A man in Colombo, Sri Lanka, uses his mobile phone. Beijing is actively exporting its internet successes, empowering businesses to transact online through the same tools developed in China. Photo: Reuters
A man in Colombo, Sri Lanka, uses his mobile phone. Beijing is actively exporting its internet successes, empowering businesses to transact online through the same tools developed in China. Photo: Reuters
Ben Crawford
Opinion

Opinion

The View by Ben Crawford

How China’s e-commerce playbook can help emerging economies transform

  • Emerging markets, like China’s, have the advantage of a sizeable young population that is highly adaptable, if not already at home in the mobile digital era. Better yet, by learning from US tech leaders, emerging markets will have the best of both worlds

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A man in Colombo, Sri Lanka, uses his mobile phone. Beijing is actively exporting its internet successes, empowering businesses to transact online through the same tools developed in China. Photo: Reuters
A man in Colombo, Sri Lanka, uses his mobile phone. Beijing is actively exporting its internet successes, empowering businesses to transact online through the same tools developed in China. Photo: Reuters
After decades of being regarded as “the world’s factory”, it’s no exaggeration to say that China has reinvented itself to become a global tech leader. It is already home to over
half the world’s
artificial-intelligence (AI) unicorns and has produced internet titans like
Baidu
,
Alibaba
and
Tencent
– also known as the
BAT
.
As the nation slips into its new role of being a leading innovator, especially in areas like
e-commerce
and
mobile
, it offers important lessons and reflections for other emerging economies.
To begin to understand China’s meteoric rise is to also realise the crucial role that the internet has played in all of this. This is hardly surprising when considering the
internet’s potential
to bring radical change across all industries and sectors. It impacts people’s lives in every way and paves the way for exciting developments in industries like
robotics
,
AI
and
health care
.
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Similarly, internet commercialisation has also been a linchpin of economic growth, with more than 40 per cent of the world’s e-commerce transactions taking place in China in 2017, up from only 1 per cent a decade ago. By 2022, China’s e-commerce market is forecast to reach US$1.8 trillion. The effect this will have cannot be understated.

At the most fundamental level, e-commerce hits right at the core of an economy, creating myriad opportunities for small- and medium-sized businesses and changing the face of retailing, logistics and supply chains. All of this catalyses the growth of the economy significantly.

Alibaba, owner of the South China Morning Post, is perhaps the best-known example of this. It has
revolutionised
the way small businesses in China sell, and has positioned itself as one of the most sophisticated and lucrative retail online platforms in the world. E-commerce platforms like
JD.com
have also had a transformative impact. And the platforms WeChat and Alipay have a virtual ­duopoly in the
online payments sector
in China, making transacting online easy for businesses and consumers alike.

But what makes China’s new-found superiority in e-commerce a model that other emerging nations can follow and draw inspiration from?

To begin with, the fact that China’s business infrastructure was initially not as developed as the West’s actually proved to be an asset. Because of this, technology and e-commerce firms have been able to leapfrog certain developments, to the dismay of their Western counterparts, creating an infrastructure that is more ready to embrace the future. Other emerging nations share this “direct to mobile digital” consumer characteristic, skipping over the desktop and laptop generations of internet connectivity.

Secondly, the new wave of digital – where everything is in the cloud and mobile – further plays to the strengths of emerging market players and their young populations. About 90 per cent of the world’s population who are under 30 live in an economy that is developing or “transitioning”. This represents a very high percentage of the economy that can adapt to technology a lot faster on average when compared to the West.

Thirdly, China is actively exporting its internet successes, particularly in Southeast Asia – empowering businesses there to transact online through the same tools developed in China. As a component of the
“Belt and Road Initiative”,
investing in infrastructure across 65 mostly emerging and transitioning nations around the world, the “Information Silk Road” combines internet corridors in many of those countries into a secure internet infrastructure.
Similarly, China’s tech giants are enabling companies globally to get online. For instance, Alibaba allows businesses
all over the world
to both acquire and sell stock – equipped with nothing more than a mobile phone – through its Taobao and Tmall platforms.
In addition to the lessons that other emerging economies may glean from the Chinese experience, there are also ways in which they may strive to do better than China. For example, when it comes to the protection of personal privacy and corporate intellectual property, one could argue that China is
not world-leading
.
Also, while Facebook and Google have
not been active
in China, and Amazon has
not achieved
much market share there, most emerging nations enjoy the benefits of being able to use the tools provided by the American tech giants, as well as their Chinese rivals, to do business online.

There are also some questions which remain unanswered, like whether the market power of the internet giants of China and America is so complete that it will entail every new potential competitor from emerging nations being either crushed or swallowed up by the existing players.

But one thing is certain for any economy that aims to leverage the full power of internet commercialisation. If the internet has the ability to
transform emerging economies
and help them ­leapfrog to positions of global ­economic dominance, it must integrate holistically across all sectors in society to avoid ­marginalising the most vulnerable parts.

It’s an exciting time for emerging economies. The ripples resulting from the growth of e-commerce can be felt everywhere – from Latin America to Africa and the Asia-Pacific region – enabling companies to reach consumers that were previously inaccessible.

The opportunity is there for the taking. But whether emerging economies can successfully make the most of it will depend on how ready they are to jump into the future without first stripping away their past. As they walk the tightrope, those that manage to stay on course will be the ones best able to leverage the opportunities of the internet while also mitigating the risks involved.

Ben Crawford is the CEO of CentralNic, a global domain registry provider focused on emerging economies that is listed on the London Stock Exchange

Wang Xiangwei
Wang Xiangwei
Opinion

SCMP Columnist

China Briefing by Wang Xiangwei

Chinese must live with a dead Baidu, as Google’s return looks doomed

  • As Trump teases us with a breakthrough in his US-China trade war talks with Xi Jinping, markets breathe a sigh of relief
  • But any deal looks unlikely to break down that biggest barrier to China’s digital economy: the Great Firewall

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Following the latest round of trade talks in Washington this month, US President
Donald Trump
announced he was delaying the March 1 deadline on his threat to impose higher tariffs on US$200 billion worth of Chinese imports. He also teased his audience with the prospect of a summit with Chinese President
Xi Jinping
“soon” to conclude a comprehensive trade agreement, much to the relief of international stock markets.

While details of the agreement are wrapped in secrecy, Trump cited “substantial progress” on issues including intellectual property protection, forced technology transfer, agriculture, services, and currency.

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Commentators in Chinese state media expressed optimism and started to prep citizens that those so-called “concessions” the government was previously reluctant to make were in fact the measures it would have to undertake anyway to move the economy forward and improve people’s living standards.

But the agreement, comprehensive as it sounds, is most likely to miss out one major area of contention: China’s Great Firewall and other barriers to the opening up of its digital economy.

China’s sophisticated internet censorship regime has blocked numerous overseas websites, including the South China Morning Post, and search engines and social media platforms including
Google
, Twitter and YouTube.
China’s sophisticated internet censorship regime has blocked numerous overseas websites including the South China Morning Post. Photo: Reuters
China’s sophisticated internet censorship regime has blocked numerous overseas websites including the South China Morning Post. Photo: Reuters

Judging by media reports and official statements from both countries, the digital world has not been high on the agenda of Chinese and American negotiators, other than in relation to US allegations of cyber theft by the Chinese – an issue that was discussed alongside that of forced technology transfer.

Presumably, given the myriad difficult and complex issues on which both sides have been working, they probably focused upon those they thought they had the best chance of agreeing on.

After all, there is a widespread perception that the Great Firewall could be one of the few red lines on which China is unlikely to budge.

If that speculation is true, it would be a real shame.

In fact, China’s digital barriers are facing increasing pressure from within as Chinese businesses, academics, and intellectuals have been increasingly vocal about the negative impact of the Great Firewall on the country’s economy, academic research, technological innovation, and its competitiveness in attracting overseas companies and talents.

The latest case in point is the controversy surrounding Baidu, China’s dominant search engine.

Baidu
, long a source of bitter complaints and frustration among Chinese internet users for its poor quality search results and questionable advertising practices, was the target of renewed public anger in January.
Baidu: dead, but not buried. Photo: Reuters
Baidu: dead, but not buried. Photo: Reuters

It started when a Chinese journalist posted an article on social media titled “Search engine Baidu is dead” with the name Baidu Photoshopped on a grey tombstone. In the article, the author blasted Baidu’s media aggregation service for highlighting unreliable information and its own products and services in its search results.

He accused the company of ceasing its mission as a search engine but rather striving to become a marketing platform aimed at making money through traffic from users searching for content.

The post immediately went viral, striking a chord with millions of hapless internet users – including this writer – who have to grapple with Baidu’s poor quality search results daily.

Even the usually staid People’s Daily, the mouthpiece of the
Chinese Communist Party
, ran a three-part series of comments in its online edition, assailing Baidu and warning other internet giants against keeping out competition and offering low-quality services.

In its defence, Baidu said information from its own service accounted for only 10 per cent of its search results and promised to improve its service.

But this is not the first time Baidu has been panned for its poor and misleading services and products.

Back in 2016, a university student who was diagnosed with a rare form of cancer died after receiving expensive but questionable treatment from a less reputable hospital he found through Baidu searches.

A national outcry ensued after an official investigation found that paid-for medical advertising always came up on top of relevant search results and the cyber authorities subsequently forced Baidu to overhaul how paid advertising results should be displayed.

On various estimates, Baidu accounts for between 70 to 80 per cent of China’s search engine market, towering over smaller operators such as Sogu and 360 Search as well as Yahoo China and Microsoft’s Bing.

China’s prohibitive internet policies have helped Baidu, big time.

Google’s exit from China in 2010, triggered by China’s increasing online censorship, has further cemented Baidu’s lead. Before its exit, Google commanded about 30 per cent of China’s market share, trailing Baidu but providing healthy competition and a far better alternative for Chinese internet users seeking high quality search results.

Google’s former offices in Beijing’s Zhongguancun, China’s Silicon Valley. Photo: Simon Song
Google’s former offices in Beijing’s Zhongguancun, China’s Silicon Valley. Photo: Simon Song

But as Baidu’s quality of service has declined rapidly over the past few years, the public clamour for Google’s return has become louder.

Moreover, China’s academics and businessmen alike have argued the country’s severe restrictions on cross-border data flows – including slow cross-border internet speed and the inability to access global online tools like Google – have damaged China’s competitiveness and innovation.

Back in March 2017, Luo Fuhe, a prominent academic and a vice-chairman of the Chinese People’s Political Consultative Conference, the country’s top consultative body, caused quite a stir by publicly releasing a proposal urging the Chinese government to ease internet restrictions to enable faster access to overseas news and academic websites and search engines.

Luo Fuhe. Photo: Handout
Luo Fuhe. Photo: Handout

Then Luo argued, rightly and reasonably, that while the Chinese government had every right to block websites deemed harmful to national security, most of the overseas websites, particularly those reputable ones run by international organisations like the United Nations or foreign universities or research institutes, were valuable resources for Chinese academics – as were online search tools like Google.

Anyone who has tried to search for English-language information on Baidu should know how lousy its service is.

Many have been forced to use virtual private networks (VPNs) to access cross-border data but that has proved an unstable solution given the Chinese government’s increasing crackdown on VPNs.

In recent years, foreign businesses operating in China have consistently lobbied the Chinese government to relax its internet controls.

In its latest business climate survey, AmCham China, which represents American businesses in the country, said more than 90 per cent of respondents felt slow cross-border internet speeds and the blocking of online resources harmed their competitiveness as well as their operations.

Similar sentiment has been expressed by European and other foreign businesses in China.

Indeed, at a time when China wants to transform its economy into one driven by innovation and to attract more foreign businesses to set up their Asia-Pacific headquarters within its borders, faster internet access to the outside world and the ability to use the internet tools and platforms with which they are familiar should be seen as crucial to that goal.

Last year, hopes were briefly raised that all the pressure had finally led to some progress, with the US media suggesting that Google was planning a return to China and had been working on a censored version of its search engine, code-named Dragonfly.

Ironically, the ensuing media pressure from the US and the opposition of some Google staff appears to have forced Google to abandon the plan, much to the dismay of Chinese internet users.

For them, even a filtered version of Google would be much better than Baidu.

Now, with competition out of the picture and external pressure less than expected, Chinese internet users have little choice but to live with Baidu – the search engine that is already “dead”.

Wang Xiangwei is the former editor-in-chief of the South China Morning Post. He is now based in Beijing as editorial adviser to the paper