China’s booming internet economy gathers pace on rising mobile connectivity and innovation, says report

China’s internet boom is likely to gather pace on the back of the mainland’s widespread mobile connectivity, the ability of China’s biggest internet players to innovate quickly and its massive number of internet users, according to the Boston Consulting Group.

With 710 million internet users – the world’s largest number – who collectively spent almost US$1 trillion online last year, China’s internet economy was booming with no signs of growth slowing down any time soon, said a BCG report, Decoding the Chinese Internet.

“China’s internet landscape is fast changing and volatile. Ongoing innovation in business models, applications, and content leads to intense competition,” said François Candelon, a BCG senior partner and co-author of the report.

The report highlighted that success in the Chinese market requires companies to be able to localise their offerings for consumers, respond quickly to the volatile internet landscape, and successfully integrate both online and offline channels.

The strong internet ecosystem built by big technology players in China like Alibaba, Baidu, Tencent and JD.com has also raised the barriers of entry for foreign companies to compete successfully in the market.

Although China currently has the world’s highest number of internet users, the report suggested that the country is poised for further online growth.

Its 710 million online users are almost as many as that of India and the US combined, and yet internet penetration at 52 per cent is among the lowest in the G20 countries.

The report said China not only had a talent pool of science and engineering graduates, which is low-cost, but the Chinese government was also pouring money to boost internet infrastructure, especially in broadband, mobile internet and cloud computing.

Chinese technology giants are also pushing out new internet business models, with companies like Alibaba and JD.com introducing new retail concepts that use big data and artificial intelligence to personalise retail services for consumers and better integrate online and offline shopping.

The operations process for merchants could also be optimised using the data that these retail giants possess, raising the efficiency of the entire retail process from beginning to end.

“The new development models will create new opportunities for the Chinese internet market,” said Hongbing Gao, vice-president of Alibaba Group and dean of AliResearch, which also contributed to the report.

Alibaba owns the South China Morning Post.