Generation 40s – 四十世代

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What tiny Luxembourg can teach ageing Hong Kong about labour mobility in the Greater Bay Area

CommentInsight & Opinion
2017-12-27

Lucy Kwan and Rex Wong Yat Chun say Luxembourg can be a model for Hong Kong as it tackles a static demographic and labour structure. Hong Kong must take advantage of its closeness to the Pearl River Delta by embracing openness through the flow of ‘frontier workers’

 

Hong Kong is faced with a labour mismatch problem. Industries such as construction and catering complain of chronic worker shortages, while Hong Kong’s youngsters are encouraged to choose a “decent” career in our pillar industries. Our education system, therefore, oversupplies white-collar workers but undersupplies blue-collar workers, who are seen to have less bright socio-economic prospects. As a result, our talent pool is imbalanced and cannot react according to the actual needs of industries.

Many developed cities in the world can draw their talent pool from surrounding areas. However, Hong Kong is special. Currently, there seems to be a lack of concerted and proactive efforts to increase labour mobility in both directions. Hong Kong should form a conurbation with neighbouring cities so that citizens within the economic circle can freely move from their residence to their workplace.

The completion of the Hong Kong-Zhuhai-Macau bridge and the high-speed railway may realise such a vision. Luxembourg gives us a template.

Despite limited space and population, Luxembourg is one of the world’s most influential financial centres. On aggregate income per capita, Luxembourg ranks among the top economies in the OECD group of wealthy nations. Such economic miracles would not have been achieved if only locals were involved. In fact, nearly half of its population of just 500,000 are foreigners. Moreover, nearly half of the total national employments (more than 170,000 workers) involve “frontier workers”, that is, they reside in neighbouring countries and commute to work, usually daily.

The Luxembourg government has made huge efforts to facilitate cross-border employment. For example, frontier workers can come and go without any restriction if they are European Union or European Free Trade Association nationals. If they are third-country nationals, they must hold a valid work permit issued by certain countries, as well as a valid Luxembourg employment contract bearing a clear statement from their Luxembourg employer that they work for a specific number of days of the month.

Cross-border workers pay taxes in Luxembourg for income generated within the country. To avoid double taxation, Luxembourg has agreements in place with its three neighbours, France, Germany and Belgium. Cross-border workers in Luxembourg pay their part of social security in Luxembourg just like residents, which is lower than in the three adjacent countries.

Luxembourg’s success exemplifies the realisation of a high degree of cross-border mobility. It suggests a bright future for the integration of the labour markets in Hong Kong and adjacent cities such as Shenzhen, Macau and Zhuhai. These four southernmost cities in the “Guangdong-Hong Kong-Macau Greater Bay Area” could become the core of the area, and our labour markets would complement each other and be integrated. From Hong Kong’s perspective, industries such as construction and catering could employ workers from our neighbouring cities.

Also, our university graduates would find many more opportunities in the region and it would be easier for them to go where they are both needed and valued.

Hong Kong’s economic and social issues resulting from an ageing population and static growth might be more easily solved.

To facilitate such mobility, we should first accelerate the development of new commercial and residential areas near the border, namely the North Lantau New Town, the Lok Ma Chau Loop area, and the Northeast New Territories.

It would hopefully become a commercial area that would attract companies, especially technology start-ups, to set up their headquarters. Also, the number of border control points and their capacity to handle the rising traffic volume should be expanded.

Secondly, the social security and taxation system for frontier workers within the region should be harmonised.

Workers may live on the mainland but still enjoy the best business environment in the world, including favourable tax rates, simple registration procedures and the established legal protection in Hong Kong.

Hong Kong’s competitiveness does not come from natural resources, but its people. We need a vibrant and flexible talent pool to sustain our unique competitiveness. Therefore, we should not turn a blind eye to our static and ageing demographic and labour structure. Our proximity to the Pearl River Delta gives us a geographical advantage in supporting our economic growth as well as exerting our influence.

Lucy Kwan is an honorary assistant professor at the Department of Statistics and Actuarial Science at the University of Hong Kong. Rex Wong Yat Chun is a third-year student majoring in economics and finance at HKU

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How China is leading the ‘new retail’ revolution

CommentInsight & Opinion
2017-12-28

Edward Tse and Jackie Wang say market moves by Chinese firms like Alibaba, Tencent and JD.com show how key players are experimenting with various forms of tech-driven ‘new retail’ in the O2O world, making the industry more dynamic than ever

While the past two years may have been brutal for brick-and-mortar stores worldwide, China’s online and offline retailers have witnessed a “new retail” revolution, driving an increasingly stronger national consumption.

Since China launched economic reforms in 1978, the country’s retail industry has undergone multiple stages of development.

With foreign retailers flooding in after China joined the World Trade Organisation in 2001, the scene was diversified. Offline retail started to be challenged by Taobao, Alibaba’s online shopping platform, which was founded in 2003 and grew ­exponentially in the following decade. The transaction amount for Alibaba’s “Singles’ Day” 24-hour online sales each November 11 has grown from 50 million yuan (HK$59 million) in 2009 to 168 billion yuan this year.

With e-commerce booming, businesses have been adopting an “online to offline” (O2O) model, using online channels to attract offline traffic. In the past few years, this phenomenon has evolved into the notion of “new retail”.

New retail represents a trend of online merging seamlessly with offline, resulting from the prevalence of digital technology, like mobile payment, wireless internet, sensors and artificial intelligence (AI).

In this model, online is no longer just a sales channel, but provides ubiquitous touchpoints to interact with consumers and their social groups. By contrast, offline retailers are trying hard to keep consumers in their brick-and-mortar stores for longer, offering better customer experiences by leveraging digital technologies.

From sales and marketing to ­logistics and inventory management, the new retail revolution is transforming the industry. For example, Amazon Go, the pioneer in new retail in the US, tracks purchasing behaviour with sensors placed on supermarket shelves. After consumers choose their products, they can just walk out of the store, with the amount payable automatically deducted from their mobile payment account.

Some aspects of the retail operation are also becoming less human-led. In China, logistics firm Cainiao is incorporating hi-tech-enabled hardware and software to improve efficiency. In its logistics park, ­Cainiao deploys drones to monitor the security of the venue. Within the warehouse, several robots called “Geek+” work with staff to sort packages. It also uses computer vision to identify, monitor and ­arrange different orders.

Improved logistics efficiency is contributing to the consumer experience as well. Consumers will not only receive their packages faster, but also with fewer errors and get fresher goods.

Whereas in America, Amazon is at the forefront of the new retail revolution, China’s speed and intensity have gone into orbit. Players big and small are experimenting with various forms of new retail, making the industry more dynamic than ever.

Driven by the huge market ­opportunities and abundant venture capital, start-ups in China are actively participating in this revolution. For example, Xingbianli, a convenience store and vending machine start-up, offers many popular Korean and Japanese products that could mostly only be bought via daigou (individuals who shop overseas and resell to Chinese consumers). More importantly, it is testing the area of unmanned retail.

Products have their own bar code, which can be scanned by consumers when they choose their shopping and then check out on the Xingbianli app. There is also a mini-library and a ­café within the convenience store, aimed at making consumers linger.

Traditional local retailers are also incubating their own new retail formats, such as Super Species, a subsidiary of China’s largest supermarket chain, Yonghui Superstores.

Super Species specialises in selling fresh produce, such as vegetables and seafood, and combines the traditional market with restaurants, ­cafés, florists, and so on. It has also introduced a Yonghui Partnership Plan, allowing staff to present more innovative retail ideas and pilot them within the stores. Super Species itself is becoming an incubator for those innovative ideas, and new retail here is no longer just about changing the store format, but also the mindsets of all staff.

Tech giants like Alibaba, Tencent and JD.com are heavily investing and competing head to head in the offline battleground. Alibaba ­invested US$2.9 billion in one of China’s largest supermarket chains, Sun Art Retail Group, in November. It aims to transform Sun Art’s offline business of over 400 ­Auchan and RT-Mart branded ­hypermarkets and provides technology to enhance customer data and inventory management.

In 2015, JD.com invested US$700 million in Yonghui Superstores. This month, Tencent, a close ally of JD.com, acquired a 5 per cent share in Super Species, and made capital injection for a 15 per cent stake in Yonghui Yunchuang Technology, Yonghui’s supply chain and logistics subsidiary.

To further compete with Alibaba online and enrich their own ecosystems, Tencent and JD.com are ­investing in VIP.com, a Chinese e-commerce platform specialising in discounted products for women.

They will together own 12.5 per cent of VIP.com and, as they further monetise their traffic, the new retail battle with Alibaba will ­get fiercer.

Foreign companies are also ­actively piloting their new retail strategy in China. Earlier this month, the world’s largest Starbucks ­Reserve Roastery opened in Shanghai, leveraging Alibaba’s technology to give consumers a more immersed Starbucks journey.

This is also the first mass offline application of augmented reality (AR) technology. Consumers can use the Taobao app to unlock the AR features in the store, such as learning about the details of the Starbucks coffee brewing process.

Technologies are enabling these companies to create new business approaches, while intense competition is driving all players to ­become better. They can’t afford to slow down. China’s scale also allows companies to use the market as a business laboratory and to experiment with business models.

Through fast launch and adaptation, players can fine-tune their business model at a rapid pace.

Beyond retail, the future consumption landscape will be much more complicated and sophisticated. Digital technologies, especially AI, 5G network and the internet of things, are already blurring the boundaries of industries.

Eventually, retail will be merely one layer of the consumer lifestyle, albeit a high-frequency one. The internet of things will create a new ecosystem that is ubiquitous and interconnected. Also, 5G network development will facilitate this process in the near future and bring about disruption in the retail world.

Assisted by machine learning and big data, consumers will ­increasingly be viewed as a “segment of one” and receive more personalised solutions, not just in ­retail, but in every facet of their life.

To that end, China will be at the global forefront of innovation and experimentation.

Edward Tse is founder & CEO of Gao Feng Advisory Company, a global strategy and management consulting firm with roots in Greater China. Jackie Wang is a senior consultant of the firm


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Education innovation gets a Nobel of its own in the Yidan Prize

South China Morning Post
CommentInsight & Opinion
2017-12-22

Bernard Chan says the winners of the Yidan Prize – one of many generous initiatives by mainland business leaders – have ideas that can change education for the better in the world, including Hong Kong. These ideas deserve a bigger platform

If you have never heard of the Yidan Prize, you probably will in the years to come. It was founded in 2016 by Charles Chen Yidan, co-founder of Tencent, to honour individuals worldwide for forward-looking innovations in education.

I attended the inaugural awards ceremony here in Hong Kong earlier this month. Among the speakers were Cherie Blair, founder of the Cherie Blair Foundation for Women, who made some powerful points about the importance of educating girls.

The prize is a big step towards giving education innovators the type of status they deserve. Not only that, the event also opened my eyes to the growing role that mainland Chinese business figures now play in philanthropy and global social development.

In the mainland, business leaders are involved in the central government’s renewed campaigns on rural poverty alleviation. Big tech companies like Tencent, Alibaba and JD.com are entering agreements with local officials to support development in specific rural areas in China.

Mainland tycoons are also becoming increasingly involved in charitable activities overseas. These tycoons for the most part have humble origins, and some went through real hardship early in life. They have seen their businesses expand at home and, increasingly, overseas. Successful entrepreneurs with a global outlook, they seem to genuinely want engagement with and to contribute to the wider world.

Jack Ma, the founder of the Alibaba Group (which owns the South China Morning Post), started the Jack Ma Foundation in 2014 to promote educational, environmental and other causes as far away as Africa. He is also behind the Alibaba Entrepreneurs Fund (I sit on its Hong Kong governing board), which invests in and mentors start-ups here and in Taiwan.

As for Chen, he has endowed his Yidan Prize with HK$2.5 billion. International judges and advisers will select two laureates (individuals or small teams) per year. These winners will share HK$60 million a year in prizes, half in cash and half for research funds.

We all follow the Nobel Prize and other international awards that bring fame to the people responsible for breakthroughs in medicine or physics. But surely education is at least as important as, for example, genetics or astronomy, and individuals doing pioneering work in education deserve a high profile.

The first two laureates were psychologist Carol Dweck of the US, for work on students’ motivational mindsets, and Vicky Colbert of Colombia, founder of the Escuela Nueva (“New School”) movement of innovative primary schools in Latin America. By highlighting achievements by relatively unknown figures, the awards remind us how we usually overlook education as a key to the well-being of humanity.

Dweck’s work has been crucial to furthering understanding of how kids rise to challenges and enjoy learning. Her ideas could be stimulating in Hong Kong, with its rigid attitudes about what makes a child “intelligent” or “hard-working”.

Colbert’s achievement was creating a model of school management, teaching and community involvement that has spread through poor areas in Latin America, India and the Philippines. Designed for less developed countries, her methods are an impressive reminder that money is just one part of what makes a school successful.

The Yidan Prize Foundation has commissioned a study on the effectiveness of education systems around the world. Rather than focus on test scores, it looks at the inputs. The resulting Worldwide Educating for the Future Index is a reminder that Hong Kong’s own record is mixed. Despite what some think, we do very well in terms of teacher quality – ranking with Finland and South Korea.

However, Hong Kong lags in curriculum and assessment methods. This will not surprise anyone who has followed the ups and downs of education reform over the years.

The Yidan Prize is a major addition to initiatives like the WISE Prize for Education launched in 2011, and the Global Teacher Prize launched in 2014. Hopefully, it will build on their work in giving advances in education worldwide recognition and a “Nobel” status.

Bernard Chan is convenor of Hong Kong’s Executive Council