In China One Child is Worth Two Iphones- You Won’t Believe This

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January 7, 2015 by ...

Chinese have a love/hate relationship with Apple products. They hate the fact that Apple gear is not only beautiful and secure, but pricey as well. Their feathers also ruffle over the price premium that Apple enjoys. The latter point is not lost on the ruling communist party which has had Apple in its gunsights for years now. They too think Apple is price-gouging their clan and resent Apple’s universal appeal. For a country desperately seeking ‘soft power’, an Apple’esque firm is what they need. Unfortunately, an Apple clone is what they will have to settle for.

What best typifies China’s Apple lust is the insanity that buying their goods evokes. A few years ago a Chinese woman sold her virginity for an Iphone 4S, and a mainland guy swapped out his ‘spare’ kidney for an Ipad. More recently a woman from Chengdu traded her five year old brother for a pair of Iphone 6’s.

It is such fanaticism that has Beijing gritting its teeth. ‘Oh but if we only had a global brand! Something to make the world love China. Sadly enough our best option is malware infested Huawei phones.’

Beijing’s war against Apple

Beijing is doing whatever it takes to fight this anti-Apple battle. Their two-part approach is to attack the American firm while simultaneously promoting the hometown favorite. Their fair-haired boy is Huawei, which they mandated communist members buy. The firm is best known for its ties to the Red Army and not the most inviting option for most of us in the west. Xiaomi, however, does not carry such negative baggage. Being a practical sort, Beijing will ride out the Xiaomi wave, after all, its leader Lei Jun is a powerful party member.

The communist party attack on Apple began a few years ago when ‘Apple everything’ was in full tilt. They read the reports of the kidney and virginity swaps and saw how crazy so many Chinese were for the foreign gear. Beijing controls the press and began to wage war. They called Apple out for discriminating against Chines customers vis a vis warranty work. The true problem was that mainland Chinese were unwittingly buying fake Iphones from Hong Kong. When these were taken to Apple service, they were rejected. The party cloaked it as anti-China racism. They also claimed that Iphones had a shorter warranty period in China than elsewhere, this too was meant to prove their point.

Beijing also decided to hold Apple, but not the Chinese, responsible for their acts. It was shown that students were taking out tuition loans and then investing in Apple gear instead of their future. The communists were so incensed that they threatened to ban Iphones/pads and or force Apple to reimburse those confused and wayward students.

This type of thing has been playing out in China for many years now and the brainwashing was a success. It has given the Chinese a chance to eschew a foreign manufacturer in favor of one of their own. The problem is that until Xiaomi, no Chinese brand had cache. Like I said, the Chinese know Huawei is in the pocket of the party and outside of communist meetings has no street cred what so ever. Most of the other brands too, have little appeal. Xiaomi, however, gives them hope.

Xiaomi, hated at home but loved abroad

It is not only the communist party which seeks a global brand, but the Chinese too. The people are educated about the glory of China’s history and how it was the ‘center of the universe’. Students are taught that while the rest of us were hunting down mastodons merely covered with a fig leaf, the Chinese existed at the peak of civility. I suppose Roman history is censored out of text books, or this contention would clearly be called into question. Be that as it may, it ‘hurts the pride’ of the Chinese people that their land has been turned into a manufacturing floor and all they got out of the deal was polluted land and the highest rate of cancer in the world.

Nationalism is how they reconcile this problem. They rue the day that foreigners beat them into submission, relegating China to third world status and seek anything which will put them back on top. This is where Xiaomi fits in.

Most Xiaomi users do not like the brand

The west waxes poetic about Xiaomi, its innovative spirit and how it will take over the world. The Chinese, however, are not so sure. A survey of Xiaomi users in the sweet spot of their market showed that the vast majority of Xiaomi owners do not like the brand. The report is in Chinese and thus most western newsies have no idea about this, but it is true. By proxy, Xiaomi becomes the firm for Chinese to back.

Most of my Chinese MBA students disdain Xiaomi for its failure to innovate. To them it is nothing more than a knockoff, something of which they are embarrassed. That discourse is merely for insiders, however. Chinese culture does not engender airing dirty laundry in public and so many here just remain mum. Once you get to know them, however, they open up.

The fact is that they will back Xiaomi because it is the best option. Communism does little to instill creativity and Xiaomi is proof of that. The firm has taken the easy road, copying Apple. Beijing has enabled them along the way by failing to enforce IP laws it has on the books. The net result, ie global brand, gives them more pleasure than proving that they are living up to the pre-WTO promises they made before 2001.

Chinese back Xiaomi because they have to

Contrary to what you may read in the press, the Chinese back Xiaomi because they must. Failure to do so would mean explaining they they do not like the firm. If forced to do this, they would have to admit that Xiaomi pirated designs and is merely a clone. This would fracture their collective psyche, insofar as they don’t want us to know how bad things really are here. Copying aside, they also fear that the rest of the world knows that even though China has over 20% of the world’s population, they cannot produce a Steve Jobs. They would prefer to ride the rap and nod their heads as we in the west tout Xiaomi for them.

From where I’m sitting the dynamic is funny to view. Big name publishers go on and on about Lei Jun’s firm, but know little about why it is sticky in China. Perhaps they lack perspective. Ultimately, Xiaomi will hit western markets, be sued through its teeth and forced to clean up its act. They will prove that stealing early and often is a viable business model, as long as one’s government is backing them. The Xiaomi story is not so much about Xiaomi but about China and broken promises. I guess the only conciliation that those of us in the west can take from all this is that at least nobody is trading their kin for Xiaomi cell phones.

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