Professor Zhang and his PhD student, Hu Qinlu, along with Ni Huang of the University of Miami, explored the value of the content from small creators in user engagement, as well as the efficacy of traffic allocation in motivating small creators to improve their content.

The hidden power of small creators

The researchers partnered with a leading online short video-sharing platform in Asia to conduct two field experiments. In the first experiment, the platform split viewers into two groups: the treatment group and the control group. The control group had 9,065,114 viewers, and the treatment group had 4,532,431 viewers.

Viewers in the treatment group were assigned content from small creators whose half of the videos were removed from their recommendation pages. Viewers in the control group received no intervention, which means they were exposed to normal recommendation pages without any modification.

“To maximise viewer engagement, a platform should support and promote small creators to keep active viewers engaged. At the same time, it should attract and retain less active viewers by offering popular, high-quality content from star creators.”

Professor Philip Zhang Renyu

Small creators are defined as those who have historically attained less than one thousand followers, which comprise around 99 per cent of the platform’s population. The result showed that reducing content from small creators at first seemed beneficial for engagement. The content from small creators might be perceived as low quality.

However, as a result of reduced content, active viewers spent less time on the platform, while inactive viewers engaged more. Replacing recommended content from small creators with content from well-known creators was found to appeal more to inactive viewers, but not to active viewers. Inactive viewers prefer high-quality content from well-known creators, while active viewers seek content diversity and engage with smaller creators.

The researchers then investigated further by observing a random sample of more than 188 million creators and their content production behaviours in seven days. The results confirmed that when active viewers are exposed to less diverse content due to the reduced videos from small creators, they may find the platform less appealing.

Small creators are more likely to produce diverse content, and removing such content reduces consumption diversity, which may affect active viewers more than inactive ones. It bears mentioning that active viewers contribute the most to viewership and are critical to the platform’s success.

“To maximise viewer engagement, a platform should support and promote small creators to keep active viewers engaged. At the same time, it should attract and retain less active viewers by offering popular, high-quality content from star creators,” says Professor Zhang.

content creator — Small creators are more likely to produce diverse content, which contributes to diversity and appeals more to active viewers.

Not all small creators deserve merits

In the next experiment, the researchers assessed the impact of traffic allocation on small creators by increasing their content exposure. In the treatment group that received a modified algorithm, the platform gave extra exposure to more than 480,000 small creators to boost their viewership on the recommendation pages. In the control group, the same number of small creators received normal algorithms without any modification.

The result showed small creators in the treatment group scored 265.65 per cent more exposure and 289.81 per cent more new followers than those in the control group. This led them to increase content production quantity by 5.87 per cent without compromising the quality. Content quality is measured by likes, comments, and forward rates.

These positive effects are more prominent among popular small creators, who only take 0.83 per cent of the sample yet contribute to 79 per cent of the total viewership and 17.85 per cent of the total videos uploaded.

Meanwhile, the small creators in the treatment group only increased their content production by 2.89 per cent. The researchers then suggest that aided exposure can be optimally utilised if given to more experienced and emerging small creators.

Popular small creators are also more likely to engage with replies and comments when given additional exposure. Therefore, Professor Zhang suggests platforms to strategically allocate traffic to small creators that are relatively more popular to foster their growth and development.

“Our findings challenge the common belief that higher output may compromise quality, as our evidence shows that small creators are capable of maintaining their production standards even when the visibility is significantly enhanced,” says Professor Zhang. “It is possible that, upon receiving more viewer traffic, the small creators with motivation and passion for their content are able to scale up their production without sacrificing quality.”

Sustainable ways to grow cash-burning marketplaces

Further delving into the history of viewership, the researchers found that additional traffic for small creators with low viewership in the past can motivate them to improve content quantity and quality, but those with consistently low viewership might not benefit much as they may lack motivation or skills. The impact of boosted traffic might also be less noticeable for small creators with higher past viewership, but more experienced creators may still be motivated to improve.

Finally, the research suggests that segmenting viewers based on their historical watching frequency helps optimise traffic allocation by tailoring content recommendations to active and inactive viewers, ensuring both small and established creators reach the right audience.

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While technology has reshaped civilisation, credit to non-tech often goes unnoticed. A CUHK expert provides perspective on these overlooked aspects

By Putro Harnowo, Senior Content Manager, China Business Knowledge @ CUHK

Technology has become the buzzword of the century, and the buzz is getting louder nowadays with major media propagating blockchain, artificial intelligence, and quantum computing. The advancement of modern businesses has been unquestionably propelled by science and engineering, but other elements are often overlooked.

“People overemphasise technology-driven business disruption these days,” says Dominic Chan, Associate Professor of Practice in Entrepreneurship at the Department of Decisions, Operations and Technology at the Chinese University of Hong Kong (CUHK) Business School. “Technology plays a huge part but business model-driven seems neglected despite being equally important and, in some cases, even more powerful than technology.”

In a masterclass for the School’s EMBA programme titled Beyond Tech: How business models disrupt industries in October 2024, Professor Chan explained how modern industries and businesses have been shaped by many disruptions and at this point, no company can escape from being disrupted.

budget airlines — Budget airlines revolutionised the aviation industry with their business model: cost saving while making sure the passengers are happy.

Uber is an example of business and technology-driven evolution as it utilises the internet to connect moving vehicles and passengers simultaneously. Amazon is another case of a business model and technology-driven company. Jeff Bezos started with a bookshop, but he envisioned an online store that could not be replicated offline.

However, not all modern businesses have to implement cutting-edge technology. Besides taking lots of time and resources, technology can be hard to catch up with. Business models may be something that every company should consider to focus on.

Take Airbnb as an example. Many tourists are reluctant to spend money on expensive hotels, yet many spare rooms, flats, or houses are available, so Airbnb connects the dots. “Technology was helpful but the core of the idea is Airbnb’s business model. The idea itself doesn’t need a lot of technology and someone is bound to think about it,” Professor Chan adds.

Another perfect yet familiar example is budget airlines. Low-cost carriers and a jet engine maker have changed the landscape of the aviation industry. Although the industry is fueled by technological advancement, the fundamental business model has given these carriers the ability to fly higher.

How budget airlines make everyone happy

Budget airlines are everywhere nowadays, making it possible and affordable to travel to almost all destinations worldwide, from Pacific Southwest in the US, RyanAir and EasyJet in Europe, to AirAsia, Hong Kong Express, and JetBlue in Asia Pacific, to name a few.

As many probably know, low-cost carriers cut costs by providing basic services with limited baggage without loyalty clubs and only fly to lower-cost airports like Luton and Standsted in London instead of Gatwick or Heathrow. However, there are other inconspicuous tactics these airlines use.

“Although technology development is vital, business models deserve merit. At the very core of our ability to disrupt with business models is our understanding of customer needs and value creation.”

Professor Dominc Chan

As safety is paramount, airlines must ensure their pilots and staff are trained to deal with all types of planes seamlessly. Using just one type of aircraft will make all the training easier and save maintenance costs. Budget airlines also fly short-haul, around four to five hours, to generate more revenue per passenger per hour. The staff can fly and return on the same day, which means no hotel cost and more time with family at home.

“The core business is very disruptive but mostly business-driven, not technology-driven,” says Professor Chan. “It’s a win-win because the passengers pay less for tickets, and airlines can make money. To be sustainable, the business model has to be win-win.”

Such business strategies never come overnight. Many cases have shown budget airlines went bankrupt because the management had no idea how to put up with the nitty-gritty of cutting costs while ensuring a win-win strategy.

Jet maker boosts the industry reforms

At the heart of the aircraft is the engine. Rolls-Royce has made such machines for many aircraft, including the Boeing 777, 787, and Airbus A330, A340, A350, and A380, among others. To hold more than half of the global market share for jumbo jet engines, Rolls-Royce had to disrupt the market.

Airlines conventionally own the planes. Manufacturers and other companies provide repair and support services, but airlines are the ones responsible for the maintenance. “Airlines don’t like that,” says Professor Chan. “These days, if you talk about finance, many companies prefer operating expenses over capital expenditures as they are more steady.”

Rolls-Royce changed its business model and no longer merely sold jet engines. Instead, they came up with a subscription model named “power by the hour”. “They’re not selling the engine but hot air. As long as hot air comes from the jet engines, the clients pay for those,” Professor Chan adds.

The market welcomes this approach. For Rolls-Royce, this method can generate a steady revenue rather than a one-off deal as they also prefer operating expenses. It also makes Rolls-Royce more customer-focused as it becomes even more dedicated to ensuring its engines work and are aligned with the client’s interests.

When it comes to maintenance, modern jet engines are quite sophisticated. Their sensors can spot problems earlier and notify the system of any damages or when to run a special checkup. Rolls-Royce calls it the TotalCare programme and claims that 80 per cent of the new customers are now up for this.

Recreating and finding business models

Professor Chan notes that the well-known Blue Ocean strategy has actionable methods with keywords like eliminate, create, raise, and reduce. Some aspects of the business model may be unnecessary, and eliminating them will create better value, i.e., removing confusing or costly items that don’t add value to the customers. Raising aspects that are currently undervalued or underperforming will make it easier to identify opportunities to improve the company’s value proposition. Additionally, the company needs to reduce or minimise over-designed elements for efficiency.

“You first need to understand the existing model because you can’t go somewhere if you don’t know how to start with,” Professor Chan says. “You also need to know the market trend because you’re not just disrupting the model for today but looking at the future. What will the future customers like after you disrupt the industry?”

Why you should and shouldn’t be afraid of AI

After learning the existing models and the market trends, Professor Chan urges, engaging the customer is a must. Not all firms know their customer, and they will be the last to be surprised when the customers leave. Before succeeding in disrupting, the market will judge the business models so firms can measure the outcome and continue to improve.

“Business models can significantly revolutionise the industry,” Professor Chan adds. “Although technology development is vital, business models deserve merit. At the very core of our ability to disrupt with business models is our understanding of customer needs and value creation.”

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Amid the increasing emphasis on sustainability across industries, how can businesses mitigate potential risks associated with climate change scepticism?

By Pan Jingyi, Principal Writer, China Business Knowledge @ CUHK

Each year, scientists issue warnings about breaking temperature records, and regrettably, this troubling trend continues. The latest World Meteorological Organisation State of the Climate Update indicates that 2024 is on track to be the warmest year, with a global mean surface temperature of 1.54 °C above pre-industrial levels during the first nine months.

From the severe drought in central China during the summer of 2024 to Spain’s devastating floods in October of the same year, people around the world are grappling with increasingly frequent extreme climate events. However, a 2023 report by French energy company EDF reveals that 36 per cent of the global population continues to question the human origins of climate change.

“As extreme weather events become more prevalent, our findings indicate that climate change sceptics would shift their beliefs after experiencing these events by themselves.”

Professor Hong Ying-yi

Experiencing anomalous weather conditions first-hand may influence people’s perceptions of climate change, but what about those who believe in climate change conspiracy theories? Will they still trust the conspiracy after experiencing the direct effect of global warming? How does scepticism surrounding climate change impact businesses? And what can companies do to foster scientific literacy on this critical issue?

“As extreme weather events become more prevalent, our findings indicate that climate change sceptics would shift their beliefs after experiencing these events by themselves,” says Hong Ying-yi, Choh-Ming Li Professor of Management at the Chinese University of Hong Kong (CUHK) Business School.

In a study titled Hotter weather, less of a hoax? Testing the longitudinal association between experience of temperature anomalies and belief in climate change conspiracy theories, Professor Hong and her collaborators investigate the links between the experience of unusual temperatures and climate change conspiracy beliefs.

The findings could have implications for businesses in sectors sensitive to climate conditions. A report titled Investing in the green economy 2024 by the London Stock Exchange Group unveils that the green economy has been second only to the technology sector in growth and financial performance in the past decade, generating a total annual revenue of almost US$5 trillion in 2023. Understanding public perceptions of climate change would be useful for businesses to develop strategies in communication, marketing, and sustainability practices.

“Companies that care about sustainability would grow their brand equity in the long run,” she adds. “Businesses that ‘walk the talk’ can convince their stakeholders to understand the importance of sustainability and mitigate potential risks associated with climate change scepticism.”

Hotter weather, fewer conspiracy beliefs?

Working together with Chan Hoi-Wing of the Hong Kong Polytechnic University, Wang Xue of Beijing Normal University, Tam Kim-Pong of the Hong Kong University of Science and Technology, and Huang Bo of the University of Hong Kong, Professor Hong conducted two studies in the US and China.

The team recruited around 1,000 adults from each country to complete online surveys. The results indicated that individuals who perceived unusual summer temperatures were less likely to believe in climate change conspiracy theories in both countries. In the US, the effects lasted even four months later.

Why do experiences of unusual temperatures affect people’s climate change beliefs? Professor Hong and her collaborators identified two possible reasons. The first one is the perceived psychological distance, referring to how individuals perceive the relevance of climate change—whether it will affect their local area, people in other countries, or future generations.

As the psychological distance diminishes, individuals are more inclined to view climate change as an imminent and pressing threat. “The experience of hotter local temperatures would lead to less perceived psychological distance of climate change and, in turn, attenuate climate change conspiracy beliefs,” Professor Hong concludes.

Secondly, the team found that experiencing hotter temperatures also triggered stronger negative emotions toward climate change, leading to fewer conspiracy beliefs. “Negative emotions may make people more vigilant of potential threats and, therefore, would be more likely to reject the hoax conspiracy narratives,” Professor Hong explains.

However, unlike the subjective experience above, the researchers observed a mixed picture regarding objective temperature anomalies. Objective temperature anomalies refer to the actual measured anomalies or deviations from a long-term average temperature for a specific location and time period.

They found that objective summer temperature anomalies were associated with higher climate change conspiracy beliefs in some contexts. In the American sample, a hotter summer was linked to increased conspiracy beliefs, contradicting the initial finding. This suggests that personal experiences and perceptions matter the most in shaping conspiracy beliefs.

Strong conspiracy mentality can be changed

Extreme weather events often prompt individuals to seek out more information about climate change, and more exposure through discussion and other means of communication could promote climate change concerns and beliefs. The researchers found that climate change information exposure was linked to lower conspiracy beliefs in the long term, though the effects were less noticeable in the short term. “The beneficial effect of climate change discussion, information seeking, and information exposure on reducing scepticism may take time to emerge,” Professor Hong says.

The study also highlights the role of personal experience in shaping opinions. While individuals with stronger conspiracy mentalities are more likely to hold climate change conspiracy beliefs, their attitudes could still shift based on personal experiences and increased exposure to relevant information.

“The increased information exposure may help people with a conspiracy mentality to develop a better scientific understanding of climate change, as exposure to non-hoax narratives and climate change discussion may contribute to enhancing the perceived scientific consensus on the issue,” says Professor Hong.

What businesses can do to address climate change scepticism?

The intensified challenges posed by climate change require various sectors, including businesses, to collaborate to tackle these pressing issues. Embracing sustainability not only nurtures healthy global ecosystems but also fosters the prosperity of businesses.

Nevertheless, scepticism about climate change remains a barrier. “Climate change sceptics will not be willing to engage in pro-environmental behaviours nor to support pro-environmental policies and regulations,” Professor Hong says. “This can undermine the sustainability effort by government and businesses.”

Are you ready to eat green for a sustainable future?

The current research highlights the potential for shifting climate change conspiracy, suggesting that occurrences of temperature anomalies could be a crucial opportunity to promote scientific understanding of this phenomenon. “Businesses can be ‘change’ agents on this matter. They can enhance their collaborations with scientific institutions and help to promote scientific understanding of climate change via their marketing and public relations activities,” Professor Hong says.

In conclusion, she emphasises that sustainability stands as one of the fundamental pillars of the human future. Therefore, companies that can harness its power are poised to flourish in the years to come.

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Guess which destination is more appealing for senior tourists: charming scenery and delicious cuisine or easy access and age-friendly services? The answer depends on their surfing skills

By Pan Jingyi, Principal Writer, China Business Knowledge @ CUHK

Young faces often take the spotlight in discussions about tourism, yet senior tourists, with their discretionary savings and spare time, possess significant resources and chances to travel. Alas, there remains a limited understanding of their decision-making process in the digital age.

Given that internet usage is increasingly pivotal to fulfilling informational needs, Lisa Wan, Associate Professor of the School of Hotel and Tourism Management and Department of Marketing at the Chinese University of Hong Kong (CUHK) Business School, delves into the impact of senior tourists’ internet literacy on their preferences for travel destinations.

“The world is rapidly advancing technologically and witnessing a significant demographic shift towards an ageing population, but we discovered that limited internet abilities among seniors act as limiters rather than complete barriers,” Professor Wan says.

“Our findings demonstrate that a lack of internet abilities does not necessarily prevent seniors from travelling, but encourages them to adopt alternative travel approaches that are deemed more feasible for them.”

Professor Lisa Wan

In a study titled Exploring uncharted digital horizons: Role of internet self-efficacy in shaping the destination preferences of senior tourists, Professor Wan and Jia Guangmei, Liu Xin and Wen Ji of Jinan University in China, also explore how marketers should target elderly tourists strategically in the era of technology.

Desirability vs. feasibility

Professor Wan notes that tourists often rely on the internet to solve problems when encountering unfamiliar environments, suggesting a strong correlation between tourists’ decision-making processes and their internet self-efficacy levels. Internet self-efficacy, representing one’s confidence in effectively performing internet-related tasks, stands as a critical factor that can change an individual’s decisions and behaviour.

Therefore, the researchers posited that senior tourists with high internet self-efficacy are more likely to choose desirable or attractive destinations, while those with low internet self-efficacy focus more on the feasibility or accessibility of tourist spots. Desirable destinations include charming scenery, abundant food choices, and a pleasant climate. Feasibility, on the other hand, typically pertains to factors such as convenient transportation and ample age-friendly services.

In addition, the researchers argued that mindsets and travel companions could influence the effect of internet self-efficacy on their destination preferences among seniors.

The role of internet self-efficacy

The team conducted a series of experiments in China to test their hypotheses, recruiting participants from online platforms and in person. They categorised senior travellers as individuals aged 55 years and above, aligning with the average retirement age in China.

The first experiment consisted of two parts: a field experiment and a scenario-based trial. In the field experiment, participants were presented with a choice between two portable nightlights for travel. Nightlight A is easy to learn but has fewer functions, while nightlight B is hard to learn but has multiple functions.

The results confirmed that seniors who are less confident in their internet skills chose nightlife A for its feasibility, while seniors with high internet self-efficacy were keen to use nightlight B that represents desirability.

In the scenario-based experiment, participants were asked to imagine going on vacation and determine whether they would choose a highly attractive yet less practical destination. Similar to previous results, senior participants with high internet self-efficacy demonstrated a greater inclination towards desirability.

“This preference may arise because high internet self-efficacy instils a sense of autonomy, the extent to which individuals have control over their travel actions and experiences,” Professor Wan explains.

Be open-minded or choose a competent companion

The researchers further explored how seniors’ mindsets and travel companions impact their decision-making. People with a fixed mindset perceive human traits as predetermined and stable, whereas those with a growth mindset see human traits as flexible and subject to significant transformation through diligent effort.

“Individuals holding a growth mindset tend to be open-minded when facing obstacles, but those holding a fixed mindset are inclined to exhibit avoidance behaviours,” says Professor Wan.

In a subsequent experiment, participants were asked to read articles designed to manipulate their mindset before selecting travel destinations. One article emphasised that an individual’s character is amendable, and another stated the opposite. The result showed that seniors with strong internet skills in a fixed mindset prefer destinations with high desirability, while those with weaker skills opt for high-feasibility ones. Conversely, senior tourists with a growth mindset tend to prioritise desirable destinations regardless of their internet proficiency.

Lastly, the researchers examined the role of travel companions. Participants were asked to imagine travelling with a friend and chose destinations as in previous experiments. The results showed that senior tourists prefer destinations with higher desirability when travelling with a tech-savvy companion, regardless of their own internet self-efficacy. However, if travel companions are incompetent, seniors with low internet self-efficacy are more inclined to visit high-feasibility places.

This finding aligns with the self-expansion theory, which suggests individuals can broaden their sense of self by engaging in relationships with others who offer resources. “Competent companions with advanced abilities and skills can be perceived as complementary to senior travellers’ own abilities, helping them overcome their personal deficiencies,” says Professor Wan.

Tailored marketing strategies for distinct groups

This research not only demonstrates senior tourists as rational decision-makers who plan ahead before making choices, but also challenges the common assumption of older adults lacking proficiency in technology.

“As senior tourists still have a strong desire to participate in travel experiences, it is crucial for marketers to acknowledge the potential of this demographic in the digital world and tailor product marketing strategies to effectively meet their unique needs and preferences,” Professor Wan says.

For senior tourists with adept internet capabilities, marketers should highlight desirable features, such as scenic beauty and diverse food options. When targeting seniors with limited digital proficiency, accentuating practical aspects like accessibility and transportation convenience would work best.

Diverse marketing channels should be employed to reach both groups, as tech-savvy seniors may use social media networks, travel forums, and websites frequently, while traditional marketing tools such as billboards and brochures are more effective in targeting seniors with low internet abilities.

Throwing Back Travel Memories to Boost Creativity

Travel planning, especially for self-organised trips, is highly dependent on internet searches nowadays. Despite technological advancements posing challenges, this research emphasises that internet abilities may serve as limiters rather than prohibitors for some senior tourists.

“Our findings demonstrate that a lack of internet abilities does not necessarily prevent seniors from travelling, but encourages them to adopt alternative travel approaches that are deemed more feasible for them,” Professor Wan says.

The new leader of the global superpower must deal with pressing issues at home and abroad. Can he rise to the occasion and meet the expectations?

Can tariffs make America great again and again?

Putting caps on inflation and debt

The true face of Trumponomics

Keeping the legacy alive

Using no-brainer approaches is normal in daily routines, but adding a little bit of thought could go a long way in personal finance

Finding the right mental shortcut

Implication for fintech businesses

Forecasting the future

You have probably heard the old adage, “Don’t put all your eggs in one basket.” It’s sound advice, but knowing where to place your eggs is just as important

Developed regions aren’t always the best choice

Driving factors for the negative returns

Less developed regions, higher returns?

Smarter allocation of agents with different performance levels to sales teams could boost returns for real estate firms facing challenging market conditions, a new study finds

A large evidence base

The best team players

Gender and education also matter

A new study finds fiscal stimulus transformed China’s bank lending, increasing shadow banking and exposing strategic shifts under regulatory pressures

The year of shadow banking rises

The rollover risks of short-lived products

The new normal prompts a shift to virtual working arrangements and a new study finds that remote auditing may become a lasting trend

Weighing between challenges and benefits

Remote auditing is here to stay

Online video platforms often favour star creators to highlight, but a new CUHK study shows boosting small creators is essential for diversity and keeping loyal viewers

The hidden power of small creators

Not all small creators deserve merits

While technology has reshaped civilisation, credit to non-tech often goes unnoticed. A CUHK expert provides perspective on these overlooked aspects

How budget airlines make everyone happy

Jet maker boosts the industry reforms

Recreating and finding business models

Amid the increasing emphasis on sustainability across industries, how can businesses mitigate potential risks associated with climate change scepticism?

Hotter weather, fewer conspiracy beliefs?

Strong conspiracy mentality can be changed

What businesses can do to address climate change scepticism?

Guess which destination is more appealing for senior tourists: charming scenery and delicious cuisine or easy access and age-friendly services? The answer depends on their surfing skills

Desirability vs. feasibility

The role of internet self-efficacy

Be open-minded or choose a competent companion

Tailored marketing strategies for distinct groups

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