What the Media won’t to tell you about China’s Youth.

As China continues its emergence on the world stage and gains evermore influence and power, more and more interest is being cast upon today’s China youth – a segment of the population that controls a growing portion of China’s domestic economy and will in the coming years control China’s industrial and economic agendas.

With such importance placed on the youth, the media, both international and domestic, are trying their best to help us understand who these people really are, and what we can expect from them. However in the media’s never-ending quest for the perfect sound-bite/headline that will turn heads and provoke public reaction, they skew the portrayal of China’s youth and miss the point.

Often media will begin an article by saying “China has over 400 million young people. These youth are…” and start using adjectives or an individual’s story to describe this whole group. Next time you’re reading any article on China youth, try to remember some of these points so you don’t get misled:

1) Is the media talking about China’s wealthy youth or the rest?

If you read an article that describes young Chinese’s consumption power, or the fact that these youth have ‘grown up only knowing prosperity’, remember that like in every country, the Have versus Have-Nots is a reality. In China this fact is hyper inflated. Do Chinese youth drive expensive Italian sports cars and buy luxury brands? Yes. Does this segment of the Chinese youth make up a very tiny small percentage of the whole group? Yes. While the large majority of young Chinese have indeed experienced prosperity for much of their lives, the term ‘prosperity’ takes on a different meaning for different Chinese youth. To some prosperity means having more than one set of clothing. To others it means owning their first digital mobile phone. To others it means buying a separate apartment for their dog. When the media is telling you Chinese youth have consumption power, put it into context and think of an upside-down funnel. Which part of the funnel are they talking about? Because it certainly isn’t the whole thing.

2) Is the media talking about big city youth or small city youth? Edgy youth or mainstream youth?

Media will find fantastic stories of some really inspirational Chinese youth who have a unique view of life, sense of style, and sub-culture group they belong to. While they are authentic Chinese young people with authentic stories, again we need to put it in the correct context. Big cities, like all big cities in the world, offer more opportunities for subcultures to develop. Access to disparate international and domestic music, movies, literature, and ideas are greater in big cities than in small. Entrepreneurs and grass-roots initiatives have greater acceptance and greater support in big cities versus small. So it is no surprise that we find greater variety and most pioneering youth in bigger cities. Again, do they make up a very small percentage of the total China youth population? Yes. Edgy youth have a similar, but uncorrelated upside funnel to China youth’s consumption power distribution. Which part of this funnel is the media showing you?

3) The majority of Chinese youth are happy – or at least content

Media focus a lot on stories of angst or stories that cause panic or shock. They do this primarily because that””s what mostly constitutes ‘news’. Unfortunately that means we get stories about Chinese youth that seek to illustrate how different they are from the rest of us, or make us very concerned about them. The fact is, the large majority of Chinese youth are happy, or at least content. There is no burning desire or excruciating pain being experienced. When we interact with youth, when our researchers and ethnographers do deep-dive immersions, time and again we find stories and personal accounts of young people who can’t come up with too many complaints. Fairly irregardless of their economic status or whether they are living in a 1st or 4th tier city, we find many youth who are patiently living in the roles and positions allotted to them. Many accept and do not question their current path in life; many, while indulging in some misdemeanors or escapes, are not driven by negative impulses. Certainly the caveat to this lack of discontentment is that through our research we also find there is a lack of excitement as well. But, for the media, a majority that is neither discontent nor excited is not compelling enough to be reported.

4) The majority of Chinese youth are not rebellious

Those youth stories that the media does find about discontentment or frustration is often implied to as instigation for rebelliousness. Not true. Most Chinese youth, while having many frustrations (but still content), do not naturally resolve to rebel when engaging their frustrations. Although having different values than their parents, teachers, or older generation, this does not mean Chinese youth will rebel. This has to do in part with contemporary Chinese culture and the social + societal construct that youth find themselves. Responsibility to the family unit still holds extreme importance to Chinese youth. It is an intrinsic part of their character. The acts that result from discontentment or frustration are not in reaction to the family, the parents or to authority. It is an engagement and exploration of a different value system. Rebellion and exercising a different value system are very separate and distinct things. The actions of Chinese youth are the latter. Media, especially international media, likes to characterize Chinese youth as rebellious because this is the context, culture and experience of those foreign nations. And when the viewers/readers of the story are primarily from that foreign culture, it is much easier to write to something they can understand and relate to. However this minute but important discrepancy has already been seeded.

5) Chinese youth do not want rebellion

Another instance of foreign context and understanding being superimposed onto the Chinese youth experience, media will sometimes talk or wonder about this generation having the potential for open rebellion. In the years I’ve been in China, in the numerous projects our teams have conducted, I have not once met a Chinese youth who has mentioned, let alone contemplated mass rebellion. Then again, I’ve never personally met any Chinese citizen who has entertained the idea. While rebellions have been in the legacies and histories of almost all nations, including China, it is not in the thought processes of today’s Chinese, and especially the youth.

6) There is no longer ‘mass’ Chinese youth

Part of the reason why mass rebellion is not an option for Chinese youth, is because ‘mass’ youth is no longer valid. The concept of banding together as one glorious generation or group of people to stand up and make one common statement does not hold sway with this generation of young people. It is also not attractive to this group if one leader were to rise up and call for everyone’s support. Chinese youth today are experiencing a rapidly evolving sense of individuality and identity. We do see multitudes of youth taking part in causes, such as leaving school and work to volunteer in aid of the 2008 Sichuan earthquake victims, or volunteering to support the 2008 Beijing Olympics or the 2010 Shanghai Expo. But it is not for a common cause or a group statement that they do these things. When asked why they volunteered, young people commonly responded it was first and foremost because they personally felt they could learn and explore something new in themselves from the experience. The fact that there are so many young people following their own self-motivated direction speaks to the strength and reality of this generation’s evolving individuality. The subcultures that have emerged, the creative and edgy youth that share their unique stories, the different ways which youth are engaging their frustrations; these are all examples of individual youth wrestling and trying to resolve who they are in their world. Media won’t tell you about this, because it doesn’t make for compelling news. Media will use one individual youth’s story to draw out one thematic experience that they use to represent the entire China Youth generation. It makes for good sensation, but couldn’t be farther from the truth.

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China’s Innovation Gap and How to Break the ‘Copy-to-China’ Model.

In the past couple months WebWednesday Beijing, a monthly gathering of Internet, tech, and digital marketing professionals has invited speakers from the China venture capital & start-up investment world share to with us their thoughts. Harry Man is a Partner at Matrix Partners, a venture capital firm in Beijing with a home base in Boston. Stanley Tang is Vice President at China Renaissance, a financial advisory investment bank for startups seeking funding.

The majority of the speakers’ thoughts and tips were fairly mainstream venture capital selection criteria, such as looking at the ‘Team first’, then the Market, then the Model. However, there was a common point made by both speakers specifically about venture capital dynamics in China.

1) Harry Man mentioned that the ‘Copy-to-China’ model is good. Creativity in China is not on technology, but more on the business model.

2) Stanley Tang said that their firm highly prefers to work with those business plans that have benchmark businesses overseas.

What does this tell us about the startup investment industry in China?

Quite simply, we’re seeing that venture capitals, start-up financial advisors, and investment banks are very active in funding copycats because the model has been tested and proven in other markets, thus lowering investment risk. This also means that the sentiment, attention, and majority of investment dollars are supporting the copycat industry in China. Both speakers mentioned that there is still a lot of opportunity for creative localization and adaptation of tried & true overseas business models. These professional investors also noted that they do prefer local Chinese entrepreneurs, as the nuances of Chinese localization are best identified and executed by a native of that culture.

Here I must add a caveat: It may be that the speakers we listened to were coming from smaller VC and investment firms, so their investment strategies cannot take on higher levels of risk, and therefore have crafted this ‘prefer copycat’ guideline as an additional risk-mitigating rule to help them in their selection criteria.

But if two speakers are saying the same thing, then it is likely that this is common practice and strategy among many China investment firms.

Given this clear preference for investing in copycat start-ups, what does this mean for original innovation in China?

Here I want to add another caveat: We could be looking at a paradox – chicken & egg – scenario. Venture capital’s preference for copycat start-ups maybe a direct result of the entrepreneurial ideas coming out of China. VCs are investing in predominantly copycats perhaps because the other actual original ideas are just not very good. Maybe the best that would-be entrepreneurs in China can come up with right now is copycat models. Indeed, both speakers mentioned that they do a lot of handholding with their selected investment start-ups, as most are first time entrepreneurs.

Regardless of which side of the paradox you believe to be truer, one thing is for certain: one reinforces the other. A VC culture of investing in copycats drives many entrepreneurs to think, plan and look for opportunities only as a copycat. Conversely, if there are not enough good, fresh, original ideas coming out of China’s entrepreneurs, naturally this will influence VCs to allocate their funds to primarily copycat models.

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If China has this downward spiral paradox, how then can it break out, and get the chance to build an investment ecosystem that at least allows China the opportunity to create something completely unique?

In the developed economies, and especially in the North American context, Angel investors help to fill that gap between early stage startup and venture capital financing. Angels play a pivotal role in championing a much wider variety of entrepreneurial permutations – the widest rim of the funnel – which inevitably gives rise to a greater probability of different and unique innovations being funded by venture capital. In China the Angel circuit is almost non-existent, a natural consequence of an economy and investment environment that has leapt almost overnight from a society of have-nots to a society with a small group of have-plentys with no investing experience.

To fill this gap, venture capitalists are revising their tactics and role in China, taking on more duties that normally an angel investor would do; the VC often provides training, HR, and direct development strategy. But venture capitalists can only do so much.

Lee Kai Fu, the former head of Google in China, identified this systemic problem with China’s innovation capacity very early on and decided to do something about it. Late in 2009 he announced the creation of a new company called Innovation Works. This company would be a hybrid angel-investor/startup-incubator. While adding a very minimum seed capital into the ventures they recruit, Innovation Works’ main value-add is its ability to augment the founding entrepreneurial team by supplying expertise in areas the founders have not: finance, marketing, user experience, design, strategy, engineering, etc. All the combined expertise makes for better product and business quality, and better chances of market success. Lee Kai Fu’s prestige and Innovation Works’ reputation means their endorsed startups have a clear path to eager venture capitalists ready to ensure enough funding so the startup can reach its full potential. What Innovation Works gains in return is a significant share of these top-grade startups, effectively giving Innovation Works a portfolio of higher-performance, lower-risk startups. Innovation Works may eventually end up with a better IRR and higher startup success rate than even the top VCs.

Innovation Works is a new kind of creature for China, and perhaps is the structural component China needs that will allow entrepreneurs to pump fresh ideas and opportunities into the startup soil bed here. There are other natural incubators in China, namely the academic institutions like Tsinghua, Peking U, and Fudan. But whether universities can weaponize incubation as well as a privatized entity like Innovation Works remains to be seen. The other saving grace may be in China’s DNA of copy-cating. Now that Innovation Works has shown one viable model to solve this innovation gap, will others copy and iterate? Maybe an entire industry of incubators is just what the doctor ordered. It could give entrepreneurs enough time and incentive to start thinking beyond copycatting and give China some real new creativity. It would also give VCs breathing room so they could start funding unique ideas beyond just copycats.

Incubators can also innovate themselves. Innovation Works is just one model, best suited specifically for the tech industry. The challenge is how incubators can be applied creatively to other industries with dynamics different than purely product-based startups? How can incubators be brought to benefit grassroots cultural entities? Can incubators be catalysts for human capital development? Similar to the tech startup environment, can incubators help open-source, viral, or the creative industries find monetization models faster, cheaper, with less risk, and with more accuracy?

One final thought: I agree with Harry Man when he says that creativity in China is not in new technology but in new business models. Its not that China cannot produce new technologies, it can. But it is so obvious that the size of China’s markets, the economies of its scale, and the ability now to crowd-source at a hyper extent, means China’s greatest and easiest opportunities for innovation and creativity will come from new business model development. There will be models that can only be tested and proven in a market size only China can currently provide. Models that America’s numbers cannot validate. There will be models that emerge from China with individual margins too small to be worthwhile in America, but extended with China’s long-tail, these models may suddenly become viable. And there may be models based on cultural norms found only in Eastern cultures, norms that may alter the paradigms of doing business, norms that the West could not behaviourally or naturally conceive of.

Incubators could be a key player in innovation and creation for China. At the very least, they could offer China the opportunity to switch course, away from the diminishing returns of copycat startups.

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Is this China’s Woodstock?

The beginning of May each year marks the start of the festival season in Beijing. During the 3-day May holiday in China, Beijing is host to a number of cultural events, from live music, theatre, and visual arts.

This past May holiday I spent three straight days at Modern Sky’s Strawberry Music Festival. Modern Sky is one of China’s most successful and pioneering independent music labels. They have, over the course of over 10 years, built a portfolio of some of the most influential, original and popular Chinese indie bands. The Strawberry Festival is an assembly of many of Modern Sky’s own bands, plus a number of international music acts. This was the second year they’ve done the Strawberry Festival, billed as a ‘Folksy’ music and art festival. And indeed it was.

I attended with my partners at China Youthology. As we took in the entire experience, we made many observations. Here are some snippets of what we discussed:

1. The music scene is alive and kicking, and in a big way that only China can do. The most obvious observation is the sheer number of people attending these festivals. While it does not compare to the reportedly 500,000 people that showed up to Woodstock, the Strawberry Fest had about 20,000 to 30,000 attendees each day for 3 days. Some people may scoff at Strawberry Fest’s paltry numbers when compared to Woodstock, but here’s an extra detail: Strawberry Fest was only one of three music festivals going on in Beijing simultaneously during that long weekend. Each of the other music festivals MIDI, Ditan also had thousands of attendees, and in MIDI’s case, tens of thousands of attendees like Strawberry Fest. For a country where to many foreigners the only image of mass public gathering also involves tanks to suppress, having three outdoor festivals with tens of thousands of participants is no small feat.

2. Strawberry v. MIDI: Shifting cultural tastes. MIDI is a hardcore punk rock and metal music festival. It has been the premier music festival in Beijing for over ten years. Strawberry, an Indie-pop, music and art festival, emerged just two years ago and has already equaled if not surpassed MIDI in numbers. What does this say about the changing tastes of Chinese youth? Or perhaps more insightfully, are we seeing a new wave of young people discovering the music of their generation, in juxtaposition to the music of the youth that preceded them? Even while at the music festivals, we met many patrons who would swear by one of these festivals while shunning the other. It is clear that Indie-Pop, with the free-flowing hippy fashions, funky retro-electro-rock influences, and geeky, cute, graphic designs are on the rise, while Angst-Rockers, black shirts, and grunge may have an uncertain future. Only successive music festivals will reveal.

3. Rising quality: It was immensely impressive the quality displayed by some of the bands. Aside from the fact that a number of the bands are multi-ethnic, these contemporary Chinese indie bands are showing an intense exposure to world influences. They are incorporating innovative elements that define the best of world-class musicians. These bands are also exhibiting a refinement in sound quality and production that only comes from long experience touring overseas. Indeed, many of these groups have toured Europe, North America and other important musical melting pots, multiple times. They come back with best-in-class musical standards. One aspect that surprised me the most was the large majority of original songs by Chinese indie bands that are all written and performed in English. In contemplating why this is, I could think of two reasons: 1) The bands are so highly influenced by international music standards that they are creating, processing original music in the same language, 2) The bands are strategic-enough to expect their music has the ability to cross over to other international markets, thus making English songs would improve the probability of success exponentially. I think the reason is a combination of both, but I’d like to believe it is the former that drives this phenomenon.

4. Performance-ship: Another outcome of Chinese bands touring abroad is that their performances become more sophisticated. Understanding the power of audience interaction, the best bands are intimately conscious of their performance. They understand their performance experience is intricately related to their brand. From costumes to props to audience participation, Chinese bands are creating interactive experiences with their patrons never seen before in China.

5. Commercialization: Strawberry Festival was also impressive because of the strides it took in commercialization. While there wasn’t any new commercial inventions, the pervasiveness of commercialization within the festival was impressive. From Volkswagen cars enjoying product placement on the performance stages, to a fully-branded vodka bar beside the electronica stage, sponsorship and product placements were fully optimized at every opportunity. What is more though, it was not overbearing or intrusive to the experience, in fact, all the attendees accepted the brand presence and took it as part of the identity of Strawberry Fest. What does this say about the Chinese and their acceptance and embracing of brands as an integral part of the cultural experience? I think many marketers and media specialists are thinking actively about this question today.

6. Creating shared collective memories: Perhaps the most important take-away from these cultural festivals, in their size, experience and novelty for this young generation, is that they are creative key milestones of shared collective memories. Sooner or later some of the youth that attended these events will realize, recognize, or characterize some aspect of the experience and it will germinate into an artifact of this generation’s identity. What this artifact will stand for, what it will mean for the constituents at ascribe to this generation, and what it signifies for everyone else, is the job of researchers and anthropologists. Much like Woodstock, Beatle-Mania, or Elvis on national TV, it is these events and experiences that are happening right now, molding the mindsets and perspectives of China’s youth.

7. Cultural trends, nuisances, icons will start here: If these festivals continue, you’ll see that these events will be the genesis for new trends, icons and generational habits. The Strawberry Festival invites and encourages an open market where independent shop owners, artists, and aspiring entrepreneurs can set up shop to sell and exhibit their wares. This year we already saw white ‘Jabawaki’ style face mask become virally popular. I can foresee that as these festivals and markets grow bigger, the markets will become just as important if not perhaps more, than the musical performances. Certainly for trend watchers, the markets may be where the real insights will be.

Of course, this is all dependant on the government’s good graces in allowing these mass congregation of young people continue to happen. It is always a risky endeavour, and China’s track record with these kinds of events has been haphazard to say the least.

So is Strawberry Festival China’s own Woodstock. It could be. Or perhaps more accurately the whole consortium of festivals together, their compounded effect on this generation, could be the beginning of an experience that helps anchor a generation’s identity and provides a place for new generational artifacts to emerge. If you haven’t yet been to one of China’s music festivals, maybe you should thinking about coming next time. If you missed America’s Woodstock, make sure you don’t miss China’s.

Update: Archie from China Music Radar wrote a wonderful post on the music festivals as well, draw different conclusions. I encourage you to read his post. I understand there are a lot of people with differing points of view, especially on such a passionate subject such as music. I say, Good! Lets keep discussing and debating!

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