China’s financial services sector has experienced burgeoning growth in the past two decades. Hong Kong and Shanghai rank among the top 10 Global Financial Centres in 2023, according to the Global Financial Centres Index 33. By the end of 2022, the country’s financial institutions had a total of 419.64 trillion yuan in assets, increasing 9.9 percent year on year. Among them, banking institutions had assets worth 379.39 trillion yuan, which increased by 10 percent compared to the previous year.

Coinciding with the rapid capital market development, initial public offering (IPO) activity has also risen sharply. PwC’s Global IPO Watch 2022 reported the total amount of funds raised through IPOs in China’s domestic markets constituted about 39% of the global proceeds last year, replacing the U.S. as the world’s number one in terms of IPO proceeds for the first time.

Vibrant as other developed markets may be, China’s financial industry is shaped by one important factor that makes it unique like no others in the world. Guanxi, a Chinese social concept of interpersonal connections with implications for the exchange of favours, has long been dominating the Chinese socioeconomic landscape. Previous studies define that guanxi connections are characterised by trust in family-like relationships and instrumental exchanges that run alongside affective bonds. Business networking in the West carries no such elements. In the realm of finance, guanxi often plays a considerable role in shaping the behaviours of economic agents. While this purposeful networking behaviour has potential benefits, it can also bring undesirable consequences.

In this Chinese University of Hong Kong (CUHK) Business School White Paper, we conducted a series of studies into how the guanxi culture has led to the development of a unique financial sector in China and examined the impact of guanxi between different actors in China’s financial sector.

First, we look at how social ties between fund managers and analysts affect their behaviours and business decisions, and how they reciprocate the benefits they receive from each other. We then ask whether guanxi connections between investment bankers and auditors affect the IPO process and firms’ post-IPO performance. The third type of guanxi ties we discuss are those between auditors and audit committees. What negative implications and benefits do such ties bring? In what way can they undermine audit quality? Fourth, we look at how guanxi ties between financial analysts and firm management affect the acquisition and dissemination of bad news surrounding problematic firms. Lastly, we highlight the implications of our findings.

To find out more about a specific topic, click on the links below to navigate to the relevant chapter:

INTRODUCTION – Where Guanxi Matters: The Modern Chinese Financial Sector

PART I – The Influence of Guanxi on the Fund Manager-Analyst Relationship

PART II – Does Guanxi Affect the IPO Process in China?

PART III – Guanxi and Auditing

PART IV – Can Guanxi Help Analysts to Uncover Bad News?

CONCLUSION – How to Counter Negative Effects of Guanxi Ties in Financial Sector?

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The post Where Guanxi Matters: The Modern Chinese Financial Sector first appeared on China Business Knowledge.

Have you ever imagined reaching for the stars, space walking on the moon, and watching Earth rising with a cup of coffee at a space hotel? For most people, getting to the space is nothing more than a dream. Although space travel sounds futuristic, it is turning into reality. Virgin Galactic first blasted off to suborbital space on July 12, 2021 and Blue Origin soared past the edge of space on July 20, 2021. Then, Space X launched Resilience which carried 4 civilians into space on Sep 15, 2021, making it the world’s first spacecraft to carry all civilian passengers.

Space tourism refers to members of the general public, such as civilians and space tourists, visiting space solely for recreational purposes. It covers spaceflights for various distances: suborbital, orbital, and beyond the Earth’s orbit. For example, Virgin Galactic provides suborbital trips that reaching around 100km altitude and passengers can enjoy several minutes of out-of-seat weightlessness and breathtaking views of Earth in space costing US$450,000. In 2022, it already attracted 800 customers signed up for the trips. SpaceX offers even more expensive orbital trips that reaching an altitude of almost 600km and can keep passengers in space for several days costing US$55 million. China is also catching up quickly (with 370 commercial space-related companies set up as of 2021) and it is expected to start suborbital travel in 2025, which costs around 2-3 million yuan (US$285,00-US$427,000).

With the continued advancement of space technology, space exploration has become a key mission for many nations including the U.S. and China. For example, the U.S. plans to return to the moon and establish a lunar colony over the next few years. China also built its Tiangong space station in 2022 and is planning to get to the Moon in 2030. The Chinese State Council pledged to “make the space industry an important part of the nation’s overall development strategy.” The rapid development of space technology will further lower the costs of space tourism and the space tourism market is expected to grow rapidly. The global market for space tourism is estimated to reach US$1.7 billion by 2027, and the U.S. and China are the two biggest potential markets for space tourism. North America is the leading market for space tourism, with a market share of more than 40 percent. Asia-Pacific trails closely behind, with a market share of about 30 percent. The Chinese space tourism industry is forecast to be worth US$401 million by 2027, making it the second largest in the world.

Having civilians travelling to space will be a breakthrough in human cultural development. As space tourism hits mainstream commercialisation, who would be more interested to spend money on enjoying the breath-taking views of Earth in space? Moreover, a luxury space hotel Voyager Station is scheduled open for business in 2027. In order to generate revenue, what activities and foods should space tourism companies provide to tourists once reach orbit? Since space tourism is still expected to remain relatively expensive, what about the masses who are still unable to afford space travel? Is there a way for them to experience space travel in a cheaper fashion? What lessons can companies seeking to develop space tourism learn?

These are some of the questions I sought to answer in this Research White Paper.

To find out more about a specific topic, click on the links below to navigate to the relevant chapter:

INTRODUCTION – Space Tourism Isn’t Science Fiction Anymore

PART I – Consumer Reactions to Space Travel across Cultures

PART II – Space Hotel and Space Food

PART III – Space Travel Opportunity for Public?

CONCLUSION – Future Direction for Space Travel

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The post Space Tourism Isn’t Science Fiction Anymore first appeared on China Business Knowledge.

The unprecedented socio-economic changes brought on by the COVID-19 pandemic have changed the business landscape around the world and in China. At the same time, pandemic-related challenges spurred the emergence of new technologies. Entrepreneurs actively responded to the rapid economic changes by coming up with innovative solutions and adaptations. For instance, robots delivering food to students’ dorms have been commercialized, and the check-out process is run by Artificial intelligence (A.I.). Additionally, A.I. can also be used to write stories and even computer programmes. These innovations facilitated contactless transactions and logistics, making life easier during and after the lockdowns.

It was also during 2022 when Generation Z (Gen Z), better known as “Post-’00s” in China, came of age and was ready to enter the workforce. Despite the record number of unemployment among the youth due to the economic turbulence, the Gen-Z also showed an unprecedented level of interest in starting their own business from scratch.

On Bilibili, a video platform popular among Gen-Z Chinese, entrepreneurship-related content racked up 830 million views in 2021, up 77% over the previous year. The majority of the viewers expressed enthusiasm for pursuing non-traditional careers or seeking alternatives to full-time employment.

In addition, continuous rural migrations to China’s urban centres over the years further fueled the rise of the startup culture, where risk-takers contributed to the rapid development of innovations in the marketplace.

With such drastic transformations in society, work and business landscape, the driving forces behind entrepreneurship have taken on a much different nature than those shaping entrepreneurship in the previous generations.

In this CUHK Business School Research White Paper, we will examine some of the questions surrounding the rise of a new brand of entrepreneurial culture in China. First of all, in light of the propensity of the Gen-Z to found startups without any prior experience working and while holding full-time jobs, what can they do to increase the chances of keeping their startups afloat and ensuring long-term success?

Once a startup company is established, what should entrepreneurs focus on to get it off the ground and expand its market reach and profitability? In view of the shifting political landscape and institutional changes in China over the years, entrepreneurs may need to adjust their strategies according to the current stage of institutional changes.

One of the most drastic transformations in Chinese society as a result of institutional change is the migration of the rural population to the country’s sprawling cities. Along with the migration came the rise of entrepreneurism in urban centres. A fascinating phenomenon emerged: Those who came from rural areas turned out to be among the most successful entrepreneurs in China’s history. What are the factors contributing to this? How can we leverage those factors to continue nurturing successful entrepreneurs?

Lastly, for the younger generation who grew up in business families found by first-generation entrepreneurs, what impact does the changing socio-economic landscape have on their career choices? As they tend to forge their own paths, family businesses can no longer expect the heirs to continue their legacy with certainty and must nurture them differently.

These are some of the aspects of entrepreneurship that we will seek to explore.

To find out more about a specific topic, click on the links below to navigate to the relevant chapter:

INTRODUCTION – A Handbook for the Modern Entrepreneur

PART I – Leveraging Multi-faceted Experience for Entrepreneurial Success

PART II – Entrepreneurs Picking the Right Strategy for Different Stages of Marketisation

PART III – How Urban Migration Helped Drive Entrepreneurship in China

PART IV – Entrepreneurial Career Paths of New Generations in Family-Owned Enterprises

CONCLUSION – Entrepreneurship in 2023 and Beyond

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The post A Handbook for the Modern Entrepreneur first appeared on China Business Knowledge.

We live in an era of the unprecedented and rapid warming of the global environment due to human activities. So far, global temperatures have already risen by 1.1 degrees Celsius above pre-industrial levels, and the world has also witnessed a rise in the number of extreme weather and climate events, particularly in 2022 which was dominated by headlines of heat waves in Europe, flooding in Australia and drought in China.

This fight against climate change will require firms and governments alike to commit unparalleled levels of financial resources and investment, but at the same time, a transition to a green economy can unlock future economic opportunities and jobs. For instance, sustainable investing is becoming increasingly popular as more and more people have come to realise the importance of a low-carbon economy. A recent report estimated that total ESG-related assets under management (AuM) will rise to US$33.9 trillion by 2026, from US$18.4 trillion in 2021.

Given that climate change is widely expected to become increasingly important to investors, in this CUHK Business School Research White Paper, we shall seek to examine how institutional and retail investors perceive the risks and opportunities associated with climate change and how they will react in response.

For example, with extreme weather becoming more frequent, people are becoming better aware of the seriousness of climate change after personally experiencing it. Can this translate into different performances on the stock market for companies depending on their carbon footprint?

Within the market, institutional investors are a segment whose decisions can have a great impact on the overall sentiment. How will these large-scale investors react to global warming? And while some investors adjust their investment decisions in response to climate change, companies also face mounting pressure to become more environmentally friendly. Can climate risks really affect the valuation of a firm on the stock market, and how does this translate into its business decisions on the operational level?

Finally, previous studies have shown that climate change does affect the portfolio choices of institutional investors, but there is little information about its impact on the retail side. If companies with high carbon emissions come under pressure from investors, what happens to their employees? Do families working for high-emission industries face additional risk to their income streams and would they change their investment behaviours as a result?

We shall seek to answer these questions in the following sections of this white paper.

To find out more about a specific topic, click on the links below to navigate to the relevant chapter:

INTRODUCTION – The Unstoppable Rise of Sustainable Investing

PART I – Does Climate Change Sway Markets?

PART II – The Power of Institutional Investors

PART III – Pollution and its Institutional Investor Discount

PART IV – Does Regulatory Risk Affect Retail Investment Decisions?

CONCLUSION – Adapting to Changing Investor Sentiment

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The post The Unstoppable Rise of Sustainable Investing first appeared on China Business Knowledge.

The global economy has faced a series of extreme shocks over recent years, ranging from the COVID-19 pandemic to the U.S.-China trade war and Russia’s invasion of Ukraine. These dramatic changes have had far-reaching effects on globalisation, leading to a fundamental reversal of multilateral trade openness and the disruption of the status quo in global supply chains. Traditionally, the tradeoff in global supply chains is cost efficiency (such as in China) and risk concentration.  Increasingly, companies and governments are calling into question the sourcing strategies that have dominated supply-chain management for decades. After the trade war and COVID, global supply chain risk, especially geopolitical risk, has become a recognized issue.  New trends such as geo-economic regionalisation of supply chains, sourcing consolidation back home or among close trading partners, and facility establishments clustered around the final end-user market, have begun to emerge, as globalised manufacturing comes under intense pressure and supply chain risk – especially tail risk from unforeseen events – becomes increasingly recognised as an issue.

Traditionally, supply chain globalisation has offered firms the advantage of cost savings, and access to materials or production capabilities that may not be available domestically. However, the COVID-19 pandemic and U.S.-China Trade War have highlighted the vulnerability of global supply chains and how they expose firms to operational risk and potentially unfavourable economic or political developments in countries where their partner firms are located. As a result, the restructuring of global supply chains has been taking place across industries and geographies, with firms considering multiple trade-offs, incentives, and constraints.

So how should firms adapt their supply chains to maximise returns, minimise risk and improve resilience in the face of sudden or long-term interruptions? What trends do they need to be aware of as they build their networks in the new global economic order that is emerging? Moreover, what will the supply chains of the future look like? In this CUHK Business School Research Whitepaper, we review a raft of studies that provide some early answers to these questions and may help to guide businesses through the turmoil and unpredictability that have characterised global markets following the pandemic.

An initial hint is provided by our recent study, The Bullwhip Effect in Supply Networks, which challenges the traditional wisdom that supply chains are linear in nature and demand shocks are amplified upstream along the chain. Our study demonstrated that today’s companies operate as part of a complex supply network, with each player having multiple customers and suppliers. Firms at the higher levels of the supply chain network (where raw materials are typically procured) do not tend to feel the “bullwhip”, or an amplification of the fluctuation in demand, from their individual downstream customers as they essentially serve a portfolio of networked firms. We also found that suppliers who actively manage their customer base go on to enjoy a notable reduction in demand variability, suggesting that firms could mitigate the bullwhip effect through their choice of customers. Global supply networks involve complex webs of links between different sectors, industries, and countries, in which a company may have multiple supply relationships and simultaneously operate at higher and lower levels of the network.

To find out more about a specific topic, click on the links below to navigate to the relevant chapter:

INTRODUCTION – Managing Supply Chains in the Post-pandemic New Normal

PART I – How Does Risk Propagate along Supply Chains?

PART II – Where Will Global Supply Chains Go?

PART III – How is Political Economy Intertwined with the Global Supply Chain?

CONCLUSION – The Future of Supply Chains

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The post Managing Supply Chains in the Post-pandemic New Normal first appeared on China Business Knowledge.

COVID-19 has done much to change the purchase habits of consumers around the world, especially by significantly accelerating the adoption of online commerce. Around the world, retail stores shut down as countries entered lockdowns to prevent the spread of the virus during the start of the pandemic. Online commerce boomed as consumers flocked online to purchase a wide array of goods.

Two years on, in the new normal that has emerged, it is becoming increasingly apparent that the rise in ecommerce is here to stay. According to figures released by the United Nations Conference on Trade and Development (UNCTAD), the online retail sales of seven countries that altogether made up for around half the world’s total GDP jumped from US$2 trillion in 2019, immediately before the pandemic began. This rose to around US$2.5 trillion in 2020 at the height of the pandemic, and its rise was sustained into 2021 at US$2.9 trillion, with China making up for over half of online retail sales across these markets.

Customers are becoming increasingly savvy in their digital shopping experiences. To ensure businesses stay on top of trends in the post-pandemic world, they must build an effective strategy that takes into account the rapid evolution of consumer preferences that have been brought on by the pandemic.

In this CUHK Business School Research White Paper, we shall examine some of the questions that companies and marketing professionals must deal with to succeed in this new digital age. First of all, customers now more than ever expect e-commerce websites to be clear, informative and highlight the wide variety of products available to them. In light of this, how can companies most effectively capture the attention of consumers in a digital age where the majority of purchase decisions are increasingly being conducted in front of mobile devices such as smartphones?

As consumers have switched their purchase habits away from physical retail stores, so too has payments now shifted to being dominated by an array of region-specific digital formats, from bank transfers to e-wallets and credit cards and even short-term financing (Buy Now Pay Later) solutions. But can the use of digital payments affect how customers make purchase choices?

Social media has also become a crucial part of any e-commerce plan, with the popularity of platforms such as Instagram, Tiktok to China’s WeChat all surging as people sought to maintain social contact at the height of the pandemic. Many of the current generation now use social media as their main conduit with which to learn more about the world around them, including where to shop and what to buy. In this age of the rise of social media, how can companies leverage off new and exciting ways to communicate to their customers and spread the word of mouth, and how can they shape consumer feedback to their advantage?

Finally, physical retail itself has been transformed as customers have gradually make their way back to brick and mortar stores, with more and more businesses making use of touch interfaces to communicate and interact with customers. Do their use affect consumer choice and what could be potential implications for consumers and policymakers?

These are some of the questions that we will be seeking to address.

To find out more about a specific topic, click on the links below to navigate to the relevant chapter:

INTRODUCTION – Retail Marketing in the Digital Era

PART I – Capturing Consumer Attention in the Smartphone Era

PART II – Digital Payments and Consumer Purchase Decisions

PART III – Can Social Media Platform Choice Can Affect Customer Feedback?

PART IV – Are Touchscreens the Future of Food and Beverage Retail?

CONCLUSION – The Importance of Understanding Retail Trends in the Digital Age

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The post Retail Marketing in the Digital Era first appeared on China Business Knowledge.