Chinese Internet Growth is Staggering and is Still an Enormous Business Opportunity

South China Morning Post CEO Gary Liu recently gave a Ted Talk explaining the staggering growth of the Chinese internet and how it is rapidly changing millions of lives for the better. What’s especially fascinating is how impactful their internet growth has been for the Chinese migrant workers and the poor and how this is only the beginning.

There are still 600 million Chinese offline, their wages are rising too which means their spending power is a huge opportunity for internet startups. 

South China Morning Post CEO Gary Liu talks about the impact of 772 million Chinese that are now on the internet:

Technology is Changing China

Once every 12 months, the world's largest human migration happens in China. Over the 40 day travel period of Chinese New Year 3 billion trips are taken as families reunite and celebrate. The most strenuous of these trips are taken by the country's 290 million migrant workers for many of whom this is the one chance a year to go home and see parents and children they left behind.

Travel options are very limited with plane tickets costing nearly half of their monthly salary, so most of them choose the train. Their average journey is 700 kilometers, the average travel time is over 15 hours and the country's tracks now have to handle 390 million travelers every Spring Festival.

Until recently, migrant workers would have to queue for long hours, sometimes days, just to buy tickets often only to be fleeced by scalpers and they still had to deal with near stampede conditions when travel day finally arrived, but technology has now started to ease this experience. Mobile and digital tickets now account for 70% of sales, greatly reducing the lines at train stations, digital ID scanners have replaced manual checks expediting the boarding process, and artificial intelligence is deployed across the network to optimize travel routes.

New solutions have been invented, China's largest taxi hailing platform Didi Dache launched a new service called Hitch which matches car owners are driving home with passengers looking for long-distance routes. In just its third year Hitch served 30 million trips in this past holiday season, the longest of which was further than 1500 miles. That's about the distance from Miami to Boston.

China's "Need Economy" is Driving Innovation

About a year and a half ago I moved from my home in New York City to Hong Kong to become the CEO of the South China Morning Post and from this new vantage point. I've observed something that is far less familiar to me, propelling so much of China's innovation and many of its entrepreneurs is an overwhelming need economy that is serving an underprivileged populace which has been separated for thirty years from China's economic boom.

The stark gaps that exist between the rich and the poor, between urban and rural, or the academic and the unschooled, these gaps form a soil that's ready for some incredible empowerment. When capital and investment become focused on the needs of people who are hanging to the bottom rungs of an economic ladder that's when we will start to see the internet truly become a job creator.

Because of the country's sheer scale and status as a rising superpower, the needs of its population have created an opportunity for a truly compelling impact. When explaining the rapid growth of the Chinese tech industry, many observers will cite two reasons. The first is the 1.4 billion people that call China home.

Chines Government: "Active Participation" or "Pervasive Intervention"

The second is the government's active participation, or pervasive intervention, depending on how you view it. The central authorities have spent heavily on network infrastructure over the years creating an attractive environment for investment at the same time they've insisted on standards and regulation, which has led to fast consensus and therefore fast adoption.

The world's largest pool of tech talent exists because of the abundance of educational incentives. Local domestic companies in the past have been protected from international competition by market controls. Of course, you cannot observe the Chinese internet without finding widespread censorship and very serious concerns about dystopian monitoring.

Yet, the Internet Has Continued to Grow

Yet the Internet has continued to grow and it is so big, much bigger than I think most of us realize. By the end of 2017, the Chinese internet population had reached 772 million users. It's larger than the populations of the United States, Russia, Germany, United Kingdom, France, and Canada combined. Also,  98 percent of them are active on mobile and 92 percent used messaging apps. There are now 650 million digital news consumers and 580 million digital video consumers.

The country's largest ecommerce platform Alibaba now boasts 580 million monthly active users. It's about 80 percent larger than Amazon. On-demand travel between bikes and cars now account for 10 billion trips a year in China. That's two-thirds of all trips taken around the world. So it's a very mixed bag the internet exists in a restricted, arguably manipulated from within China, yet it is massive and has vastly improved the lives of its citizens. Even in its imperfection, the growth of the Chinese Internet should not be dismissed and it's worthy of our closer examination.

As the Chinese Internet continues to grow, even in its imperfection and restrictions and controls, the lives of its ones forgotten populations have been irrevocably elevated. There is a focus on populations of need, not of want, that has driven a lot of the curiosity, the creativity, and the development that we see. There's still more to come.

An Enormous Opportunity: 600 Million Chinese Offline

In America, internet penetration has now reached 88 percent. In China, the Internet has still only reached 56 percent of the populace. That means there are over 600 million people who are still offline and disconnected. That's nearly twice the US population and an enormous opportunity.

Wherever this alternative fuel exists, be it in China or Africa or Southeast Asia or the American heartland we should endeavor to follow it with capital and with effort driving both economic and societal impact all over the world. Just imagine for a minute what more could be possible if the global needs of the underserved become the primary focus of our inventions.

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