From 5G networks to e-commerce, AI to super apps, China is pushing ahead with next-generation tech that others have successfully replicated. The China Internet Report details 8 key trends happening today.
China has emerged on the world stage with a host of innovative global tech companies. And increasingly, successful strategies are being studied and replicated in other markets with Go-Jek in SEA and Facebook in the US. The China Internet Report 2019 was introduced at Hong Kong’s RISE conference last week. Authored by Edith Yeung of Proof of Capital and Ravi Hiranand and Chua Kong-ho of South China Morning Post, the report offers key insights into the region’s technology trends with deeper insights across 11 key sectors, including e-commerce, Content & Media, Sharing Economy, 5G and Artificial Intelligence. Here’s our roundup of what it has to say.
China is increasingly operating in its own technology ecosystem (AKA Rise of the Super Apps)
China’s Internet penetration rate may only be 60%, but its sheer scale means that still equates to more than three times the number of Internet users as those in the United States. In terms of mobile payment systems, the gap is even wider: more people pay with their phones in China than there are people in the US. Tech giants known as BAT (Baidu, Alibaba, Tencent) have built ecosystems while challengers, TMD (Toutiao, Meituan-Dianping, Didi), are strengthening their core businesses.
AI-driven solutions are being adopted on a massive scale
China is embracing AI in a big way, exploring applications like access control, customised recommendations, surveillance and smart city solutions. Already, Alibaba’s FlyZoo Hotel features AI robots that look after room service and laundry, while rooms are accessed via facial recognition. Chinese news aggregator Toutiao recommends personalised news articles to people with different interests based on its AI-driven algorithms, and JD.com’s 3D Fitting Room allows users to see how clothes will fit on their body through a customised avatar with similar hair, face and body dimensions. Using AI+5G, in the near future, commuters can scan their faces on a tablet-sized screen mounted on the entrance gate and have the fare automatically deducted from their linked social accounts – a system already implemented at the Futian Station in Shenzhen.
Purchasing habits are changing drastically
Taobao’s recommendation-feed traffic surpassed its search traffic in August 2018 – something the report sees as a shift to be played out across the shopping landscape, from search-based shopping to recommendation-based shopping. Influencers are more effective at driving purchases and are becoming the most preferred marketing format by advertisers. Beauty vlogger Austin Li, with over 20 million followers on Tik-Tok and four million followers on Taobao Livestream, holds a record of selling 15,000 lipsticks in five minutes.
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Lower-tier cities are driving e-commerce consumption and growth
The report highlights that lesser developed cities have huge untapped potential for e-commerce. There are 128 million Internet users in third-tier or below cities who have not yet bought anything online, compared to the 74 million in first- or second-tier cities – and more than 70% of the increase in annual active users in the third quarter of 2018 came from lower-tier cities.
China’s appetite for content remains insatiable
QZone (Tencent) and iQiyi are the largest players in media and entertainment, followed by Youku. All three, amid heavy competition, have increased investment in original content. About 800 million Chinese consumers regularly watch short videos, but the short-video market’s growth rate is expected to slow down after growing 42% in 2018. Chinese consumers are seeking different routes and are even willing to pay for content, such as long-form videos and music. Despite the slowing macro environment as online entertainment provides low-cost alternatives, growth is expected to continue.
Chinese consumers are embracing the sharing economy, including ride-sharing and home-sharing
Compared with US consumers, Chinese consumers are more open to sharing platforms, be it ride-sharing or home-sharing. In 2018, automobile sales fell for the first time since the 1990s in part due to car-sharing. There are two primary home-sharing services in China that compete with Airbnb China. Tujia is a market leader backed by Ctrip with 1.4 million listings while Alibaba’s Airbnb-clone Xiaozhu has over 500,000 listings. Compared to other sharing services, kitchen-sharing is gaining popularity in China, driven in part by the 355 million people who use food delivery apps to order meals on their smartphones.
China’s Esports Market is Big…
Globally, esports revenue is predicted to exceed USD 1 billion for the first time this year – and nearly one-fifth of it will come from China. Tencent and NetEase have long dominated their home market. Now their expertise in mobile is being recognised outside China with both winning the right to develop smartphone versions of some of the world’s biggest games like PUBG (PlayerUnknown’s Battlegrounds), which went on to be the world’s most popular smartphone game. You can expect to see a Call of Duty mobile version in late 2019, also made by Tencent. It should also be noted that the Chinese esports community is leading the way with the second-highest distribution of female esports fans globally, averaging at 30%, just 2% behind South Korea.
Social credit is becoming a reality in China
In 2014, the Chinese government announced that by 2020, all citizens would be ranked on the basis of their ‘social credit’ score, claiming that the system would rely on a series of rewards and punishments meant to encourage people and businesses to abide by rules and to promote integrity and trustworthiness in society at large. Already, there are 13.5 million Chinese individuals that have already been classified as untrustworthy and are banned from taking high-speed rail and flights. China Youth Credit Management (CY Credit) is developing a big-data-driven credit system for people aged between 18 and 45, an estimated 460 million people and those with a high score may receive perks such as bypassing the first round of job interviews. Whether this is a Confucian dream or an Orwellian nightmare, we’ll just have to wait and watch.
Long gone are the days where China’s Internet giants were labelled as mere ‘copycats’ for creating clones of popular social media platforms. Global tech companies are now replicating successful concepts from their Chinese counterparts, from the super app to social+ e-commerce to short video and live streaming. “Tech companies from around the world are taking cues from new digital innovations and new tech business models in China driving the fourth industrial revolution – the China Internet Report will be essential reading because of China’s Internet industry’s growing global influence,” relates SCMP’s tech editor Chua Kong-ho.
Oh, how the tables have turned.
The full report can be found here: China Internet Report 2019