The Great Hoops of China

Or Yellow Man Can Jump. A deep dive into the Chinese basketball market.

Congratulations to Jeremy Lin for winning an NBA Championship with the Toronto Raptors. Mr Lin, a Taiwanese-American from Palo Alto who played his college ball at Harvard, joins only two other people of Asian ethnicity to have won an NBA championship. The other two were Chinese imports: Mengke Bateer, an ethnic Mongolian, who won with the San Antonio Spurs in 2003, and Sun Yue, with the Lakers in 2009. They weren’t NBA stalwarts like Mr Lin, though. Whereas those two barely lasted in The Show, Mr Lin has had a nine year NBA career, filled with ups but mostly downs until this championship.

Mr Lin has had a tumultuous career as a professional basketballer — unexpectedly revitalising the New York Knicks as an unheralded rookie (few Ivy League players have excelled in the professional ranks, and none from Harvard), kicking off the “Linsanity” craze and seeming destined to be the next great point guard in the league, before succumbing to various injuries that transformed him from up-and-coming star to journeyman. Funnily enough, Mr Lin is probably best-known for his long-running feud with Lakers superstar Kobe Bryant that began in Mr Lin’s rookie season and hit a boiling point when the pair were Lakers teammates for a brief moment in the 2014-2015 season.

Mr Lin is currently a free agent and probably nearer the end of his career than the beginning. But if he never plays an NBA game again, he will at least be set for life, having earned an estimated $66 million before taxes from playing. And Mr Lin, who is close friends with basketball-crazy Taiwanese mega-entertainer Jay Chou, may have the option to embark on an even more lucrative basketball-related career in China, albeit as a promoter-endorser rather than as a player. Mr Lin may not have had as stellar a playing career as China’s most successful basketballer, Yao Ming (a member of the NBA Hall of Fame and now chairman of the Chinese Basketball Association). But Mr Lin is without a doubt more popular amongst young fans, with his trendsetting urban style and sometimes dreadlock’ed hair. For all Mr Yao’s playing abilities, he was never baller. J.Lin (as his legions call him), though? Fire.

Screenshot of Mr Lin, from Dunk of China

Last year, Messrs Lin and Chou teamed up to host a very entertaining (if you like hoops) basketball reality-tv show in China called Dunk of China (这！就是灌篮). The show essentially pitted young streetballers with dazzling hotdog skills against a group of college players in a 3-on-3 tournament. It was watched by nearly 100 million viewers during its initial airing on cable tv (Zhejiang Satellite TV in China) and streaming on the Youku platform. It was also released in Mr Chou’s native Taiwan on ETtoday, a digital news platform and streaming channel owned by Eastern Media International.

The show’s success owes something to the immense popularity of basketball in China. Ever since the Republican era of modern China after 1912, Chinese people have embraced basketball as a symbol of modernity and progress. Heck, my grandmother played basketball for her senior high school team in Shanghai in the early 1930s. My mom has the photos to prove it. Plus basketball is democratic — anyone can play it. You don’t need a big pitch, nor any special equipment. Just a ball and a hoop. In this, it mirrors why basketball is also so popular amongst poor, inner-city neighbourhoods in the US.

In-app ad on Youku for Dunk of China

According to the NBA, which has been actively developing the China market since the early days of China’s reform and opening up in the mid-1980’s, basketball is China’s most popular sport, with some 300 million people regularly playing it recreationally in China. The NBA also claims that 83% of Chinese people aged between 15-24 (some 450 million) are NBA fans. That figure might be high, but maybe not by much. Chinese people are rabid for NBA basketball. NBA games have been shown on tv in China since 1994. These days, every NBA game is shown live with Chinese-language commentary all season long. Six games per week are shown live on national tv on the main CCTV channel. Even the NBA’s Summer Development League, which only the most hard-core of fans in the US follow, is broadcast in China.

NBA-in-China’s rising tide has also lifted Nike. From the mid-1990’s on, Nike’s marketing efforts in the China market have leveraged basketball’s grassroots popularity, particularly promoting an urban inner-city culture that, in turn, has created a vibrant hip hop music scene. Chinese streetball pioneers, like MoreFree (his parents know him as Wu You), cite a pivotal 2001 Nike ad, “Hip Hoop”, that catapulted urban basketball culture into the mainstream consciousness in China. China is the Portland-based sportswear brand’s fastest growing region, and in 2018 reported $3.5 billion sales in Greater China (including Hong Kong and Taiwan). Shanghai hosts the world’s largest Nike store, the Nike Shanghai 001 House of Innovation, a 41,000 sq ft wonderland for sneakerheads. Chinese sneaker brands — Anta, 361, Li-Ning, PEAK — have all stolen a page from Nike’s playbook, investing heavily into the domestic basketball market while sponsoring NBA players as headline hooks.

Very urban streetball ad from Nike China, Summer 2017. Note the hook “I’m up next” (下个我上). It’s not only a streetball phrase, but also reflects Millennial sentiments very well.

Dunk of China, besides being a vehicle for Mr Lin’s post-NBA career, may also have helped propel a couple of its cast into mainstream basketball stardom. The first, Yang Zheng, a 25-year old 196-cm Beijinger who is a star on the professional streetball circuit in China, has registered to play in the Chinese Basketball Association this coming season. Mr Lin says he has madskillz to play in the CBA (and a knack for buzzer-beating three-pointers), but it remains to be seen if he’s left it too late to be playing organised hoops for the first time at 25. If nothing else, he’ll add some street style to the more conservative CBA.

The two other standouts created by the show are Zhu Mingzhen and Zhang Ning, teammates on an indomitable Peking University side that has taken the Chinese University Basketball Association (CUBA) championships three years in a row (they will both be seniors this year). Mr Zhu is a 200-cm power forward who grew up in Beijing, with a Ugandan father and a Chinese mother. Thanks to his sponsor, Li-Ning, Mr Zhu spends his summers training at basketball camps in the US, and could very well find his way to the CBA after graduation.

Yang Zheng versus Zhang Ning, Dunk of China screenshot

But it’s his PKU teammate, Mr Zhang, a Hebei-native, who has the potential to be Chinese basketball’s next superstar. The 192-cm shooting guard has a powerful driving style, but can also shoot three-pointers. He was selected as Dunk of China’s MVP. In Mr Zhang’s case, as early as two years ago, Yao Ming said he plans to recruit him for the Shanghai Sharks. Mr Zhang said recently that he wants to play, or at least train, in the NBA Development League after he graduates. Even if he most likely falls short of an NBA career (he wasn’t selected in the NBA draft and is an over-ager, having repeated eighth grade), the experience of playing against American up-and-comers could logarithmically accelerate his chances in the CBA. Mr Zhang is a marketer’s dream (and probably that of no few girls, too). He’s smart (Peking University being China’s equivalent of Harvard), good-looking and clean-cut, yet plays with aggression and arrogance seldom seen in Chinese players. Dr Dre already has him peddling headphones in China.

Zhang Ning wants you to buy Beats by Dre

Incidentally, CUBA itself will have been the biggest winner from the exposure it’s gotten from Dunk of China. Compared with NCAA college basketball in the US, CUBA is an underdeveloped brand outside of its core basketball-obsessed demographic. Partly that’s because the CBA doesn’t place as much emphasis as NBA teams on recruiting college ballers to fill future ranks. Most CBA teams have their own affiliated youth teams in a system that’s more akin to European football. An equally compelling reason may be that, for Chinese parents, university is for academics not sports. Even Jeremy Lin’s mother has said she faced criticism from friends for letting him play so much basketball in high school. So students feel embarrassed for being too fan-boy or fan-girl for their school team. This feeds back into a dearth of alumni boosters, in the US sense, so the fandom cycle is perpetually disadvantaged. But it’s like the chicken-and-egg question. Improve the college basketball product, align it more closely with the school brands (since everybody loves school so much), and the basketball-mad Chinese masses will dig deep into their wallets to support it.

In the not-so-distant future, CUBA’s Big Eight year-end tournament could be bigger (at least in viewership, if not dollars) than NCAA’s March Madness (its Division 1 Men’s Basketball Tournament). The 2018 March Madness tournament had over 97 million viewers on US domestic tv, and was re-broadcast to 180 countries. Amazingly, NCAA earned an estimated $900 million from March Madness alone last year, on tv ad revenues of $1.28 billion! Now that’s a goal for CUBA to aspire to.

Youku ad for CUBA match between Dongbei University of Finance and Peking University

And they are moving in this direction too. In October last year, Alisports, the sports promotion division of internet giant Alibaba, paid one billion yuan (around $150 million) for seven-year exclusive operation rights for CUBA. Alisports says it will continue to show more CUBA games than the 300 top-tier men’s basketball matches shown last year, especially on Alibaba’s Youku streaming platform. They are also quickly initiating reforms to justify this investment. CUBA has started playing games in a home-and-away system, rather than at neutral locations, to help build campus identity and fan loyalty. Smells like school spirit.

Over the longer-term, these efforts will create pots of gold for Chinese schools, just like college sports does in the US. This growing environment seems custom-made to benefit an Ivy League, NBA champion baller like Jeremy Lin. Swish.

Beijing streetball impresario MoreFree (Wu You, the little Chinese guy) playing at his world famous annual streetball tournament, SundaySunset@Dong Dan Park in Beijing
Congratulations to @jlin7

This post is the sole property of Joseph Lo, Joe Quietly Ruminates Blog. All Rights Reserved.

Stories From a Chinese Hospital

I hate hospitals. But a series of medical emergencies in my family in recent years has forced me to become something of an expert in the Chinese public healthcare system. Having lived most of my life in Hong Kong, Canada and the US, I can attest that trying to see a doctor in China is a totally alien experience, completely different than anything I’d ever encountered before.

I’ll also admit that I view healthcare through the rose-tinted spectacles of Canada, which has (almost) free universal healthcare. Seeing a doctor is free in Canada even though you still have to pay for your own medicines (unless you’re poor, in which case drugs are subsidised). My mom had a kidney transplant in Vancouver a number of years ago, which was completely free. I always tell my Chinese friends that they have no idea what socialism is until they’ve lived in Canada.

In Canada (or Hong Kong which organises its healthcare system in a similar way), when I had non-acute medical needs (like a cough or a low-grade fever, or if I needed a vaccine shot), I visited my family doctor. Even if you suspect you have a more serious illness, like cancer, it’s your family doctor you turn to first, who then recommends you to specialists. In recent years, there’s been a trend towards community health centres, typically staffed by a group of general practitioners rather than one individual doctor. But the idea is still the same. In general, in Canada or Hong Kong, you’re discouraged from visiting the hospital emergency ward unless it’s a real emergency, since you’re taking away resources from people who have legitimate acute needs. Plus, hospitals are full of germs. So stay away if you can.

In China, the opposite is true. There is no such thing as family doctors (or maybe there are, but I’m neither wealthy nor important enough to avail of their services, hence my ignorance). If you’re ill, even for a low-grade fever or a sore throat and a cough, you make your way to the best general hospital you can, because that’s where the doctors are. There are local community clinics in the public health system but they are generally perceived to be staffed by doctors of lesser ability than the large hospitals, and thus to be avoided. Many of these clinics employ semi-retired doctors in their 60’s and 70’s, that I especially make sure to avoid. Since universities in China were closed for most of the 1960s to 1970s during the Cultural Revolution, you have to consider where and how these guys got their medical training.

“Barefoot” doctors, or the Rural Cooperative Medical Scheme, were at their peak during the Cultural Revolution. Basically they were laymen with a box of bandages.

So you go to the best hospital you can. Arriving at the hospital, you first need to get in-line to pay the registration fee for a queue ticket for the doctor you wish to see. In Shanghai, the registration fee is currently around $3.20. I won’t talk too much about medical costs in China, as my situation, being a foreigner, is different than that of locals who are on public medical insurance schemes. My partner and I have private global health insurance purchased from a large insurer in Hong Kong. It’s expensive, but gives me some peace of mind in case things go really wrong.

One interesting thing about cost. These days it’s also possible to obtain the queue ticket online. And, in fact, the hospitals prefer you do that to minimise line-ups, administration costs, and scalpers. Scalping queue tickets is not only a real thing, it’s a big thing, especially for in-demand medical categories such as paediatrics or for a famous specialist in oncology. No one wants to wait in-line with a sick child. And in China, with its critical shortage of doctors, combined with the inefficient practice of pushing everyone to the hospitals, you could be waiting for most of the day before you see the doctor.

According to a report in Caixin magazine, in 2017 there were 2.44 physicians for every 100,000 people in China. Contrast that with Canada, where there are 234 physicians for every 100,000 people (and even there, most people think there should be more doctors). In fact, if you arrive at the hospital after 3pm without a queue ticket, I doubt you’ll be seeing the doctor that day.

Line up and pay, please.

After you’ve seen the doctor, it’s back to the queue to pay the doctor’s fee and for your prescription. Or if you’ve been ordered to run some tests, at this time you’ll need to pay the doctor’s fee and for the tests on a pay-as-you-go system. A funny thing is that, in virtually all large hospitals, the payment counters are centralised in one or two locations, usually in the main lobby, so you end up doing a lot of walking to and fro.

For instance, if you have a badly sprained ankle from using your lunchtime to play tennis (as I did one time), you somehow have to hobble from the registration counter on the first floor, to the orthopaedic department on the third floor for the consultation. Then if the doctor orders x-rays (as he did for me), it’s back to the first floor payment counter to pre-pay for the x-rays. You take the receipt and hobble to the x-ray clinic in the basement of the hospital to have the scans. Following that, it’s back to the doctor on the third floor for his final judgement, before returning to the lobby to pay for your prescription. Luckily, the hospital pharmacies are usually near the payment counters, so it’s not a far hobble to get there. I was also lucky because, midway through this experience, my assistant came to look for me. Besides taking over some of the legwork, she proved very adept at stealing hospital equipment, in this case some helpful crutches (which I duly noted at her next performance review). It’s much the same routine if you have the flu and the doctor orders up some blood work. You have my sympathies if you’re ill, alone, and have to fend for yourself in a Chinese hospital.

Huashan Hospital in Shanghai. In a previous lifetime it was Harvard Medical School’s teaching outpost in China. Just don’t go there if you’ve sprained your ankle.

This pay-as-you-go philosophy, oddly, extends to surgery. When my partner had acute appendicitis that required an emergency appendectomy, I was given an invoice for all the drugs to be used during her surgery and told to purchase them from a small pharmacy just outside the lobby of the hospital (this being a large modern hospital in downtown Shanghai). I did so, and was given a boxful of miscellaneous drugs, including antibiotics and anaesthesia to take back to the surgeon. That’s fine. But in the case of anaesthesia, what if she had required further doses during her surgery? Would the doctor have run out and told me to go buy more? It was also strange that this pharmacy only took cash. They did, however, give me fapiao (the official VAT receipt) upon request, so it must have been aboveboard.

A serious problem is the unequal distribution of quality medical services between the smaller towns and tier-1 cities in China. This has given rise to a large medical migration phenomenon, because the best specialist healthcare is available only in the largest cities. The seriously ill and their families will literally pack up and stream into the cities in search for cures.

Xinhua Hospital in Shanghai.

Last year, my father-in-law got stomach cancer (he’s in remission now, thankfully). While taking him to his regular chemotherapy sessions, I had a chance to poke around the highly-regarded oncology department at Xinhua Hospital in Shanghai. Not only were the wards chock-a-block, even the stairwells were full of people. Many people were also carrying luggage, indicating perhaps that they were out-of-towners.

One family told me they were from a town in neighbouring Jiangsu province, about a four hour drive from Shanghai. Their 6-year old daughter had leukaemia. So the parents quit their jobs, sold their apartment, and moved to Shanghai to get her better treatment (cramming five people – the girl, the parents and one set of grandparents – into a rented 10-sq metre studio). They did this because the little girl’s grandfather had contracted lung cancer several years before, and the medical treatment in their hometown wasn’t able to save his life. Hopefully, Shanghai was enough to save her’s.

This post is the sole property of Joseph Lo, Joe Quietly Ruminates Blog. All Rights Reserved.

China Charges Ahead

The electric car market in China

Let’s establish credentials first, shall we? I am a major petrol-head. I have been a fan of Formula One, Le Mans and MotoGP most of my life. My summer drive is a BMW sports car powered by an inline-6 motor that’s been “chipped” – ie, the ECU is modified for power and responsiveness over efficiency. At other times of the year I drive a crossover-SUV that gets me around comfortably, and reasonably fast, for work. I still maintain a valid motorcycle license, even though I ride sparingly since my halcyon university days. I can probably recite more facts about classic sports cars and racing than I can about my own family.

So I love my cars and motorbikes. And I’ll be the first to admit that modern electric cars are pretty cool. There’s more processing power in a modern high-end electric vehicle (EV) than there was in my college computer lab. AI and road sensing technology is leading to a higher threshold of safety for passengers and pedestrians alike. A need for lighter weight, higher efficiency in EVs means that innovations in chassis design and materials engineering pioneered by the likes of the Swatchmobile in the mid-80s (that later came to market as the Mercedes Smart) is finally entering the mainstream. Another cool aspect is that long tailpipe concerns are highlighting the need for cleaner electricity generation, which in turn is pushing advances in green energy and grid management.

Not a Prius, not a bomb

More importantly, the new generation of EVs are nothing like the Toyota Prius, or should I say, Toyota Snail. To paraphrase Eric Cartman, Tesla’s are hella fast, man. Electric motors deliver maximum, head-snapping, torque from standstill. Sitting in my friend’s madly accelerating Tesla, I believe it. A Tesla Model S P100D in Ludicrous Mode accelerates from standstill to 100 km/h in under 2.3 seconds (on the track with a professional driver, boys and girls), making it the fastest production car of all time. Even the NIO es8, a full-size SUV made by the closest China-brewed Tesla competitor, can accelerate to 100 km/h in 4.4 seconds. By contrast, a 2019 Porsche 911 Carrera takes 4.2 seconds to that speed. Of course, the added weight of the EV batteries means an EV won’t handle in turns as nicely as the Porsche. But the 911 doesn’t seat 6 people, 2 dogs and haul a load of groceries, either.

NIO es8

So I want an EV. And were it not for my partner’s pathological fear of “sitting on a bomb”, as she describes lithium-ion battery cars, I would probably have already swapped the Mercedes GLC300 daily-driver for the es8. In fact, I’ve been to the NIO store at Beijing Oriental Plaza twice in the past six months, crawling over and pawing the display vehicles to the dismay of the sales associates. Build quality seems good, as good if not better than any other Chinese domestic-brand car (petrol or electric) I’ve ever seen. There’s a very handsome optional upgrade to tan Nappa leather seats. I even tried to convince, unsuccessfully, the NIO store guys to let me sit in the $1.2 million EP9 EV supercar they had on display behind velvet rope (it’s a development of the erstwhile pace car for Formula E racing made by Rimac). Anyway, her safety fears may be overblown. At least none of the cars blew up while I was in the shop. Next step is to arrange a test drive, and pray it doesn’t blow up while I’m driving it.

Great economics

Random explosions aside, the economics of EVs are fantastic in China. As a baseline comparison, the GLC300 gets roughly 500-km range from a full tank of petrol in the stop-and-start traffic jams of Beijing. Given that 95-octane petrol costs about CNY7.25 per litre in Beijing, its average cost per km travelled is around CNY1.15. A friend’s Tesla Model 3 with the 75-kWh long-range battery will give about 450-km range on a full charge in a normal week. Its average cost per km travelled? With some luck and planning, it’s possible to get it down to less than 9 fen per km (about 1.3 US cents, note that there are 100 fen to a yuan).

Let me explain about the luck and planning. Urban residents in China almost all live in apartment buildings, with assigned parking in basement garages. Many, but certainly not all, parking spaces meet the requirements for installing a dedicated EV charger under the same account as your home electricity meter. If your space does meet the requirements, then congratulations! A standard charger, including installation, comes free with every new Tesla. Home electricity in Beijing is CNY0.52 per kWh, so fully charging a 75-kWh battery costs just under 40 yuan. With 450-km range, you’re paying less than 9 fen per km. If your space doesn’t allow for a charging station, all is not lost. There are plenty of public charging stations. In Beijing, the peak (day-time) charging rate is CNY1.8 per kWh, while off-peak it’s CNY1 per kWh. Charging exclusively on the public network gives the Model 3 running costs of between CNY0.30 to CNY0.17 per km.

A Tesla Model 3 charging in the basement of our apartment complex

What’s range anxiety?

Living in China, one big change I’ve noticed in the past 2-3 years is the proliferation of public EV charging stations, mushrooming literally everywhere. The Chinese Electric Vehicle Infrastructure Promotion Agency reported in January there were 330,000 public charging stations in China. The aim is to have 1.4 million in place by the end of 2019, or one charging station for every three EVs (around 1.25 million EVs were sold in 2018, and they expect to sell a larger number this year).

From personal experience travelling around China’s tier-1 and tier-2 cities for work, I have seen charging stations now installed in the parking areas of most large-scale shopping malls, office complexes, public parking lots, parks, and larger petrol stations. In Haidian District of Beijing, the university and high-tech district where I am, there are about 500 public charging spaces. Granted, it’s Haidian, China’s Silicon Valley and home of Tsinghua University and Peking University. But in fact, since late last year, Beijing municipality has required that all new public parking lots allocate no less than 10% of parking spaces for charging (I’m not 100% certain, but I believe this covers new shopping malls and offices too).

EV charging station at Haidian District, Beijing

It’s not just urban centres, but highways too. It’s definitely possible to drive an EV with a decent-sized battery along China’s most economically-important corridor – the 2,800-km of inter-province expressway connecting Shenzhen to Xiamen, Hangzhou, Shanghai, and then to Beijing. I make this trip, actually parts of it, at least once a year (courtesy of my family’s two pugs, a short-nosed dog breed not welcome on most airlines scared of liability). Along the corridor, there are service areas approximately every 50-km (rest stops in North American parlance), all with a petrol station, fast food outlets (often a Starbucks, KFC, McDonald’s, and a few local brands), a convenience store. Two years ago, I started seeing some EV charging stations. Today I see charging stations at every service area. I’d say the only limitation to long-distance driving now is the time it takes to recharge.

Consumers like them

So EVs are cool and have great operating economics. But there are additional reasons why Chinese buyers like them. For one, they are easier and cheaper to register than petrol cars. An explosion of car ownership since 2012 has led to to unfettered congestion and pollution in many cities, which the authorities are trying to curb by limiting new car registrations and with road space rationing. A prospective car buyer in Shanghai, Shenzhen, and Guangzhou must first purchase a new vehicle registration through a monthly auction before they’re allowed to buy a car. This new registration now goes for roughly CNY100,000 (around $15,000), a good chunk of change, which EVs are exempt from. There’s no auction in Beijing. Instead there’s a lottery offering a 1-in-2,000 chance every month (with a ceiling of 100,000 new licenses issued each year). A friend of mine has been in every lottery for four years; she’s still waiting to hit the jackpot. EVs are also exempt from this, as well as from road restriction and congestion pricing. In Beijing, private petrol cars are restricted from driving one weekday of every week, depending on the last digit of your license plate number (Monday to Friday, everyone’s allowed out on the weekends).

There are also social factors contributing to EV popularity. Young urban women increasingly prefer to drive themselves rather than take public transit or didi (China’s Uber). A quick (granted, unscientific) survey of female colleagues and friends in their late-20s to mid-30s found the belief that rush hour subway trains in Beijing and Shanghai are notorious pervert magnets, while several high profile rape-murder cases last year involving didi drivers and their female passengers have frightened them off ride-sharing after dark. The development of inexpensive electric urban cars, small two-seat vehicles that are easy to park and drive, has spurred this segment. The futuristic-looking Baojun E200, jointly developed by General Motors and SAIC Motor, is a good example. Weighing 830-kg, it offers 250-km range from a 24-kWh battery pack and costs just CNY54,800 after subsidies, very affordable for a well-educated female professional.

SAIC-GM Baojun E200

Another interesting rationale for the popularity of EVs in China versus the US is that Chinese consumers, in general, are eager early adopters because, well, prior to 1978 with the country’s economic reform and opening up, there was nothing new to adopt. People lived in apartments assigned to them by their work units, rode bicycles of ancient design, wore uniform grey frocks and didn’t have private possessions per se, let alone cars. So now that Chinese people are able to afford cars, and whatever else they fancy, conspicuous consumption has rocketed and car ownership, in particular, has exploded. As recently as 2005 there were only 10 million private cars in the entire country; by the end of 2017, there were 170 million. So not having grown up with any “dream car” to aspire to (like mine was TV detective Magnum P.I.’s scarlet Ferrari 308 GTS, now that’s a car), means there’s no baggage when considering cool new stuff.

China’s top 10 selling EVs in March, 2019

Rolling back subsidies? Meh.

In March, the Ministry of Finance announced it was reducing the cash subsidies given to EV buyers. The new program offers CNY25,000 for EVs with range over 400-km, and CNY18,000 for vehicles between 250-to-400-km range. It cancelled subsidies for EVs with less than 250-km range, and forbid provincial and local cash subsidies. A Bloomberg report said the new rules represented a near 67% roll-back of cash subsidies for EV purchases, much higher than the expected 40-50% reduction.

Yes, the old plan was more generous. It gave CNY35,000 for EVs with 80-150-km range; CNY50,000 for cars between 150-to-250-km range; and CNY60,000 for EVs with over 250-km range. But the old program also encouraged low-technology. Cheap and nasty EVs in the less-than-250-km range category have accounted for as much as 70% of EV sales to date. The new program will encourage more innovative and efficient higher-range EVs, while also freeing up cash for the government to accelerate investment in charging infrastructure. This is more likely to further encourage EV take-up. So I don’t think the new plan is likely to have much drag on sales growth on EVs with more than 250-km range, which is the category the industry needs consumers to buy. If anything, the EV proposition is getting better and better, with more range, more charging stations, and less anxiety.

BYD e6 taxi in Hong Kong

Critical mass reached?

I’m sold on EVs, but it’s still too early to say that critical mass has been reached in the real world (that’s the inverse of what’s in my head, according to my partner). While EV sales are just a fraction of petrol cars, their take-up continues to accelerate. In 1Q2019, EV sales rose 118% year-on-year to over 254,000 units. EVs now make up some 10% of private vehicles in Shanghai and other major cities. And whereas sales of petrol cars have plateaued and are now beginning to fall, EV sales are still climbing strongly.

There’s further impetus for EV growth. Since the beginning of this year, each Chinese automaker has been obligated to make EVs a minimum percentage of their overall sales under a “cap-and-trade system” similar to what is in place in the US. This requirement is helping incubate the more than 500 EV companies in China (most of which are start-ups), as it encourages the established domestic automakers to collaborate with their EV counterparts in design, manufacturing, sales and service. The best example is the relationship between NIO and JAC Motors (Jianghuai Automobile), a state-owned automaker in Anhui province. NIO outsources all of its manufacturing to JAC in a tie-up modelled after the Apple-Foxconn relationship.

BYD Yuan EV535

Will there be 500 EV makers still in business in five years? Most likely not. The closest analogue to what we’re seeing in China now is the birth of the US auto industry in the first few decades of the 1900s. At its peak, there were 485 car-makers, which whittled down to 253 in 1908, and then just 44 in 1929. By then 80% of US car production came from Ford, General Motors and Chrysler. But while companies disappeared, as we all know consumer demand for cars did not.

This post is the sole property of Joseph Lo, Joe Quietly Ruminates Blog. All Rights Reserved.

The Speedbird has Landed

I had the chance to fly in the British Airways’ Concorde between London and New York in September 2003, a couple of weeks before BA mothballed its supersonic passenger jet fleet. The joyride cost me a months’ salary (flying Concorde cost more than a normal first class air-ticket), but it was worth it to tick off my bucket list. I have been fascinated by the Concorde for as long as I can remember – its supersonic speed, its hooked eagle’s beak, canard wings, long cigar shape. To my mind, it’s what an aircraft should look like.

Oh, you know what else made the trip worthwhile? The musician, Sting, was in the seat next to me. I had the chance to introduce myself and tell him, “don’t worry, I won’t bother you, I’m not a fan”. After which he put on his headphones to ignore me for the rest of the flight.

A version of this article was originally published in South China Morning Post on October 22, 2003. (https://www.scmp.com/article/431898/speedbird-has-landed)

Here’s what The Economist thinks about latest developments in supersonic air travel: https://www.economist.com/technology-quarterly/2019/05/30/supersonic-aeroplanes-could-make-a-comeback

The Concorde supersonic airliner at London Heathrow

An hour into British Airways flight BA001 from London to New York, the journey is almost half over. The aircraft’s captain, Adrian Thompson, speaks softly over the public-address system, telling passengers in a calm, cool and collected voice not unlike that of supersonic pioneer Chuck Yeager.

‘Ladies and gentlemen, I thought you might like to know that we are now flying faster than a speeding bullet, flying on the very edge of space … flying so high that if those of you with a window seat care to look, you can actually see the curvature of the Earth. You are riding a rocket, that’s the only way to describe it,’ Captain Thompson tells the 100-odd lucky passengers onboard, including myself.

A rocket is not what we are riding, though. Yet a quick glance at the speedometers conveniently placed in the front of the two passenger cabins – they read mach 2, or twice the speed of sound, at an altitude of more than 18,288 metres – confirms that this is no ordinary jetliner either, which is perhaps why its pilot sounds so much like Mr Yeager.

Concorde Lounge at London Heathrow

Another glance out of the small, grapefruit-sized windows reveals a view that few earthbound humans will ever see: down below are pillowy clouds and the blue afternoon sky, while stretching above is the inky darkness of space. The windows are warm to the touch and the wings have turned purple – both effects of friction – as ‘the rocket’ hurtles through the outer reaches of the atmosphere. Its fuselage has been stretched almost 45cm by the immense heat.

Despite all this, the flight is smooth, since turbulence is something experienced only by lesser aircraft that have to fly much closer to the surface of the Earth. For the passengers, there is no sonic boom. That is something for the landlubbers far below.

This is the Concorde, known to air traffic controllers by its ‘Speedbird’ call sign, which for the past 33 years of its operational life with British Airways (BA) and Air France has represented the epitome of luxurious air travel, the domain of wealthy celebrities, bankers, captains of industry and socialites. Sting is a regular passenger, as are David Beckham and his wife, Victoria. Barbra Streisand joked that it was her nose that inspired the aircraft’s famous ‘droop nose’. And nearly all members of Britain’s royal family have flown it. The late Queen Mother celebrated her 85th birthday sitting in the jump-seat of the Concorde’s cockpit. Queen Elizabeth II travelled on Concorde in 1992, during her tour of the United States.

More cramped than JetBlue

To most people, though, Concorde is more than just an extremely fast jetliner for the wealthy It represents the human imagination and the idea that, through innovation and ingenuity, we can break the limitations of gravity and space.

Captain Mike Bannister, BA’s general manager of the Concorde fleet and its chief pilot, says his most amazing experience at the controls of the aircraft was during Queen Elizabeth’s Golden Jubilee, when he flew in formation with the Royal Air Force’s Red Arrows demonstration team over Buckingham Palace. ‘I couldn’t anticipate the sensation, and sense of excitement, at seeing a million people in Hyde Park looking up at the Concorde as it flew past. I could anticipate the aviation experience, but not the human experience,’ Captain Bannister says.

Sadly, after more than 50,000 flights carrying 2.5 million passengers, the Concorde will bow out on Friday with its final commercial trip between New York and London. BA plans to retire the five Concordes in its fleet to museums around the world, while Air France has already begun to do the same. Air France has also scheduled a sale of some of its spare Concorde parts through auction house Christie’s next month, including nose cones, seats and even the aircraft’s beautifully designed Olympus engines.

High-tech, back in 1976

The reason for the Concorde’s retirement is a simple one: economics. Before the crash of an Air France Concorde in April 2000, which killed 114 passengers and crew, the services were symbolic of the caviar lifestyle. By the time the aircraft returned to service after a 16-month refit to prevent another fatal accident, the world was a much different place and most of its traditional clientele had been lost. The September 11, 2001, terror attacks in the US were still fresh in people’s minds. In any case, the global stock market meltdown of the previous year meant that even the rich had less disposable income to throw away on such a conspicuous luxury as first-class travel and supersonic flights on the Concorde. At the lowest point, some flights carried fewer than five passengers.

The Concorde’s age has also contributed to its demise – it entered service in 1976. At the beginning of this year, Airbus, the modern incarnation of the Anglo-French consortium that built the Concorde, told BA and Air France that it would no longer be able to offer technical support for the supersonic aircraft at commercially viable rates, rising US$60 million during the next two years.

In any case, while BA has always claimed its Concorde services are profitable, the 14 operational jetliners, which cost British and French taxpayers the equivalent of US$18.5 billion in present-day dollars to develop, were handed over to the two airlines for nothing. By comparison, a modern Boeing 747-400 jumbo jet, which can carry more than four times the number of passengers and uses a quarter of the fuel to cross the Atlantic has a list price of about US$200 million.

Flying on the edge of space

The Concorde betrays its age the moment we board. The thin, cigar-shaped fuselage necessitates a cramped cabin that is no wider than that of a modern regional jet for 50 or 60 passengers. A cabin attendant of normal height has to hunch her shoulders and duck her head to allow a passenger by in the aisle. There is no inflight entertainment system to save weight and the seats, while swathed in greyish-blue Connolly leather of the type found in high-end luxury cars, are thinly padded shells sporting manual controls that do not allow much adjustment.

Throughout the flight, particularly on the ground before takeoff and when the Concorde’s afterburners are switched on to propel the plane through the sound barrier, there is a strong smell of kerosene, on which the engines feed. In no modern jetliner would such outside smells be allowed to invade the cabin.

But this idiosyncrasy has not deterred the large numbers of enthusiasts eager for a last chance at flying supersonic. Since April, when BA and Air France announced the Concorde’s impending retirement, the flights have been nearly fully booked and full of noisy tourists (me included) eager for a supersonic flight-of-a-lifetime on the Concorde’s marvelous 1960s-era technology.

The wings turn purple from the heat

And far from the sophisticated, quiet, polite socialising that must have marked flights during the Concorde’s heyday, flights are now more akin to rowdy package tours, with passengers wandering the aisles, swapping notes and taking photographs and videos of its every aspect. Unlike all other commercial flights, passengers on the Concorde are not asked to turn off cameras and electronic equipment during takeoffs and landings, providing the opportunity to capture its white-knuckle 460km/h acceleration down the runway on video.

Besides being a nuisance to celebrities – Sting, the musician, sits next to me – the present breed of passengers are also cunning thieves, taking as souvenirs virtually anything on board that isn’t screwed down. The flight attendants say the safety cards are the most popular souvenirs, followed by the menus and inflight magazines exclusive to the British Airways Concorde; they later plead unsuccessfully with passengers not to take the safety cards as these are required for the next departing flight. Needless to say, the safety card in the pouch in front of my seat has found its way into my rucksack, along with the menu, magazines, and some legitimate Concorde souvenirs purchased from the duty free trolley.

Unfortunately, since September 11, the elegant silverware emblazoned with the Concorde insignia have been replaced by plastic cutlery in the name of safety, otherwise those too would have found their way into my grubby hands.

Still, the aircrew say they don’t mind the revelry. Julie van den Bosch, who joined the fleet in 1976 after a brief career in modelling and is now the Concorde’s longest-serving cabin crew, says ‘it’s been like this since they made the announcement’ that Concorde would be retired.

Please don’t steal the cutlery

‘We don’t mind it at all. Like the passengers, we just want to enjoy every last moment,’ Ms van den Bosch says. ‘Like the passengers, we are also saying goodbye to a very astonishing aircraft.’ Later, while waiting in line to collect a supersonic flight certificate and to have our picture taken with the crew in the Concorde’s chock-full-of-dials cockpit, a 20-something Japanese enthusiast, who says: ‘Call me Toshi’, recalls the flight: ‘That was cool!’

Nearly all other passengers I asked – including a Manchester couple celebrating their golden wedding anniversary, an Australian businessman reliving his dead father’s dream vacation, and a BA pilot paying full fare for the chance to escape from his day job of flying subsonic Boeing 767s to continental Europe – agree with Mr Toshi’s summation of the experience. On what other adventure could someone sit at the edge of the Earth’s atmosphere, while spooning Osetra caviar and sipping Pol Roger 1986 Cuvee Sir Winston Churchill champagne?

Yang Liwei, China’s first taikonaut, may have flown higher on his journey above the Earth last week, but his fried rice and tea are poor substitutes for vintage bubbly and roast guinea fowl with truffle stuffing.

Caviar and prawns before supper

While the Concorde is most often thought of as the ultimate in luxury travel, on-board service bears little relationship to modern first-class service. Its closest relation is probably the Pan Am Clipper services operated by Pan American Airways on a series of around-the-world flights during the first half of the last century, when air travel was a new and exciting technological frontier.

While speed is the Concorde’s forte, the journey is over much too quickly and before the wonderment of having barged past the sound barrier truly sinks in, Captain Thompson announces that we will soon be arriving in New York, and thanking the passengers for ‘flying this wonderful aircraft’.

‘Sadly, it will soon be heading, like the others, to a museum. Right now, I feel like joining it,’ he signs off.

Inside the Concorde cockpit

This blog post is the sole property of Joseph Lo, Joe Quietly Ruminates Blog. All Rights Reserved.

The Greater Bay Area – Xi’s Plan for the South

A version of this article was originally published in Week in China (www.weekinchina.com – paywall)

Chinese president Xi Jinping has a grand vision, called the Greater Bay Area Plan, to transform the south coast of China into an integrated cradle of innovation that will help lead the country into a new era of prosperity. It’s a fantastic vision of the future. But for people who already live and work in the GBA, it’s also a bit head-scratching. We’ve been living this dream for 40-odd years, even if we did call it the Pearl River Delta.

In 1979, then-paramount leader Deng Xiaoping made the stupendous decision to fence off parts of Guangdong and Fujian province as market-oriented special economic zones (SEZ) that would help lead the country out of poverty. Investors from Hong Kong and Macau, especially those whose family roots originated in Guangdong, which is most of us, quickly took advantage of the opportunities afforded by an abundance of cheap land and labour, greased by light regulation. My family was among those who made an early bet on Shenzhen in the early 1990’s, establishing a plush-toys factory on property leased from Futian district. That our factory was successful had as much to do with cheap rent and the thousands of (mostly) young rural women surging into Shenzhen for jobs and a new life, as it did with our acumen.

Seeded by capital and expertise from Hong Kong and Macau, the GBA now produces more than one-third of China’s exports and contributed 12% of China’s GDP in 2018, over $1.5 trillion. If the GBA were a country, it would be the thirteenth largest economy in the world, just behind South Korea and ahead of Spain and Australia. This success is no mean feat, considering that the GBA spans three separate legal, monetary, passport and customs jurisdictions.

Shenzhen-GBA-GDP
Photo credit: BBC

What’s old is new in the GBA

To paraphrase Benjamin Disraeli, change is inevitable and constant. The last of the barbed wire fencing around the Shenzhen SEZ was finally taken down last year. Those young women that my family’s Shenzhen toy factory relied upon? Gone home to Hunan or Sichuan to raise families, and few have come to replace them. Cheap locations are also a thing of the past. Shenzhen’s landscape has transformed so completely that our old factory address, then on the outskirts of town, is now part of a high-density residential development in a central location where a 1,000-square feet flat costs slightly more than $1 million.

These changes have necessitated that the GBA keep moving up the value-added chain for survival. So far, that’s been happening organically. Shenzhen has morphed into a dynamic centre for prototyping consumer electronics and software, underpinned by companies like drone-maker DJI, mobile phone giant Huawei, and internet linchpin Tencent. And while the original Shenzhen model was all about export, these days catering for China’s own middle-class is equally important. Government forecasters say domestic private consumption will account for 80% of China’s GDP growth this year. So instead of making toys for export, I’ve invested in a startup that makes mobile games for Chinese millennials. Zhongshan and Foshan, the “home counties” of the GBA, have developed flourishing industrial catering and food processing industries, catering largely to the 105 million people in surrounding Guangdong province and the 8 million-plus in Hong Kong and Macau.

How can Xi help?

Formula one racing cars have a boost button the driver presses for a jolt of extra power in overtaking maneuvers. Mr Xi’s plan for the GBA is essentially the same thing; let’s take China’s most dynamic economic region and supercharge its development to help the country navigate around the impending middle income trap.

Mr Xi can make this happen by ensuring that more convenient transport links are built for the GBA, particularly east-west links. It is critical that the construction of the Zhongshan-Shenzhen Corridor be completed as scheduled in 2024. Connecting the east and west sides of the Pearl River Delta will ensure more balanced growth. Currently, the only northern route across the PRD is the heavily-used Humen Bridge running between Nansha and Dongguan. I drive often between Macau and Shenzhen and, even in light traffic, it’s a 4- to 5-hour journey which often takes a lot longer. With the ZSC, that journey time is expected to be halved. It’s a shame the new bridge doesn’t include a high-speed rail line, as well.

 

HZMB
Photo credit: The Telegraph

It’s also critical to ensure that people can move freely about in the GBA, especially between Hong Kong, Macau and the Mainland, while still respecting one country, two systems. It’s especially onerous in Macau, where fears of inappropriate behaviour by Mainland cadres have led to irrationally tightened access. For example, in the last year, a routine invitation extended to Zhuhai officials to attend the annual dinner of a Macau trade association necessitated back-and-forth paperwork months in advance. Further work reducing overall red tape for businesses will also help. My own company employs an administrative assistant whose primary job, it seems, is to queue – at the bank, at the tax bureau, at the labour bureau, and so on.

What’s the GBA’s ceiling?

Silicon Valley, or the San Jose metropolitan area, is most often mentioned as the target the GBA should be aiming for. This comparison is unfair and it sets the GBA up for failure. The GBA inhabits a disparate world that includes very diverse micro-economies, from agriculture to technology. Silicon Valley is tiny, by comparison, and concentrated on software and innovation.

But there is one thing I believe the GBA must emulate, and that is Silicon Valley’s openness. Silicon Valley is world-class because it’s a melting pot of the brightest people and best ideas from all over the world. Taiwanese-Americans are well represented there, as are Indians. About 15% of Silicon Valley startups are founded by Indians, who also lead some of its biggest companies, like Microsoft, Google and Adobe. Since the role each city plays in the GBA is clearly laid out in Mr Xi’s plan, to be world-class region as a whole means each city must be a leader in its field. It’s not enough for Hong Kong and Macau to be international, while the rest of the GBA is cloistered.

The GBA has a long way to catch up to Silicon Valley’s track record of economic dynamism and innovation. Let’s hope that Mr Xi’s vision helps the GBA to create a whole that is, at the very least, greater than the sum of its parts.

 

This blog post is the sole property of Joseph Lo, Joe Quietly Ruminates Blog. All Rights Reserved.

Luckin Coffee – A Coffee Unicorn with Chinese Characteristics

I love coffee. I start every morning with a café au lait. I have a cappuccino for my elevenses (yes, like Paddington although I don’t always have marmalade). An espresso after lunch, followed by another cappuccino at tea time. So when Luckin Coffee, a start-up chain in China, announced its Nasdaq IPO plans, my caffeine-enhanced reflexes automatically grabbed a prospectus to see if the company’s stock is worth adding to our retirement stash.

Luckin Coffee styles itself as China’s homegrown Starbucks, with an extra shot of digital disruption. The two-year-old company will raise over $500 million when it debuts on Nasdaq, with an initial market cap of $4 billion. This is amazing. More than amazing, because only last month Luckin Coffee completed its $150 million Series B with a post-money valuation of $2.9 billion. It can use the cash though, since it burned through about $75 million in the first quarter of 2019. Break-even isn’t even a dot on the horizon.

To be clear, Luckin Coffee is not anything like Starbucks. Starbucks in China is a premium, aspirational brand. Chinese people, especially people from second-tier cities, desire to be seen sipping Starbucks. It’s been careful not to oversaturate the market, even though there are now over 3,700 Starbucks restaurants across China, far more than the 2,400 McDonald’s in China. The average Chinese Starbucks is generally more luxurious than its US counterpart, with nicer furniture, lighting and ambience. Most people don’t realize that a tall latte at Starbucks in China is priced about 20% higher than in the US, despite wages in China being so much lower. Starbucks in China has become the default spot for informal business off-sites. Hey, we’re fancy white-collar folks so let’s meet at Starbucks and discuss a project. Probably because of its high-end positioning, Starbucks resisted digital ordering, payment and delivery models until striking a partnership with Alibaba’s ele.me food delivery platform (think Uber Eats, but with thousands of crazy e-bike riders) last year.

For Luckin Coffee’s founders, coffee seems almost incidental. If they could sell delivery orange juice for the same traction, I don’t doubt they would. First sentence in its prospectus: “Our mission is to be part of everyone’s everyday life, starting with coffee.” Of its 2,370 stores at March 31, only 109 were actual restaurants (so-called Relax stores in Luckin Coffee parlance, roughly comparable to a US Starbucks but not as nice as the average Chinese Starbucks). Virtually all of the rest were Pick-Up stores. What is a Pick-Up store? Imagine a typical delivery-pizza joint in the US, like Domino’s. It will be a tiny shop with little or no seating that sells 90% of its pizzas by phone order and pimple-faced delivery boys.

I visited a Pick-Up store recently in Zhongguancun business district in Beijing that was little more than a small counter next to a convenience store in the lobby of an office complex (there actually was a Domino’s next door, too). The Luckin Coffee staff told me the counter space was rented from the convenience store. In fact, its stores are almost all like this, located inside busy office complexes, industrial parks and university campuses. This is Luckin Coffee’s strategy. Focus store-building in high density areas, acquire new customers aggressively. Rather than luring you out of your cubicle with a third-place like Starbucks, it instead promises to send the caffeine jolt straight to your desk. Coffee’s free if not delivered within 30 minutes.

Prices are lower than at Chinese Starbucks, closer to McCafé in China. A regular-sized latté is 24 yuan (~$3.50), while a snack-sized ham and cheese croissant is 16 yuan (~$2.35). But the prices on the menu are almost irrelevant at this point. To acquire customers as aggressively as it has, Luckin Coffee’s had to give away a lot of free coffee. The entire menu was 50% off in 4Q18. Free coffee when you first download the app. Free coffee upon each friend referral. One free coffee when you buy two. Five free when buying five. In the first quarter of 2019, for every new customer acquired, it spent 16.9 yuan in “new customer acquisition” costs and 6.9 yuan in “free product promotion expenses” (I’m not certain there’s no double-counting, the prospectus isn’t clear). In the last quarter of 2018, those figures were 25 yuan and 10.1 yuan, respectively. So at least its spending on new customers is falling.

Unfortunately, the number of new customers is tumbling concurrently with its customer acquisition spending. New transacting customers fell from 6.5 million people in 4Q18, to 4.3 million in 1Q19. Existing customers seem indifferent as average monthly transacting customers has plateaued – from 4.33 million in 4Q18, to 4.4 million in 1Q19. More worryingly for a startup supposedly on its aggressive growth curve, sales are falling. In 4Q18, it sold 17.65 million average monthly total items. That dropped to 16.28 million items in 1Q19. Of that decline, coffee accounted for a small decline from 13.42 million items to 13.08. But other (non-coffee items) fell precipitously from 4.23 million to 3.2 million. One caveat: the Lunar New Year festival, which is a week-long holiday for many offices, falls in the first quarter of each year and will have affected seasonal sales.

So Luckin Coffee seems to have had to buy most of its “friends”. And friends who are bought and paid for are fair-weather ones at best. The result is total operating losses of 1 billion yuan (~$146 million) for 1Q19, from 479 million yuan revenue (~$71 million). The chain has no clear path to break-even, let alone profitability, since it plans to keep growing its network for years. Let’s leave Starbucks in the portfolio then, and give Luckin Coffee stock a pass? Maybe. But there is something intriguing to Luckin Coffee’s claims of digital disruption. I just don’t think its future success lies solely in coffee.

Luckin Coffee is expending significant effort on its digital strategy. The chain only wants customers to order and pay via their mobile app. This allows it to minimize in-store employees – even in the Relax stores, there are no cashier staff. As such, Luckin Coffee knows everything about your consumption in real-time – time, date, location, preferences, etc – and can consolidate the data for future data mining, to tailor marketing promotions for discrete customers or adjust its store-opening strategy. What excites me more, though, is the thought that Luckin Coffee can also leverage its data and platform to sell other things that China’s overloaded office workers might want. Our mission is to be part of everyone’s everyday life, starting with coffee. That convenience store in Zhongguancun where the Pick-up store is located? Luckin Coffee might conceivably strike a partnership with the convenience store (or more likely its parent company) to list select products on its platform for sale, to be delivered along with coffee and croissants. All of a sudden Luckin Coffee’s mobile app becomes a third-party ecosystem that can take advantage of network effects and new retail opportunities (as Alibaba calls online-to-offline retailing).

As I write this blog post, an interesting piece of related news has appeared in my desktop notifications. Meituan, China’s leader in food delivery with two-thirds of the market, announced an expansion of its food delivery network into urban courier services (delivering documents and small packages from office to office). Meituan, Hong Kong-listed with a $43 billion market cap, started life in 2010 as a Groupon clone but is now the faraway trendsetter for what it calls local life new retail services (ie, food and grocery delivery within a certain radius, cinema tickets, bike-sharing after it acquired Mobike for $2.7 billion last year, etc – I’m going to write a blog post soon that summarizes and translates all the latest catchphrases in Chinese internet). Incidentally, Meituan is Luckin Coffee’s delivery partner. And Luckin Coffee’s market footprint just happens to perfectly overlap with urban courier services. On that basis, it makes sense for a deeper collaboration between the two. After all, if coffee, croissants and convenience store yogurt-Oreos-tampons can be delivered together, why not documents and small packages too? Or eventually, for Meituan to acquire Luckin Coffee as a plug-and-play asset that immediately extends its core local life business in a much more synergistic way than its acquisition of Mobike did.

Luckin Coffee has intriguing unrealized potential. But before it can crystalize what’s possible, it needs to deliver answers about its core business’s traction and sustainability. On a metaphysical level, I find it difficult to believe it’s possible to buy real customer loyalty. Can the chain find a sweet-spot between new customer acquisition and burn rate? If it can show investors a path towards being viable, and it quickly sprouts as an ecosystem for wider local life services….as my favourite author Mark Twain wrote, “There’s gold in them thar hills!”

This blog post is the sole property of Joseph Lo, Joe Quietly Ruminates Blog. All Rights Reserved.

A Monumental Date for Modern China

Today marks one hundred years since the May Fourth demonstrations in 1919, when thousands of students rallied in Beijing to protest China’s treatment in the Versailles Peace Conference. The May Fourth Movement, as the extended protests became known, was a seminal point in the country’s history, shaping modern China in ways that are still felt today. The demonstrations radicalized China’s fledgling political movements and laid the groundwork for the birth of the Chinese Communist Party two years later.

There’s not much I can write about the May Fourth Movement (and the events surrounding it) that aren’t in history texts already. But I feel it’s important that I try, if only to impart to my cousins who grew up overseas, in Canada and the US, just how important May Fourth is to our modern Chinese identity. China today is China because of this day a century ago.

China had entered the First World War on the side of the Allies on the condition that the German colony in China be returned upon victory. At the time, Germany controlled most of Shandong province with its important deep-water port at Qingdao, or Tsingtao as it was then spelled (eponymous with the tasty brand of beer which we can thank the Germans for). Over 140,000 Chinese were sent to fight under the British and French, mostly in a logistics role, although 10,000-20,000 eventually lost their lives on European battlefields. During the war, Japan, which was also fighting with the Allies, revealed its own hunger for Qingdao. Japan was subsequently able, at the Versailles negotiations, to manoeuver Britain, France and the US into acquiescing to its demands, whilst bullying and bribing the Chinese government of the time (the Beiyang government, or the First Republic of China, which was then fractured into warlordism) to submission. This was the spark that catalyzed the Beijing students’ march on Tiananmen on May 4th, 1919.

Starting early that day, over 4,000 students from 13 universities and colleges in Beijing marched from their respective campuses, voicing disgust with their own government’s incompetence and corruption, the betrayal at Versailles by the Western democracies that many students so admired, and their loathing of Japanese imperialism. Not just Japanese imperialism, but also (and even more abhorrent to the Chinese psyche) collaboration by the warlord Duan Qirui and his followers, including Cao Rulin, then vice-minister of foreign affairs who led the Chinese delegation at Versailles. General Duan had taken 145 million yen in soft loans from the Japanese two years earlier, ostensibly to help fight the Great War but really to consolidate his power in China as the premier warlord. This was $75 million dollars in 1917 money, or roughly the equivalent of $1.5 billion in today’s, assuming 3% annual inflation. The enraged protestors marched on Mr Cao’s home in Beijing, burning it down. In the aftermath, student leaders were arrested and beaten (but that’s par for the course).

The protests spread the next day, as all Beijing students went on strike. And stirred by newspaper coverage of the Beijing protests, students and workers in cities across China took up the torch. They expanded the protests until engulfing the country. From early June, a general strike by workers in Shanghai, the country’s commercial hub, paralyzed the Chinese economy. Under intense public pressure, the Beiyang government’s representatives in Paris could not sign the Treaty of Versailles, despite having previously agreed to terms. This led to China’s own separate peace accord with Germany, mediated by the US, in 1922, which returned Shandong province and Qingdao to nominal Chinese sovereignty (nominal because Japan would eventually invade anyway).

The most important accomplishment, I think, of the May Fourth Movement was that it opened the eyes of Chinese activists to the awesome power of political organizing and harnessing public opinion. Far from just being impassioned but powerless “intellectuals”, the protests showed them that they could challenge authority and have genuine influence in shaping the future. Mao Zedong later credited the May Fourth Movement with being the launch pad for the communist revolution in China. But it’s important to keep in mind that the May Fourth protests were not an expression for democracy, nor of specific support for communism or nationalism or any other –isms. It was a popular uprising that was deeply patriotic and expressing the widespread anger with the West’s betrayal of China and Japanese imperialism. It was as much about self-disgust at what a weakling China had become, and the self-expression and experimentation with political ideas that they thought, just maybe, might better suit China going forward.

In fact, May Fourth didn’t just happen in isolation. It was an extension of the New Culture Movement, started in 1915 by a group of influential thinkers and documented in a popular magazine called La Jeunesse (or New Youth in Chinese and English, but French was on the masthead because educated people knew French a hundred years ago). This group was frustrated by the slow pace of progress in China after the 1911 Xinhai Revolution that ended imperial rule. The revolution had otherwise done nothing for China’s problems except create a class of corrupt warlords and their cronies. So there was widespread disillusionment. People began promiscuously embracing all things modern while doubting things old, traditional and Chinese. So those marching the streets on May Fourth were feminists, Marxists, scientists, socialists, anarchists, Christians, conservatives, liberals, republicans, legalists, cats of all different colours and shapes. Some of them disagreed with Dr Sun Yat-sen’s ideas for a second new nationalist republic, while some agreed. But really the only thing they agreed on was that the old ways were bad. And so from this swirling cauldron of ideas, modern China began to take shape.

These people are also why I admire Peking University so. The New Culture Movement and, by extension, Modern China sprouted there. Under Peking University’s then-president Cai Yuanpei, a French and German-speaking scholar, the university became a magnet for all new ideas. Among those attracted were Chen Duxiu and Li Dazhao, later to be the co-founders of the Chinese Communist Party. Mr Chen, dean of the university’s School of Letters, had founded La Jeunesse. Mr Li headed the university’s library. The noted linguist, Hu Shih, who was nominated for the Nobel Prize in Literature in 1939, used La Jeunesse to popularize vernacular Chinese over the Classical Chinese that was still the norm (imagine if all books and newspapers were written in the Classical Latin of Cicero, even though you otherwise spoke and used modern colloquial French, Spanish or Italian). Others included Yang Changji, an educationalist from Hunan province who brought with him his student Mao Zedong. The young Mr Mao worked in the library reading room and was a regular contributor to La Jeunesse. The great novelist, Lu Xun, published some of his acclaimed works in the magazine, including A Madman’s Diary and The True Story of Ah Q. Likewise did Mr Lu’s younger brother, the acclaimed essayist, Zhou Zuoren.

A lot has changed for China over these one hundred years. While I am deeply a patriot, I am also a believer in globalism. I don’t still hold grudge against the past sins of Japan or France and England. It saddens me that, after a century since May Fourth, China still has some way to go before we catch up – socially, economically, technologically – with the developed countries of the West. So I believe there’s still a place in modern China for independent ideas. And keeping an open-mind, to have healthy debates about our nation’s direction. Just like on May 4th, 1919 (although we should leave out burning down people’s houses, no matter how much of a rat we think they are). Let’s leave it at that.

 

This blog post is the sole property of Joseph Lo, Joe Quietly Ruminates Blog. All Rights Reserved.

A Taiwanese-American in the White House?

Andrew Yang wants to run in the 2020 US presidential elections as the Democratic Party candidate. Victory is a long-shot. But I’ve told my wife that, if he gains the White House, we should consider emigrating to the US. Not just because Mr Yang is of Chinese ethnicity, like us (gotta support the brother!). But because President Yang will hand out $1,000 each month to every adult American citizen, no strings attached. He calls it the Freedom Dividend – ensuring citizens share in the material success of the wealthiest nation in history.

A proposal for universal basic income (UBI) is, surely, naïve for anyone with aspirations for higher office in the US? The American Dream is one of prosperity and upward social mobility fueled by hard-work and initiative. Socialist hand-outs have no place in this ethos. Even in left-leaning Canada, UBI has never gained mainstream traction. Perhaps because Canada is, like the US, an immigrant society where many first- and second-generation Canadians share notions of meritocracy and self-improvement, albeit within a kinder society with universal healthcare and a better social safety net. If Americans support his idea, and vote Mr Yang into office, 260 million US citizens over 18 multiplied by $12,000 a year would cost around $3.12 trillion. How does he propose to pay for it? So, since initially hearing about Mr Yang’s presidential ambitions a few months ago, I’ve been curious to learn more. It turns out that there’s rhyme and reason to his madness.

There’s precedent in the US for sharing economic windfall with citizens in Alaska, a traditionally conservative state. Alaska pays an annual dividend of between $1,000 to $2,000 to citizens from a percentage of oil revenues. Indeed, the Alaska Permanent Fund was created in 1976 to put some oil revenues out of the government’s direct control because citizens were unhappy with profligate politicians. By all accounts, the scheme has helped towards eliminating extreme poverty in Alaska, without encouraging moochers. Recent studies by economists at the University of Pennsylvania found no decrease in labour participation in Alaska as a result of the dividend. Common sense would tell you that $1,000 a year is hardly enough to quit your job for (even $12,000 a year is below poverty line). Mr Yang is adamant that, in a society where 57% of Americans would struggle with an unexpected $500 bill, his dividend will give working families breathing space and a cushion to pursue their dreams. Still, giving around three-quarters of a million Alaskans $1,000 a year is relatively easy with its bountiful oil. What about for the US in its entirety?

For Mr Yang, automation and artificial intelligence are the new oil. In his view, these technologies, in which America inarguably leads, are both plague and panacea for the US economy. Plague because automation is on the verge of decimating traditional mass market American jobs en masse. Consider three of the most common job categories in the US – manufacturing, retailing and trucking/logistics. In the case of manufacturing, automation already has. A 2016 study by Ball State University researchers found that automation, not China, accounted for 85% of the 5.6 million manufacturing jobs lost in the US between 2000-2010. In retailing, e-tailing’s ascent has been at the expense of shopping malls and Main Streets everywhere, with vacant retail space at record rates. Amazon rose from just 1.5% of total US retail sales in 2013 to 5% last year, and likewise with a metamorphic Walmart whose online sales now account for 4%. While the rise of online shopping is increasing demand for trucking and logistics, ironically, automation inevitably means fewer jobs. Robots already do much of the heavy lifting in Amazon’s fulfillment centers, with humans as trouble-shooters. And the advent of self-driving trucks makes many of America’s 3.5 million trucking jobs at risk within 3-5 years. Established vehicle-makers like Tesla, Daimler and Volvo have all demonstrated prototypes. Numerous well-capitalized startups, including TuSimple, Ike, Peloton, Embark, Waymo (owned by Alphabet) are in the game also. Automation in the trucking industry will doubtless accelerate retail and service sector job losses in the small towns that hitherto relied on servicing truckers, doubling the pain. But these bad things are taking place even as American productivity and economic prowess grow unabated. After all, Americans, or at least American companies, largely invented these technologies and can deploy them for profit. So their utility as panacea must be in finding a fair way to ensure that workers who have lost their jobs to these new technologies benefit from them regardless.

If, at this point, Mr Yang simply said, let’s tax the heck out of the companies behind these new technologies and make them pay for the Freedom Dividend, I wouldn’t bother writing this blog post. Instead, and to his credit, Mr Yang makes a compelling case for tax reform. Most people, even Americans, agree that some form of taxation is fair and necessary for every society. The dissent usually lies in how much to tax and how to apply those tax dollars. But according to a recent study by the Institute on Taxation and Economic Policy, under President Donald Trump’s tax “reforms”, tax has become almost optional for the wealthy and powerful. Sixty Fortune 500 companies (the biggest in America), otherwise profitable, were allowed to pay zero federal income taxes in 2018. These companies included Chevron, Goodyear, Eli Lily, IBM, and, yes, Amazon. Certainly, it’s not the fault of corporations or the wealthy that they’re able to find legal loopholes to reduce their taxes – if loopholes exist, it’s your duty to take advantage. So the issue is a structural one. Reform the tax system so it’s equitable.

Listening to Mr Yang speak on the Ben Shapiro Show, a right-leaning American podcast (which was itself a surprise since Democrats normally avoid Mr Shapiro like the plague, although I find him generally fair and honest), he said his long-term goal is tax reform to encourage more labour rather than discourage it. To that end, Mr Yang advocates a move to a consumption-based tax system instead of the current income tax. Such a system aligns well with the American Dream, which is, at its core, a libertarian ideal. Work harder and prosper with all the fruits of your labour. And (at least until the advent of BET) be frugal, save and re-invest for an even better future. What could be more fair?

There are arguments against a consumption tax replacing income tax. Here are two of the biggest. One, a consumption tax is presumed regressive (benefiting the rich more than the poor). Everyone, the argument goes, needs to consume some basic necessities. For poor people, basic necessities may be all they can afford to consume, while the rich can get their basics, their luxuries, and still have money left-over for savings. Thus, the poor are taxed on a higher proportion of their expenditures than the rich. To be fair, this would be true if all staples are equal. But they are not. A look at the toilet paper section of your local supermarket easily demonstrates the broad distribution in prices of one “basic necessity”, not to mention the difference in prices between Whole Foods versus Stop&Shop. So a family earning $100,000 per year is likely to spend much more on basics than a family earning $20,000. Two, a consumption tax could never replace income tax for sheer volume of tax collections. This really depends on the level that a consumption tax is set, and how the economy reacts. The US Treasury reported collecting $1.7 trillion in income and payroll taxes in FY2018. Mr Yang proposes implementing a 10% value added tax (VAT) on all economic transactions, which he believes would raise $800 billion in new revenue. What level of VAT would raise $2.5 trillion? And before anyone objects by saying that would destroy retailing and discourage tourism, remember that income tax has already been deleted and, as in most countries already with VAT, foreign tourists could be offered tax refunds on departure (this is what Europe does).

Getting back to President Yang’s Freedom Dividend, how would it be paid for? So $3.12 trillion minus $800 billion in VAT receipts is $2.32 trillion. It turns out that half of all Americans are already receiving some kind of federally-provided support, whether in social security, welfare, food stamps, or a combination, totalling over $1.5 trillion. Replace those stigmatized, and widely disliked, programs with the dividend and the bill is now down to a more manageable $802 billion. Mr Yang says the Freedom Dividend effectively injects massive economic stimulus at a local scale – people can finally do car repairs they’ve put off, get extra tuition for their children, or patronize their local dive more frequently. In some cases, having a reliable financial cushion could encourage entrepreneurship or volunteering. Thus, the balance, and more if Mr Yang is correct, will come from economically revitalized communities and Main Streets. Mr Yang estimates the tangible return on this stimulus at $2.5 trillion.

On his website, Mr Yang has a plethora of interesting and, to me, laudable and plausible ideas for making America great again (not that America has really ever stopped being great, depending on the definition – culture, economy, technology and military, no other country comes close). Americans often say being born in America is like winning the lottery, which I say is true if the alternative is being born in Bangladesh or Somalia. But perhaps being the son of Taiwanese immigrants who successfully grasped the American Dream, Mr Yang doesn’t take for granted his citizenship (to paraphrase Starship Troopers). Few other presidential candidates in recent memory, Barack Obama being the exception, can claim the same personal connection to the immigrant’s American Dream. Mr Yang has taken full advantage of his lottery win. He has a first-rate Ivy League education, studying economics at Brown and then law at Columbia. He is a successful entrepreneur who sold his test-prep company to the Washington Post group. But he’s also trying to give back to America, by starting a non-profit with his gains rather than pursuing further riches. Let’s be honest, with his values, Andrew Yang could pass off as Chinese-Canadian. Maybe if he doesn’t win, he can emigrate and be Canada’s prime minister instead.

This blog post is the sole property of Joseph Lo, Joe Quietly Ruminates Blog. All Rights Reserved.

Where’s the Beef?

Where’s the beef? Apparently, it’s in genetically-engineered Franken-yeast.

Burger King has just rolled out a non-meat version of its Whopper sandwich using a patty from Silicon Valley meat-analogue startup, Impossible Foods. By all accounts, this new soy-based patty from Impossible Foods, called the Impossible Burger 2.0, tastes a lot like real ground beef. The Impossible Whopper, as BK is calling it, is so far only available in selected outlets in St Louis, Missouri. I’m excited. I really hope the trial is successful and the Impossible Whopper’s rollout expanded to somewhere closer to me, so I can go try it.

Don’t get me wrong, I love red meat. I lust after huge, chargrilled tomahawk ribeye steaks. Juicy hamburgers are delicious. Over the Chinese New Year holiday a few months back, I had a 65-day dry-aged beef cheeseburger that I’m still dreaming about. But I’m aware of the ethical arguments against eating meat, as well as the environmental arguments against commercial cow farming. It’s All Too Much when Paul McCartney takes the Dalai Lama to task for not being a vegetarian (Paul knows it’s hard to grow enough vegetables in Tibet, right?). But in any case, believe Bill Gates when he says farts from one cow are bad enough, the simultaneous farts from 1.5 billion of them are devastating. Okay, I’m just paraphrasing.

I’m excited for the Impossible Whopper because the spoils are humongous for whoever can come up with the first plausible meat substitute and take it mainstream. Demand for beef, and meat, in general, is growing. Each American ate more than 25 kilograms of beef on average in 2016, nearly two-thirds of it in ground form (ie, hamburger patties). Data is patchy, but it seems total annual beef sales in the US are approaching US$100 billion. BK and Impossible Foods aren’t the first to throw their hat in the ring. A&W, a Canadian fast food chain where my wife and I like to get root beer floats in the summer, partners with Beyond Meat to offer a pea-based faux burger. The problem, however, is that no one has ever perfected a meat-analogue that satisfies a carnivore (like me). Many vegetarian products purporting to be beef-flavoured contain concoctions, whipped together by research chefs and food scientists, known colloquially as “natural beef flavour”. And while some of these mixes come close, they all lack a hard to pin down after-taste that defines authentic beef to the palate.

Impossible Foods says it has solved this chimera. Its founder, Patrick Brown, who is also professor emeritus in biochemistry at Stanford University, discovered that the answer lies in the heme molecule. Heme is a key component in hemoglobin, the iron-containing protein in red blood cells that carries oxygen from the lungs to every part of your body. Heme, the company says, is beef’s secret sauce. That makes sense. My 65-day dry-aged beef burger was cooked rare, still a bit bloody in the middle, and it was, frankly, mouth-watering.

Professor Brown’s real breakthrough, though, is inventing a method to mass produce heme without having to go the vampire route to get it. Heme is produced not just in animals like cows (and people) but also in certain plants. In this case, the roots of the soybean plant have nodules that, when infected by the Rhizobium bacteria, produce oxygen-regulating leghemoglobin as a self-protection mechanism. Leghemoglobin is similar to cow hemoglobin in that it also contains heme. Still, it takes a long time to grow enough soybean plants to extract meaningful amounts of leghemoglobin. So Impossible Foods isolated the responsible genes from the soybean plant and inserted them into a strain of yeast, which it can grow a lot of quickly through industrial processes. The heme is then isolated from the yeast through a purification process. Le voilà, heme ready to be added to meat-analogue to give it a really authentic red meat flavour. Pretty cool.

I’m a geek for new tech, so Professor Brown’s breakthroughs really excite me. But I’m glad that I’m not an investor in Impossible Foods.

The business case for genetically-modified food products is weak, especially in a world where some parents are even questioning the safety of vaccinating their kids. Affluent consumers are demanding healthier, natural food options, and trending away from overly-processed and genetically-modified products. My wife doesn’t let me eat Twinkie’s any more. In the US, both sales and margins are growing fastest in the higher-end segments of the food economy. Think Chipotle and Whole Foods. Even in China, after food scare upon food scare in recent years, middle-class consumers are re-orienting towards healthier options. A November 2018 report in The Economist says many Chinese consumers are discomfited by the genetically-modified soybeans imported from the US and Brazil as animal feed and food oil. Even the US Food and Drug Administration (FDA) took some convincing that Impossible Foods’ designer heme molecule, sourced as it was from genetically-modified yeast, is safe for human consumption. As late as August 2017, the FDA said the company hadn’t demonstrated its safety, even though a beta version of the Impossible Burger was already on market.

While Impossible Foods has first mover advantage in developing a meat-analogue flavoured with heme, and presumably good enough to satisfy meat-lovers, the company can’t maintain its lead for long. Impossible Foods doesn’t own the IP of the heme molecule (luckily for people and the Red Cross), just one process to mass produce it. The rest of the Impossible Burger is just research kitchen lab-magic. Magic, yes, but not sorcery. Next time you’re in your local supermarket, take a trip down the potato chip aisle. Research chefs and food scientists are veritable David Copperfield’s, who can reproduce the flavours and textures of just about anything. Think of heme as the next evolution of “natural beef flavor”. Impossible Foods has no particular competitive advantage in this field.

Now that the heme secret is out, the market is beginning to see a rush of companies eager to join the fray. One company, Triton Algae Innovations, in San Diego, California claims to have found a way to produce plant-based heme in bulk without genetic engineering. Apparently, the Chlamydomonas reinhardtii strain of algae, which the company researches as a potential source of biofuel, also produces heme under the stimulus of UV lights. Of course, its yield, efficiency and suitability as food additive are variables requiring further investigation. But if Triton’s process for manufacturing heme turns out commercially viable, there’s nothing to stop, for instance, Beyond Meat from quickly rolling out a Beyond Burger 2.0-with-natural-heme.

Impossible Foods is a cool company, whose main asset is its head start in being able to make lots of a genetically-engineered, overly-processed, but tasty (a claim which I hope to verify in the near future), meat-analogue. Now that its secret is out, right as rain, other companies will follow with even more plausible products aimed at separating me from my beloved beef burger.

This post is the sole property of Joseph Lo, Joe Quietly Ruminates Blog. All Rights Reserved.

The Venezuela Joke

Two weeks ago, China sent 65 tons of medical and humanitarian aid to Venezuela, pledging that more help would be available if needed. China’s gesture was presumably much better received by Nicolas Maduro’s clique than the similar supplies sent by a US-led coalition in February to opposition leader Juan Guaido. This aid is sorely needed by Venezuela, which has basically run out of basic food staples and medicines in the face of runaway inflation. In February 2018, the UN issued a statement that said: “Vast numbers of Venezuelans are starving, deprived of essential medicines, and trying to survive in a situation that is spiraling downwards with no end in sight.” Since the middle of March, much of the country has also been without power and water for weeks at a time.

This blog in no way argues for other countries to meddle in Venezuela’s internal affairs. In general, I believe we should be respectful of the politics and sovereign rights of each country (unless they begin to infringe on someone else’s). What I am curious about, however, is how Venezuela got itself in this dire predicament in the first place. By all accounts, Venezuela should be a leading light in the Mercosur trade bloc and one of the richest countries in the Southern Hemisphere, if not the world. The country has the world’s largest stock of proven crude oil reserves, some 300 billion barrels in aggregate. A barrel of OPEC oil over the past 4 years has averaged about US$50, so Venezuela is theoretically standing on US$15 trillion. In addition, Venezuela also has an abundance of oil sands, which, if fully recovered, would be equal to the world’s reserves of normal crude oil and is also roughly the same amount of oil sands that Canada has.

Regardless of your stand on global warming and the ethics of oil, with such a natural abundance, there is no excuse for Venezuelan babies to be dying for want of formula and antibiotics. Even a wasteful Venezuela should be able to feed itself. Not so. Last week, I finished reading Daniel Yergin’s two excellent books on oil and geopolitics, The Prize: The Epic Quest for Oil, Money, and Power and The Quest: Energy, Security and the Remaking of the Modern World. The two books chart the modern development of the oil industry from the first oil boom in the United States when oil was struck in Pennsylvania in 1859, to geo-political and technological shifts that have alternately sparked or suppressed demand for oil, and the future of the oil industry. Mr Yergin is scathing when detailing the ineptness, hypocrisy and corruption of the late Hugo Chavez’s regime (and by extension, Mr Maduro). Mr Chavez systematically pillaged and destroyed the state-owned oil company, Petroleus de Venezuela (PDVSA), squandering a resource that belongs to all Venezuelans.

Under Messrs Chavez and Maduro, oil production has declined steadily to where it is now at its lowest level in 50 years, according to the Center for Strategic & International Studies. In March, OPEC said Venezuela’s oil production was now just over 1 million barrels and declining. Contrast that with the nearly 3.5 million barrels per day the country was producing in 1997 when Mr Chavez was first anointed president. Mr Yergin blames Venezuela’s declining production numbers on a refusal to reinvest in industry and infrastructure, preferring instead to throw PDVSA’s ever-declining returns on advancing Mr Chavez’s questionable dreams of his self-styled “Bolivarian Revolution”. The country is now in such a state of disrepair that it, apparently, has only one functioning power plant remaining to service the entire country of 30 million people.

Meanwhile, Mr Maduro has blamed his country’s plight and, more specifically, the recent record-setting blackouts on the “demonic” machinations of “imperialist America”. Having grown up on a steady diet of Monty Python’s Flying Circus, Second City, Kids in the Hall, and, of course, the rollicking Stephen Chow, I can chuckle along with what is surely Mr Maduro’s attempt at humour. It also brings to mind my favourite Mark Twain quotation: “Truth is the most valuable thing we have. Let us economize it.”

This post is the sole property of Joseph Lo, Joe Quietly Ruminates Blog. All Rights Reserved.