Hello BoF Professionals, welcome to our latest members-only briefing. China’s colossal size and dynamism makes it a top priority for any global business, but it remains opaque to many in the fashion industry. Leveraging our rare access and local knowledge, the BoF China team demystifies the Chinese market with weekly industry analysis and the wider socio-cultural context you need to sharpen your focus.
HONG KONG, China — For most Hong Kong natives, living in one of the world’s most densely populated cities means shoebox-sized apartments and sky-high rents, but Christina Dean sees a silver lining.
“The city is tiny, but packed with influential people,” says the founder and board chair of local NGO Redress, which works to reduce textile waste in the fashion industry. Last week, Redress launched its ninth Design Award: the world’s largest sustainable fashion competition sponsored by the likes of the Hong Kong government, UPS and leading Chinese fashion group JNBY, with whom this years winner will design a sustainable collection for retail.
“Stakeholders in textiles and raw materials, investors, NGOs, experts in carbon and supply chain, logistics, shipping, exports, the legislative council… the whole industry is clinging onto a rock, which is ideal for collaboration.” But this is only one of the reasons that Hong Kong is primed to become Asia’s next sustainable fashion hub, according to Dean.
Factories and mills may be scattered around the rest of Asia, but many companies are headquartered in Hong Kong — a free port and the world’s third largest logistics hub — to avoid customs on import goods and nab low shipping rates.
“In the 50s, the city was one of the biggest exporters of apparel in Asia. That’s not the case [now], but we’ve retained a large volume of manufacturing expertise and knowhow,” Dean tells BoF. “Local businesses own factories in 300 locations around the world, and being within a five-hour flight to 50 percent of the world’s population is a huge competitive advantage.”
The city is in no short supply of game-changing fashion businesses. Take Grana — a maker of premium ethical basics with an Everlane-esque approach transparency and pricing — and the world’s largest shirt-maker Esquel, which manufactures over 100 million shirts annually for Ralph Lauren, Hugo Boss and Tommy Hilfiger. Esquel is currently working on reindustrialising natural dyes and automating manufacturing in its factories across China, Malaysia, Mauritius, Sri Lanka and Vietnam.
Local businesses own factories in 300 locations around the world, and being within a five-hour flight to 50 percent of the world’s population is a huge competitive advantage.
Yet, neighbouring Hong Kong is Taiwan, a global leader in manufacturing functional fabrics who could challenge the former as Asia’s eco-fashion capital.
A much-overlooked hot spot for innovative textile manufacturing, major manufacturers Singtex and Tex-Ray develop durable and eco-friendly fabrics made from coffee grounds, beans, and bamboo fibres, while independent label Weavism bonds collagen peptides from fish scales with rayon fibres to produce functional anti-UV, anti-odour products for Taiwan’s humid climate.
According to the Taiwan Textile Research Institute (TTRI), around 50 percent of sportswear fabrics used by global brands such as Under Armour, and almost 80 percent of fabrics used by outdoor brands from The North Face to Columbia are manufactured in Taiwan. As such, small changes could make big waves across the globe. “Taiwanese businesses are experts on functional fabrics, and we have the automation and manufacturing technology to push sustainability forward on an industrial scale,” says Weavism founder Tony Chen.
Where Hong Kong has the likes of Redress, Grana and Esquel, Taiwan also has its share of green organisations and brands. Industry organisation Fashion Revolution (with its Hong Kong counterpart My Fair Lady), design agencies Renato Lab and Nbt Studio, green beauty and lifestyle brand Greenvines, and independent designers such as Xuxuwear, Howma, Project by H and Voome have their loyal followings.
For both Hong Kong and Taiwan, the past few months have been full of scientific breakthroughs. In October, Taiwanese textile supplier Far Eastern New Century unveiled a chemical recycling solution capable of dissolving polyester and filtering out polymers. The same month, The Hong Kong Research Institute of Textiles and Apparel (HKRITA) in partnership with the H&M Foundation found a chemical process that provides a solution to recycling textiles without quality loss — a ground-breaking breakthrough that is slated to be scaled up for applications across the global fashion industry. Textile company Novetex’s new recycling spinning mill in Hong Kong is already making use of HKRITA’s technology.
And as waste piles up in the Greater China region, breakthroughs are needed more than ever. The South China Morning Post states that 340 tonnes of textile waste is discarded daily by Hong Kongers, while Taiwan News estimates that 438 pieces of clothing are thrown away every minute in Taiwan. Despite Beijing’s initiatives undertaken to tackle pollution, coal-fired emissions, and encourage greener investments, textile waste doesn’t top its list of priorities — according to strategic advisory firm Collective Responsibility, 45 percent of textiles produced in the mainland go to waste.
340 tonnes of textile waste is discarded daily by Hong Kongers, while 438 pieces of clothing are thrown away every minute in Taiwan.
With Greater China slated to become the world’s largest fashion market in 2019, eco-initiatives are critical, and could reverberate through Asia and beyond. “When Hong Kong says something, the rest of Asia listens,” stresses Dean. “Japan and Seoul are super cool, but I’m not talking about streetwear trends. I’m talking about the essence of leadership and change in [the sustainable fashion] field.”
Though the potential is there, so are challenges. Despite the technological expertise and industrial capabilities that heighten Taiwan’s potential to become a sustainability hub, Chen thinks that an industrialised approach can leave much to be desired. “A lot of factories view recycling plastic bottles and nets to make polyester as purely good business, so the recycling process is industrialised,” Chen continues. “At the end of the day, we’re still putting out a lot of plastic into the world to end up with that product.”
Though the region has its share of disruptors, start-ups in the sector are dwarfed by ruling business models. “We talk about rental platform and circular economies, but they’re tiny in the scheme of things,” says Shaway Yeh, the Shanghai-based group style editorial director of Modern Media and founder of sustainability-focused creative agency Yehyehyeh. “Few are working on changing the old business model, which relies on fast turnovers and mass production.”
As is the case globally, much is needed to educate the region’s vast population as to everyday acts of sustainability. “A lot of Asian consumers are much more viscerally aware of consumption and its effects on the planet because they see it, eat it, breath it, and drink it,” says Dean. “But there’s a gap between that awareness and action…the educational understanding of it isn’t there yet.”
On the upside, Hong Kong, Taiwan and mainland China’s tech infrastructure could go far in unlocking the region’s eco-potential . “We’re obsessed with our phones and spend all our time on WeChat, but people can also use the app for donations,” says Yeh. “There’s a huge talent pool that is innovative in coming up with solutions to logistical problems.”
Where the talent, technology and businesses are in the right place, what’s needed is for stakeholders — consumers included — to push the dialogue forward. “It’s still too earlier to call the region a sustainable fashion hub,” says Lv Xiaolei (commonly known as Madame Lu), the deputy secretary general of Shanghai Fashion Week. “But with its many textile manufacturers and vast consumer market, if sustainable fashion is accepted by the ecosystem, the region will contribute a lot to the dialogue.”
FASHION & BEAUTY
Trending in China: 1,800-Year-Old Robes
The number of Chinese regularly wearing Hanfu — robes inspired by traditional Chinese dress — has grown to as many as a million people, many of them young people who are wearing the robes as a mark of modern pride in the longevity and cultural history of the Chinese nation. The central government is encouraging the trend, which complements President Xi Jinping’s calls to revive and preserve traditional Chinese culture and values, last April, the Central Committee of the Communist Youth League declared its first “Traditional Chinese Garment Day”, urging young people to don ancient finery to demonstrate “cultural confidence” to the world. The trend also corroborates recent consumer surveys that consistently paint younger Chinese as increasingly nationalistic. (The Economist)
US Apparel Company Cuts Ties With Factory Linked to Internment Camp
Badger Sportswear, a US-based supplier of college team-themed apparel, has announced it will no longer do business with Hetian Taida apparel, a Chinese manufacturer found to be utilizing labour from inside an internment camp in Western China, where as many as one million Uighurs and Kazakhs have been detained. In a statement, Badger said it will no longer do business with Hetian Taida, nor import any goods from the same region “given the controversy around doing business” there. As if there weren’t enough reasons for American companies to rethink manufacturing in China – lower priced alternatives elsewhere in the region and tariff increases on the horizon, for example – this latest controversy underlines the need for due diligence in doing business in China. (AP)
China’s Facebook of Cosmetic Surgery Capitalises on Youth Trend
SoYoung (known as Xin Yang in Chinese) is a social network for cosmetic surgery, showing not only nearby listings for clinics, price comparisons for procedures, but also a “newsfeed” on which users can post photos of their own treatment outcomes. Aiming at China’s millennial generation (under 35s make up 96 percent of customers for cosmetic procedures in China) has proven a winning strategy thus far, with SoYoung capitalizing on a market that doubled in value between 2015 and 2017 (according to Deloitte) and is on track to RMB 334 billion ($ billion) by 2020, to raise $160 million last year, allowing it to join China’s growing list of tech unicorns. But questions remain as to its monetization model and a potential for slowdown as China’s economy cools and spending slows on elective procedures. (China Economic Review)
TECH & INNOVATION
Alipay Passes 1 Billion Users
Chinese mobile payment service Alipay now has more than 1 billion users worldwide thanks to recent partnerships with smart payment services in overseas markets such as India and Thailand. This announcement comes hot on the heels of parent company, Ant Financial, claiming more than 900 million users as recently as November 2018. Ant Financial, an arm of Alibaba, is the most valuable fintech company on earth, with a valuation of $150 billion. Now, it seems, plans for global expansion on top of domestic domination (Alipay has more than 700 million customers within China) are starting to bear fruit. (Technode)
Twitter Users Face Renewed Beijing Crackdown
Chinese police are increasingly questioning and detaining Twitter users in the country, in a move seen as an escalation of online censorship efforts. Like other Western social media platforms, including Facebook and Instagram, Twitter is blocked in China, only accessible via a virtual private network (VPN) service. It’s status as largely inaccessible for the majority of internet users in China had made it less of a target for censorship than local platforms, such as Sina Weibo and WeChat. This latest crackdown should be cause for concern also for the increasing number of globe-trotting Chinese who also use platforms like Instagram (and brands who use the platform to connect with an international Chinese audience). Even beyond the great firewall of China, big brother is watching. (New York Times)
Are Douyin and Tiktok the Same?
In spite of efforts by parent company Bytedance to market TikTok and Douyin as essentially two versions of the same app, there are actually significant differences between the two. Depending on the location of the app store used, only Douyin (within China) and TikTok (outside of China) will be available for download. It’s not uncommon for Chinese apps to have “two modes” for local and international versions (WeChat for example) but the differences between Douyin and TikTok run deeper. Although they share the same functions, layout, and logos, its users in China and overseas are kept completely separate and are not able to interact with each other, with popular accounts from one app inaccessible to the other. Beware conflating one with the other. (What’s on Weibo)
CONSUMER & RETAIL
Bosideng Retail Sales up 30 Percent for First Three Quarters
Domestic high street brand Bosideng last week released earnings of the third quarter showing a 30 percent rise in retail sales over the first nine months of the 2018/19 financial year on the back of strong down jacket sales – a hero product for the brand. The company said the improved retail performance was primarily the result of their ongoing strategy to consolidate and improve the quality of their retail network as well as upgrade the image of the brand, in keeping with China’s broader “consumption upgrade”, which has propelled many domestic brands to increase the quality of their offering. Bosideng stock rose 3 percent on the news. (Jiemian)
Urban Revivo Continues International Expansion
Chinese fast fashion brand Urban Revivo plans to further its international expansion in 2019 by opening a 2,000-square-meter flagship store in Moscow. This planned opening follows Urban Revivo’s initial effort at international outreach, to Singapore in 2017, followed by the opening of a London outpost in 2018.The brand has been touted as a potential contender to be the first Chinese fashion retail brand to make a meaningful impact internationally, but thus far its global ambitions have remained within the realm of testing the waters, rather than an all-out assault on the dominance of global players such as Zara, H&M or Uniqlo. (BoF China)
How Much Does Wechat Know About Chinese Consumers? A Lot.
The release of WeChat’s latest annual report included detailed profiles of each generation that makes up its more than 1 billion-strong user base. As the platform becomes ubiquitous among everyone from the very young to very old, it’s building a veritable treasure trove of data. According to when users were born, WeChat claims it has a good idea of their communication style, sleep schedule, preferred transportation, consumption choices, and reading habits. Among their generational findings: Post-90’s favourite emoji is the face palm and Post-80s demonstrate the keenest interest in current affairs. (Sixthtone)
POLITICS, ECONOMY, SOCIETY
World Bank Lowers China’s 2019 Growth Forecast
The world bank has lowered its forecast for China economic growth in 2019 because of softening investments and trade tensions. China’s projected growth for the year was cut 0.1 percent to 6.2 percent. Soft export numbers coming out of China for December seem to back the World Bank’s caution. China’s total exports fell to $221.25 billion last month, down 4.4 per cent from the same period in 2017, according to data from China’s General Administration of Customs. This drop – the biggest since December 2016, when China grew at its slowest pace since 1990 – was unexpected, with analysts forecasting a 2 per cent rise, leading to predictions to an even worse performance as 2019 develops. (Caixin & SCMP)
Hong Kong Pop Star Makes a Stand Against Beijing’s Tightening Grip
Cantopop songstress Denise Ho had been a burgeoning star in Mainland China (where most of her income was derived), before her high-profile involvement and eventual arrest in Hong Kong’s “Umbrella Revolution” protests made her persona non-grata in China. Since then, her music has been scrubbed from Chinese streaming sites, her social media pages have been banned and she has been dropped as a spokesperson by Lancome. In spite of what many would consider lethal professional blows, Ho remains defiant, as her fate increasingly mirrors that of her island homeland. (The New Yorker)
Daisy Wang Announced as New CEO of Hearst Magazines Greater China
Taiwan-based Daisy Wang has been named the new CEO of Hearst Magazine International’s Greater China operations, effective as of January 14. Her 15-year media career includes heading Hearst’s Taiwan business, overseeing the introduction of titles such as Harper’s Bazaar and Cosmopolitan to Taiwan, as well as the dramatic renewal of Elle in Taiwan, remaking the magazine for the digital era. It’s hoped she might be able to bring the same success to the digital footprint of the group’s Mainland China magazines. Yvonne Wang, president of Hearst Media Advertising Group (China), and Xiao Xue, CEO and editor-in-chief of Elle China, will both report to Wang moving forward. (BoF China)
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