Digital China

Digitisation bolstering the Chinese economy

by Weiqi HAN

China’s telecoms sector has grown at an especially rapid pace over the past several years, and digitisation levels are already very high in certain sectors, notably e-commerce and FinTech. Chinese tech companies have fully embraced the digital transition, and support from the national government is helping the country meet its targets in this area.

A booming digital economy

The swift adoption of digital technologies has been a key ingredient in accelerating economic growth in China. IDATE DigiWorld estimates the Chinese digital tech digital market will reach 558 billion EUR in 2023 (+9.3% a year on average between 2018 and 2023). Totalling 142 billion EUR in 2018, the telecom sector is the number one contributor, and forecast to stand at 155 billion EUR in 2023 (+1.8% a year on average). The Internet services market is expected to total 223 billion EUR in 2023 (+16% a year), while the IT services and software sector, along with content services, are still in the early stages of development. With 854 million Web users at the end of June 2019 (61% of the population), China is home to the world’s largest Internet population. According to the CAICT, the digital economy accounted for around 35% of China’s GDP in 2018, a figure that is expected to rise to 40% in 2020.

Internet services market tripled in six years

Progression of China's digital services market, by segment

Source : IDATE DigiWorld

Chinese players are the only ones capable of rivalling US tech giants

Over the past decade, China’s three main national telcos have worked with the country’s leading telecom equipment suppliers, and especially Huawei and ZTE, to step up the pace of national network rollouts. The network infrastructure’s rapid progress has spurred the development of digital services, and the Chinese digital ecosystem is developing faster than anywhere else in the world. BAT (Baidu, Alibaba, Tencent) remain the central pillars, but a number of new tech giants, aka TMD (Toutiao, Meituan-Dianping, Didi Chuxing), have begun to build a real presence by marketing their own brand of vertical services. The smartphone market is also soaring, with local brands (Oppo, Vivo, Xiaomi) overtaking foreign ones inside the country. While there are still restrictions on foreign investors in the Chinese market, they are being somewhat relaxed.

Chinese heavyweights continue to expand

Chinese companies' ranking in the Big Tech top 500

Source : Fortune Global 500

National initiatives and support schemes for tech innovation

Aware of the impact that digital technologies have on the country’s economic growth, the Chinese government is taking a proactive role in building a global network infrastructure. Since its 13th five-year plan in 2016, it has rolled out a series of national economic initiatives, and supplied public monies to promote the development of innovative technologies like AI, IoT, 5G, big data and blockchain. In 2018, the government gave a total 870 million RMB (111 million EUR) to 39 AI projects.

After launching 5G in China in November 2019, the Chinese government announced an investment of 411 billion USD, between 2020 and 2030, in 5G telecom network rollouts.

Chinese government investing heavily in AI and IoT

Chinese government's main tech sector initiatives

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Source : IDATE DigiWorld in "Digital China"

National Social Credit System underpinned by digital innovation

The Social Credit System, which began in 2014, is expected to be implemented nationwide in 2020. Its main purpose is to supply a centralised national system for keep a running score of the economic and social reputation of every citizen and enterprise in the country, through the use of emerging technologies such as facial recognition and big data. There is still no national databases, but several pilot projects have been launched by several local government entities, working in tandem with major corporations (Alibaba, Tencent…) to put the Social Credit System into place in certain key areas. Alibaba launched “sesame credit” in 2015 to assess its customers’ consumer credit behaviour. Other projects are expected to emerge in the coming years. Sizeable efforts are still needed to adapt the new system to the existing one, to protect personal information and solve a range of technical issues.

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