Chinese technology companies have witnessed amazing growth in the past half decade. Of the world’s top 20 internet firms, nine originate from China, even though just two went public prior to mid-2013. Tencent’s market value has increased by a factor of seven in the past five years Alibaba, which only IPOed in 2014, is now the country’s most valuable company.
The meteoric growth of China’s internet firms can be partly attributed to the number of people accessing the internet. China has an online community that is more than twice the size of the total population of the US and exceeds the entire populace of Europe.
These insights form part of famed venture capitalist Mary Meeker’s 2018 Internet Trends Report. The document contains everything from global e-commerce trends to internet policy, and more importantly, China’s rising influence in internet-related markets.
Development of artificial intelligence
The explosive growth of digital data in China is providing the opportunity for the country to increase its artificial intelligence capabilities rapidly. China did not enter any international AI challenges until it 2011, at which point it placed 11th in the Large Scale Visual Recognition Challenge. However, it has advances hastily in the past few years. In Stanford’s ongoing Question Answering Dataset, Chinese organizations have dominated the top five places.
While the US is currently ahead in the race to advance AI technologies, China is focussed on gaining ground. The Chinese government hopes to be the at the forefront of development by 2030. The most valuable AI unicorn in the world, SenseTime, calls China its home.
Numerous AI research centers have been launched this year in Beijing. In February, city officials launched an international research center led by CEO of Sinovation Ventures, Kai-Fu Lee. Four months later, in May, Qualcomm opened an AI department dubbed The Qualcomm AI lab.
Technology is driving domestic consumption
China’s economy is increasingly driven by domestic consumption, representing a 62% contribution to GDP growth, compared to 35% in 2003. Internet-based consumerism is propelling this trend with the proliferation of e-commerce.
Online-to-offline (O2O) are changing the face of retail in China. Numerous outlets are beginning to provide both online shopping capabilities and brick-and-mortar stores. Alibaba’s Hema has shown that physical stores with online capabilities can dramatically increase its number of transactions. The combination of daily online and offline purchases have enabled the company to facilitate twice as many sales as its competitors.
Unlike countries like the US and UK, which transitioned from computers to mobile devices, China has remained a mobile-first economy. As such, the country’s mobile data consumption to drive these services increased by 170% year-on-year.
Local tech companies are also spreading their services overseas. While Alibaba’s non-China revenue makes up just 8% of its total, it has seen over 65% year-on-year revenue growth in its international operations. The company has been investing heavily in the Asian market, with several investments in Pakistan, India, Indonesia, and Singapore.
Mobile payments dominate
Alibaba’s Alipay still commands the mobile payments sector. The company controls 54% of the market while WeChat Pay holds 38%. The country’s total mobile payment volume reached nearly $16 trillion in 2017.
The prevalence of mobile payment platforms is also allowing for growth in the car and bicycle rental sectors. The country is responsible for 68% of global trips on these rental platforms. Bike rental companies have a presence in most of the country’s major cities. However, due to the saturation of the market (and city streets), the government has been cracking down on the continued deployment of bicycles to selected cities around the country.
Video services have begun dominating the entertainment sector
In 2013, the country spent 60% of its daily entertainment time on social media and 13% on video platforms. As of March 2018, video services have seen a dramatic increase in time spent on their platforms, up nearly 70%.
Short-form videos are driving this upward trend. Users of Douyin and Kuaishou spend an average of 52 minutes a day on these platforms. Additionally, online video content budget exceeded that of China’s TV networks for the first time in 2017. The increased budget is enabling platforms like iQiyi, Tencent Video, and Youku to produce original content and license exclusive films and TV series on their platforms.
China loves social gaming
Chinese gamers spent most of their time on team-based multiplayer games, including Honor of Kings and PUBG Mobile. The country is also home to the biggest computer game company in the world. Revenue from computer games reached almost $30 billion, the highest in the world.
Tencent’s recently published financial results are a testament to this. The company reported a 26% increase in gaming revenue in May.