Behind the great firewall, China’s internet is thriving – even in rural areas

Even with more than 772 million internet users, China’s internet penetration of 55.8 per cent among the lowest in G20 countries – but that could be about to change as rural China becomes the next battleground for the online revolution

PUBLISHED : Saturday, 03 February, 2018, 9:34am
UPDATED : Saturday, 03 February, 2018, 6:06pm

When farmer Hu Guizhi got her first smartphone last year, she mastered a new skill that would end up saving lots of trips to town: online payments.

“Now I send red packets, shop online, top up my phone, and pay utility bills with just a touch. It couldn’t be more convenient,” said the 55-year-old whose farm is in a small county about 400 kilometres from Zhengzhou city, location of the world’s largest iPhone factory.

The Zhengzhou factory operated by Foxconn, a major supplier to Apple Inc, is capable of producing hundreds of thousands iPhones a day, but in the part of central China’s Henan province where Hu lives, many residents are only just starting to experience the convenience brought about by the mobile internet. 

For many rural dwellers like Hu, smartphone-enabled payments have gone beyond novelty, to become ubiquitous methods of paying for goods and services in supermarkets, restaurants, clinics and even street vendors.

By the end of last year about 47 per cent of China’s rural internet users had adopted mobile payments, up from 31.7 per cent a year earlier, according to data published on Wednesday in a biennial report by the government-run China internet Network Information Centre (CNNIC).

Hu is one of the 7.93 million people from rural China, a number bigger than the entire population of Hong Kong, who joined the country’s newest group of internet users last year.

Unlike urban Chinese, who now see the internet as part of their daily life – from watching movies, buying baby milk formula from overseas, to ordering food delivered to their doorstep – most Chinese in the country’s vast rural areas have largely been left behind by the internet revolution.

Boasting 772 million online users at the end of 2017, China has the biggest internet population in the world – bigger than India and the United States combined – yet its internet penetration rate of 55.8 per cent is among the lowest among G20 countries. Internet penetration rates in Japan, Britain and South Korea all exceed 90 per cent.

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China has shown remarkable progress since the internet revolution made its way to the country about two decades ago. At that time there were just 60,000 Chinese online, mostly students and teachers at universities, according to Wu Kun, a senior researcher with Ali Research, an internet-focused think tank backed by Chinese e-commerce conglomerate Alibaba Group Holding, owner of the South China Morning Post.

Growth in internet usage was supercharged in 2015 when Beijing unveiled its internet Plus strategy – a concept to integrate the mobile internet, cloud computing and big data for manufacturing, and promote the development of e-commerce, industrial networks and internet banking, which paved the way for strong government support for cross-border e-commerce and mobile payments.

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“In the era of personal computers, Chinese tech companies worshipped their predecessors in Silicon Valley, but now they are increasingly seen on equal footing,” said Wu. “The technology gap between China and the US has narrowed from a few years to no more than three months.”

China has even taken the lead in certain areas such as mobile payments, he added, citing research that Chinese consumers spend 50 times more on mobile payments than their American counterparts, who have been slower to take up mobile payments because of the well established credit card and consumer banking system in the US, which was lacking in China. 

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Lower-tier cities and rural China represent huge untapped opportunities for the country’s internet companies
Lu Zhenwang, Wangqing consultancy

With about 73 per cent of China’s urban population already connected online, the battlefield has shifted to small cities and rural areas because the low-hanging fruit of young and tech-savvy urban citizens has been picked. 

“Lower-tier cities and rural China represent huge untapped opportunities for the country’s internet companies. Consumers there may not be as wealthy as those in urban China, but they are key to winning the second half of the match due their sheer size in population,” said Lu Zhenwang, chief executive at Shanghai-based Wangqing Consultancy. 

Almost three quarters of people in China’s rural areas, where half the country’s population live, have yet to use the internet, according to the latest CNNIC report.

How e-commerce changes lives in rural China

Hu’s newly acquired mobile payment skills were learned after two days of instruction given by her son, who works in the Chinese capital of Beijing. And like many non-internet users in rural China, the biggest incentive to learn about the technology was knowing she’d be able to earn “red packets” sent electronically by friends and relatives.

Alibaba and its biggest e-commerce rival have been ramping up their efforts to reach China’s rural customers.

In thousands of villages and counties across China, Alibaba has been setting up service centres since 2014 to support its e-commerce business, training locals to provide delivery and other support services to attract users who have zero knowledge of online shopping, while has also rapidly been expanding its service centre workforce in rural areas.

China’s biggest tech companies are also venturing abroad to bring their e-commerce services to other low-income countries with big populations like India and Indonesia, betting that the same business model will transport across borders.

Alibaba’s Ant Financial is exporting its know-how to India by investing in Indian mobile payment service provider Paytm. Didi Chuxing, the Chinese equivalent of US ride hailing giant Uber Technologies, has made a string of investment from Southeast Asia to Brazil, to expand its footprint outside mainland China.

One of the latest Chinese tech exports is app-enabled bike-sharing. After carpeting Chinese city streets with millions of bikes and luring 200 million Chinese users last year, the two biggest remaining bike-sharing players Mobike and Ofo have taken their bicycle sharing business model to a dozen countries including Japan, Malaysia, France and the US.

Chinese users are very active in adopting new things and they change very fast. So companies in China need to constantly come up with new ideas
Jeffery Towson, Peking University

“Companies that are already winners in the China market will continue to expand overseas. Ambition is only half the equation; the other half is more about culture,” said Jeffery Towson, a Peking University professor.

“Chinese users are very active in adopting new things and they change very fast. One day, you are cool, and the next day you are not. So companies in China need to constantly come up with new ideas.”

For the several hundred million people in China whose life revolves around the internet, 97 per cent see the smartphone as their primary connection device. It is now normal for Chinese to use all kinds of apps to chat with friends and family, to shop, make investments and entertain themselves with gaming, online videos and music. 

The pressure is on for internet companies to constantly come up with the next big thing to keep the attention of consumers so they can monetise the experience.

Chinese farmer live-streaming from his remote village is an online hit

The latest fad is live streaming, with about 420 million Chinese hooked on watching live video streams of complete strangers doing things online as a new form of entertainment. But that alone has not been enough, with the live-streaming platforms having to reinvent their formulas in recent weeks to keep eyeballs on their apps.

Several major live-streaming apps have invested billions of yuan into developing online question and answer shows to attract more users drawn by the opportunity share in daily cash rewards of as much as 5 million yuan (US$795,800).

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Meanwhile, signs of how the mobile internet is changing lives in rural China can be seen back in Henan province. “My son bought my husband his first smartphone last year. He is glued to the phone. He puts it by his bedside at night, checking it while he is awake, and using it constantly while eating or whenever he takes a break from farming,” said Hu.

Additional reporting by Celia Chen in Shenzhen