ChinaEconTalk: TV Drama Explains Class Mobility, The Tencent/Bytedance Messaging War, Jokes

After a Chinese New Year break, we’re back at it with two stories, one using a recent TV drama to explore changes in China’s social class structure since the 1970’s, and another on Tencent/Bytedance competition in the messaging space. Read until the end for some jokes I heard at a recent Chinese-language stand-up night in Beijing.

I’m still looking for a new name for this newsletter. Respond to this email and if you suggest the one I pick, I’ll send you a wacky Taobao t-shirt.

Scan here to add us on WeChat!

Like a Flowing River’s 40 years: Seven opportunities to change one’s fate

大江大河40年:改变命运的七次机遇
By Zhang Jiajia  张假假 and the anonymous “Boss Dai” — 戴老板 Dài lǎobǎn
February 21, 2019

In late 2018, the drama Like a Flowing River caught fire in China. It tells a story of how one family climbs its way up the socioeconomic ladder in the country’s “reform and opening” era.

Having made it through 11 episodes so far (available with decent English subtitles on Youtube), I’m hooked. For me, the most interesting part of the show is how it portrays the Party’s complex role in China’s economic history. On the one hand, it acknowledges some mistakes made by the Party, which led to years of economic ruin. On the other, a fair share of the show is devoted to some forward-looking CCP officials, who are bold enough to enact meaningful reforms to the Chinese economy.

Inspired by Like a Flowing River, the article summarized below gives an in-depth analysis of seven opportunities for Chinese people to achieve upward mobility in the past 40 years.

First was the 1977 return of the gaokao (高考 gāokǎo), the nationwide college entrance examination. In 1966, at the beginning of the Cultural Revolution, Mao Zedong ordered the exam canceled, saying that the education system was dominated by the elite class. In the following 10 years, many of China’s most talented youths were sent to the countryside, spending their late teens and twenties in farms instead of labs and libraries. When the gaokao made a comeback in 1977, 5.7 million candidates took the exam, and many of them seized the opportunity to change their fates through education.

Second was Township Enterprises 乡镇企业, innovated from the Anhui Model, which through reversing collectivization allowed farmers to reap the benefits of increased productivity as well as start their own businesses.

Land reform in action from Episode 4

The third was ‘Two Track Businesses’ 双轨生意, where enterprising individuals found arbitrage opportunities in the dual-price economic system of the 1980s to buy for cheap in the planned economy and sell for a profit on the open market. While some ended up in jail for these sorts of schemes, a common phrase at the time was that “it was better to make it a little while as a wheeler and dealer than spend a lifetime struggling.”

At the end of the day, the profiteers’ made their money on the backs of the government and the common people. Some scholars have estimated that losses leaking out from the dual track system numbered in the billions of RMB. “From this mad carnival of fortune-making came the central manifestation of social injustice in the 1980s, causing enormous side effects and lighting the fuse for many incidents.”

The fourth were people going “out to sea” from ‘Iron Rice Bowl’ jobs in SOEs, universities, and the government to test the business waters in the 1990s. “九二下海” The biggest fortunes were made in “real estate, finance, and other ‘policy-intensive’ heavily regulated industries, thereby avoiding the fierce competition in more liberalized corners of the economy.

The fifth was the natural resources boom of the 2000s. China’s entrance into the WTO and subsequent rapid growth rates helped to drive a massive run-up in price for industrial inputs. In Shanxi Province, in particular, coal mining practically overnight birthed a whole class of coal barons. After a series of disastrous mining accidents in 2008, the government began to buy back these mines from the coal barons, only to pay for such assets as the top of the market thereby insulating these players from the dip in resource prices following the Great Recession. The author makes the point that these sort of riches are common in world history, yet “because of China's political system the overall impact of the Shanxi coal barons was less than that of America's oil barons in the 19th century.”

The sixth was the insanity of China’s property market. As Zhou Jintao, Chief Economist at CITIC joked, “it was not important that you found a job at CITIC ten years ago. What was important was to buy a house next to CITIC in Chaoyangmen ten years ago.”

Over the past twenty-year bull market, “the rise in housing prices has allowed all participants to gain wealth, but not all have been able to change their class. To do so, you needed property in first- and second-tier cities + more than three sets of housing + low debt to be able from childhood to join the ranks of the wealthy.”

The seventh and final opportunity to change class status came from the “internet dividend,” the mass boom in companies. The author writes, “Even though it’s only been 40 years since owning privately held money has been legal, there is already a distinction among entrepreneurs between ‘old’ and ‘new’money. The reputation of ‘new money’ includes transparency, high pay for workers, and a positive social image.”

In sum, the author concludes that while “the lives of Chinese people have undergone tremendous changes over the past four decades, the relative position of most people in society has not changed.”


The Douyin/WeChat War: A battle over market share, or user privacy?

The messaging app WeChat is so ubiquitous in China that it’s sometimes hard to imagine any other real competition exists. Dig below the surface, however, and things get more interesting. For a time it was not clear whether WeChat would triumph over Xiaomi’s chat app or TalkBox. Now, ByteDance has made a move with their new product Duoshan on the assertion that WeChat does not adequately cater to young users. Beyond a fight for the market share, the issue of user privacy has arisen this week in a tryst between Bytedance and WeChat surrounding their friend-finding techniques.

抖音微信之争的真相:地盘之争,还是用户隐私之争?

Caijing Weekly, 1/24/2019

All Eyes on Allen Zhang as Competitors Take On WeChat

Back in January, all eyes were on Allen Zhang, the “founding father” of WeChat, when he made his speech at Tencent’s annual conference. With competitors like Bytedance making moves amidst criticism of WeChat, it was assumed Zhang would offer clues about where WeChat is headed. What exactly is wrong with WeChat, though? As 张远 Zhang Yuan, from TMTPost argues here it has “lost its driving force” and needs to find a “new engine.” WeChat, currently with a billion users, has largely tapped out its growth potential and currently suffers from “not enough kinetic energy to power further social expansion.” WeChat Moments (the equivalent of Facebook’s News Feed) strayed because it has become too much of a place for establishing an online persona. The LinkedIn (or Instagram) feel of Moments (as opposed to that of Snapchat) is due to the fact that one’s WeChat “friends” include not only family and friends, but also colleagues and bosses. This results in content posted on WeChat Moments becoming the “lowest-common-denominator” serving to make one look good and not rock the boat. This explains the lower engagement rates, particularly among young people, who are more career-focused than their elders.

Another pitfall, according to Zhang Yuan is that around 80% of the content that users read on WeChat is found via friend recommendations, while 20% is from official accounts of companies, media outlets, or individual journalists that users have opted into following. Relying on your friends and prior subscriptions alone to push content this way has its drawbacks: “Shouldn’t social platforms help users discover the wider world out there? Why must we borrow our friends’ eyes to see the world from a different point of view? For gathering interesting content, social recommendations are obviously less efficient than algorithms.” Competitors are taking advantage of WeChat’s pitfalls and launching products that fill the gaps. ByteDance turned heads with the launch of their video chat app Duoshan on January 15 at Beijing’s 798 Art District. As Liu Jingfeng 刘景丰reports in her Huxiu post “Toutiao’s Doushan Poses Threat to WeChat 头条多闪了一下微信的腰,” ByteDance’s products target users under 30. Illustrative of this is ByteDance’s  25-year-old product manager, Xu Luran 徐璐冉, who spoke at the launch. According to ByteDance, China’s youth need a way to send short videos to each other without pressure. “Unlike WeChat’s Moments feature, there won’t be a way to publicly comment or ‘like.’ All you’ll be able to see is who viewed your video,” says Xu. All comments will be reserved for one-on-one channels. This design decision was made to “relieve social pressure” that can be so rife on WeChat.

Doushan/WeChat War plot thickens amidst user privacy concerns

Late last month Bytedance announced that logins to its flagship Douyin app through WeChat (much like the way you use your Facebook account to log into third-party sites), were mysteriously suspended. At first, many Chinese netizens suspected that this was just one more flashpoint in the Tencent/Bytedance war. However, Caijing uncovered a potentially more valid justification for WeChat shutting down Bytedance’s access to its API.

Today, Tencent’s biggest moat is WeChat’s social graph. In the US, Google, Twitter, Snapchat, Linkedin, and Facebook can all make reasonable guesses as to who your friends and colleagues are, and as Americans take down peoples’ phone numbers, new products with a social component can leverage phone books. Yet in China, no other companies have remotely as clear a window into Chinese social networks as does Tencent. Re-adding your closest connections on a non-Tencent product is annoying, and with less-close relationships, often just too awkward to ask. It has taken a killer unclone-able app (like the PC version of PUBG on Steam) or direct integration with the Tencent ecosystem (like PinDuoDuo) for most social networks to sing.

Currently, the process to add friends in Duoshan via WeChat is cumbersome, to say the least. Like sending Alibaba Taobao links through WeChat, users have to copy a personalized message and then open the Duoshan app with their friend’s random ID string on their clipboard.

Mine is:

This friction point has been enough to kill many a Chinese messaging app in the past. But as some internet commentators have noted, the Doushan recommended friends list seems to already know who your WeChat friends are.

I know lots of these people...but how does Duoshan know I do?

As Caijing revealed, Douyin had been using a special cookie when its users logged in through WeChat to figure out who your friends are on their rival platform. WeChat likely blocked Douyin logins as a violating of its policies with regard to consumer data. Upon realizing this, Caijing went into an extended meditation on the differing philosophies of Allen Zhang’s WeChat team as compared to the Bytedance upstarts. What follows is an abridged translation of the article.

“The heart of the dispute is not so much a dispute between Bytedance and Tencent. It is better to say this fight reflects the two companies’ different attitudes towards user data and privacy, representing a global dividing line between internet companies.” 

On the one hand, Bytedance, lead by CEO Zhang Yiming, values efficiency, is good at quickly gathering traffic, and is strong in monetization. Revenue is quickly used to gain a larger market, meaning the company is always in a state of very thin profit, but more traffic is continually gathered. Bytedance’s fundamental product logic is to "follow human nature," using machine learning to arrange content, and relying on algorithmic dopamine to retain users. This kind of logic, when applied to social networks, means that these sorts of games with cookies are to be expected.

WeChat, in contrast, on principle maintains vigilance against algorithmic traffic distribution. Its proclaimed cornerstone value, “the user is supreme,” supposedly grants content vetting power to the user, and encapsulates the idea that shared information based on social connections can self-correct in ways algorithms cannot. As WeChat would have it, using AI will create the atmosphere of a spoiled child (则会诱惑用户在溺爱的环境中). The ways that WeChat puts users first are evident; the subscription relationships, the elimination of garbage news, the very little intervention in the distribution of small program and public account traffic, and the lack of full-screen ads.

To the world’s question of why Tencent does not "put data first," we find an answer of sorts in a statement by CEO Pony Ma: “We will not open up the different product scenarios of users for the needs of their own business. Many companies talk about data, but Tencent is user-centric. We need to consider the needs of users to provide services. Tencent will retain such values ​​regardless of whether it is To C or To B.”

The attitude of the two companies to data and user privacy is clear, and it is not difficult to understand why Tencent is resentful of Bytedance stealing user data.

This is not a tragic story about Don Quixote [ie Bytedance] holding a javelin to the windmill, but a story about how to treat users. It could even be said that this is a confrontation between two internet trends: a question of how to manage the huge amount of traffic that the top technology companies control.

Everyone is happy to see more competitors appear in the market, and competition brings more and better services. But if it is achieved by stealing the social network of competitors and the privacy of users, such competition is not a good competition, but rather, competition of the basest order. (而是一种比拼下限的竞争。)

WeChat does have a lot of pain points, and users are expecting new products to appear. To make a new social network do you have to copy an old one, though?

A few days ago, at the scene of the multi-flash conference, Xu Wei, the person in charge of the multi-flash product born in 1993, called Allen Zhang "Uncle Allen," as if to declare one thing: WeChat doesn’t understand young people, but Duoshan does. The products designed by young people are nimble and novel. However, ‘Old Uncle Allen’ may be more inclined to treat the power in his hands with care.

Notes and Jokes

A Chinese guy working at a tech firm made sure his kid was born in the US because neither he nor his wife have Beijing hukou and international schools in Beijing require a foreign passport.

You can’t buy knives in supermarkets.

Some jokes from a recent Mandarin-language stand up night (search 单立人 on WeChat if you want to check them out in Beijing)

You know those parents who take their grade school kids to the gates of Beida and Tsinghua (the two best schools in China) to get their photos taken? That’s the closest 99.9% of those kids will ever get. Well, actually, if they want to become delivery boys bringing dumplings to the students, then they can come in whenever they want!

My subway line 13 literally has no advertisements on it. Seriously, are we that poor even Pinduoduo doesn’t wanna buy some billboards?

You know, Chinese people are one of the few groups in the world that take English names. I thought it was super interesting how when I was studying in the US other international students, even if their names were really hard to pronounce, would force Americans to learn them. Really cool, right? Respecting your own culture? So I decided to do the same. But after someone told me what 东 ‘Dong’ really meant, I got over respecting my culture pretty quick….

This past Chinese New Year I went back to hang out with my dad, a super traditional Henanese guy who can’t really speak standard Mandarin. This New Years he promised me that ‘within two years, we’ll get Taiwan back!’ I said, ‘Dad, I’m pretty sure you’ve been giving me that same line for the past two decades.’

Image result for 担当画

Dan Dang (担当), Early Qing Dynasty painter/monk whose Wikipedia page I need to write.

Loading more posts…