Today on The Negotiation, we speak with Xin Yi Lim, Senior Director of Corporate Development at Pinduoduo and former Technology Analyst for GIC in Singapore and New York.

Xin Yi discusses some of PD’s latest developments, including founder Colin Huang Zheng’s recent move into an executive chairman role and news on the company’s agritech initiatives, which include its Smart Agriculture Competition to encourage innovation in both AI and traditional strawberry planting methods. She then goes into the role of live streaming in PDD’s marketing efforts and defines the relationship that the company has with its various types of vendors and other strategic partners.

“Live streaming is probably the number one industry buzzword this year as well as last year,” says Xin Yi. COVID-19, of course, had a big impact on the popularity (and necessity) of live streaming. For Pinduoduo, the key was to find the value in a live streaming product as opposed to releasing one for the sake of having a product. In particular, one of the goals in using live streaming is to drive conversion which, at its root, is a matter of building trust. According to Xin Yi, “Live streaming should be part of the shopping experience and not a distraction from it.”

An MCN is a third-party service provider that has a collection of content providers, akin to such platforms as YouTube. These are intermediaries that brands turn to if they need ready-made solutions for content since every content creator has their own following or fanbase.

C2M shortens the distance between consumers and manufacturers. “In essence,” says Xin Yi, “it is a differentiated way of thinking about how products are designed, made, and sold to consumers.” Traditionally, manufacturers do not have a direct connection to consumers and have inefficient systems for getting feedback on their products. Usually, focus groups are used when creating new products, and this process oftentimes causes quite a bit of delay. The concept of C2M takes advantage of the fact that much of the retail world has gone digital in the form of eCommerce, allowing for that direct interaction between consumers and manufacturers.

“Longer-term, the momentum behind eCommerce penetration is still very strong. In terms of PDD’s strategy, it has always been squarely focused on, ‘What do our users need and how can we provide the right products that they need for each category? How can we provide value as well as an interactive shopping experience to our 600+ million users?’”

Today on The Negotiation, we speak with Wei Liang, Professor of International Policy Studies at Middlebury Institute of International Studies at Monterey. She discusses the current state of the Belt and Road Initiative in-depth, as well as China’s current reputation on the world stage amid a variety of crises, not least of which are COVID-19 and the country’s strained relationship with Hong Kong.

The Belt and Road Initiative was first announced in 2013 by President Xi Jinping with the ambitious (and ever-evolving) plan to connect Asia, Europe, the Middle East, and Africa. The belt begins in the northwest part of China and connects to Central Asia through to Europe. The road refers to the 21st Century Maritime Silk Road which connects China to Southeast Asia, the South China Sea, the Indian Ocean, all the way through to the Middle East and Africa.

China’s goal is to connect with regions that it never had much economic influence in previously, while at the same time trying to bypass the influence of the United States by going through the “backyard” of Russia and India. China is intentionally keeping the BRI a “vague concept” striving to make it “open and inclusive”. One thing that has remained constant since its inception is that the United States has not been included thus far and does not seem likely to participate in any capacity any time soon.

China’s relations with other powerful countries has been unsteady for a variety of reasons. China’s exponential rise as a global exporter in Asia is one factor. The language and cultural barriers are others. Recently, certain issues have influenced China’s image for the worse, two of the biggest being the impact of COVID-19 and the country’s turbulent relationship with Hong Kong.

China’s focus is on infrastructure investments, which is why it put a tremendous amount of resources into the BRI. Its current relationship to the US, particularly after the trade war and the COVID-19 outbreak, is a confirmation to many scholars who have been following the unique relationship between the two countries: China has always sought to remain prepared with alternative markets to do business in.

Regardless of which party wins the US presidential election in November, China will continue to have to deal with the profound mistrust between the two countries. Economic issues are one thing. Geopolitical and security considerations are another, and the two nations have continually stoked the embers of conflict throughout the past few years.

Today on The Negotiation, we speak with Gen Kanai, Director of Strategic Partnerships at Animoca Brands and Mentor at Chinaccelerator.

Regarding the challenges of entering the Japanese market, Gen says that Japanese customers generally do not pirate software and content. Japan “can be a very profitable market if you can crack the market.” At the same time, it is a challenging market, with many non-Japanese companies having failed in Japan. eBay is a prime example of a failure, while Google, Twitter, and Snapchat fared better due to a number of factors that Gen enumerates.

Sales cycles and establishing stakeholder trust are generally much longer processes in Japan, but the payoff is the incredible loyalty that Japanese consumers have for successful companies in the country. On the other hand, during his five years working in China, Gen has found that it is particularly difficult for foreign entities to enter the consumer segment “for a whole host of reasons”.

Asked about his experience working with Mozilla and expanding to other markets, Gen says that the best part about his involvement was interacting with users. Community is incredibly important for Mozilla since it is a non-profit organization with a fraction of the budgets of Google, Apple, Microsoft, and other companies that provide competing browsers. Mozilla enjoys a user base made up of Firefox fans who not only love the product, but also the company’s non-profit mission and the fact that Mozilla does not make money off of its users directly.

On the other hand, the most challenging part of Gen’s job was dealing with countries that were completely closed to Firefox such as South Korea, thanks to technical decisions made by the Korean government around internet banking, stock trading, and any other kinds of secure transactions. During Gen’s time, online technologies in Korea only worked with Internet Explorer.

Mozilla’s open-source, non-profit business model can still be emulated today, with some caveats. Mozilla rose “out of the ashes of Netscape” when the latter company failed. Sergey Brin struck a deal to feature Google as the default search engine with a fraction of the ads from its search results being paid to Mozilla. Things changed when Google opted for more ownership with the creation of Chrome, but Firefox remains a lucrative product that is able to make “north of $100 million a year” for as long as it can navigate the ever-evolving trends and standards established by the top internet companies of the day.

Today on The Negotiation, we speak with Benjamin Qiu, Partner at Loeb & Loeb LLP. Benjamin is an “attorney focused on the capital market, venture financing, corporate governance, IP asset development, and technology protection & licensing.” He discusses the legal side of startup financing in China, of which he first developed expertise during his time at Innovation Works (China’s answer to Y Combinator), where he served as both fund director and a key member of its legal team.

Benjamin had the opportunity to join Innovation Works in 2009, an interesting time in the startup world. With his background in international property law, this was his first time stepping into the venture capital space. 2009-2010 saw quite a bit of liquidity due to a lot of government stimulus around the world at the time. The first iPhone came out in 2007 and mobile was on the rise exponentially. Early-stage funding was focused on mobile startups.

While Y Combinator used a more “cookie-cutter” deal structure, Innovation Works created the groundwork for new technologies before scouting the market for visionary entrepreneurs to lead innovation and form a startup based on the fresh technology.

The legal framework in China, as drawn up by the National Venture Capital Association (NVCA), essentially borrows from that of Silicon Valley. In the past, it heavily favored the investor, but with the high number of options startup entrepreneurs have today, the law has approached a “middle ground” structure that protects both investors and entrepreneurs.

Asked about similarities between the discovery process in China versus that of Silicon Valley, Benjamin says that “80%-90%” of startup investors look for the same things in a founder, the most important being a firm grasp of industry knowledge. The biggest difference is that local entrepreneurs are the preferred choice, as opposed to Silicon Valley whose many resident founders hail from different cultural backgrounds.

A foreign tech startup looking to get funding in China would “find it useful to have outside investors who, on top of the money, also provide local knowledge and guidance.” They can also potentially help the founder in finding the best staff and leadership for the company, and even facilitate deals. Benjamin notes that startups that deal with content such as Google and Facebook will have a significantly tougher time getting off the ground in China compared to an Uber or an Airbnb.

M&A and IPO opportunities in China have seen a lot of convergence with Silicon Valley’s own realities. Until several years ago, a lot of the large tech companies (i.e. Alibaba, Tencent, etc.) were not known to willingly acquire younger startups. But, as is characteristic of the Chinese market, things drastically changed. In more recent years, many acquisitions took place. Also, in spite of current tensions between the U.S. and China, the U.S. is still the number one place that publicly lists rising Chinese companies.

Today on The Negotiation, we speak with Shanshan Tang, Global Business Lead for Canada at Alibaba. Alibaba’s Vancouver office was opened in 2018 with two main goals: to help Canadian brands (especially smaller ones) sell to China using their eCommerce platform, and to promote cross-border tourism and online and in-store enablement of Alipay.

Alibaba was founded as an eCommerce company 20 years ago. Today, it has evolved well beyond that. According to Shanshan, today the platform provides “a marketplace, logistics, payment services, marketing, call computing, big data, lifestyle, entertainment, and health.”

With the many unique challenges presented by COVID-19 in 2020, some interesting trends have emerged on Tmall’s platform. For one, online tools such as live streaming have become much more popular. In line with this, there has been a closer integration of Tmall’s online and offline stores. Shanshan shares that amid the complete shutdown in China during the pandemic, department store associates took advantage of their tools by live streaming promotional videos right “from their counters”.

The future of Alibaba’s eCommerce ecosystem sees the ever-closer integration of online and offline resources. There will also be an increase in the implementation of AI to Alibaba’s online tools to help merchants better customize the buying experience for individual consumers. Tmall has also put a focus on improving its brand loyalty forums in order to foster a greater sense of community among its customers.

As the first step for companies looking to capitalize on Alibaba’s many sales and marketing channels, Shanshan recommends that they enter the platform with their hero products initially, using content marketing via social media to promote their brand and value proposition.

Today on The Negotiation, we speak with Barbara Finamore, Senior Strategic Director for Asia at the Natural Resources Defense Council and the author of Will China Save the Planet (2018). She started her career with the NRDC as an environmental litigator, a position she left after getting married to a U.S. diplomat in the 1980s. Her husband took her to China in 1990, when the country was considering its earliest initiatives for sustainable development.

Barbara was there to witness first-hand the country’s signing of the Framework Convention on Climate Change, as well as the drafting of the world’s first sustainable development blueprint for the 21st century, known as Agenda 21. Since the mid-1990s, Barbara has been heading the NRDC’s energy program in China.

Says Barbara: “I got hooked on the challenges that China faced and getting to know the people who were working to address those challenges, many of whom became leaders in China’s energy and climate policy.”

China’s environmental problems took off alongside its rapid economic growth in 2001 when the country joined the WTO. Its performance during that decade would earn China the moniker of being the world’s “economic miracle”.

China’s most valuable commodity during this period? Coal: the world’s dirtiest fossil fuel and the leading source of CO2 emissions in the world, as well as the source of China’s devastating air pollution. Coal was the cause of 2013’s “airpocalypse”, during which time the Chinese citizens were breathing in an equivalent of one-and-a-half cigarettes per hour every day. In 2018, China launched its Air Pollution Prevention and Control Action Plan which intends to cut down coal use.

COVID-19 has had a tremendous impact on China’s energy and environmental sectors. Chinese citizens have become less willing to take public transit due to crowding. There is a greater interest in private vehicles (which will have negative effects on climate change in the long run). The government has increased its focus on electric vehicles as essential to its long-term industrial transformation—a major element in its “new infrastructure” initiative (other elements include 5G and artificial intelligence).

In the short-term, the Chinese government is taking steps to ease its environmental controls on gasoline-powered engines since the automotive industry as a whole is a pillar industry in China, being responsible for some 10% of jobs and nearly 10% of all retail sales.

Today on The Negotiation, we speak with Xin Yi Lim, Senior Director of Corporate Development at Pinduoduo and former Technology Analyst for GIC in Singapore and New York.

Xin Yi discusses interactive eCommerce, a relatively new term that aims to reproduce the experience of offline shopping by “trying to understand human needs through the community that surrounds each and every one of us.” Pinduoduo has created a team purchase model on a mobile-first, mobile-only platform where, if you buy something with a friend or anybody else in your social network, you enjoy lower prices.

According to Xin Yi, traditional eCommerce is “a targeted, solitary shopping behavior that is also ultimately efficiency-driven.” When we shop offline (i.e. at a mall), we typically have conversations with our companions when considering a purchase. This type of interaction and feedback is essentially absent when we shop online on a conventional eCommerce platform—no algorithm can match this element of human touch.

Pinduoduo differentiates itself from other eCommerce platforms with their fundamental understanding that “people’s needs can be very dynamic, and they can be influenced by those around them.” The company’s goal is to create true value for money, both for consumers and merchants, by creating a platform that mimics the offline experience and quite literally takes the term “sharing economy” to a new level.

Using data gathered from Pinduoduo’s interactive eCommerce platform, certain trends emerged. There is now a tendency towards “rational consumption”, which means that consumers are ultimately looking for value-for-money goods. Xin Yi discusses the trend known as C2M or Consumer to Manufacturer. China, known for decades as having an export-driven economy, is now beginning to focus on manufacturing products that appeal to an increasingly savvy domestic market. Pinduoduo allows its brands to collect anonymous consumer feedback, and from this create better, more marketable products that expand existing markets, and even create new markets.

COVID-19 has caused the sale of agricultural goods to skyrocket. These goods have always been available through Chinese eCommerce platforms, but they were “rediscovered” through necessity, by consumers. To further encourage and comfort online shoppers of agricultural goods, Pinduoduo began to conduct livestreams with farmers and other stakeholders demonstrating the quality of their products. Other newly popular verticals include fitness and culinary brands.

Today on The Negotiation, we speak with TR Harrington, Co-Program Director at Mobile Only Accelerator and Program Director at SOSV. He is also a Startup Mentor at Antler, Mucker Capital, and Chinaccelerator.

TR discusses the mindset and strategies he used to run a Shanghai-based marketing agency in China, and gracefully enact an exit strategy after over a decade of serving as CEO. He says that the key to his success as a foreigner was his ability to adapt to the culture and expectations of the local market.

By extension, TR encouraged foreign brands, who approached him for his services, to adopt that same attitude if they expected to maximize their investment in China. In addition to being willing to do their marketing the way the Chinese do, they should also be prepared to move at the speed that the Chinese are known for. Finally, foreign brands should not underestimate the power of utilizing social media to reach customers and clients—such as tapping into WeChat’s customer service capabilities.

TR believes that continuous process improvement is a big factor in helping foreign brands stand out in the vast and turbulent sea that is the Chinese market. The key is to go big or go home: TR says that a relatively small company that only makes a 3x improvement will have almost zero impact on their revenue and bottom line. He also says that it is possible to go “too far” or “too deep” with metrics that do not count. Instead, brands should make it a point to prioritize the “500-foot view” metrics.

Asked about which behavioral traits startup founders must have, TR says that it is not enough to follow through with the advice given by investors and mentors. It is equally as important for them to ask why they are being given that advice in order to learn how to make consistently sound decisions in the long-term.

Today on The Negotiation, Todd speaks with author, speaker, university professor, and serial entrepreneur James Lalonde. He shares decades of experiences working in Asia, comparing and contrasting the social, cultural, and political characteristics of Japan, China, and North America to illustrate how these similarities and differences impact each country’s influence on the world stage.

James believes that building a business in China as a foreigner does not present any more challenges than building a business anywhere else does. Having worked in multiple countries, James does not see any particularly unique barriers for outsiders looking to start a business in China. “It’s really about how you approach getting your idea to market, and those things are really not specific to any culture. Being a successful entrepreneur is not necessarily a cultural thing.”

Different startup ecosystems exist in different regions of China. According to James, “Beijing is not really good at marketing itself” to foreign investors and entrepreneurs by virtue of having more than enough internal demand. Regardless, if your company specializes in software, IT, or AI, it is best to have a base in Beijing. If you are a manufacturer, Shenzhen is the place to be. Places like Shanghai and the surrounding areas deal best with consumer brands, which include lifestyle and fashion products. Other provinces may specialize in data centers or medical tourism. It all depends on what industry the government wishes to promote in the particular locale.

James asserts that the higher education system does not prepare students for the future of work. Advanced degrees are not often earned through practical experience, which means that the primary endeavor young people are preparing for while taking these courses is, in fact, the rat race. “You do not get credit for what you know, in a lot of organizations,” James reminds us. For his own companies, he prefers to hire individuals with a thirst for knowledge and an aptitude for creativity, rather than those who are “book smart” in business.

Asked his opinion on the Belt and Road Initiative, James questions the long-term ramifications of connecting several dozen countries with this particular infrastructure network. For instance, once the “bridge” is built, China has minimal, if any, control over how individual countries will make use of it. Will these countries truly use the network to improve trade relations with China, or take advantage of this resource and leave China in the dust?