By @SimonCocking. Interesting follow up interview with Winston Ma, Managing Director of China Investment Corporation (CIC), whose book China’s mobile economy, which we recently reviewed. Available to buy from Wiley publishers here.

China’s Mobile Economy by Winston Wenyan Ma. Reviewed

Since writing the book are things progressing along the lines you expected / predicted?

Compared to my previous book “Investing in China” that was in 2006, this book on China’s internet-based “mobile economy” was a much more challenging project. For one thing, China’s economic model had transformed from decades-long double-digit rapid growth into a more sustainable growth model based on innovation and consumption. For another, the explosive growth of smartphone users, e-commerce, and online content consumption and creation led to a digital revolution in almost all industries and business sectors.

According to CNNIC (China Internet Network Information Center) data, at the end of 2016, China had 731 million internet users, which was the size of the total population of Europe. The number of mobile internet users was just below 700 million (695 million), accounting for 95.1% of the total internet users. Still, the number should continue increasing as only approximately half of China’s 1.4 billion population are mobile internet users.

More rapidly than many people have expected, the new generation Chinese internet and technology companies are creating a remarkable wave of innovation in business models and product features that challenges the long-held perception of “made in China” copycatting.

For example, when years ago Tencent launched its first instant-messaging product named QQ, the product was viewed as a replica of the same system on which Yahoo Messenger and MSN Messenger were based. More recently, when Tencent started the new mobile app WeChat, it was compared to Facebook and WhatsApp, because WeChat was first and foremost a messaging app for sending text, voice, and photos to friends and family. Today, however, WeChat (as well as QQ, another social messaging product of Tencent) has evolved into a much stronger mobile platform than those loosely-related foreign counterparts.

To satisfy Chinese mobile users’ needs, Tencent has built an entire ecosystem of interrelated services around the initial WeChat platform. Alongside text, video and voice messaging, WeChat users can now shop and make payments, play games, book hotels or flight tickets, order a taxi and do many other things without ever leaving the app. The critical element is the mature mobile payment system, which make the integrated services provided by the app more relevant in China rather than in the US. Another special feature is its voice input capability, which allows users to bypass the cumbersome process of writing Chinese characters on phone screens. Unlike the users in the US and other markets, the WeChat users in China are often seen holding up their smartphones like walkie-talkies as they dictate their messages and listen to replies.

Not so long ago, the conventional wisdom was that China had become a master of imitation, but would never amount to much as an original innovator, and thus could never hope to challenge Silicon Valley. However, that old view is now laid to rest, with the emergence in China of world-leading innovations and companies in some of the most important technologies of tomorrow.

Is anything happening slower than anticipated?

Almost half of China’s population is still in rural areas, so the market potential for e-commerce is huge. As the city markets become more saturated, the rural areas provide the most growth potential for the e-commerce companies. According to CNNIC (China Internet Network Information Center)’s data, however, the internet penetration rate in China’s rural areas has shown signs of slowing down lately (see the Figure below), even though the number of internet users in rural areas has increased steadily.

Figure: Internet Users in Rural Areas as % of total Internet Population in China, CNNIC data December 2016

Future growth in rural internet population, which requires substantial investments in the network infrastructure in remote areas, may need further central government policy support. Also, changing the habit of shopping in brick-and-mortar stores into online platforms may take time for many rural residents. They have to build up their trust in purchasing goods from virtual shops, develop brand awareness, and learn how to place orders online.

Do you think we will see more collaborations like those with Uber, between Chinese and Western companies?

Yes. The mobile transformation of China’s economy has also had profound implications for global stakeholders dealing with the China market. During China’s digital boom, foreign investors are richly awarded, and consumer goods companies see an emerging market filled with opportunities from an expanding middle class. Overseas users are cautiously adopting smart phones and mobile apps created in China, but Silicon Valley tech giants are taking notice of new competition arising from Asia.

With the largest internet and smartphone user population in the world, more and more innovative business models and advanced features are arising in China’s tech sectors (as illustrated in the case of WeChat above). Also, the expansion of Uber (and its Chinese rival apps) in China, the San Francisco-based car-sharing app company, is an interesting example. It may sound striking that Uber’s service took off in China much faster than it did in the US. The main reason, of course, is the large urban population, the high concentration of city residents, the broad ownership of smartphones, and the broadband infrastructure across the country,.

No doubt, the global tech industry’s competitive landscape itself is massively changed by the emergence of the internet and tech companies in China. Whereas the last decade mostly saw China and US firms establishing themselves in two isolated home markets respectively, the competition between them is set to heat up. In addition to fight more directly in each other’s territory, the China and US tech players are also seeing each other in other global markets, especially in emerging markets in Asia and Africa.

Probably because the intrinsic nature of mobile economy is connectedness, in the market sectors to be examined by this book, the Silicon Valley giants and China’s internet firms are developing a delicate relationship of both competition and collaboration in many fields (as seen in the case of Uber in China).

Going forward, for both sides, interestingly, the other side’s home market is the most important market to enter. Chinese firms are now expanding globally to find growth in overseas markets, whereas the internet companies in Silicon Valley like Apple and Linkedin are focusing on China as the single largest market for growth after the US. In particular, there will be more Silicon Valley companies coming to China to look for new features, products or business models. As Chinese companies are dealing with the same tech issues to grow their business as many US companies, their cooperation may lead to a promising cross-pollination of tech innovation

If you would like to have your company featured in the Irish Tech News Business Showcase, get in contact with us at [email protected] or on Twitter: @SimonCocking

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