Why we may be seeing more of Chinese Web products

Why we may be seeing more of Chinese Web products

The size of the Chinese Internet is staggering. There are almost 600 million Internet users in China, more than in any other country in the world (the next highest is the United States, with 254 million).



The size of the Chinese Internet is staggering. There are almost 600 million Internet users in China, more than in any other country in the world (the next highest is the United States, with 254 million).And those users represent just 44 per cent of the Chinese population. If half the population of every province in China had access to the Internet, 135 million additional people would come online.

Among Chinese Internet users, 78.5 per cent of them access the Web using their mobile devices (compared to 63 per cent in the US), and many of the most popular services, like WeChat, exist only as mobile applications.

Chinese Web users are also more engaged than Americans are. In 2011, Chinese people spent more time on the Internet than they did watching TV, while in the US that crossover is predicted to happen only this year.

More than 75 per cent of Chinese people regularly contribute content online, while less than a quarter of Americans do. And it is likely that users in China will spend more money on e-commerce this year than Americans will.


There are many reasons for the immense popularity of the Internet in China. The first set is related to what is happening offline in the country:

Existing media are weak. Because their media are censored, people in China turn to the Internet to get a deeper understanding of what is going on in their country and what other people think about it.

Moreover, if you ask an average Chinese person about TV, you will often hear: “Oh, it’s really boring. There are so many channels, but there’s usually nothing to watch.” So, Chinese people turn to the Internet for entertainment.

People are on the move. In 1990, only a quarter of the Chinese population lived in cities. Today, half do. This means that more than 300 million people moved far away from the friends and family they grew up with and the Internet is critical to reconnecting them with their roots.

The urbanisation of China will only continue: The government plans to move 250 million rural residents into newly constructed towns and cities by 2025.

Income inequality is growing. China’s economy is growing very fast — but so is inequality. For example, this year, there were 315 people in China who had more than a billion dollars, up from zero in 2003. Those who have grown wealthier than their peers in a short period of time want to establish relationships with others of similar economic stature, and to do that, they often turn to the Internet.

Kids are lonely. China’s one-child policy has been around for more than 30 years, which means most kids are growing up without siblings. When they come home from school, the only people they see are their parents. They want to hang out with people their own age, so they go online.

And some adults are lonely too. Due to the one-child policy, there are many more men than women in China, particularly in rural areas. This has created intense competition in the marriage market and some men have to work extremely hard to find a spouse. The Internet offers great opportunities to find suitable partners.


Another major reason for the Internet’s popularity in China is the immense selection of quality sites and services. Even though Chinese people cannot access Facebook, Twitter, YouTube and some Google services, they can access multiple Chinese equivalents.

In the US, Facebook is the primary site that people use to interact with friends. In China, people can choose from QQZone, WeChat and Renren, to name a few.

To interact with celebrities and strangers, most Americans use Twitter. In China, people can choose from Sina Weibo, Tencent Weibo, Alibaba Weibo — as well as a ton of little Weibos. The same goes for social gaming: Tencent, Netease, Sina Weibo and others offer many social games.

There are also many sites for which there is no equivalent in the US. For example, sites like 9158.com and yy.com enable users to sing for or with other people. Such sites provide much-needed entertainment and allow people to connect with one another easily.


The third set of reasons behind the Internet’s popularity in China has to do with the ways the Web connects shoppers to businesses:

You can find a large selection at low prices. In China, the five largest retailers account for only 10 per cent of the total retail market, so most customers have to buy items at mom-and-pop stores. Since these offer neither great variety nor low prices, customers look to the Internet to get what they need.

Brands are weak. Some China specialists I interviewed in the country estimated that 330,000 new products are introduced every year in China. Most of them are unbranded and most of them fail.

Consumers do not have enough information about these products, so they turn to the Internet to discuss them with others. In fact, more than 40 per cent of Chinese e-commerce shoppers first saw information about a product on a social media site before they bought it.

TV advertising is expensive. Since the Chinese state has a monopoly on television — and on TV advertising rates — companies often complain that TV ads are too expensive. The Internet often offers a more cost-effective solution.

Not only can firms advertise online, they can also pay online opinion leaders to drive their product reviews.

Same-day delivery is common. One reason e-commerce works so well in China is that in many of the 160 cities with populations over one million, same-day delivery is extremely cheap. Buying online is so much more fun when the item you ordered in the morning is on your doorstep that afternoon.

Some Chinese start-ups are even gearing up to deliver products within 24 hours to any city in China within the next eight years.

We should expect the Internet in China to continue drawing vast numbers of users, while finding even more ways to engage them.

Chinese companies are accelerating this trend by constantly trying new things — often in partnership with each other.

This creative freedom is the result of low engineering costs and a willingness to fail. If Chinese Internet companies introduce something that does not work, they just scrap it and move on. This approach will allow them to innovate far beyond what American companies like Facebook and Twitter are doing right now.

And if these trends continue, it will not be long before we see broad adoption of Chinese Internet products in the US and around the world, just as we saw with non-digital products in the past. This can only be a good thing for consumers.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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