Yanwen’s blog

Wednesday, February 19, 2025

Around China’s 元宵节 (Lantern Festival), I came across a news story that most people might overlook and that could make a big splash: by June 2025, China will replace its feed-in tariff (FIT) system with a fully market-driven renewable energy pricing model. This shift will move wind and solar projects to competitive bidding and market-based transactions.

The current Feed-in Tariff (FIT) system is a government policy that guarantees a fixed price for electricity generated by renewable energy sources like wind and solar. This incentive encourages energy producers to invest in renewable energy projects by ensuring a stable return.

However, by June 2025, China plans to phase out this system. Under the new policy, prices will be determined by market conditions, such as supply and demand. Wind and solar projects will be subject to competitive bidding or market transactions to decide pricing.

Key Aspects of the New Policy:

1. Full Market Pricing: Renewable energy will primarily be bought and sold through market transactions, with prices fluctuating according to demand and supply, similar to other commodities.

2. Sustainable Price Settlement: A new system will ensure long-term price stability, with mechanisms in place to prevent sudden price fluctuations, helping energy producers and investors plan more effectively.

3. Differentiated Treatment for Existing and New Projects: Existing renewable energy projects will maintain current pricing under the FIT system, while new projects will adopt the new market-based model.

Why This Matters:

(1) For China’s Renewable Energy Industry:  Moving from FIT to a market-based pricing system introduces price competition. This could lower energy costs over time as companies strive to offer cheaper and more efficient renewable energy solutions.

As the market becomes more competitive, there will be greater pressure on innovation. Companies will need to innovate and improve efficiency to stay competitive in a market with fluctuating prices. This shift could accelerate the development of cleaner, more efficient technologies.

However, for developers and investors, the move to market-based pricing introduces uncertainty about long-term price stability, which could discourage some from investing in new projects. The lack of a guaranteed price means the financial risks are higher.

(2) For China’s Energy Transition Goals:  This shift aligns with China’s commitment to reducing carbon emissions and transitioning to renewable energy. By encouraging market-driven pricing, the country may accelerate the growth of its renewable energy sector—especially solar and wind power. The new pricing model could also boost long-term investment in energy infrastructure and technologies.

However, while lower prices could make renewable energy more accessible, there’s a risk of price volatility if demand fluctuates or if too many projects come online simultaneously. This could create instability in energy pricing, potentially affecting consumers and businesses.

(3) For the Global Renewable Energy Market: As the world’s largest producer and consumer of renewable energy, China’s pricing shift could cause significant effects on global energy markets. This may influence energy pricing worldwide, especially in countries that rely on China for renewable energy technologies or trade.

Finally, this shift towards market-driven renewable energy pricing could not only accelerate China’s energy transition but also set a precedent for other nations. As the world’s largest renewable energy producer, China’s move could inspire a global push for more competitive, efficient, and sustainable energy markets, driving innovation and fostering international collaboration on climate goals.

Thursday, February 20, 2025

I’ve long heard about the success story of the Chinese retail store, 胖东来 (Pàng Dōng Lái), and have tried to pinpoint what makes it unique.

We’re all familiar with financially successful companies, both retail and wholesale, such as Amazon, Walmart, or Costco. These stores share some common traits: outstanding customer service, high-quality products, a great in-store experience, a loyal customer base, and razor-thin profit margins like Walmart.

There’s a Chinese saying: "为富不仁，为仁不富" (wèi fù bù rén, wèi rén bù fù), meaning "To become rich, you can’t be benevolent; to be benevolent, you can’t become rich." The idea is that wealth and kindness don’t go hand in hand. In order to accumulate wealth, you must exploit your employees; sharing profits or being kind means making less money.

Take Andrew Carnegie for example, the ultra-wealthy steel magnate, who notoriously paid his workers poorly, treated them unfairly, imposed long working hours, and faced violent strikes as a result.

Another example is Walmart. While it’s famous for its massive wealth, it also faces a staggering 70% employee turnover rate due to low wages, poor benefits, and subpar working conditions. As a result, Walmart has to spend heavily on training new hires each year.

However, Yu Donglai, the founder of Pang Donglai, decided to take a different path from those who extract profits from 'the sweat and blood of their employees,' even if some later donate those profits to charity. He questioned, "What’s the point of making so much money if those who work for you don’t benefit from it?"

At Pang Donglai, employees are given high salaries, excellent benefits, and generous vacation days. Because of this, people are eager to work for and stay with the company.

Yu’s profit-sharing model is simple but effective: when everyone has money to earn, people will have money to spend and be happy to go to work, creating a virtuous cycle in the commercial ecosystem.

In a world where the mantra "profit over people" often dominates, businesses like Pàng Dōng Lái offer a refreshing reminder that success doesn’t have to come at the expense of employees. Yu Donglai’s approach proves that profitability and benevolence can coexist—by treating employees well and sharing the wealth, a company can create not only a loyal workforce but also a sustainable business model. 

In the long run, fostering a mutually beneficial relationship with employees can lead to happy and productive workforce and a thriving ecosystem, paving the way for lasting success of a company.

Sunday, February 16, 2025

There is a test that evaluates emotional awareness called the Emotional Awareness Scale (LEAS). It asks participants to read 20 scenarios involving two people and then describe the emotions at play. These responses are assessed by psychologists against a rubric. Interestingly, chatbots like ChatGPT have achieved near-perfect scores on the LEAS, far surpassing the average human’s score.

This brings up an intriguing question: Does this mean AI has higher emotional intelligence (EQ) than humans? And is AI truly self-aware? For now, I have more questions than answers.

Lately, I’ve been hearing the term 出海 (chū hǎi), which translates to “going overseas.” It refers to companies seeking growth and development opportunities abroad. This has become a major business trend in China, driven by the challenges domestic companies have faced in the post-pandemic era, especially the slow recovery of the consumer market.

While businesses have historically sought international expansion, the trend of chū hǎi has gained significant momentum in recent years—particularly in the wake of the pandemic. As businesses look abroad for investment opportunities, new factories, and untapped markets, the scope of this international push has expanded to include both traditional sectors like manufacturing and emerging sectors like e-commerce, technology, and even entertainment.

Innovative Capabilities— Many Chinese business leaders believe their innovative products and services have strong potential in foreign markets. China’s tech companies, particularly in e-commerce (like Alibaba and JD.com), mobile apps (such as TikTok’s parent company ByteDance), and electric vehicles (like BYD), have already made significant inroads into regions like Southeast Asia, Europe, and the Global South.

Geopolitical and Trade Barriers—Despite this ambitious global expansion, Chinese companies face several significant hurdles, including tariffs and rising geopolitical tensions, particularly in the Global South. National security concerns about China’s mobile apps, especially in countries like the United States and India, add another layer of complexity.

Adapting Strategies— To navigate these challenges, many Chinese businesses are adapting and refining their strategies. They are localizing their products and marketing approaches to better align with the cultural preferences of new markets, such as in South America. Some are forming joint ventures or partnerships with local players to help them understand and comply with regulatory environments.

Reconceiving "Place"— The concept of chū hǎi is not just about physical expansion—it’s also about reconceptualizing “place” in the global business landscape. No longer confined by geographical borders, Chinese companies are embracing a more flexible, globally-minded approach to business operations. In this sense, they are following in the footsteps of many European companies.

For example, some Chinese firms are setting up research and development centers overseas to better understand local consumer needs, similar to Apple’s R&D center in Shenzhen. Others are shifting production and logistics hubs outside of China to reduce reliance on domestic supply chains or to mitigate trade tariffs.

There’s an old saying, 胸怀天下, 放眼世界  (xiōng huái tiān xià, fàng yǎn shì jiè) - translates roughly, Embrace the whole world, have the world in your mind. It conveys a sense of having a broad vision and global perspective.

Beyond expanding market share, chū hǎi represents a fundamental shift in how Chinese companies view competition with their global mindset.

Saturday, February 15, 2025

My sister and her husband often drive their son to work in the morning, mainly due to unfavorable weather. He’s turning 27 this year, and some might see this as overprotectiveness—especially since he could ride his e-bike or take public transportation. But I see it differently. As retired parents, they treasure these ride moments with their son. It reminds me of when my children come over for lunch and we drive them back—not out of necessity, but simply to extend our time together, savoring those fleeting moments.

Recently, I came across a timely news piece about a major trend shaping China’s e-commerce landscape—livestream shopping. It’s no surprise that marketing guru Gary Vaynerchuk calls it the next big thing, and China is already at the forefront of this revolution.

The numbers are staggering: over half a billion consumers regularly tune into e-commerce livestreams, driving a significant share of China’s online retail sales. I see my relatives shopping this way all the time.

Livestream shopping work so well for these reasons. 

1. Real-time product demos build trust – Seeing a product in action reassures buyers and enhances credibility.  

2. Flash sales and limited-time deals tap into FOMO (fear of missing out) – A classic sales tactic that keeps audiences hooked. Hurry up—过这个村就没这个店! (guò zhège cūn jiù méi zhège diàn) "Once you pass this village, there’s no more shop like this." The saying conveys a sense of urgency, implying that once the opportunity (such as a flash sale) is gone, it's gone for good.

3. Instant engagement fosters a direct connection – The interactive format strengthens consumer trust and boosts conversion rates. 

Some livestreamers sell millions in minutes, proving just how powerful this sales model has become. Brands that ignore it risk falling behind, especially as platforms like Douyin (TikTok’s Chinese counterpart), Taobao Live, and Kuaishou continue to shape consumer behavior.

Livestream shopping is an emerging trend, blending entertainment, social engagement, and retail into a seamless experience. With China leading the way, this trend has already begun to influence global markets, and its potential is far from fully realized. As consumer habits continue to evolve, staying ahead of the curve will be crucial for those who want to capture the attention—and wallets—of today’s digital shoppers.

Friday, February 14, 2025

Lately, I’ve found myself binge-watching short video clips and still thinking about them long after I’ve stopped watching. A friend once told me, “It’s so easy to lose an hour on short videos.” While she lamented the wasted time, I see it from another perspective: You are what you eat. You think what you see. The indulgence in low-quality information leaves a lasting imprint on our minds.

Just as the food we consume shapes our physical health, the information we absorb influences our thoughts and perspectives. If you spend hours on mindless short videos, your brain continues to process them even after you’ve turned off the screen. The effect is immersive—these videos don’t just vanish; they linger, subtly shaping how you perceive the world.

I can't think of a better Chinese saying than this one, 近朱者赤，近墨者黑 (Jìn zhū zhě chì, jìn mò zhě hēi), meaning, One who nears vermilion becomes red; one who nears ink becomes black," suggesting our environment and influences shape who we are—just as the food we eat nourishes the body, the information we consume nourishes the mind.

For those seeking self-improvement, being selective about the information we consume is crucial. In today’s digital landscape, what is truly valuable is often not popular, and what is popular is rarely valuable. Likewise, what is new is not always important, and what is important is often not new.

On a different note,  China’s BYD is in advanced talks to form a carbon credit pool in Europe, according to Reuters. A carbon credit is a permit allowing companies to emit a certain amount of greenhouse gases. Firms that produce fewer emissions than their cap can sell excess credits to those exceeding their limits, creating a market-based system to curb pollution.

BYD’s move highlights several key trends in the global EV market and Europe’s evolving regulatory landscape:

1. BYD’s Growing Influence in the Global EV Market   BYD’s ability to supply carbon credits underscores its leadership in the EV sector. Unlike legacy European automakers still struggling with electrification, BYD’s high sales volumes allow it to generate surplus credits—turning regulatory pressure into a business opportunity.

2. A Strategic Entry into the European Market   Rather than simply selling EVs, BYD is embedding itself deeper into Europe’s automotive ecosystem. By forming carbon credit pools with European manufacturers, it strengthens business ties with competitors, potentially paving the way for future collaborations or supply chain integration.

3. Regulatory Loopholes and the Cost of Compliance   The EU’s carbon credit system is designed to accelerate electrification, yet it also allows traditional automakers to delay their EV transition by purchasing credits instead of fully committing to change. While this helps legacy companies stay financially stable, it raises concerns about whether the policy is genuinely driving progress or just postponing it.

4. China’s Growing Dominance in EV Technology   This development reinforces how Chinese EV makers—especially BYD—are not just catching up but actively reshaping the industry. While European automakers rely on regulatory workarounds, Chinese firms are already operating ahead of emissions targets, signaling a faster-than-expected shift in global automotive power.

Ultimately, BYD’s approach mirrors Tesla’s early strategy of selling credits to traditional automakers, but with an added strategic twist—strengthening its foothold in Europe while profiting from its EV dominance. European manufacturers now face a choice: accelerate electrification or keep paying their Chinese competitors for compliance.