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China’s internet users grew in 2016 by the size of Ukraine’s population to 731 million

High penetration rate, and a slowdown from double-digit growth, puts pressure on internet companies to find ways to attract users

PUBLISHED : Sunday, 22 January, 2017, 7:50pm
UPDATED : Sunday, 22 January, 2017, 9:40pm

China’s internet users increased at the fastest pace in three years as the abundant availability of internet-enabled smart phones spurred usage and increased the penetration rate in the world’s most populous nation, according to a report by the state agency responsible for the industry.

The Chinese internet market expanded 6.2 per cent in 2016, gaining 43 million internet users --equivalent to the population of a Ukraine or Argentina -- to put the total number of users at 731 million, according to data by the China Internet Network Information Centre. Penetration rate rose by 3.1 percentage points to 53.2 per cent, the CINIC data showed.

The 2016 growth pace has slowed from the double-digit clip that was recorded five years ago, when smart phones first became the engine driving the country’s internet usage.

Already, 95.1 per cent of China’s users, or 695 million people, access the internet through their phones, with the growth rate rising to a plateau.

The increasing penetration rate marks the end of the era when internet companies can simply rely on the growth of the overall user population to bolster their traffic and usage. Now they have to work harder to attract visitors to their sites, or to download their applications, requiring billions in development, marketing and subsidy dollars.

“If you are a startup, and you still pin your hope on mobile internet, there is little hope that you can become a unicorn in this era, because the market has entered a period of flat development,” Baidu Inc’s founder and chief executive Robin Li said during a December industry conference. A unicorn is a start-up valued at over $1 billion.

Baidu, operator of China’s dominant internet search engine, has invested billions in artificial intelligence, with applications in problem-solving bots to self-driving automobiles.

Xue Yu, an analyst with IDC, said the government’s guidance on internet industry development, released a week ago, stressed the content control and cyber security, which could increase the cost of internet content production. Under increased regulation and fading population dividend, “stability” will be the theme of China’s internet industry.