China Watch #3 – Lego #1 in China, Chinese Protesters Want to Go to the Movies, Apple Moving iPhone Production to India and Vietnam

Lego #1 at Retail in China, Hasbro and Mattel Lag

According to a Chinese source who translated for me, Alibaba is reporting that Lego is the number 1 selling toy in China. Interestingly, neither Mattel nor Hasbro made the top 20.

Apple Moving iPhone Production to India and Vietnam

Apple announced this week that it is moving production of its iPhones out of China and to India and Vietnam. Why is it leaving? One big reason is the recent riots at Apple’s biggest iPhone manufacturing facility in China. The rioting and resulting shutdown created an iPhone shortage of six million units. But it’s more than that. Consider this quote from the Wall Street Journal:

Western companies piled into China because of its huge market, low labor costs, and promise of market reform. But those days are over as President Xi Jinping has put the state back in charge of the economy and used regulation and theft to punish foreign investors

Apple’s Warning About China Business, Wall Street Journal, december 4, 2022

Like other western companies, Apple entered China during the Presidencies of Deng Xiaoping and Jiang Zemin. A strong entrepreneurial spirit, encouraged by the government, brought China prosperity under those leaders. It also made some people very rich.

That has changed under President Xi. He put the state back in charge of the economy and backed away from the free market economy that brought China so much power and prosperity. He wants the Communist party back in control, which means stunting the influence of business people like Jack Ma, co-founder of the Alibaba Group. Tellingly, Mr. Ma is no longer living in China. He is reported to be in Tokyo.

Apple will move out of China, but moving into India and Vietnam will take a lot of work. Vietnam does not have a large enough population, and India lacks the infrastructure. Furthermore, there will need to be a trained labor force ready to make phones. That’s a real challenge because Apple and Foxconn will have to hire hundreds of thousands of Indian and Vietnamese workers. There is going to be one heck of a learning curve.

Chinese Protesters Want to Go to the Movies

China has experienced a series of protests across the country. Chinese citizens, frustrated by government imposed covid quarantines and lockouts, are calling for an end to restrictions on their lives

What surprised me, and probably everyone else, is that the crowds also called for the movie theaters to reopen. Here is a quote from a Washington Post editorial by Sonny Bunch:

“A video showing protestors in Shanghai chanting, ‘I wanna see a movie!’ was widely shared on WeChat among Chinese film fans and industry professionals over the weekend,” according to the Hollywood Reporter.

Chinese protesters want ‘cinema freedom.’ Hollywood should help them., Sonny Bunch, Washington post, December 5, 2022

Mr. Bunch notes that American movies, which used to be so popular in China, have been sidelined by the Chinese government, which wants its people to watch more homegrown films. He thinks now is the time for movie studios to push for more American movie releases in China.

Animated features not only sell movie tickets, but they sell toys as well. Let’s hope the Chinese government sees some benefit in reopening China to American pop culture.

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