Diaper Spillage Averted in Macau

A good save the other day in Macau by men on opposite ends of a flatbed wagon:

None of the boxes of diapers hit the ground. These diapers, which are designed to avoid another type of spillage, were apparently being delivered to locations in Macau. Given this area's close proximity to Macau's border with Zhuhai, many of the diapers are likely destined for locations in mainland China, whether as personal purchases or part of a grey market which I first looked at several years ago. During my recent time in Macau and Zhuhai, I have revisited the topic. Later, more about what I found, including how goods not only flow out of Macau through the grey market but into it as well.

Xi Jinping's Advice for New Zealand

Last year I shared the story of a young man I met who would regularly travel from mainland China to Macau to purchase baby formula produced in New Zealand. Like many others in China, he did not trust Chinese baby formula due to a number of milk-tainting scandals. He was also not confident that the foreign formula he could could purchase in mainland China would be genuine. In a later post, I commented on the creative approach taken by a Chinese baby formula company to garner the trust of Chinese consumers through advertisements placed on far-away London buses.

So I must admit my jaw dropped a bit when I saw the Chinese news agency Xinhua had this to say about a recent meeting between China President Xi Jinping and New Zealand Prime Minister John Key:

Xi stressed that food safety concerns people's health and urged New Zealand to take tough measures to ensure food quality and thus maintain the sound momentum of economic and trade cooperation between the two countries.

As Josh Chin reported in the China Real Time Report, I was not alone in my reaction:

In a country where authorities routinely accuse other governments of casting hypocritical stones, the notion of Mr. Xi berating another country’s leader over food safety proved too much to bear for many social media users [in China].

“He should be saying this to himself,” wrote one microblogger. “How does he have the gall to say this to the New Zealand prime minister?”

For more about what prompted Xi's recommendation to New Zealand and how Chinese responded online, see Chin's full article here.

Product Placement, Dyslexia, and Censorship

Now seems to be a good time to share a variety of links to stories that touch on subjects found in previous posts here. In no particular order...

1. Earlier this year I shared the story of a young man who traveled from his home in mainland China to Macau so he could purchase New Zealand baby formula. Due to past formula scandals in China, he and his family did not trust locally produced formula. If he could have purchased imports in mainland China from trustworthy sources at a reasonable price he would not have needed to make the journey to Macau. In addition to high tariffs, as Wang Shanshan reported on Caixin there is another reason for the inflated prices of imported formula (H/T C. Maoxian):

One reason is supermarkets force dealers to pay large commissions to put their products on shelves, Yao Wenhua, senior executive of a Beijing-based trade company, said. This has forced dealers to raise retail prices to make a profit.

Read the article here for more about the commissions and how they are driving grey market online sales of imported formula through sources such as Taobao.

2. I recently posted about China blocking The New York Times in reaction to a story about the wealth of Prime Minister of China Wen Jiabao's family. Similar to my comments last year about an example involving YouTube, Evan Osnos in The New Yorker mentions that the blocking is not only an issue of censorship:

China has now blocked two major American news organizations (Bloomberg has been blacked out for four months, after a similar story on the incoming President, Xi Jinping), without official explanation. They are large American businesses, with substantial financial investments associated with their operations in China. At a certain point, the United States Embassy will have to weigh in, which will only ratchet up the pressure.

See here for more from Osnos about the "fallout from Wen Jiaobao's family fortune".

3. In a non-China-related post I considered whether tennis player Andy Murray's dislike for reading could be connected to a cognitive deficit. I pointed out that having such a deficit would not necessarily prevent a person from being successful. Kate Rix on Open Culture shared an interview revealing how a long unidentified reading deficit not only did not prevent director Steven Spielberg from achieving success, it may have helped lead him to his passion:

What no one, including the DreamWorks co-founder himself, knew until recently is that all those 8 mm shorts were more than just a pastime. In a recent interview Spielberg revealed that he is dyslexic and that he was only diagnosed five years ago. “It explained a lot of things,” Spielberg told Quinn Bradlee. “It was like the last puzzle part in a tremendous mystery that I’ve kept to myself all these years."

Always two years behind the class in reading, Spielberg was teased by other kids in school. He dreaded having to read in front of the class. He never lacked for friends, though looking back on it several of his friends were probably also dyslexic.

“Even my own friends who were just like me, we didn’t have the skills to talk about it,” he recalled in the interview for Friends of Quinn, a site for people with learning differences. “I got bullied. I dealt with it by making movies. That was my cover up.”

See the post here to watch a video of the interview and read Rix's summary of it.

Fake 'The Body Shop' Store in Changsha, China

Today in Changsha, (mainland) China, I saw this store:

And now a relevant piece of information from The Body Shop's online site for Hong Kong:

Does The Body Shop operate in Mainland China?

No, The Body Shop does not currently operate in Mainlaind China. We have no stores or online shopping presence. The Body Shop cannot guarantee the quality or authenticity of any products purchased in Mainland China.

So I paused for a few moments as I was passing by. And then, of course, I went inside.

One column of shelves was dedicated to products from The Body Shop. The rest of the store featured similar products mostly from German and Australian companies.

On the side, one of the Australian products was "Essence of Kangaroo". I wondered why anyone would want this type of essence. After a quick online search I found that some brands claim it is an aphrodisiac (with an extra kick?) made up from ground meat and other items such as kangaroo sperm. I am unsure of the trustworthiness of some of the stores so I will not bother linking to them. However, maybe it is worth noting a short article on The Guardian titled "Essence of kangaroo among scams to fleece Sydney tourists".

Anyways, a saleswoman in the store confirmed one of my suspicions. She claimed that The Body Shop products were originally purchased in Hong Kong, where there are numerous legitimate stores. Although it is conceivable that the products in this store are counterfeits, the containers showed no obvious signs of this. Plus, my familiarity with the extensive grey market that exists between Hong Kong/Macau and mainland China* makes the bought-in-Hong-Kong story rather plausible to me. However, I am not an expert in identifying fake cosmetic products, and as noted above there is no guarantee from The Body Shop regarding the products' quality or authenticity.

Like the many "fake" Apple stores I have seen in China, there may be improper uses of trademarks, but the related products being sold appear to be genuine. Given its use of The Body Shop trademark and the placement of the name were a store's name typically appears, I think it is fair to call this a "fake The Body Shop store".

How to characterize the Essence of Kangaroo is another issue, though.


*Some examples of the cross-border grey-market transport of goods in a post here.

Baby Formula in China: Foreign Brands Coming In, Advertising Going Out

Several months ago I shared a story of a young man who occasionally makes a long trip to Macau from his home in mainland China so he can purchase baby formula produced in New Zealand. He does this because of previous milk-safety scandals in China, and he wants to be sure that his cousin's infant receives a genuine non-Chinese baby formula. He is not alone in his concerns, and foreign brands of baby formula are well aware of the demand in China for their products. In Buy Buy China, Dror Poleg reports that this combined with Chinese taxes leads to significantly higher prices for foreign baby formula:

The brands, in turn, make the most of their captive market [in China] and mark up prices up to 4 times their level in the US or Europe. A tin of foreign baby formula ranges from around RMB 200 to RMB 400. Some high end products – such as Wyeth’s Illuma, Nestle’s NAN H.A., and Mead Johnson’s Enfagrow - cost even more. China now levies a 10% tax on imported baby formula in an effort to promote domestic alternatives. But demand driven by safety concerns is inelastic, meaning Chinese consumers absorb the extra costs while foreign brands continue to grow their market share. Similar, if more moderate, dynamics can be seen in the market for other baby products.

The higher cost of some products in mainland China is yet another reason why the Macau-Zhuhai border is a key point in a grey market sales network.

Chinese brands are of course also aware of the situation and hope to improve their image. But it may seem surprising that one well-known Chinese brand is attempting to do this through advertising not only in China, but in London as well. In fact, Londoners themselves are confused. As reported by Boruo Chen in Asia Society:

Yili, a Chinese milk company based in Inner Mongolia, recently launched an ad campaign on London's iconic double-decker buses that had locals scratching their heads. The ad shows Chinese men and women, none of whom are recognizable celebrities or athletes, alongside the brand's logo, in Chinese. No Yili products are for sale in London, and few clues on the buses hint as to the significance of these people.

Is this a sign Yili has made a huge marketing blunder? Maybe not. Poleg claims in another article on Buy Buy China that Yili's main goal for its London advertising is not influencing British perceptions. Instead, Chinese consumers are the target:

On closer inspection we found the London campaign is part of a broader effort to restore Yili’s reputation back in China, following its implication in scandals involving Mercury- and Melamine-tainted milk formulas. The campaign is orchestrated by Ogilvy & Mather and includes a cooperation with Youku, China’s leading video site, and a domestic advertising campaign as well. The London ads are used to appeal to Chinese Olympic visitors and serve as fodder for a PR push in the Chinese media, trying to portray Yili as an international brand that is well accepted beyond China’s borders (here, for example, in Chinese).

Poleg is skeptical that such a campaign will be successful. However, Darren Wee in the Financial Times expresses reason for optimism (article is behind a paywall but can be read in full if you click its entry on Google, Bing, Yahoo!, etc. -- do a search on one of the sentences below to find it):

Chinese consumers love western brands, so Chinese companies have begun to advertise in the west to build a reputation at home.

Sales of Yili Shuhua milk rose 12 per cent when it featured in the 2011 Transformers  film.

This result suggests that Yili knows what it is doing, even if Londoners are baffled.

It is fascinating to consider how advertising in a far away country may prove valuable at home for Yili. And not only does it suggest some of the ways in which businesses based outside of China can profit even when a Chinese company is targeting Chinese consumers, it is also an example of how evaluating the quality of a design, whether a marketing campaign or a mystery beverage vending machine, requires understanding its purpose.

If the campaign proves to be a success for Yili, it is possible even more Chinese companies will attempt a similar strategy. Could Londoners soon find themselves regularly puzzling over Chinese ads?

At least for the short term*, London's advertising sales agents probably hope so.




*The question of whether it would be good for them in the long term raises some interesting issues I would want to further consider before commenting.

More "Fake" Apple Stores In China: Does Apple Care?

[UPDATE at end]

According to recent reports, new genuine Apple Stores will open in the Chinese cities of Shenzhen and Chengdu. These will be the first Apple Stores outside of Beijing and Shanghai in mainland China. Shenzhen is an intriguing location for a new store since its border has been a significant entry point for Apple products smuggled into mainland China from Hong Kong due to differences in prices and availability.

In addition to several Apple Stores in China, there are numerous authorized resellers of Apple products. But there are many more unauthorized resellers, examples of which I shared here and here. I also shared an example here of an unauthorized reseller with a website nearly identical to Apple's. All of those examples came from Southeast China, so I will now share examples of unauthorized stores in the northwestern city of Yinchuan in Ningxia Hui Autonomous Region (Ningxia is similar in stature to a Chinese province). In addition to serving as evidence that unauthorized resellers are not limited to a specific region of China, they provide an opportunity to discuss some of the concerns Apple may have about such stores.

Like before, I did not deliberately seek out any of these stores. I opportunistically took the photographs on several occasions while I walked around Yinchuan's central Xingqing District. Here are just a few of the stores I saw selling Apple products:

In all of the examples above an Apple logo is prominently displayed in the location above the main entrance where one could expect a store's name, even in China.

Apple's online list of authorized resellers as of today shows only one authorized reseller in all of Yinchuan or anywhere else in Ningxia (note: an employee at the Apple Store in Hong Kong insisted to me that this list is regularly refreshed and reliable). Based on the store's address it is not any of the stores displayed above or later in this post. However, these stores not being listed as authorized is in itself not a problem since it is reportedly not illegal to resell genuine Apple merchandise in China.

Regardless, in a country with so many fake products some consumers may be especially motivated to buy Apple products from stores reviewed and authorized by Apple. That is what makes these other unauthorized stores in Yinchuan even more intriguing:

Although Apple likely does not want stores stating they are authorized resellers when they are not, Apple is likely more concerned about protecting the Apple Store identity. The famous fake Apple Store store in Kunming received attention from Apple not because it was unauthorized, but because of the extreme measures it took to appear as a genuine Apple Store. In short, whether Apple pursues any action against a store in China is probably related to the likelihood a consumer will incorrectly believe they are shopping at a store operated by Apple. A quick estimation based on what I have seen suggests there are thousands of unauthorized Apple resellers in China, many of which may be misusing Apple's trademarks to a variety of degrees. If Apple wished to pursue every potential case it could have a huge challenge ahead of itself. But at the moment I see no indications that Apple will take any significant action unless a store goes to more extreme lengths to imitate a real Apple Store. In that case, Apple has taken a more pragmatic approach and the situation is far more manageable.

The famous store in Kunming crossed several significant lines which made it worthy of Apple's attention. For example, the staff believed they worked for Apple and wore shirts identical to those worn by Apple Store employees. The second factor is why these two stores in Yinchuan particularly caught my attention:

In both stores, employees were wearing shirts that appeared to be similar, if not identical, to the Apple Store shirts.

When I spoke with two of the employees in the second store, I asked them if the store was an "Apple Store". One quickly said it was. Then the second jumped in and said it was not. She explained that their products were genuine and from an official Apple Store in Beijing. She did not believe she worked for Apple. At no point did the employee appear to evade any of my questions, and I never had the impression she was concerned anything might be amiss.

So, are any of the above stores enough to get Apple's attention? All I can say is that in most ways they are not highly unusual in comparison to many other unauthorized stores I have seen. They also did not go to the same extremes as the store in Kunming. Nonetheless, I suspect those Apple Store shirts could cause some feathers to be ruffled at Apple.

I could now go on and on and share examples of stores in other cities in China that to varying degrees may be infringing on the identity of genuine Apple Stores.

Unauthorized store in Lanzhou, Gansu province

Unauthorized store in Xining, Qinghai province

But I shall refrain. I think I have already sufficiently made my point. Again, there are many unauthorized stores across China and it does not appear that Kunming or Southeast China is special in this regards. But based on my experiences, the famous store in Kunming remains a special example.

Finally, I want to give credit where credit is due in Yinchuan, namely this business:

Despite the English mispelling, this Apple Authorized Service Provider is indeed listed in Apple's online locator. Consistent with my observations of what was for sale in Yinchuan's unauthorized stores, it only offers services for iPads, iPhones, and iPods -- no service for Macs. So, Yichuanese can rest assured they have a convenient and authorized option for servicing some of the Apple products they may buy, whether at Yinchuan's single authorized reseller, Yichuan's unauthorized resellers, or elsewhere.


UPDATE: Now tired of seeing "fake" stores? Then maybe the Chinese mobile phone with an apple logo in this post will interest you: "Insights and Headaches for Apple: The iPncne in China".

A Long Trip for Milk: Barriers, Trust, and Truth in China

During my visit to the top of Guia Hill in Macau I met someone new:

We met while we were both exploring historic Guia Fort. He lives in mainland China and was visiting Macau for the day. One topic he mentioned during our wide-ranging chat was the Internet censorship enabled by China's Great Firewall (which does not operate in Macau). He said it does not affect him as much as some of his friends since he works at a Taiwanese company which uses a VPN to securely (and freely) access the Internet. Regardless of his own situation, he believes the Great Firewall is unfortunate and should not exist.

In addition to the Great Firewall, there is another barrier in China that bothers him -- the borders between mainland China and China's special administrative regions of Macau and Hong Kong.

Pass (通行证) required for mainland Chinese to enter Macau or Hong Kong

Despite possessing the passport-like pass mainland Chinese need to enter Macau, for each visit he must apply for a new visa-like permit to be placed in it. As with China's Great Firewall, he wants the border removed and believes it is not fair to mainland Chinese.

What most caught my attention was what brought him to Macau. Although he enjoyed seeing the sights, his primary goal was purchasing the customs maximum two cans of New Zealand baby formula. Like cigarettes and diapers, baby formula is a common product brought to mainland China by those coming from Macau. Due to past milk scandals his cousin with an infant does not trust the milk products produced in China. Approximately every two months he plans to take a more than hour-long bus ride from the city where he lives to the Macau border, pass through two immigration channels, purchase baby formula, pass through immigration again, and take another long bus ride back home -- all in one day.

I asked him why he did not save himself the trip and purchase the New Zealand baby formula through a source closer to his home. He said his family would not be able to trust its origin due to the vast numbers of fake products found in mainland China. When I asked him why fake products were such a problem he replied, "The Chinese government often lies to the people. So, the people..." He did not finish the sentence and simply looked away with an expression I am hesitant to interpret. I will just say that it did not at all appear to be positive.

He may not agree with some of China's policies. He may be wary of China's milk. He may not trust all of what he hears from China's government. But despite his frustrations, his story does suggest signs of positive recent changes in China. He was doubtful he would have as easily obtained a permit to visit Macau only 10 years ago. And I am not sure whether 10 year ago he would have as openly expressed himself or he would have given permission to publicly share his thoughts with his photo included.

Regardless, he feels conditions still need to improve for himself and others in China. And sometimes he is willing to take a long journey to help it happen.

Cigarettes, Noodles, and Diapers: Profiting from China's Internal Borders

At Zhuhai's Gongbei Port (拱北口岸) in China's Guangdong province one can see a steady stream of people exiting immigration at the border between Macau and mainland China.

Numerous people pass through the border for a variety of purposes. One of those purposes is very pragmatic.

Sometimes it is apparent that many people are openly carrying at least one of several items. For example, these three women were each carrying a box of instant noodles and a box of cigarettes:

While some people may be bringing these items from Macau for themselves or to give away as gifts, it is clear many have another goal in mind -- selling them as part of a large grey market in mainland China.

For example, some people will sell their box of cigarettes to buyers on the other side of the street from Gongbei Port:

People with larger colored bags are just some of the buyers that can be found in this area.

Though at other times, people can sell their cigarettes immediately upon exiting the Gongbei Port building:

Buyers (in this case all have plaid-patterned bags) quickly clear out if people with the appropriate uniforms arrive.

Especially for selling other items, some walk a little further and head down an alley with a warehouse-like building including many individual "stores". The sales patterns can vary from day to day. On one day there was a store where people could sell a brand of Japanese instant noodles (出前一丁) without waiting in line. However, people carrying another item had to stand in a long line:

In Chinese I asked one of the men apparently working in the area, "What is this?"

He replied, "This is nothing."

I did not feel the need to continue the discussion since it was already clear that this "nothing" was in fact people selling a highly desired item in mainland China: Merries diapers from Japan.

Why do these items need to be brought from Macau? Due to their status as special administrative regions, both Macau and Hong Kong sell goods that for a variety of reasons are not available (or as easily available) through official channels in mainland China. However, in some cases a grey market sales network in mainland China exists as I previously described for the iPhone 4S. The border at Macau and Zhuhai is particularly convenient for transporting some of these goods since both cities have urban areas immediately adjacent to the border. Not surprisingly, many of the stores in Macau near the border sell the very items that are most desired by mainland Chinese.

There can be a variety of reasons as to why these goods are in particular demand. For some, such as the diapers, it is due to the perceived safety and quality of equivalent products made in mainland China. The article "What Chinese Shoppers are Buying Online" on Forbes discussed this issue:

Recalling the terrible fall 2008 mass poisoning incident when six Chinese babies died and hundreds of thousands of children were sickened by melamine-tainted milk, it is no surprise that Japanese-made infant powdered milk is among the top-selling products. Some Chinese believe that direct Internet sales and home deliveries of powdered milk products would ensure that the contents had not been altered...

Also in the “baby” category are best-selling Japanese diapers, including the Kao “Merry” or Unicharm “Moony” brands (128 yuan/US$19)–again, priced higher compared to local brands. Chinese parents believe that the diapers contain no harmful chemicals that cause allergies or rash, and the materials are top-notch, preventing spillage.

And it is not just Chinese who are concerned. Some foreigners residing in mainland China have also turned to the Internet to purchase baby supplies produced elsewhere (see here for one perspective).

Based on what I saw, it appears that due to customs' restrictions people are very limited in the number of items they can bring to Zhuhai (I rarely saw people carrying more than one package of the above-mentioned items). However, last August Dan Harris on the China Law Blog commented that the situation was far more flexible at another border at that time:

An interesting thing is happening on the "border" between Hong Kong and China.

Nothing.

Let me explain.

Like virtually all countries, China has various limits and duties relating to what can be brought into the country. China is generally quite good at enforcing these limits and duties.

Except for quite some time now it has been looking the other way when it comes to food imports from Hong Kong. If you go to the border between Hong Kong and China, you will see what I mean. There you will see many, many people bringing back into China massive quantities of baby formula and the customs people are doing nothing. Nothing. The same is true for all sorts of other packaged foods being brought into China.

It is not uncommon for the various border "policies" to change (sometimes without official notice) so this difference comes as no great surprise.

There appear to be several other fascinating aspects of how the various grey markets seen at the Zhuhai-Macau border operate such as people being typically paid in Macanese currency, sellers reportedly making multiple trips in a day across the border, and variations on which items are "popular" from day to day. I will refrain from commenting on them, since I am still fuzzy on a number of issues. Regardless, it is striking that a grey market can apparently thrive for items such as instant noodles that need to be carried one by one across two immigration checkpoints.

So, like the Shanghainese reader who expressed an understanding for Macau's and Hong Kong's borders due to concerns over protecting cities' cultures, there are other mainland Chinese who may have their own reasons to appreciate the borders. While some mainland Chinese are not supportive of the policies which restrict their travel within China, for others the borders combined with special rules for Hong Kong and Macau provide an opportunity for profit.