China And The Ripple Effect On The Global Stage
What are the risks that could arise from the economic slowdown in China? How does China affect to other countries? Since starting its market reforms almost thirty years ago, China´s currently economy cannot be ignored.
Even if China has not left behind its centrally-planned economy yet, it has introduced some big measures to turn into a market-based country. Such efforts have resulted in a huge GDP growth and has lead the country to reach all the Millennium Development Goals by 2015.
Currently China has become the second largest economy in the world, but deals the first in the ranking by the quantity of goods and services produced. Moreover, according to the expectations published by the International Monetary Fund (IMF) for the present year, China will be responsible of the 18% of the entire World economic activity.
If to all this we add the expectations of its huge and richer population, its rapid change on production models and its consequent role on the World stage, we can conclude that the importance of China in the world has become a matter of vital importance in today’s global interregional balance.
But its big hits cannot make us forget that China still remains a developing country, and as we have mentioned before on our article “Ten Challenges on Chinese Future“, not only market reforms are incomplete, but also it has huge challenges ahead which must start to face.
After the financial crisis of 2008, neither the business community nor Governments have fully restored their confidence on the global economy. The doubts about the economic bonanza and the future role of Western countries have underestimated the increasing influence capacity of China in the international arena, while doubts have generated certain fear of a possible blowout of the country.
Trade effects are a game changer
The channels through which China affects the global economy can be summarized on:
- Decrease in trade and exchange rates
The Chinese leadership on trade makes hard not to affect global demand. China’s import volumes keep growing, but less than expected. This becomes a huge problem to those countries dependent on Chinese exports: raw materials are highly susceptible of the slowdown.
This effect creates a bidirectional paradox: China affects the world as much as the world affects China.
Although there has been much speculation about a possible future depreciation of the RMB in order to relaunch Chinese exports, in the team we believe that a currency war is currently off the table.
- Oil lower prices and commodities
The latest drops in oil prices are caused by the lack of confidence on Chinese economy. Its weakness has led to enormous imbalances on exporting countries of crude oil and raw materials: Russia, Brazil, OPEC countries and the U.S. still suffer for it. China’s falling demand has greatly contributed to the new situation and with it, deflation has knocked on the door.
However, according to the latest analysis made by the IMF, the negative effects are supplemented by growth in the purchasing power of the population. The Organization still thinks that lower prices on commodities have a positive effect on general economy.
- Monetary and inflation policies
The recent affordability of RMB should not make us forget that Chinese weakness can lead to a global new paradigm surrounded by deflation and debt. Once again, lower prices stimulate consumption, and this leads to boost demand, bigger sales and prosperity. Lower prices have become the stimulus of global economy.
- Cultural hegemony
Even if the Western countries have underestimated China’s rise, the consequences can already be seen. Although Cultural power follows to Economy and Politics, China already shows its increasing political and cultural power on international arena: mandarin language and Chinese diplomacy have become a key to Government policy.
Its empowerment is more visible in East Asia, but runs fast around the rest of the world. We have started living in a China-centrism, in which global power gravitates around Chinese policy.
Nowadays, confidence in the global economy is vital for prosperity but unpredictable. The ripple effect that is lived in the global area, is greater than ever.
Understand this huge spider web which is China, seize opportunities to launch your business and boost your sales, are our goals.
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Demand Side Platform in China
Overview of Demand Side Platform (DSP) in China
After arriving to China in 2012, DSP has gained popularity among advertisers due to its way of changing the traditional advertising buying model, from media buying to target audience buying. It lets advertisers see their ads performance more intuitively, allowing them to change promotion strategies more efficiently. As one of the main trends in the digital advertisement development , there is no doubt that DSP will play a more important role in China’s digital marketing scene.
What is DSP?
Demand side platform (DSP) is a system that provides the technology needed to unlock the value of real time bidding (RTB) information provided by ad exchanges. There are thousands of advertisers on the Internet trying to promote their products with high-quality media, precise target audience, optimized advertising strategies and high ROI (Return On Investment). In simple terms, DSP is a service platform for advertisers, in which they can set up target audiences, delivery area and biding price etc.
RTB and Ad exchange
Real time bidding (RTB) is a digital ad buying process that allows advertisers to evaluate and bid on individual impressions. Let us pretend that the Internet is a big cobweb, where users leave traces when they are surfing on it. By using this new technology, advertisers can take all this data into consideration, and then decide the site, placement and bidding price on each ad impression. Usually, this process is completed in 120 milliseconds.
Ad exchange is like an open online advertising marketplace that lets publishers and advertisers connect with each other. You could think of it as a stock exchange; however, it works by auctioning each impression to the highest bidder.
What are the advantages of DSP?
- Wide reach: There is no limit of time and space, advertisers can show their ads when they want to show them and to any target audiences.
- Low cost: Unlike traditional media ads, DSP uses programmatic buying and charges by CPC/CPM, which gives advertisers more flexibility with their budget.
- Specific target: With the Data Management Platform (DMP) of DSP, advertisers can easily target their potential audience according to different characteristics (like age, gender, place, income, etc), this makes advertising more accurate and cost-efficient.
Challenges of DSP development in China:
- Lack of transparency
Many Chinese DSPs do not provide full transparency and access to their platforms, which makes it hard for advertisers to understand and optimize their marketing strategies. Usually, they just provide a report for advertisers after one promotion. As a matter of fact, some DSPs cannot even guarantee the stability of the system because of the lack of technical ability.
- Quality of media resources is hard to define
Usually big publishers just release leftovers from their inventory to ad exchanges, while they build their own private exchanges with premium resources. For example, Baidu, Alibaba and Tencent all have their own private marketplaces, through which they sell these good ads resources to big clients at a higher price. So advertisers who want to work with DSP in China have to work very hard to find the high quality traffic.
- Accuracy of target audience is uncertain
Big companies like BAT (Baidu, Alibaba and Tencent) are reluctant to share their data, and there is no mature Data Management Platform (DMP) in China yet. So most DSP companies just gather data from their own ad network, third-party ad serving, or existing software, which makes the accuracy of target audience data rather doubtful.
What is a suitable DSP?
There are four features a good DSP should have:
- Appropriate RTB capability: A good DSP must be able to decide whether to participate in the auction and what is the biding price for each impression in real time.
- Appropriate directing capability: A good DSP should have a huge Data Management Platform (DMP), through which advertises can target potential audiences more precisely.
- Appropriate data analysis capability: Be able to provide, analyze and optimize reports for advertisers, which are the most valuable part of a good DSP.
- Appropriate technical capability: A successful campaign on real-time bidding (RTB) system depending mainly on the algorithm and matching model of a good DSP.
This article was edited by Andres Arroyo from 2Open.
References:
http://www.marketing-interactive.com/brief-guide-programmatic-ad-buying-china/
https://www.clickz.com/clickz/column/2282204/the-challenge-of-rtb-dsp-in-china