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Weekly #6 Five China stories you need to read: Summer travel rush in China; Real estate not for speculation; Anti-corruption campaign in medical sector
Outside of those in the tourism industry or engaged in cross-border business, most Chinese people don't typically have a strong interest in international travelers
These days, Chinese travelers are busy embracing their first post-pandemic summer vacation with family and friends despite all the heat and crowd. That's certainly what hotels and restaurants would like to see. But what's on the other side of the coin? What is going on in other sectors during this summer season?
GRR’s roundup this week includes five intriguing pieces carefully selected from China's social media platforms. The topics are as follows:
1) Why less international travelers come to China and what is China's response
2) The prices for budget hotels are skyrocketing to go beyond the reach of consumers
3) Real estate is losing its appeal for investment and speculation, the same in big and small cities
4) A powerful anti-corruption storm is sweeping up China's medical system
5) Why is the commonly used face recognition technology put under restraint and how has the regulation changed
The first two articles both discuss travel in China: the first on inbound tourism and the second on domestic tourism. In this summer travel rush, there are apparently far more Chinese tourists than international visitors.
While traveling in China, you were supposed to go through face recognition at the railway station, airport or hotel check-in. But now this technology is restricted in use for privacy reason. The last piece will later go into detail.
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1.Why international travelers don't want to visit China? 老外为什么不爱来中国了？
Overview: The difficulties of international travelers entering China have always been discussed, even before COVID-19. Over the first half of 2023, the recovering inbound tourism in China was still a far cry from the pre-pandemic level. The downturn cannot only be attributed to high air price caused by the pandemic. More importantly, the cumbersome procedures of visa application and possible inconveniences during the trip are holding foreign visitors back. In response, China is now taking measures to falicitate entries and encourage inbound tourism.
This article comes from 旅界 [Tourism Zone News], a WeChat official account that offers updated information about travel trend in China, serving as a bellwether of tourism industry.
"If an American wants to travel to East Asia and has no preference for a particular destination, eventually he would rather make South Korea or Japan his choice, because these two visa-free countries can save him the cumbersome procedures applying for a Chinese visa," said a netizen from Zhihu, a Chinese Quora-like question-and-answer service.
Notably, Hong Kong and Macau are visa-exempt to most international travelers across the globe and many of them will think they have already been to China since they have visited these two cities. There is no need to spend time on a visa for the Chinese mainland.
此前，一名正在世界旅行、坐拥25.5万粉丝的韩国博主No mad Shaun将自己前段时间的中国之旅拍成了Vlog，他指出了一些在中国旅游不太便利的地方，引发两国网友热议。
No ma Shaun, a South Korean vlogger with 255 thousand followers, has been travelling around the world and recorded his recent trip to China. In his videos, he pointed out some inconveniences visiting China, which triggered hot discussion from netizens of both countries.
He compared this trip to "a journey to the West" with many difficulties. For example, as a foreigner, he found it hard to hail a taxi in China and could only live in hotels of four-star or more, which was much too expensive for young people.
He also noticed that for many tourist sites in Beijing, one could only book tickets on the phone. "If a foreigner does not have a Chinese phone number, it will be hard to make a reservation."
Regarding this problem, a chief of a tourist agency in Beijing told Tourism Zone News that "for package tours now, we have to submit the international travelers' names and passport information to the e-itinerary. One site even requires their passports to buy tickets, then they have to go through baggage security screening and face recognition. It is indeed a lot of trouble."
Some of the problems mentioned above are being solved.
In late July, WeChat and Alipay both announced that they had launched services allowing mobile payment for foreign users in China. Now athletes and travelers from all over the world can enjoy all kinds of convenience in all parts of China through Alipay, including shopping, car-hailing, subway, and sightseeing, etc.
For visa, Ministry of Public Security of China held a news conference at 3 August, rolling out 26 measures to improve services and ensure high-quality development.
It is stated that for international visitors who come to China for activities like business negotiations, trade exchanges, installation and maintenance, expositions and conferences, and investment and startup, they can apply for entry port visa by showing invitation letter and necessary materials to enter China if there isn't time for them to get a visa before arrival.
Meanwhile, for those who need to take more than one trip because of business, after entering China, their visa can be renewed for three-year validity of multiple business entries.
Comments: Taking a trip to a certain place and seeing it by oneself can be an effective way to clear whatever misassumptions that exist. More profoundly, it promotes people-to-people exchanges and economic ties between two countries. China is now improving services to smooth the way for inbound tourists, but it is not being dealt with as somewhat of a imperative priority.
For one thing, domestic tourism still takes the more important role in the market which has its own problems to be solved as indicated by the next article. For another, Chinese people, except for those concerned with the tourism industry or cross-border business, normally do not show a particular interest in international travelers. At the moment they are grappling to afford even budget hotels during the summer travel rush. Thus it can be seen that a country's way of reacting reflects the public's will to some extent.
2. With a monthly salary of USD 2,750, one can't even afford budget hotels: The landscape of China's hotel market has drastically changed 月薪2万住不起汉庭：中国酒店市场格局大变脸
Overview: The article discusses that after the pandemic, hotel prices across China surged, with budget hotels experiencing sharper price increases than mid-to-high-end ones. This trend is especially notable during peak tourist seasons, with a notable shift: many once-affordable budget hotels like "Hanting [汉庭]" and "Rujia [如家]" are now priced beyond the reach of average consumers.
This price surge follows a mismatch between rising travel demand and a slower recovery of hotel supply. Several hotels have terminated three consecutive years of losses, with expectations to recoup previous losses within this year alone. This situation has impacted both leisure and business travelers.
The article comes from 深网 [Deep Web], an original in-depth reporting column launched by Tencent Technology, digging into the hidden stories of popular companies, events, and figures in the TMT (Technology, Media, and Telecommunications) field, exploring the deep logic behind them.
In the first quarter of 2023, Huazhu Group's net profit was RMB 1 billion. Compared with the 99 million yuan in the first quarter of 2019, it increased by over 900 percent. Meanwhile, the net profit for BTG Hotels (Group) in the first quarter of 2023 was 115 million yuan, an increase of about 17.3 percent compared to 98 million yuan in Q1 2019.
Huazhu Group, BTG Hotels, and others are just the tip of the iceberg in the chain hotel business this year. According to the "2022 China Hotel Industry Development Report", the chain rate of hotels in our country in 2022 was only 35 percent, and more than 60 percent were bed and breakfasts and other lodging hotels. Now that the leading chain hotels have started making money again, how were they in the first half of this year?
"Whether it's price or occupancy rate, the revenue from the B & B I run is definitely better than it was in 2019. By my estimate, the losses from the past three years could be recouped this year. During the tourist peak season, a room can earn 10,000 yuan a month," Wang Fang, who has been running a bed-and-breakfast in Benxi for 6 years, revealed to "Deep Web".
Wang Fang's bed-and-breakfast is located near a famous scenic area in Benxi, Liaoning Province. It's a 5-minute drive to Xiaoshi Yizhuang, Benxi Water Cave, Guan Shan Lake scenic area, and several other 4A and 5A scenic spots. During the tourist peak season, the price for an entire bed-and-breakfast that can accommodate 6 people is RMB 600-700/night. In the off-season, they can be rented by day for around RMB 200.
"Because they are all returned customers, the bed-and-breakfast is almost always full during the peak tourist season. Sometimes, because I don't have enough rooms, I have to help them find new rooms. I've already bought a new building (well-decorated) and I’m planning to expand my business," said Wang Fang.
In response, an OTA industry insider told Deep Web that "many hotel and B & B entrepreneurs feel a sense of urgency that if they don't make money this year, they'll never make money again. But for newcomers who want to get into the B & B or hotel industry now, it's not a wise move."
This year, under the policy guidance of promoting consumption and expanding domestic demand, the tourism industry has recovered first. As a result, there's a huge demand for bed and breakfasts near popular scenic areas. However, the ones really making money are entrepreneurs with managerial experience. If someone is considering entering the industry at this time, facing the need to recruit and train staff, it will be hard to jump on the bandwagon of tourism boom.
Comments: The hotel industry's recovery after the pandemic has led to a clear mismatch in supply and demand, causing rapid price increases. Particularly noticeable are the rises in economy hotels, placing pressure on many ordinary consumers. This phenomenon reflects the swift resurgence in tourism and the asynchronous supply of hotel accommodations. While ending years of losses is good news for the hotel industry, it could also hinder the overall recovery of tourism, especially for budget-conscious travelers.
3.A few words about real estate 随便聊几句房地产
Overview: “Housing is for living in and not for speculation” was first proposed in 2016 to control high property prices in cities, it was included in the 19th National Congress report in 2017 and was repeatedly emphasized over the next few years. However the concept was not mentioned in the meeting of the Political Bureau of the Communist Party of China (CPC) Central Committee in July this year.
This article believes that in the future, houses in China will lose their investment properties and become depreciating products like mobile phones and cars. It predicts that even in first-tier cities, the liquidity of houses will get worse, and everyone is willing to sell their houses for cash. Although the concept of “housing is for living in and not for speculation” has indeed curbed the phenomenon of inflated house prices, but when facing the trend of falling house prices, it has lost its significance.
The article comes from 九边 [Jiu Bian], a WeChat blog focusing on finance, history and economics. This blog, for three consecutive years, has been selected as one of the top 10 most collectible blogs by Evernote.
The "housing is for living in and not for speculation" policy has seen initial success, as speculation in the housing market has become nearly impossible in most cities. However, those who own multiple properties in small cities still attract envy from locals, but in the long term, these properties may not remain as valuable.
In many cities, house prices are no longer likely to take off, and the future path is possible to be like this:
In many cities, housing prices have passed their peak, causing regret among those with multiple houses. They are determined to sell when prices show even a slight increase. As a result, every positive development leads to a flood of listings, causing prices to continue falling instead of rising. Subsequently, more people join in selling their properties, no longer caring about profits, but only aiming to cash out their excess houses.
Currently, many cities are experiencing an influx of second-hand properties on the market. While in the past few years, people were fervently hoarding properties during the real estate boom, and now they want to sell at high prices.
In the future, the slogan "housing is for living, not for speculation" may gradually lose significance and fade away because there is no longer anything left to speculate on.
First-tier city properties are difficult to speculate on due to low liquidity. Investing in a highly promising property requires a huge sum of money, often reaching tens of millions of yuan (over 1.38 million U.S. dollars). However, when it needs to be sold, it could take up to six months to find a buyer because there are very few people who can afford such properties, and those who have the money may not necessarily be interested in it. Investors have to wait patiently for the right buyer.
Many investors initially thought they could make a profit from these assets. However, due to urgent needs, they had to sell their properties at a steep discount. Depositing the money in the bank could have earned more than investing.
In cities below the first-tier level, hoarding properties can be much more risky because it may result in financial losses. A few years ago many people were speculating on taxi licenses, but now there are hardly any buyers. The same is true for real estate.
In fact, speculators in the real estate are more akin to "trend traders." Once the trend disappears, they lose interest. Moreover, from the experience of other countries, housing prices are similar to stock prices, far exceeding their intrinsic value in bull market and declining dramatically in bear market. It often takes years for the prices to stabilize and recover.
Comments: With an oversupply of housing, China's real estate industry's focus is shifting from expansion to managing existing inventory. This shift is exemplified by frequent discussions such as urban village revitalization during this year's meeting of the Political Bureau. Therefore, the fading of the slogan "housing is for living in and not for speculation" may be a sign that the real estate industry is entering a new stage of development.
4.Medical anti-Corruption storm strikes: average of one hospital director investigated every day 医疗反腐风暴来袭：上半年平均每天“进去”一个院长 | 潜望
Overview: In recent years, the government has been intensifying efforts to combat corruption in the pharmaceutical procurement and medical service sectors in order to reduce the burden on healthcare and sever distorted profit chains in hospitals. Professionals in the pharmaceutical field widely believe that this year's anti-corruption campaign in healthcare is more comprehensive and forceful, as evidenced by the investigation and removal of over a hundred hospital directors and secretaries. The storm of anti-corruption in the healthcare sector has also had a significant impact on the stock prices, pharmaceutical sales representatives and pharmaceutical companies.
This is a report by 腾讯财经 [Tencent Financial and Economics], a WeChat blog focusing on finance, owned and run by Tencent Holdings Ltd.
Hospitals actually have strict regulations for pharmaceutical sales representatives, such as restricting their access to key medical areas and prohibiting private contact with medical personnel outside of designated times and locations. Those who violates the rules will be blacklisted.
However, these sellers can always find a way out: "If I make an appointment to see a doctor, they can't refuse to see me."
On July 22, a document inscribed by a hospital's medical affairs department revealed that two pharmaceutical sales representatives from a European company's Beijing branch were caught during a disciplinary inspection. The hospital demanded the company either dismiss or transfer them and requested a result.
Pharmaceutical sales personnel can be categorized into two forms of organization. One is similar to the European company, where all employees are managed by the company and the company is held responsible if anything goes wrong. The other form, which is adopted by most domestic companies, involves dismantling the sales department and retaining only a portion of the innovative or core business of their own operations. The rest of the general business is outsourced to external agents, maintaining a more distant relationship with the headquarters.
In early August, there were online rumors that an office of Hengrui Medicine, China's "leading innovative drug company", had been raided somewhere and the data had been taken. Hengrui quickly repudiated rumors, stating that "the company, its subsidiaries, and all dispatched institutions did not experience such a situation."
However, Hengrui Medicine's stock price plunged by over 16 percent in the past week, marking the largest weekly decline in the company's history. This reflects investors' lack of confidence in whether Hengrui can safely get through this round of anti-corruption storm.
Chinanews.com previously revealed that between 2016 and 2019, more than half of the top 100 pharmaceutical companies in the country were found to have engaged in direct or indirect kickbacks. Among these companies, one had been involved in over 20 cases within three years, with a single case involving kickbacks of more than 20 million yuan (about 2.76 million U.S. dollars).
Recently, the Shenzhen Stock Exchange and Shanghai Stock Exchange have put forward new requirements for initial public offerings, including strict scrutiny of the sales expenses of pharmaceutical companies seeking listings.
The intensity of this anti-corruption campaign has caught the attention of investors and observers beyond the pharmaceutical industry.
According to incomplete statistics from Tencent News' "Qianwang", since 2023, more than 155 hospital directors and secretaries have been investigated as part of the campaign. On average, one for every two days. Those who have been arrested are basically prominent figures in the local medical system, some currently in office, some retired. Some were taken away involuntarily, and some turned themselves in. This showcases the deterrence of the anti-corruption campaign in the medical system.
A pharmaceutical sales representative admitted on social media that two of their clients have been out of contact for half a month. They fear that their clients have been investigated for corruption.
Comments: Corruption in the medical field is often related to the kickbacks associated with the purchase of drugs and medical equipment. Professor Li Ling, an authoritative expert on healthcare reform, believes that medical corruption is linked to China's long-standing practice of "hospitals funding their operations with profits from overpriced drugs", which was introduced by transnational corporations. The government has been continuously cracking down on kickback practices. This year’s anti-corruption campaign reflects China's commitment to putting people and their lives above all else. However, corruption takes various forms and is difficult to eradicate. Li believes that "providing healthcare workers with transparent and dignified income is fundamental to curbing medical corruption".
5.Facial recognition to be regulated in hotels, banks and stations 宾馆、银行、车站将被限制“刷脸”
Overview: Indeed, facial recognition technology is not a novelty in China. People can use "face scan" payments to make purchases in stores. However, while life becomes more convenient, personal privacy may also be at risk of infringement. According to the article, in 2019, a wildlife park in Hangzhou was sued for collecting and using facial recognition information without proper consent.
This article tells the new policy on the limitations on the usage of facial recognition in public and commercial spaces. It specifies that personal identification devices cannot be installed in private spaces, and that businesses such as hotels, banks, and museums cannot force individuals to undergo facial recognition verification unless required by law or regulations. It also emphasizes the importance of protecting individual privacy and legal rights when using facial recognition technology.
This article comes from 财经e法 [Caijing e-Law], a WeChat blog focusing on legal, governance, and ethical issues in the internet industry.
According to the "Regulations on Security Management of Facial Recognition Technology Application", facial recognition technology can only be used in public places and business premises to remotely and unobtrusively identify specific individuals if it is necessary to safeguard national security, public safety, or protect the life, health, and property of individuals in emergency situations.
In recent years, the application of facial recognition technology has garnered public attention many times.
In 2019, Beijing subway planned to use facial recognition technology to improve passenger security checks and increase efficiency. According to a report by Chinese financial magazine Caijing, at that time, some subway stations had installed security gates with facial recognition devices and added cameras in the security check areas. Although this measure was not eventually implemented, it raised concerns among academics regarding the potential risks associated with large-scale collection of facial information.
In 2019, a case involving Guo Bing, a specially-appointed associate professor at the Faculty of Law and Politics, Zhejiang Sci-Tech University, and Hangzhou Wildlife World Co., Ltd. sparked wide-ranging discussions within the industry on legitimate collection and use of facial recognition information. It’s known as the "first facial recognition case".
In 2019, because Hangzhou Safari Park changed its annual pass entry method from fingerprint recognition to facial recognition, Guo was required to activate his face in order to enter the park. With no resolution reached through negotiation, Guo filed a lawsuit against the park. In April 2021, the court of second instance ruled that Safari Park's intention to process the collected photos as facial recognition information went beyond the original purpose of collection, violating the principle of legitimacy. The court ordered Safari Park to delete Guo's facial information, including the submitted photos when he applied for the annual pass. Since fingerprint recognition gates were no longer in use, the park also needed to delete Guo's fingerprint information.
The new regulations provide specific provisions for various application scenarios of facial recognition technology.
For instance, Article 6 stipulates that hotels, public bathrooms, changing rooms, toilets, and other places that may infringe upon others' privacy shall not install image capture or personal identity recognition devices.
As for business premises such as hotels, banks, railway stations, airports, stadiums, exhibition halls, museums, art galleries, and libraries, Article 9 states that unless required by laws and administrative regulations for verifying personal identity using facial recognition technology, it is banned to enforce, mislead, deceive, or coerce individuals into accepting facial recognition technology for the purpose of conducting business or improving service.
Zhao Jingwu, an associate professor at the Law School of Beihang University, said that the new regulations have established thresholds for the application of facial recognition technology. It stipulates that the use of this technology must be necessary and should not cause serious infringement on individual legal rights and interests, such as personal privacy.
Comments: With the development of technology the growing concern for the protection of personal privacy has become an important issue for the Chinese people. In 2021, China enacted a personal information protection law.
In comparison to existing legal regulations, it is noteworthy that the new rules provide specific guidelines for the application of facial recognition technology and introduce more practical measures for enforcement. Though the new regulations are still under consultation, their formal implementation is expected to trigger a wave of rectification. Looking ahead, the scope of facial recognition usage is likely become increasingly defined, and it is expected to have more efficient measures to address any violations of this technology.