China has taken a leadership role on the global technology stage, with Chinese tech brands now considered trailblazers rather than copycats, according to the latest China Internet Trends Report. Here’s what you need to know from the recently released 2019 edition.

China increasingly operates in its own technology ecosystem

Although China’s internet penetration rate is only 60%, its sheer scale means almost three times the number of internet users as the United States. In mobile payments, the gap is even wider: more people pay with their phones in China than there are people in the US.

Tech giants Baidu, Alibaba, Tencent (BAT) have built ecosystems while challengers TMD (Toutiao under ByteDance, Meituan-Dianping, Didi) are strengthening their core businesses.

AI-driven solutions are being adopted on a massive scale

The country is embracing AI in a big way, across areas such as access control, customised recommendations, surveillance and smart city solutions.
  • At the Futian station in Shenzhen, commuters can scan their faces on a tablet-sized screen mounted on the entrance gate and have the fare automatically deducted from their linked accounts.
  • Alibaba’s FlyZoo Hotel features AI robots that look after room service and laundry, while rooms are accessed via facial recognition.
  • Chinese news aggregator Toutiao recommends personalised news articles to people with different interests based on its AI-driven algorithms.
  • com’s 3D Fitting Room gives shoppers the ability to try on clothes through a customised avatar with similar hair, face and body dimensions.
Lower tier cities are driving e-commerce consumption and growth

Lesser developed cities still have huge untapped potential for e-commerce. There are 128 million internet users in third-tier or below cities who have not yet bought anything online versus 74 million in second-tier or above cities. More than 70% of the increase in annual active users in 3Q 2018 came from lower-tier cities.

Shift from search-based shopping to recommendation-based shopping

Shopping styles are changing, Taobao’s recommendation-feed traffic surpassed its search traffic in August 2018. Influencers are more effective at driving purchases and are becoming the most preferred marketing format by advertisers.
  • During Kuaishou’s e-commerce festival, the top influencer who has over 40 million followers on the platform sold US$7.2m worth of goods within three hours.
  • A beauty vlogger, who has 24 million followers on Douyin and four million followers on Taobao livestream, holds a record of selling 15,000 lipsticks within five minutes.
China’s appetite for content remains insatiable

About 800 million Chinese consumers regularly watch short videos, but the short-video market’s growth rate is expected to slow down after growing 42% in 2018.

Chinese consumers have become more sophisticated and willing to pay for content, such as long-form videos and music. Growth is expected to continue despite the slowing macro environment as online entertainment provides low-cost alternatives.

iQiyi and Tencent are the largest players, followed by Youku. All three, amid heavy competition, have increased investment in original content.

Chinese consumers are embracing the sharing economy

Compared with US consumers, Chinese consumers are more actively involved with and open to sharing platforms.
  • In 2018, automobile sales fell for the first time since the 1990s in part due to car-sharing.
  • There are two primary home-sharing services in China as an answer to Airbnb. Tujia is a market leader backed by Ctrip, with 1.4 million listings while Xiaozhu Duanzu, backed by Alibaba, has over 500,000 listings.
  • Apps, such as home-grown Ycloset and MSParis, tap demand from young professionals for affordable luxury rentals and from college-age fast-fashion fans without the income to constantly update looks.
  • Compared to other sharing services, kitchen-sharing is still relatively new in China, driven in part by on-demand meal delivery.
The report was authored by the South China Morning Post and its sister site Abacus, in conjunction with Edith Yeung, managing partner at blockchain venture capital fund Proof of Capital.

Sourced from South China Morning Post