Digital China

China is no longer the country of cheap manufacturing and knock-offs. Now serving a huge domestic market, comparable in size to that in Europe, China’s top digital players appear to be the only ones capable of rivalling their US counterparts. Their ambitions are expanding little by little beyond emerging countries and into developed markets, notably in the e-commerce and fintech sectors.

China has overtaken Europe in the digital realm

In only a few years, China has become a veritable digital superpower, with telecoms, Internet and content markets that are larger than the EU5 combined. China is also the most advanced digital consumer market in terms of communication solutions (with QQ and WeChat topping the ranks), e-commerce and associated payment apps (Alipay and WeChat Pay).

The market’s momentum is expected to hold steady, sustained by the advantage of its mammoth size, combined with still strong economic growth and a regulatory environment that is favourable to the domestic market’s development (and Internet markets in particular). The widespread adoption of FTTx and plans for a swift 5G rollout will also enable China to hold onto its lead. Backed by a vast national financing plan, the country is already a pioneer in the area of smart cities and intelligent networks. The rise of the Internet of Things will further disrupt such vertical markets as automotive and transportation.

China: one of the few countries with its own digital ecosystem

Building on this foundation, local innovation will provide a powerful lever for digital innovation in China. The country stands out in particular for being rooted in a domestic ecosystem, with the BAT trio (Baidu, Alibaba and Tencent) that provides a fully home-grown digital environment. Their new model, led by WeChat – which incorporates mobile payment, m-commerce and social media in a single app – has proven very successful on the monetisation front. Led by Alibaba, China’s e-commerce market is already bigger than the US market in terms of transaction volume. It will continue to stimulate innovation, especially in the fintech sector, spurred by mobile payment and online loan solutions, managed by its Ant Financial subsidiary.

Chinese service providers eye foreign shores

With substantial cash in hand, the BAT trio will maintain the pace of their international expansion, even if their domestic market, which represents more than 90% of their revenue, remains their main battlefield. Emerging countries are still their prime target for exporting existing services. But they are also going after developed markets such as the United States and Europe, initially targeting Chinese tourists with WeChat Pay and Alipay, and later the local clientele, as is already the case in Japan. In addition, despite lagging behind their Western rivals in sectors like cloud computing, artificial intelligence and big data, Chinese players fully intend to catch up by way of massive investments and the acquisition of innovative companies, both in China and abroad.

China outperforms advanced markets in some consumer-oriented digital markets
China's top tech companies still investing heavily, both at home and abroad
High-profile acquisition or investment by Alibaba and Tencent