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TechNode: Why QR codes trump NFC in China

© Jonas Leupe/Unsplash.

Among the ten customers lining up inside a Starbucks store in Beijing, I seemed to be the only one who showed up at the cashier with an iPhone, ready to pay for my breakfast with Apple Pay. It was my turn: a grande-size latte, and a ham and double cheese bagel. “WeChat or Alipay?” asked the barista.

Apple Pay did not enter the Chinese market until 2016. The two homegrown Chinese payment services were released much earlier: Tencent’s WeChat Pay in 2014, and Alibaba’s Alipay in 2004. While WeChat Pay and Alipay rely on QR codes, the American tech giant opted for the solution that turns your phone into a virtual tap-and-go bank card with NFC, a technologically more secure alternative. When Apple signed a contract with China’s UnionPay – which owns the QuickPass contactless technology similar to Visa’s payWave – mobile payments had already been commonplace in China. Many had asked: Is Apple Pay able to compete with WeChat and Alipay on their home turf?

Today, Apple Pay holds 90% market share in the Chinese contactless payment sector, outshining its competitors in China including Samsung Pay, Huawei Pay, and Xiaomi’s Mi Pay. But the larger context is, the NFC payment sector only holds less than 10% of the entire Chinese mobile transaction market (in Chinese). Moreover, research from 2017 Q1points out that 67 percent of customers use WeChat Pay or Alipay to shop in a convenience store, while NFC-based payments remain in the zero-percent range; 47 percent of convenience store staff have no understanding of Apple Pay. The QR code model of WeChat and Alipay apparently takes the lead in the Middle Kingdom, and there are clear rationales behind that.

NFC chips are a luxury

Often overlooked, but important to remember: Shanghai isn’t a miniature of China. While it would not be a stretch to see hundreds of customers lining in front of Apple Stores trying to get the newest iPhone models at the earliest possible time, such high-end smartphones are not as popular in lower-tier cities around the rest of the country.

In fact, Apple is only the fifth most popular smartphone brand in China, following four indigenous manufacturers – Huawei, the Oppo-Vivo duo, and Xiaomi. To many Chinese users, cheaper smartphones from domestic brands priced below a thousand yuan – also known as qianyuanji (千元机) – are often more favorable options than high-end products that would cost fivefold.

Although many homegrown brands have released their own NFC-based payment features, they are often only available on upscale products. Among the smartphones with the highest sales volumes on JD.com, China’s leading e-commerce website, I have examined five smartphones that are below two thousand yuan from the aforementioned brands: Huawei Honor 9, Oppo A57, Xiaomi Redmi 5 Plus, Xiaomi Redmi Note 5A, and Vivo X9s. It turns out that none of them is shipped with NFC chips.

QR code payments, on the other hand, demand no such extra hardware requirement. It is for sure that NFC chips come with an additional cost, and that is a luxury for many Chinese customers who have little incentive for paying an extra price to opt for NFC-based payments.

POS terminals aren’t cheap

Many vendors, mostly local small businesses, are hesitant to support NFC contactless payments due to the underlying costs. While it is reasonable to expect McDonald’s to accept credit cards, a vendor at a local farmers’ market in a Chinese city is less likely to own a POS machine that supports contactless chip cards.

QR codes are seen as a more convenient alternative to costly POS terminals. If you are a small business owner, you would have to follow a much more sophisticated, and pricey procedure to obtain a POS terminal than printing a QR code to request funds on WeChat or Alipay.

The absence of credit cards

Consumers in many Western countries are incentivized by the benefits and promotions that credit card holders enjoy. Although credit cards are ubiquitous in major Chinese cities like Beijing and Shanghai, they are not at all commonplace in rural parts of the country or even lower tier cities.

There are also roadblocks for college students, freelancers, retired citizens, and stay-home parents to apply for credit cards. According to a 2017 report from The People’s Bank of China, the average number of credit cards owned by each person in China is 0.39. In the US, the number is 2.6.

While the majority of Chinese people don’t get cash back from credit card companies, they can from Alipay. As third-party services, both Alipay and WeChat Pay have frequently offered (link in Chinese) promotions, cashback rewards, and “red packets” to users, including those who have only added debit cards to their accounts.

Instead of waiting for traditional financial institutions to advance China’s credit system, Chinese internet titans have introduced their own credit rating systems – Sesame Credit from Alibaba and Tencent Credit – to reward citizens based on an assessment of their shopping behavior and financial credit history. Ant Check, a feature on Alipay, offers overdraft and personal credit line services to qualified users. While WeChat and Alipay have already established a new model of online financing, NFC-based payments still largely depend on banks and credit card companies.

Notwithstanding that NFC-based payments are still taking the lead in many Western countries, I look forward to seeing the QR code model to be exported to developing regions like Southeast Asia, where it would allow people with a $99 smartphone to benefit from mobile payments – or online financing in general – in a convenient, economical and secure fashion. Moving forward, we should continue to expect a growing presence of QR codes in more scenarios of cashless transactions not only in China but also worldwide.

This article was originally published on TechNode, one of the largest English-language outlets covering tech in China.

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The Rise of China’s Political Influence in the United States

The University of Texas at Austin recently rejected its China Public Policy Center’s proposal to receive funds from the China-United States Exchange Foundation (CUSEF), a research foundation chaired by C. H. Tung, the Hong Kong Special Administrative Region’s first Chief Executive after the British handover in 1997. In response, Senator Ted Cruz of Texas — who has been a critic in the US Congress against China’s human rights violations — labeled the CUSEF as “a pseudo-philanthropic foundation” in a letter written to the President of UT Austin Greg Fenves, accusing China of “[establishing] influence in policy debates abroad”.

The People’s Republic of China’s agenda of overseas political infiltration has already sparked nationwide debates in Australia and New Zealand. While Anne-Marie Brady from the University of Canterbury argues that smaller countries — with less political power such as New Zealand — are more vulnerable to China’s tactics to promote the Chinese authority’s ideological influence both domestically and internationally, it has become increasingly evident that the United States is not only not exempt from, but perceived as a major target in China’s blueprint of both reshaping international judgments on Chinese political affairs, as well as building its soft power influence on the global stage.

Robert Hutchings — an expert on national security and a professor at the University of Texas at Austin — describes the funding of the university’s China Public Policy Center as “a source that might be trying to use the center for its own agenda”, and fears that it would interfere the academic independence and integrity. C. H. Tung is not only the former Chief Executive of the Central Government of Hong Kong and the Foundation Chairman of the CUSEF. In Beijing, Tung serves as the Vice President of China’s People’s Political Consultative Conference (CPPCC), which self-identifies as a “United Front” organization under the direct control of the Communist Party of China. The United Front Work Department, as described by former U.S. intelligence analyst Peter Mattis, is an organization that “[mobilizes] the party’s friends to strike at the party’s enemies.” The primary goals of the United Front Work Department include promoting political ideologies in accordance with the stance of the Communist Party — particularly its views on Hong Kong, Taiwan, and Tibet, territorial disputes, as well as ethnic minorities — by uniting Party members and liaising with its supporters both within China and the Chinese communities abroad.

Another example of China’s establishment of its influence in the American academia took place at the University of California, San Diego. In 2017, the university invited the Dalai Lama — the Tibetan Buddhist leader perceived as a territorial separatist in China — as the commencement speaker. The decision was decried by the university’s Chinese Students and Scholars Association (CSSA), which urged the administration to reconsider their resolution and claimed to have reported the incident to the Chinese Consulate General in Los Angeles. According to an investigation from the New York Times, leaderships of Chinese student groups in American universities, including the 155-odd chapters of the CSSA nationwide, maintain unofficial links with the local Chinese consulates.

In a similar case, the Ministry of Education of China removed the University of Calgary — the Canadian university that bestowed an honorary degree upon the Dalai Lama in 2009 — from its list of accredited institutions, affecting nearly 600 students whose degrees would not be recognized upon their return to China. It is evident that many Chinese students at UC San Diego were also worried that the Chinese authority would react similarly to the incident.

“Chinese students have pumped billions of dollars into the US economy through tuition, fees, and consumption,” said Hu Xijin, the Editor-in-Chief of China’s state-owned nationalist media Global Times, on Twitter, “This revenue stream alone impacts many levels of US society, and China controls it.” In the US, students admitted internationally — who often pay full tuition — have been financing the cost of public universities and financially subsidizing local students. There are 329,000 Chinese students studying in the US, making Chinese students the largest group of foreign-born students nationally. From this aspect, China possesses the leverage to influence many layers of the American society, and could use it to force American educational institutes to step back from certain sensitive political issues.

Occurrences in other countries have demonstrated China’s goal of promoting its own stance on domestic political affairs to the global audience. In Australia, a Chinese-born businessman named Xiangmo Huang sparked a national contention on foreign political donations, as Huang made generous donations to major Australian political parties while he served as the chairman of the Australian Council for the Promotion of the Peaceful Reunification of China (ACPPRC), a “non-government, non-profit” political council linked to the Communist Party of China. The ACPPRC has been accused of collaborating with the United Front Work Department to infiltrate the Communist Party’s political viewpoints into the Australian parliament through monetary contributions. In response to the concerns over the Chinese meddling in Australia, Australian PM Malcolm Turnbull made the remarks that the Australian people will “stand up” against any attempt of Chinese political infiltration, making a reference to Mao Zedong’s speech in 1949.

Photo credit: Mark Schiefelbein/Associate Press

American enterprises with businesses in mainland China are also forced to go through political self-censorship in accordance with the demands of the Chinese government. In a recent event, Marriott International — an American hospitality company based in Maryland — was accused by the Chinese regulators of listing Hong Kong, Taiwan, and Tibet as countries on their online survey, and “liking” a tweet from a “separatist group” on Twitter. After the Ministry of Foreign Affairs urged the company to respect China’s sovereignty and territorial claims, the President and CEO of Marriott International, Arne Sorenson, issued an apology stating that the company had un-”liked” the tweet and shut down its Chinese websites and mobile apps for further investigation “at the request of the [Chinese] Government”. In the meantime, the American employee who “liked” the controversial post on Twitter was fired by the company. According to Bill Bishop from Axios China and Sinocism, the Chinese government had “punished a U.S. firm for activities for the activities of a U.S.-based employee on a U.S.-based social media platform that is blocked in China, and that U.S. firm acquiesced without a fight.” The message from the Chinese authorities has been clear: American (or all foreign) companies in China must comply with the Communist Party’s political agenda, even if the occurrence takes place in their home country.

On the flip side, the US government would have less power to dictate the political inclination of a Chinese company in America. Imagine if a Chinese company reposts an ultra-nationalistic article from the Chinese Communist Youth League on Weibo, the US government would have no authority over its American branch to force a deletion.

Similarly in academia, the Chinese government imposes significantly more regulations on foreign-sponsored academic institutions in China vis-à-vis its American counterpart. Even in local universities, professors have become unemployed for spreading “Western values” — often referring to democratic and capitalist ideologies — in classrooms. Some institutions have replaced English textbooks imported from overseas with Chinese ones that had been approved by the authorities.

China Daily found outside the MIT Sloan building. Photo credit: Tianyu M. Fang,

While China’s state-owned media outlets, including the China Daily and China Central Television — rebranded as China Global Television Network (CGTN) in the USA — provide news service to the American audience through their US divisions, American media companies have little freedom in China. The Chinese-language online versions of multiple American publications, including The New York Times and The Wall Street Journal, have been blocked in mainland China as they refused to self-censor sensitive contents related to Chinese politics.

Aside from altering judgments on China’s national affairs from the international watchdogs and governments, China’s political influence in the US has a more sophisticated objective: to spread and extend its soft power influence to the rest of the world.

During China’s 19th Party Congress in October 2017, Chairman Xi Jinping described the “United Front” campaign as the Party’s fa bao — meaning magic weapon — and instructed the Party to maintain extensive contacts with Chinese people abroad. Heretofore, the Chinese government primarily spoke in a manner that is protective inwards, such as defending its authoritarian system and human rights records from external criticism. While this standpoint is still evident within China’s political agenda, China has become more aggressive outwards. Xi Jinping’s instruction is to develop more strategies to establish its influence abroad, starting with countries with significant Chinese diaspora communities.

The United States, however, begins to progress towards the opposite direction. While the Obama administration attempted to build and stabilize its influence in the Asia Pacific region by “rebalance to Asia”, President Donald Trump’s proposal to the American diplomacy and foreign affairs puts more focus on internal affairs, under his “America First” campaign promise. The withdrawal from the Trans-Pacific Partnership (TPP) — originally led by the US itself to increase its Trans-Pacific involvement — created a vacuum for China to develop its own version of TPP, the Asian Infrastructure Investment Bank (AIIB). This vacuum would further support China’s “One Belt, One Road” initiative, which aims to develop its transregional influence in through economic strategies.

Politically, the Trump administration neglects to defend America’s fundamental values of democracy and human rights. After the death of the Nobel Peace Prize laureate Dr. Liu Xiaobo — the political dissent who had been imprisoned in China since 2009 — in July 2017, the White House — calling Liu a “political prisoner” and “a courageous activist” — failed to address any condemnation to China’s human rights violations. A contrast could be drawn between the statements from the Trump administration vis-à-vis the Obama administration in 2010 — which urged China to release Liu “as soon as possible” — shortly after the Nobel Prize ceremony. The reactions from the Trump administration were, however, not surprising. In 1990, Donald Trump publicly praised the Chinese government’s “firm hand” against the student protesters on Tiananmen Square, which took place the year before.

Such policies from Donald Trump’s administration have created opportunities for the Chinese government to advance its agenda of both continuing to silence political dissents within, and establishing its soft powers — and its political ideologies — internationally.

Be that as it may, China’s attempt of building soft power influence overseas might not easily overtake the existing global US influence. Although China is an important player in many aspects, it is not yet qualified to be actively involved in global leadership. Politically, the country has almost no involvement in the Middle East and the refugee crises; diplomatically, it has demonstrated aggressions towards countries with territorial disputes; and internally, the nation needs more time to mitigate its multifaceted urban-rural imbalance.

While the United States is the world’s emblem of liberalization and hegemony, it is in the need of taking actions to consolidate its values both domestically and globally. It is equally important for the US to realize that the American political mechanism is more vulnerable to foreign political influence than China under the Communist Party’s authoritarian control. If the two countries were to fight over their political influence, the battlegrounds would not be the same. For American institutions like the University of Texas at Austin, a scrutiny and evaluation of potential political ties should be taken into account to uphold the fundamental values of their own.

This article was also published on the blog of The Asia Lab, a student-run research project on Asian politics and economics at The Governor’s Academy in Byfield, MA.

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The problem with “trends”

I was fortunate to be born in the era of the internet. I grew up hearing all the tales of Facebook, Google, Apple, and their founders… and of course, Tencent, Baidu, and Alibaba. As a child, adults often asked what I wanted to be in the future. I could not give an exact answer. So they told me, “why don’t you become an entrepreneur, like Jack Ma?” I thought it was a really good idea. But It wasn’t just me; almost every teenager had the same thought. Then at some point, everyone built their internet startup company, a lot of which got backed by VCs. Experienced as well as inexperienced VCs put their money into good as well as shitty products. The outcome dovetailed with a simple principle in the market economy: the shitty ones were worth nothing so they died, and the good ones survived. “That was a bubble,” people began to whine on the cyberspace, blaming “internet entrepreneurship”.

The Chinese government launched a campaign to promote mass entrepreneurship and innovation. A few of my friends bought the idea so they started their own business on the internet right away after graduation, and most of them did not work well. The problem is, many of them wouldn’t even be able to get a decent job in the career market. When others with better educational backgrounds, more extensive experience, and more professional expertise were struggling with their startups, my friends did not even get a chance to join the game after working for years. However, there were some companies did thrive when Chinese VCs were wasting their money on overvalued products: local ride-hailing app Didi Chuxing beat their US competitor Uber, and food delivery service Eleme became a billion-dollar unicorn. The Chinese startup environment has been turning healthier thereafter as both VCs and entrepreneurs began to understand what makes a valuable product.

Overvalued products are definitely bubbles, but without the trend of entrepreneurship, it would be impossible for investors and entrepreneurs to distinguish the good ones (probably < 1%) from all the others that are shitty.

Today, blockchain projects are facing the analogous problem. Kodak’s stock price skyrocketed as they decided to make its own blockchain product, although nobody knew exactly what the project was. Many people have realized the great momentum of blockchain, yet the vast majority of people do not understand how it works, and only very few people could see what some possibilities are. As a result of this mindset, investors began to make speculations and put large amounts of money on overvalued crappy projects (professionally known as “shitcoins”). So that being said, we are going to invest >99% in overvalued shitcoins, and <1% in good blockchain projects, and we are going to lose money. But the idea isn’t wrong, it’s just that it takes time for us to tell the goods and the bads apart. During another “trend” that took place around 1849 — the Gold Rush — people came to the Sacremento Valley in search of gold, but many people returned home with nothing and only a few people actually became wealthy.

As entrepreneurs, it is also important to realize that strong trends are signals of change. Labeling yourself as a blockchain company will not prevent you from being knocked out, but ignoring emerging technologies is definitely not going to be a smart approach. If Sears had looked into e-commerce in 1993, it would probably have looked different today than getting close to shutting down almost all of their stores throughout the USA.

Edited 1/11/18: An earlier version of this post described Kodak’s blockchain project as a cryptocurrency. Thanks to Gee Law for pointing this out.

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Paul Graham: What You’ll Wish You’d Known

January 2017, Boston Common. Photo credit: Tianyu Fang.

Paul Graham is definitely one of my favorite essayists. He wrote a piece which was originally a speech draft to a group of high school students in 2005. As an American high school student, I personally resonate greatly with many of his points in the essay as I juxtapose my own blueprint with Graham’s thoughts.

If I were back in high school and someone asked about my plans, I’d say that my first priority was to learn what the options were. You don’t need to be in a rush to choose your life’s work. What you need to do is discover what you like. You have to work on stuff you like if you want to be good at what you do.

It might seem that nothing would be easier than deciding what you like, but it turns out to be hard, partly because it’s hard to get an accurate picture of most jobs. Being a doctor is not the way it’s portrayed on TV. Fortunately you can also watch real doctors, by volunteering in hospitals.

The curricula of most high schools are shallow. However, it is crucial to get an extensive understanding of different sectors, disciplines, and occupations. I was interested in tech entrepreneurship in my freshman year, so I ended up working at a startup over the summer because I had a lot of spare time. That was a good opportunity for me to get to know what these intangible ideas actually were.

But there are other jobs you can’t learn about, because no one is doing them yet. Most of the work I’ve done in the last ten years didn’t exist when I was in high school. The world changes fast, and the rate at which it changes is itself speeding up. In such a world it’s not a good idea to have fixed plans.

It’s very hard to foresee our society’s employment demands in the next decade. I was born in Manchuria where my mother went to high school. Because everybody in her hometown thought that the Soviets would be the superpower at some point, my mom chose to learn Russian instead of English as her second language. No one had anticipated the breakdown of the Soviet Union, but if one had mastered the methodology of learning languages (not just learning one specific language), it shouldn’t be hard to pick up a new language.

It’s hard to predict the trend, so be adaptive, get ready & be prepared for new things. Don’t waste your time on how to pass a calculus test (computers can easily solve the problems for you), learn to understand how to logically solve a problem instead. Be ready to surprise others, and don’t wait for the world to surprise you.

The best protection is always to be working on hard problems. Writing novels is hard. Reading novels isn’t. Hard means worry: if you’re not worrying that something you’re making will come out badly, or that you won’t be able to understand something you’re studying, then it isn’t hard enough. There has to be suspense.

Spot on. Challenge yourself.

If you’d asked me in high school what the difference was between high school kids and adults, I’d have said it was that adults had to earn a living. Wrong. It’s that adults take responsibility for themselves. Making a living is only a small part of it. Far more important is to take intellectual responsibility for oneself.

Yes! Responsibility. But I think it’s not just about intellectual responsibility. I go to a private school with many upper-middle-class Americans of my age, and many are not conscious of their privilege of attending an “elite” independent school in Massachusetts. I believe that we should take the equal amount of social responsibility as the privilege that our society has bestowed upon us.

When I ask people what they regret most about high school, they nearly all say the same thing: that they wasted so much time. If you’re wondering what you’re doing now that you’ll regret most later, that’s probably it.

The only way not to waste your talents is to try your best and stop wasting time.

You may be thinking, we have to do more than get good grades. We have to have extracurricular activities. But you know perfectly well how bogus most of these are. Collecting donations for a charity is an admirable thing to do, but it’s not hard. It’s not getting something done. What I mean by getting something done is learning how to write well, or how to program computers, or what life was really like in preindustrial societies, or how to draw the human face from life. This sort of thing rarely translates into a line item on a college application.

Spend time on things that are meaningful, challenging, and have long-term impacts. This is also the reason I think American high school students need to get off campus and leave their homes more often and see what our society needs. (Paul Graham describes it as a “day job”.) Find a niche in society aside from being a young adult in your family and a student in high school: writing, programming, designing, painting, lobbying, or becoming an advocate for the causes that you support.

Right now most of you feel your job in life is to be a promising college applicant. But that means you’re designing your life to satisfy a process so mindless that there’s a whole industry devoted to subverting it. No wonder you become cynical. The malaise you feel is the same that a producer of reality TV shows or a tobacco industry executive feels. And you don’t even get paid a lot.

This might be obvious to many of us, but I’ve seen too many people who set their ultimate goal of high school life as “getting into a good college”. Getting into a good college is supposed to be something a high school graduate is entitled to as one gradually becomes a responsible individual. I’m pretty sure you will most likely get rejected by your dream school if you walk into their admissions office and tell the officer that your dream is to get in there. Similarly, if you spend all your time thinking about how to make billions, unlikely will you become a billionaire in the end. (Work hard, be smart, and make sure if one day someone offers you a billion-dollar paycheck, you’re prepared for it.)

When a friend of mine used to grumble because he had to write a paper for school, his mother would tell him: find a way to make it interesting. That’s what you need to do: find a question that makes the world interesting. People who do great things look at the same world everyone else does, but notice some odd detail that’s compellingly mysterious.

Find a question! Find something that you like. Curiosity turns work into play.

But once they get started, interest takes over, and discipline is no longer necessary.

Pretty much summarizes how important curiosity is. Good entrepreneurs, writers, engineers, and elites in their respective fields are not just good because they challenge themselves, but more crucially they enjoy what they are doing. Math may seem boring, but if you find economics really appealing to you, you should be grateful for having the opportunity to learn algebra (a lot of people don’t).

The important thing is to get out there and do stuff. Instead of waiting to be taught, go out and learn.

Your life doesn’t have to be shaped by admissions officers. It could be shaped by your own curiosity. It is for all ambitious adults. And you don’t have to wait to start. In fact, you don’t have to wait to be an adult. There’s no switch inside you that magically flips when you turn a certain age or graduate from some institution. You start being an adult when you decide to take responsibility for your life. You can do that at any age.

This may sound like bullshit. I’m just a minor, you may think, I have no money, I have to live at home, I have to do what adults tell me all day long. Well, most adults labor under restrictions just as cumbersome, and they manage to get things done. If you think it’s restrictive being a kid, imagine having kids.

This! Take initiatives. Take responsibilities. You’re doing things for no one but yourself.

Please, please, please read Paul Graham’s entire essay, regardless whether you are or aren’t in high school. Many of his thoughts are also applicable to people of other life stages.

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