Tea Leaf Nation

Fool's Gold

Meet the 'Nu Stars,' the youngsters behind Nu Skin's Chinese subculture.

On Jan. 17, hundreds of young men and women partied in the ballroom of a five-star hotel in Wenzhou, a large city in eastern China. The women were fully decked out in colorful evening gowns, the men in tuxedos. Some sported expensive purses, ornate Venetian-style masquerade masks, or ribbons with the English words "Team Elite." One took to Sina Weibo, a social media platform, to urge her followers to join her: "if you are also a little bit vain, if you feel like you should be the star in your own life." For those ambitious enough, she continued, "next year's spotlight could be on you."

These young Chinese are self-styled Nu Stars, a moniker for salespeople for Nu Skin, a Utah-based health product maker that reportedly made more than 31 percent of its total revenue of $2.16 billion in China, all just in the first nine months of 2013 (fourth-quarter data is forthcoming). The company acknowledged Jan. 16 that it is now under investigation for marketing practices that, according to Chinese state-owned media, involve brainwashing and defrauding these fervent young members of China's wannabe glamour set.

Like Amway and Mary Kay, Nu Skin relies on salespeople peddling products directly to family and friends, while developing new recruits to do the same. This technique has a checkered history in many parts of the world including the United States, but it is particularly fraught in China. In 1998, the Chinese government banned all enterprises employing the practice after a flood of pyramid schemes claimed thousands of victims, but eased the restrictions somewhat in 2005 to allow "direct selling," whereby salespeople earn a commission based on the quantity of products sold, rather than the number of "downlines," an industry term for new enlists. 

U.S. companies with well-developed direct selling cultures, like Amway, Herbalife, and Mary Kay, still boast a significant collective presence in China, albeit with somewhat modified business models that involve opening brick-and-mortar stores and registering salespeople as distributors. But Nu Skin was reportedly more aggressive in its practices, employing salespeople directly and compensating them for downlines. This deviated dangerously from a relatively well-tested gray area, and toward a clear violation of Chinese regulations. On Jan. 21, Nu Skin announced that it would halt recruitment of new distributors in China.  

Rules aimed at direct selling in China are not simply intended to protect consumers from falling prey to pyramid schemes. The ruling Communist Party has historically been extra-vigilant about direct selling because it often involves some forms of mass gathering and indoctrination, which the Party deems to be key factors in developing dissent. Chinese authorities reportedly busted more than 7,600 pyramid schemes involving more than 60,000 people over a three-month period in 2013 in a campaign against direct selling. The hold of these rings on their adherents can be so strong that government interference sometimes lead to unrest: In May 2013, hundreds of people involved in a direct-sales scam confronted police in the central city of Hefei, injuring 32 officers.

Those involved with Nu Skin, however, don’t seem interested in political organizing, just the mirage of success that lies in slickly-packaged beauty products with foreign names like "ageLOC"and "Scion." Over 10,000 user accounts on Sina Weibo have "Nu Skin," "Nu Star" or "ruxin," the Chinese name for Nu Skin, in their handles. The sample is certainly skewed because Weibo, with over 280 million total users, has a youthful demographic. Nonetheless, it is revealing that an overwhelming majority of the Nu Star-labeled accounts are young women in their twenties and thirties. A fair number proudly show off the label "post-90," a common way of referring to young people born after 1990. Many call Nu Skin a "platform for young entrepreneurs," where they can "work hard, play hard." 

Judging from their social media personalities, Nu Stars are a group of Chinese youth aching for recognition, glamour, and freedom -- all in relatively short supply elsewhere in their lives. Even after winning a brutal competition for thankless, low-paying jobs, many young Chinese still struggle to pay rent, support their families, and find extra money to afford the luxury goods that their country's middle class conspicuously consumes. An August 2013 article in Chinese state-owned media cited a police report that concluded that an increasing number of college graduates join pyramid schemes because "they have become frustrated by tough competition in the job market." 

Indeed, the self-motivational quotes about hard work and overcoming obstacles that interlard the large number of online posts from Nu Skin salespeople do not carry the faintest whiff of political dissent. Instead, these young people appear to be desperately searching for a way to climb a social ladder that has become increasingly slippery. The promise of a less-treacherous path to riches -- even one that involves hard work, not just play -- has drawn tens of thousands of Chinese youth looking for somewhere to channel their aspirations. 

Many young Chinese, overwhelmed by the seemingly unattainable material demands that beset their early adult lives, say they have given up trying to meet them. For a brief time, Nu Skin appeared to offer a different path for those determined to fight for what they perceived to be the good life. Self-declared Nu Stars partied, preened, and posed before Nu Skin-branded backdrops as if they were Hollywood royalty on the red carpet. Now it may be time for them to return to a harsher reality.

Fair use/Sina Weibo

Tea Leaf Nation

Carpe Coin

It's not just the billions of dollars or the packed concerts. Crowdfunding could also change Chinese politics.

Crowdfunding, which allows web users to contribute small sums of money to fund collective projects like concerts and films, is taking off in China -- and just how far it will go is more than a business question. By allowing netizens to vote with their renminbi, online crowdfunding could become an economic activity with political effects, bringing closer two separate spheres that rarely overlap in China. As a result, in the future, crowdfunding platforms could do more than make music; they may also help bring political changes to the country. 

There's no question crowdfunding is becoming a big commercial factor in China. Websites like DemoHour and Musikid already allow Chinese citizens to hold real-world events that might once have been economically unfeasible. These sites aren't just for indie concerts -- they also allow users to find projects that excite them and fund anything from refurbishing a Tibetan hostel, to producing an avant-garde film about gay life in Beijing, to developing a portable air-quality measuring device, with perks for donors if the project hits its goal. The Wall Street Journal reported on Jan. 6 that crowdfunding is "gradually catching on" there, while an October 2013 World Bank report predicts that the Chinese market could grow as large as $50 billion by 2025. 

Crowdfunding proponents not only see nice profits ahead, but also argue that the innovation allows for new creative ventures. Some may be so creative that they border on the political. The Chinese Internet is already filled with examples of Chinese netizens repurposing seemingly innocuous new media, from Weibo (China's Twitter) to online games, to express sensitive political views critical of the ruling Communist Party. For example, in 2009, the "grass mud horse" meme, which played on three common characters that were difficult to censor but were heteronyms for a Chinese profanity, went viral, with users of video sharing and microblogging sites appropriating the meme to lambast censorship of online political speech.  

Creative netizens could also exploit crowdfunding platforms in unexpected ways. For example, if another earthquake strikes southern China, entrepreneurial citizens could use crowdfunding platforms to organize relief efforts independent of the government. Or residents of neighborhoods where developers are knocking down Beijing's courtyard homes to build sleek skyscrapers could attempt to band together and raise money to protect their communities.  

Some of what's out there is already pushing boundaries. For example, an unemployed Chinese journalist, Yin Yusheng, announced in October 2013 that he intended to use crowdfunding to pay his salary while he worked independently on investigative reports. Cases like this may test the prospects of edgier crowdfunding projects.

Crowdfunding could also gradually tilt the Chinese Zeitgeist in the direction of greater democratic expectations. In a country where most people have never participated in a free election, crowdfunding echoes the democratic process: It allows a large group of individuals to express preferences, then view data aggregating all individual responses, which ultimately determines whether a proposed project comes to fruition.

Currently, Chinese political elections, when they happen, are confined to selecting local government leaders. Voting also occurs online, but mostly to select among pre-screened choices like talent contestants on popular television show Voice of China or "grassroots heroes" nominated by state media. But crowdfunding is different. It allows anyone to create a project that can be voted up or down; no one authority vets the slate. Projects that resonate with users can be over-voted: For example, many of DemoHour's most popular projects have raised 500 percent or more of their original targets. These platforms thus create additional space for collective association not found in other votes. Users not only vote with their renminbi, but their decisions bring projects to life, then allow those who have contributed to meet offline, connecting netizens to a community of interest, and even a cause. 

These developments are not likely to please the Communist Party. Starting in September 2013, Chinese authorities have clamped down on the Internet, criminalizing some online speech and harassing or jailing some of the most popular microbloggers who comment on political matters, which the government defines broadly. In spite of these disturbing and ongoing crackdowns, the Internet has undoubtedly changed China. It's allowed individuals to give their viewpoints a voice, and showed people with minority opinions that they are not alone. Sometimes, the party stifles online political speech, but other times, authorities allow it. The presence of a new tool like crowdfunding has the potential to continue this ultimately positive dynamic, expanding its reach further into citizens' lives.

Of course, the party will act swiftly against crowdfunding proposals that challenge Communist authority directly. But that doesn't mean the government will necessarily shut down the whole industry, which may come to involve huge sums of money. Crowdfunding platforms are not just a way to share "cute cats" -- they are a locus of monetary transactions and a frontier of the digital economy, with commercial uses possibly inseparable from their political potential. The World Bank has described crowdfunding as a crucial future source of innovation and job creation in developing countries, one that could help them "leapfrog developed countries."

Decades ago, observers predicted that freer commerce in China would inevitably lead to political change. At the turn of the century, China-watchers made similar predictions about the rise of the Internet there. In both cases, observers were wrong, or at least they were right too early. But by combining the forces of commerce and the web, crowdfunding could help edge China toward political changes.

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