China’s internet industry has developed at a phenomenal speed. A recent report (in Chinese) by the Boston Consulting Group (BCG) together with the research divisions from Alibaba, Baidu and Didi reveals just how fast Chinese unicorns, or internet companies that have a valuation of over $1 billion, have grown compared to their American counterparts.

They could soon be leaving the American internet companies in the dust.

“China speed”

The internet economy’s rise in China—or “China speed” as the report called it—has astonished the world over. China’s online users have reached 710 million, more than that of India and the US combined. Its online spending hit $9.67 trillion, having grown at a compound rate of 32% during the past five years and is only slightly less than that of the US. China now equals the US for the number of companies in the top 10 internet companies in the world by market capitalization.

BCG - top 10 unicorns 2

Chinese unicorns, which played a big part in driving the market, are growing very fast. They take on average a shorter time than American ones to reach $1 billion valuations. Chinese unicorns take 4 years on average to reach this status, while American unicorns take 7 years. The percentage of Chinese unicorns that reached the $1 billion valuation within 2 years was around 46%, while that percentage for US unicorns was 9%.

China's unicorns take almost half of the time to reach $1 billion valuation compared to their U.S. counterparts
China’s unicorns take almost half of the time to reach $1 billion valuation compared to their U.S. counterparts.
BCG unicorns market cap 2

American unicorns’ combined market capitalization is still larger than that of China by a few percentage points. However, the US has 112 unicorns while China has 63. As Chinese unicorns grow in number and market capitalization, their combined market capitalization could soon overtake their US counterparts.The Chinese internet ecology has allowed a few companies to dominate the Chinese market, while the market penetration of any one single American internet company does not generally exceed 50%.

BCG - market penetration time 3

However, that does not mean there is less competition in China. Below the top tier, hundreds and thousands of new Chinese internet startups vie for survival in the latest business model flavor of the day—for example, discount and coupon e-commerce (a la Groupon), P2P online lending, and live streaming.

For the discount and coupon e-commerce sector that was hot between 2008 and 2014, companies entering into this sector peaked at over 5000 for China. In the US, that number never exceeded 650.

For the P2P online lending industry, at one point around 2015, there were over 3000 lending companies competing in this market in China. In the US, there were less than 100 companies that entered this market.

The live streaming industry is still gaining traction and the latest figure for companies offering live streaming is close to 300 in China, while that number in the US is less than 50.

It's all about survival in the China internet economy with the enormous number of competitors in any given industry.
It’s all about survival in the China internet economy with the enormous number of competitors in any given industry.

How did China’s internet economy rise so high so quickly?

The report attributed the fast rise of China’s internet economy to three factors: the boom in the economy, transparency in the industry and “leapfrogging”.

Booming economy

China’s economic growth has produced a young consumer class with higher spending power and fast adoption of internet technology. China’s population is 1.3 billion, with an average age of 33 and the portion of those under 40 make up 65% of the population or 850 million people. For the US, that number is 160 million.

The large quantity of M2 or the amount of currency in the economy has provided the capital needed for the internet companies to scale up and mature. The compounded growth rate for China’s M2 was at 16% during the past 10 years, reaching RMB 152 trillion in 2016. While that growth rate for the US was 6%, and its M2 reached RMB 89 trillion in 2016.

Transparency in the internet industry

Groupon China (Image credit: TechCrunch)
Groupon China (Image credit: TechCrunch)

Information pertaining to internet companies are readily available on the internet. This facilitates fast communication of the latest trends and opportunities. The report cited the case of Groupon which was launched in November 2008 in the US and broke even within half a year. Chinese companies quickly followed to capitalize on this business model and within two years, nearly 5000 such companies emerged.

Open source resources are another factor that has helped the development of the Chinese internet economy. There are many resources available online that startups and its developers can use for free or little cost. Google’s Android has been a huge help for Chinese smartphone manufacturers. Xiaomi was able to engineer a smartphone from scratch within one year.


In developed countries, the advances brought by the internet were incremental as industries were improving upon an already strong foundation.

In China, many of the markets disrupted by the internet were not mature and had gaps or demands that needed to be fulfilled. Internet companies addressed those pain points and successfully leapfrogged. Some even become the market leaders in their respective fields, such as Alibaba in the finance sector.

Some more numbers to take away from the report:

  • Yu’ebao, a personal finance service from Alibaba affiliate Ant Financial, has reached $165.6 billion in its assets under management or AuM in the latest figures from April 2017. It has surpassed JPMorgan Chase to become the world’s largest money market fund.
  • In 2016, China’s mobile payment transactions surpassed $8.5 trillion. This is more than 70 times than that of the US
  • In 2015, China’s online P2P lending industry was roughly worth $66.9 billion, four times higher than that of the US
  • In 2013, Alibaba’s retail e-commerce transactions reached $248 billion, larger than the combined total of eBay and Amazon.

Linda Lew is a Beijing-based journalist who covers technology, start-ups and business in China. You can reach her at lindalew at aliyun dot com.

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