Chinese digital economy is remaking the world of commerce
Edward Tse and Matthias Hendrichs say the changing shape of the fast-growing Chinese digital economy is rewriting business rules and regulations not just in China but worldwide
Singles Day (or Double 11 Day) was created in the 1990s in China to celebrate being single. A few years ago, Alibaba turned it into an online shopping event with heavily discounted goods. This year, total purchases on Alibaba's connected platforms, such as Taobao and Tmall, came to 57.1 billion yuan (HK$72 billion), a 58 per cent increase from 2013 and estimated to be about three times as high as US online sales over the Thanksgiving weekend.
These online sales are further proof of China's fast-developing digital economy. There are now some 640 million Chinese netizens, including 530 million mobile internet users. A whole new class of internet companies has emerged. Four of the world's 10 largest internet companies have their headquarters in China. These are not copycats of Western business models. Instead, they have created their own business models in the Chinese context and are innovative in their own ways.
There are several noteworthy trends of China's digital economy.
First, many leading digital companies have enjoyed exponential growth. Xiaomi, the Chinese smartphone company, has risen from nowhere less than four years ago to top the charts. It is now the world's third-largest smartphone company in terms of output. The company is reportedly valued at US$40 billion, a leap from last year's US$10 billion.
Global users of Tencent's WeChat, the popular messaging platform, now number 468 million, a huge rise from the base of 50 million at the end of its first year in 2011. China's taxi app market, with market leaders Alibaba's Kuaidi and Tencent's Didi Dache, has 154 million users after less than two years.
Second, penetration of e-commerce is increasing not only in top-tier cities, but even more so in lower-tier cities and rural areas where e-commerce often leapfrogs the traditional ways of doing business. In 2012, rural users on Alibaba's Taobao platform accounted for only 7.1 per cent of total shopping spending; by the first quarter of this year, that has increased to 9.1 per cent, with estimated total online purchases from rural users reaching 180 billion yuan this year.