China’s Internet ecosystem is becoming younger and smarter, while also becoming larger — and more isolated.
According to the second annual “China Internet Report” published by research firm Abacus and the Alibaba-owned South China Morning Post newspaper, China added 57 million Internet users, to give a 2019 online population of 829 million. That is roughly 60% of the country’s population.
The vast majority, 817 million, are mobile Internet users. And with the number who use mobile payments reaching 583 million, the cashless society is being established rapidly.
The report identifies four key trends: Chinese Internet firms are no longer followers, but are increasingly becoming tech pioneers which are likely to be copied; China is racing ahead with implementation of 5G; artificial intelligence (AI) is already being used on a massive scale; and social credit schemes are being powered by the near ubiquity of the Internet in China.
The report largely sticks to demographics, tech trends and finance, without dwelling on policy. Though, presenting the report at the Rise tech convention in Hong Kong, co-author Ravi Hirand said that China is “vast, but isolated (reflecting) the ‘Great Firewall’ and government policy.” China’s president Xi Jinping advocates a policy of cyber-sovereignty, under which each national government is free to set its own rules for the Internet, within its own borders.
The report described the mainland government as “the visible hand.” It said that fintech, gaming, and content-driven Internet companies continue to face tight restrictions by government authorities. These include an enforced halving of online lenders, the 9-month suspension of new licenses in the gaming sector, and the deletion of 7 million web items, and 9,300 apps that no longer had approval.
Chinese companies such as WeChat, Alipay and Meituan have enjoyed success with the super-app business model. That model is now being followed by Facebook, Line and Go-Jek, which are attempting to add content, payments and other functionality to their platforms. Mixing social media and e-commerce is the forte of Taobao, Pinduoduo, and Mogu and is now being emulated by Amazon Live, Checkout with Instagram and YouTube Shopping. China’s TikTok and Kuaishou are enjoying global success with short form video, rivalling Snapchat and Facebook Lasso.
The report said that China’s three telecoms leaders are rolling out super-fast 5G Internet in 12 mainland cities with a population of 167 million. China also leads the world in 5G patents.
A.I., notably facial recognition and machine learning, is being used in China for access control and customized recommendations. Examples include hotel check-ins, subway fares, content recommendation, and virtual fitting of physical goods such as clothes.
Chinese authorities are also increasingly using A.I. for surveillance and control. This includes crowd control, enforcement of traffic laws, and catching criminals. A.I is also allowing the accelerated development of smart cities.
China is also using tech to pioneer social credit systems. “China’s social credit system relies on a series of rewards and punishments meant to encourage people and businesses to abide by rules and to promote integrity and trustworthiness in society at large. In reality, there is no central scoring system but a patchwork of different schemes and apps with differing criteria across provinces, cities and villages,” the report said.
Punishments, however, are already real. The report said that to the end of March authorities had labelled 13.5 million individuals as untrustworthy; had refused the sale of more than 20 million plane tickets, and 5.7 million train tickets as punishment of people who owed money or exhibited other “untrustworthy” behavior.
Further evidence of the growth of Chinese Internet companies came from the booming number of tech firm IPOs. The report counted 28 Chinese tech firms that last year listed on U.S. stock exchanges, and a further 28 which listed in Hong Kong. Those firms have a combined market capitalization of $222 billion.