Hey everybody, welcome back to another episode of the Negotiation Podcast. I'm your host Todd Embley. As many of you know, the headlines about China's economy often tell two contradictory stories at once. Recovery and stagnation, consumer confidence and persistent caution, tech boom and structural drag. Making sense of what's actually happening requires someone who's tracking the data closely, week by week from the ground up. Robert Wu does exactly that through Bygorn, a consultancy and popular newsletter that covers the Chinese economy, consumer trends and business developments. In this episode, Robert gives us his unfiltered read on the state of China's economy in 2026. He breaks down two trends, his recent newsletter highlighted what's happening in the real estate market and whether salary recovery is real or overstated. He also assesses consumer sentiment and how it's actually showing up in spending behavior across categories. Robert then takes us through a series of sector-specific spotlights, the auto market and whether robo-taxes are genuinely scaling or still in hype territory, pop-marts trajectory and what it signals about Chinese consumer brands going global, deep-seek latest model and what it reveals about China's AI competitive position and the food delivery war between Maytwan and its challengers and what that tells us about the state of China's consumer internet. He closes with the key variables that will shape the rest of the Chinese economy in 2026 and what international businesses should understand about China that isn't making it into the headlines. So last year, they had a huge success. Actually, on the expected success, they didn't expect for that. They didn't budget for that globally, the success, right? The Baalaboo, the craze. And if you are like a normal Chinese company, you would double down that. But no, they didn't. They just say, it's too quick for us. There's going to be trouble and we're going to just slow down. And so when they're CEO this year in the annual results meeting, he said that our growth this year would be just no less than 20%. Right? And the stock collapsed because last year, they were growing like 200%. And he's not really giving a guidance or something. He's just saying that, okay, we are going to grow no less than 20%, which is like so easy for them. And they can do whatever they want and they can grow at just 20%. Which is his way to say that we don't have a KPI. We don't have a target. It's not a point this year. The point is we regroup, we find problems in our management. And I think very consciously, they don't want to, they know who their core clients are, core members and consumers are. And they don't want to piss them off. So they intentionally try to preserve this community. Home to over 4 billion people, the Asia-Pacific region boasts one of the most powerful consumer markets on the planet. Not only is it home to half of the world's under 30 population, but it's also home to more than half the world's internet users. It's a market that no globally minded organization should ignore. But entering markets like China, Japan or Southeast Asia is no easy task. Just ask the likes of Microsoft, Google, Uber and Facebook. However, times are changing. And with the right partners, doors are slowly opening as more and more companies find success growing their key markets in APEC. I myself spent 8 years in China, mostly as a venture capitalist, helping early stage tech companies grow in the Asia-Pacific market successfully. This show is dedicated to uncovering and examining successful Asia market entry and growth strategies by interviewing the experts who've done it before and truly understand what it takes to be successful in the region. My name is Todd Embley and welcome to the Negotiation brought to you by WPIC Marketing and Technologies. Robert, welcome to the Negotiation Podcast. Hi Todd, hi everyone. Glad to be here. Alright, let's start with you and byguan. Can you tell us about byguan what it is who you're writing for and what led you to start covering the Chinese economy? Alright, so actually byguan is a company of many things. The main business is actually a data service, data research service that we supply to many investment managers around the world and also the corporates to help them to make data-driven decisions about China. Every byguan was like that for a long time. We only serve a select group of clients. We were not very well-known outside that little circle of clients until 2022-2023, which, you know, at the time you understood that you may well remember it was the time when everyone was saying that China was uninvestable and foreign capital was leaving China massively, which definitely hurt our business. So we were really trying to do two things at the time. First, we were trying to explore alternative revenue to basically save ourselves, to help ourselves survive. Secondly, we also find that there seems to be a lot of misunderstanding or lack of understanding about the realities in China. And there are not many people out there to talk about it, especially during that period of time. So we were thinking, "Oh, so why can't we go out? Speak out, and we have so much good data, good content out there. Why can't we be more out there to tell a good story about what we have?" And that's the genesis of the newsletter that you saw on Substec. We started in 2023, and we've been running the byguan newsletter, but also my personal newsletter called China Translated. In three years, we are now have more than 20,000 subscribers. Mostly our investors, corporate executives, diplomats, or around the world, who have an interest or at least a stake in China. And it's been doing quite well. That's how we started. We are information service company by our very own nature, and this is just piece of information or part of the information that people need. It sounds a lot like what we're doing as well, just in the different medium. Definitely. We are both trying to. Well, I mean, China is a difficult place to understand. You know that generally people are apprehensive about cultures and places that they don't understand that they don't have a gut feel. And then there is trying to parse all of the information that does currently exist out there. What's real? What's not? How fact-checked is everything. It does create a convoluted environment, especially for investment. So I think the avatar of who subscribes to Baiguan is close to what I would expect and the type of people that I would expect to be looking for that kind of information. And it closely resembles the demographic of those who follow the negotiation as well. So let's start with a high-level thought from you. And I'd like to know what your read is on the state of the Chinese economy right now. Are we seeing recovery? Is it stagnation or something else entirely? With being through some tough years, and I think everything started actually in 2021. If you remember, torn right one was not a COVID year for China. It was doing pretty well actually. Coming back, coming off the back of a strong 2020, but 2021, China started to basically self-detonate the real estate industry while the full impact of that was felt in later years. And then, 2022 can happen. There was the very stringent anti-COVID policies. And then there's a lot of geopolitics that's making the capital market very weak. So all together, 2022, 2023, 2024. We enter the place where I wouldn't say we are the economy is actually growing in terms of volume, right? They're manufacturing the exports. They are all growing. Volume-wide is growing. And the main issue is the lack of confidence, the lack of business confidence and the lack of household confidence. And that was being reflected in the price levels. We did see a downward price pressure. And there's talks about deflation, right? And then there was also official narrative combating that, which is all understandable because just one way for you to get out of deflation. This not. talk about, I mean, it's to deny it, it's to, you know, it's all expectation management. So that has been around for a few years, a few years since 2021, 2022. But you know, what we found interesting is from all the data we saw in 2025 last year, especially late last year, I think we started to see some kind of recovery or at least normalization of this confidence issue, right? So at the same time, you know, one big proxy we watch is the prices. You know, there are many data points, there's official data and there's our own data. Officially, if you go to the National Bureau of Statistics, the NBS in China, the CPI data, the consumer pricing decks, they became stable after two years of, you know, entering negative territories, but they became stable at the end of last year and is actually ticking up a bit this year. And even excluding the effect of the war in Iran and all the prices so that we do see the price level at least stabilizing and also recovering in some fields. And then we also have our own data which closely corroborate the official narrative. We track many sectors, we track luxury, we track sportswear, for example, luxury, last Q3, the third quarter of last year, luxury sector in China. Many, most of the brands that we track, they were back into positive growth after two years of negative growth. Which is very interesting because if you think about where does this confidence comes from at the time, housing was not stabilizing last Q3, income is at least not getting that much better, but somehow rich people feel better. And one big reason could be the capital market. And maybe it's the only reason, Q3, Q4, we saw kind of a pool market in the unsure A-share market. And there's a very noticeable wealth effect from that. And then we look at other sectors. One data point that I always love to cite is what we call the China KFC index. So, Tal, you've been to China, you've been living in China for a few years. You understand that actually China's largest restaurant chain is KFC, and despite all the Chinese cuisines. But many of the Chinese cuisines are artisanal, right? It's not like chain, but the biggest chain is KFC. And it's a good representative of how well the leader of industry is managing the costs and all that. And you know, we always love to read the quality reports of KFC. So, there's one line item, which is the ASP, the average selling price of the KFC brand, which is really how much people are paying per order. At KFC. So, I remember from 2023, for more than two years, every quarter, that ASP number has been, you know, was declining, maybe negative 3%, negative 4%. You know, while at the same time, the revenue was growing 3 to 4%, which means the volume was actually growing at 7 to 8%. Basically, people are consuming more chickens, but paying less for each. Right? That's actually a good representative of the broader economy. Again, volume up. So, GDP number is actually not wrong. Volume is up, but prices are down and squeezing the profits at a corporate level, and which then send out all these derivative pressures down the line. But then if you go to check the, you know, KFC quality reports, and it's all public, right? And if you go to see that in Q4 of last year, this number finally went back to flat on a Y-Y basis. Q1 of this year also flat. It's being stabilizing at certain level now, which is interesting. You know, it's not all the restaurants sector in China, it's the largest one, and it's the cost leader. So, if you imagine, if KFC has still declining in terms of prices, then nobody else are willing to increase the price. But if the general trend is stabilizing and going upwards, then you would bet that this cost leader will be the first one to reflect that. So, we saw that as a leading indicator of the generally normalizing situation, which makes sense, because all of that is this tied to real estate. And real estate has been, the prices have been declining for a few years. But we also started to see normalizing size, right? So people readjust their expectations, and things are finally moving off. The very terrible, deflationary spirals that was seen a few years ago, and we are kind of back on track now. Yeah. So, when I studied economics on this side, we had the Big Mac price index. Yes. It was because Big Mac's all over the world, what is the price of a Big Mac in X country, Y country, things like that, almost as a kind of a purchasing power parity type of statistic. Very basic, obviously, because I don't know, I think I only took macro maybe first year or second year. I tried to avoid macro as much as possible. It's far more interested in micro. But yes, it reminds me of that. So, you already talked to us a lot about real estate and how that's a key trend that you track. What about salary? Because I know that's another one. Tell us a little bit about how salary recovery is looking like on the ground. To be honest, it's a much more opaque situation than either observing the prices or real estate or other industries. There is the observable part, and there's the huge non-observable part. I'll talk about the non-observable part first. We don't have insights into generally exactly how many people are first of all employed and then when they're employed, how well they're paid, other than the official data. The official data, they did this close, the so-called unemployment rate, and then famously, a few years ago, they paused for a few months before republishing it in a adjusted format. Basically, because the old data, especially when it comes to youth unemployment, the old data included the college students, which make it look very bad. Obviously, college students don't have jobs, but somehow they included that. That sounded really bad. They paused at the time. People were worried that they're going to stop publishing it forever. Turns out, they didn't do that. They kept publishing it in a real adjusted format. Excluding the college students, the rate came down. Then, starting from that time, the rate has been still edging up. I forgot the exact data now, but it's maybe around 20% of our employment for the youth. That, the problem is, the definition of the unemployment is very, I was relaxed. If you have one hour of working of the last week or something, you are characterized as having a job. All the gig economies, even like a very small gig economy, will be qualified as employee. Then, the people who have no job at all, no income at all, will be characterized as unemployed. I would say the situation right now overall is still tough. It's especially at the younger generation side. We are actually having a huge flux of new graduates.
Because about 20 years ago, there was also a kind of height in terms of new birth. And now 20 years later, all these new kids, they graduated from colleges. But then at the same time, the demand for younger people from all sectors have been coming down. And then there's also the impact of AI, which is also making many companies cautious about hiring junior people, which is a global phenomenon right now. So all these things add up, which is definitely putting a lot of pressure. And then you start to have Chinese state promoting this very new trendy idea called one person company, the OPC, right, which is like an AI kind of concept. But this concept really caught on in China. Global government in China has been talking about OPC, OPC a lot. And it's not really about AI actually. It's really about, you know, they just want to find whatever ways that they can to stabilize the employment situation, right. So all these anecdotes and all these kind of signs are point to some kind of stress, especially at the junior and younger side. And that's not observable. We don't have exact data on that. We can only rely on official data. The observed part though is the job postings that we track, right. We have job posting platforms in China. So sorry, the SMICAT. Yeah. So the job posting in China, there are several sites that we track and we have a, we track about 10 million jobs postings out there a month. And if you look at that though, you start to see that, you know, average salaries, for example, have been actually training up a bit, especially since last year. And if you combine that with the observation that, you know, employment situation, overall is, we don't see clear signs of improvement, then you kind of see this case shit kind of divergence, right. Which means that, you know, for the jobs, the companies are hiring. It can't be more and more senior jobs, well paid and actually getting better paid. But then you also have this huge number of graduates who are not having jobs or having only kind of gigs jobs, right. What's the aggregate impact? We don't know. We just know that it's not like a very bright, not like extremely positive situation right now. Now, let's talk about the spending of those that are probably employed. What is the consumer sentiment in China right now? Are people feeling confident, cautious, somewhere in between? And how is that sentiment showing up in spending patterns? Right. I think so overall, the word I will keep you just as before is normalizing. So you were in China decade ago, more than a decade ago, and you know how China was like at the time. There was the go-go years, right. There's people, salary and income and housing value grew really fast. And then there was a lot of the conspicuous consumption, right. Rich people by big local luxury products, spent a lot on wines and dines. And then everyone was trying to buy the best and the next electronics and all that. But that was the go-go years. And then a few years ago, we definitely had a period where everyone started to be very cautious, even the rich, you know, all the rich to the poor. People were getting cautious. People were saving. People were trying to repay their existing debts like the house loans and all that, home loans. And that was like a dream years, I would say, is the 24. Right now I think people are having a normal kind of, a more, I would say, a normal understanding of the economy and of their own confidence. You always have to compare with the marginal changes, back to economics. It's the marginal change that matter, right. Like in the beginning, when things are getting worse in many ways, they feel cautious. Now you don't need for things to get better. You just need to think, you know, not change them much to stay. And then people will get to the new normal. People will know that it's not the end of the world. Even though we've actually been to the sum of the worst period economically in almost three decades, right. But then it's not the end of the world. And people adjust to that. And people think, okay, this is okay. So, you know, then I mentioned some of the data I just share, luxury sports liars. You know, even recently we saw some uptake in the beer consumption. We tracked beer consumption in 50,000 restaurants in China as being a kind of downward trend for a few years as well. But recently we started to see positive signs again. You know, which means people are going out, hanging out. If you were in Shanghai these days, every weekend, even some weekdays, traffic was very bad. It's if you open the map app, it's all dark red or around the city. And many of the city, many of the restaurants we visited, there were a start to have long cues, long lines, which, you know, back in 24, for example, it's almost impossible to waiting lines for any restaurants. But now it's common. So I think it's just a positive thing that people are feeling not better but not worse, right? It's just normal life now. And this getting to know pace. Yeah, there's confidence. It's not like, definitely not like two years ago where many people think there's no future. The world is ending. No, no, but now it's more like normal life. It's definitely not as high as the decade ago. But we will not going back to that period anymore, right? So with people know. If they're worried about getting the dollar tomorrow, they're not going to spend the dollar today. Yeah. The more confident they are in getting the dollar tomorrow, the more okay they are was spending the dollar today. So yes, you're right. Let's talk about the auto market. It's a fascinating one for me. I personally would love to open a BYD dealership here in Canada, but that seems years away. Canada would be super fun. What's happening in China's auto sector right now? Where do robotaxies fit into the picture? Are robotaxies actually scaling or is this still just early stage hype and novelty? So overall though, the auto market right now is in the downturn in China. It's counterintuitive, but it's actually pretty seasonal effect, which, you know, because last year, there were consumer subsidies supporting the auto sector as one way for China to boost confidence. That kind of subsidy was scaling back, kind of front-loaded demand. So this year, we started to see some temporary downward trends in most of the EV makers sales in China. Many of those makers are doubling down overseas strategies now to compensate for the loss in the domestic market. So it's definitely not a very good year for the auto sector in general. And then you ask about robotaxies. It's actually a very interesting topic because this is where, for many people in North America, at least in the US, people started to have this unrealistic and kind of, you know, there's some gap in the expectation there. In the US, you have Waymo and, you know, some time Tesla, especially Waymo in many of the cities already, people are using that on daily basis. And many of the US would assume that China was also developing that really fast and maybe even faster. A few months ago, we hosted a trip to visit Chinese businesses and there are some American investors in the group and they were surprised to find that, actually, no.
Chinese people, Chinese consumers don't, you know, didn't have much experience with robot taxis. And main reason for that is most of the robot taxis, the so-called L4 companies in China, they were very confined to specific areas that were not very populated. So this is all these test areas, pilot zones in some of the big cities, like here in Shanghai, there are maybe three or four pilot zones, but always in the outside, in the outskirts of the city. And the reason for that is not because of technologies, not ready. We test it, we test drive, we test road, several of these robot taxis. Technology seems very, very fine. Even in complicated road situation, the cars can really drive smartly, pretty good already. But the government was putting a intentional kind of brick on the industry, which is very interesting, 'cause at the same time the government know that in the future, China would face a labor shortage, and this kind of industry is definitely strategic, and China can lag behind in this industry. But at the same time, again, there was this employment thing that they need to be worried about. So what turns out is long-term wise, they are very positive, they want to support the industry, but short to medium term, which is maybe three to five years, they were very cautious, and they don't want to make huge publicity about the industry. They don't want to people to talk about it. They don't want to people to feel that the robots are coming for their jobs. So there's very deliberate efforts to slow it down at this stage, and it's really a kind of juggling between powerities, the midterm and the longterm priorities. But then the result is very confined space for robot taxis, although the technology wise is pretty good already. If by normal Chinese speed, they should be everywhere now. But no, in this case, it's being intentionally slowed down. - Let's move on to Pop Mart, the collectible toy company that's gone global. Are you bearish or bullish on Pop Mart? And what does their trajectory tell us about Chinese consumer brands going international? I'm actually very bullish about this company and their products. I myself is not a consumer of the product, but I saw and I visit many stores, and I talk to friends who are the fans. What I feel is this company is very special. It's not like the typical old kind of Chinese consumer companies that depended on marketing, advertisement campaigns, and all these companies, they push really hard, and they went on state TV, splashy advertisements, and all that. It's a very different kind of animal. It's a very community-driven company. Many of the IP series, their toys, when they made it, before they made it, there was a lot of discussions, actually internally with their loyal, and the most loyal and the most sticky consumers or even members, right? And then what really amazed me was their choice this year to intentionally just voluntarily slow down, which was really wise. They actually unexpected success. They didn't expect for that. The Baalabu craze. You would squeeze the last juice out of it. If they double the sales last year, they should maybe grow four times bigger this year. That would be the trajectory that you will use. But no, they didn't. We're not ready. There's going to be trouble, and we're going to just slow down. And so when their CEO this year in their annual results meeting, he said that our growth this year would be just no less than 20%. The stock collapsed. Because last year they were growing like 200%. And this year, and he's not really giving a guidance or something, he's just saying that, okay, we are going to grow no less than 20%, which is like so easy for them. They can do whatever they want and they can grow at just 20%. And I think very consciously, they don't want to, they know who they are, core clients are, core members and consumers are, and they don't want to piss them off. Which is amazing to me. It's, you ask about how that's reflective of the Chinese consumers and all that. Chinese consumers are getting very diversified now. There are many kind of consumers. It's not in the, you know, 20 years ago when you have like a big national brand and the big marketing campaign and everyone remember your bottle water, they were just like, you know, buy it. They don't buy that anymore. Chinese consumers are more specific now. There are many different cohorts. And even if just catered to 0.1% of total population, but really good and they really love you, you can have a company that is worth hundreds of billions. So, so, so, Palmar I think is ranks in that. The founder of Palmar was born in the 1990s. I also recently know that he was actually born rich, born wealthy. He, he, he didn't found the business for money. He liked the business. He liked what he did. And, and that's actually very different from the last generation of Chinese funders, right? The Chinese funders in last generation founded companies for survival. They, they were, everyone was born poor. Didn't even have enough food. But then all this survival instincts pushed everyone to grow. Now, I think people care more about purpose. All the way, you know, from the founder, all the way down to consumers, there's a stronger purpose-driven trend, which is a great opportunity for the new generation of companies. You now suddenly have a new profile of population, new profile of consumers to cater to, and the old companies, old brands don't do that, right? So, so I think that's a, I see Palmar not just as one company, but as a representative of this new generation of companies. And they're going to be more of those. Let's talk a little AI. And I know that DeepSeek just released a new model. What's your take on China's AI landscape? How competitive are Chinese AI companies? What does DeepSeek's development signal about the broader tech ecosystem? Right, let's take DeepSeek V4 as an example. It was a very good example of the status of tech development in China. So on surface, you would argue that the gap between Chinese models and the US models are actually widening on surface. I mean, the gap, if we say, let's say DeepSeek R1, which is 205, which was the sponsor of the so-called DeepSeek moment. The gap between R1 and the existing vast models in the world in OpenAI a year ago, actually a year and a half ago, that gap. And then if you compare DeepSeek V4 and say a tropic Opus 4.8, that gap is actually widening by all metrics also by user experience and all that. That's the surface conclusion. But then deep down though, very interesting structural changes happening. If you look at DeepSeek and also why they were delayed so much, originally, people said they were going to launch it early this year, but they only launched recently. And if you look at the papers and look at how they were innovative in this new generation, the main issue,
The main task that they were so focusing on was to develop a world leading model based on a hardware and system that could be totally decoupled from the US and India and all these US-driven ecosystem. They did a lot of innovations about that. One big area that they innovated on was to drastically lower the demand for memory in their new model. Some people estimate that it's about 90% lower in terms of memory costs. And because in terms of memory, there's a global shortage, but then there's also a bottleneck for China in terms of the most advanced HBM-4 memory. But then they did that to optimize that for a more independent tax deck. And then it's also very noticeable that they were collaborating with Huawei in conjunction with Huawei and try to build their models around Chinese domestic chips and systems and all that. And I think that's the real story. The real story is they are laying down a foundation for an independent tax deck. I kind of refer it. Sometimes I think of the analogy of Galapagos Islands, archipelago, where Darwin found that their species kind of growing there, evolving there, that have nothing to do with the rest of the world, developing their own features. I think China is a huge Galapagos at this moment, a continental Galapagos, developing a whole ecosystem of hardware and software, given the constraints, given the things that we will not get at, but then how we optimize around that Roblox. I think Deepseek V4 was a big example of that. And so was the reason Huawei's announcement of what they call logic voting or tile scaling. It's really just because we don't have advanced nodes, we don't have the best EUV machines. But then today, the bottleneck of the whole semiconductor industry worldwide is interconnects between the chips. It's not just like how well you make the chips itself, but how well you're connected them. It's become a kind of stacking and the packaging game. And that's where China could focus on, which is the kind of edge the US had over China in terms of that was not that huge. So I think this is where the biggest Chinese tech now is just like this evolution along a alternative tech path. And that's going to surprise everyone two or three years down the line when this whole mature ecosystem of hardware and software came up and become a real challenger to the American standard. That would be a huge game changing moment. Now on to food delivery, because you've been tracking this food delivery war. We call it no, this is not, you know, this is not a bunch of people driving down the streets from different companies, throwing food at each other. What is happening in this space? Who's winning? Who's losing? What does the competition tell us about the state of China's consumer internet sector? This war was totally not expected last year, but it happened. Because people thought this is the industry that was not supposed to be disrupted anymore. It was the set, right? It made Juan dominate with Alibaba as a second player. But then last year, it actually started with the third player that JD somehow JD just came in through a bunch of things around and create a whole farce about it. But then they didn't really have much of the market. They subsidized a lot of consumers. They get some one-time boost in terms of sales, but Alibaba came in. Alibaba came in also unexpected. People would assume that Alibaba would double down on AI and all that, but they actually thought they too from walls. There's the AI part, but then there's also the food delivery part. And they strategically, they linked them together. Like in the AI app, they give to Chinese consumers, Chinese consumers can, you know, order a milk tea, for example, from the app, which comes some kind of traffic driver for their AI applications. So there was heavy subsidies made Juan suffer a lot. At one time, I think the market share was actually getting close to 50% for Alibaba, which was actually a huge boost from their previous ones. But I think recently the war is kind of tempering down quite significantly. I think none of the players now have big appetites to really subsidize that much. And Maituan was not in a situation to kind of over-subsidize either. When we look at the data, it's always like Alibaba had this subsidies and then Maituan followed. So Maituan was always the follower in this case. They were not like the early days. They tried to subsidize to fight for the market shares. Right now it's all existing market. And they just, you know, if Alibaba wants it to be crazy, then Maituan just sit there and try to, you know, just not to do worse than Maituan. And that's the dynamics. And then soon enough Maituan will realize, you know, it's worthless. We shouldn't do this. We should maybe find more chips and do more AI. Right? So it's getting better now, definitely. Now looking ahead to the rest of 2026. And I don't ask this to give, you know, for you to give your secrets also way of what you're tracking. But for the general population of people that are very interested to know and try to track the economy in China, what are the key variables that influence the Chinese economy? What should people be watching closely? I think first and foremost is the real estate, the housing market, and especially the housing prices. If we, I mean, we, I think we started to see normalization of housing prices in some of the cities, especially the bigger cities. If we see normalization across the board and even recovery, then I think that would be a sure sign of the stronger, better household confidence. So that's definitely something we should watch. At the same time, you know, I think the broader geopolitical landscape that is affecting everyone in the world is also affecting China to some extent. And by that, I mean, the, what's happening all moves right now. I think the people will still kind of sleepwalking. It could be a sleepwalking into a disaster, a huge energy crisis. That would affect China as well. But that, you know, same thing will affect everyone. Right. So, so we started to see some kind of restrictions. You know, like although Chinese people now drive more and more EVs, but still some people drive gasoline cars, the ICE cars. And the pressure on that is real. On domestic flights, for example, the, the, the, the, the, the, the, the, the, the, the few search are coming up as well. People are, you know, be cautious taking the flights. But you know, fortunately, we have the high speed rails, which is not that effective. So, so, yeah. So, so, so the impact now is mild. But if things get worse, you could expect some bigger impact that is not being assumed right now. For international businesses that are trying to make sense of China's economy right now, which is something that both you and I and bygones and negotiation are always trying to help with. From your point of view, what's the most important thing they should understand? That might not be obvious from the headlines. It's related to, um, to the management of the Chinese businesses. Um, so foreign businesses in China, there was a kind of dominant narrative that they were losing the market and, you know, Chinese domestic companies are too strong and all that. But it's not all true, right? If you look at, um, say, Walmart, Walmart had a huge success recently from their, uh, Sam's, uh, franchise. And then there's a German company called Aldi, um, which is really beating, uh, the Hema supermarket of Alibaba, like beating it so, wow.
Now Aldi in Shanghai used to be all He Ma, he po fresh, right? But now in Shanghai is all over, I mean it's all Aldi. German brand. And I think the trick there, and the reason there for, you know, some people, some foreign companies not doing great, and some companies are doing great, is whether they're adaptive, whether they really try to understand who Chinese consumers are, and try to find the good product market fit for the Chinese consumer. The old days of, I'm a foreign brand, and I come in, and I'm successful. That old days were gone, right? But what works is if you have good products that somehow satisfied a cohort of people in China, and you can still work. And I think a key reason for adaptation is whether you give enough voices to the Chinese team. I know that many of the multinational in China, you know, the Chinese teams being Chinese are not very good at speak out for themselves. They are dependable, they're reliable, but they're not very outspoken. And then in the headquarters, there are not many people who have the direct knowledge of Chinese market. So the market knowledge is little. So there are a lot of cases where there are good choices to be made, but got delayed. Good decisions to be made, but are not made. And there are also bad decisions that are always made because of this disconnect between the local markets and the headquarters. So I think that's important to get a communication lines and internal understanding in order, and be adaptive. And understand really what Chinese consumers want, who they are. And there's definitely going to be new growth areas, even for foreign brands. Robert, this has been incredibly insightful. We've covered a lot of different topics as well. Yeah. For our listeners who want more, who want to follow your coverage of the Chinese economy and other things, where can they find Baiguan? Yeah, you can either go on a sub-stack or just Google Baiguan, B-A-I-G-U-A-N. And also, there's not a newsletter called China Translated. It's also on a sub-stack. It provides more context, both political and the social and cultural context for many of the phenomenon in China, which really, I really try to help explain the China to our readers. Yeah. Thank you. Robert Wu, founder of Baiguan. Thank you very much for your time today. We really appreciate it. Thank you, Dao. Thank you, everyone. All right. Thanks, everybody. Please feel free to like, subscribe, even download the episodes. Obviously, you know how that feeds the algorithm monsters and helps this podcast get in front of more people. If you want to leave us a note, give us a comment, suggest maybe a good guest for the show. You can always reach out to us at
[email protected]. From me, from Robert, and from everybody at the negotiation team. Thank you very much for listening. And/or watching, we will see you next time. Bye.
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