Technology China Innovation

Four trends coming out of China and why they matter

By Hamid Sirhan | Senior strategist



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June 5, 2018 | 6 min read

When I lived in China over a decade ago, infrastructure was terrible despite the rapid economic development. You couldn’t really buy anything online because you were never sure it would arrive. Internet access was a luxury, though thankfully the Great Firewall was more like a Garden Firefence. Shelves were full of IP infringement, shanzhai devices and it was commonly suggested in the Western press that Chinese politics or culture stultified innovation.

A droid image appears from a mobile phone handset.

The HonorView 10 smartphone.

Fast forward ten years and Alibiba is as big as Amazon and on Singles Day 2017 sold over $25bn of goods, helping China hold the largest share of total retail e-commerce transactions (42.4% in 2016 vs 0.6% in 2005). Wechat has fulfilled the dream of the internet portal — the one area you go to access the best parts of the Internet — a dream that the duopoly of Google and Facebook have both failed to achieve in the West. China now has more mobile internet users than the US and Europe combined; and it looks like the tech future is predominantly Chinese.

The release of the Mary Meeker Internet Trends Report 2018 highlights the rapid change over the last ten years, and it’s clear to see that over the course of the next ten we’re going to see Chinese businesses race forward and become the dominant global innovators. If you’re still looking to China as merely a manufacturer of commodities, then you’re ignoring some of the biggest shifts coming to tech.

There are four inevitabilities that are going to unlock new audiences for your products and services and impact your market significantly.

The next smartphone

Chinese AI chips will power our next smartphones — smartphone growth has stalled but we’re about to hit a new definition of ‘smart’. Chinese companies will take on Intel and Arm to be the next global chip manufacturer. The Cambricon-1A chip has made its debut in ‘the world’s first real AI phone’, the Honor View 10. These chips are currently being used for performance increases, reducing load times and image processing times; but importantly, they’re laying the groundwork for an app economy that takes advantages of neural nets that can learn, automate and improve. It’s these neural nets that will make smartphone Voice UI a real possibility. If the touchscreen freed the phone from our pockets, the next smartphone wave will free the phone from our hands. And it will be Chinese chips powering these phones.

The new console wars

For the last four decades, home-gaming has been dominated by a few companies, usually as a duopoly or an oligopoly. From the days of Nintendo v Sega to the current Sony v Microsoft, the business has been dominated by US and Japanese companies playing off massive domestic consumption. Now China is generating some $30 billion annually in gaming - overtaking the USA, EMEA and Japan and doesn’t show any signs of slowing. The time is ripe for a major Chinese company to enter the console market and establish dominance. Any business in home entertainment should get ready for Chinese consumers, Chinese platforms and Chinese formats.

Believe in the stream

Chinese internet users spend 22% of their time on video platforms, consuming (primarily Chinese) media, and is primarily on platforms like Youku and iQiyi. This is growing at a rate of 22% Y/Y and, while it doesn’t yet boast Netflix’s 100+ million subscribers, it has hit more than 50 million in China alone. With subscriber numbers at that level, and likely to eclipse Netflix and Amazon in the coming years, western makers will need to cater to the burgeoning Chinese streaming market. Taking the Hollywood approach of minor edits doing lip service to Chinese viewers won’t be enough. The $1bn Amazon is investing in its adaptation of the Chinese Sci-fi novel, The Three Body Problem, marks the start of western companies bridging cultural divides and making a play for Chinese viewers (and Chinese pockets).

Cashless society

With $16T spent on mobile payments in 2017  —  for an idea of scale, there’s about $900m in currency circulating in China in 2018  —  China has taken to mobile payments in a big way. Split primarily between Alipay and Wechat, it’s common in tier 1 cities to not carry any cash at all, knowing that they can use their Wechat wallet to pay using a QR code or book a Didi. A far cry from a decade ago when savings were routinely kept on one’s person or in one’s house and cash was king. With digital infrastructure development in the US notoriously slow — it’s still common to have to deal with cheques and signatures —  the EMEA has the opportunity to accelerate the move towards mobile payments.

If China has spent the last ten years moving to catch up with Western markets it’s going to spend the next ten at the forefront of innovation. The creative and marketing opportunities that flowed from the web, GUIs, messaging and the touchscreen will also flow from Chinese innovations and they’re going to make a huge impact on what your customers consume.

Prepare for markets to be shaken as traditionally-dominant western powerhouses face competition from Chinese technological giants. If you haven’t been thinking about how your brand and products can be marketed to Chinese consumers, or how you can prepare for the rapid adoption of Chinese technology then you risk being left behind.

Hamid Sirhan is senior strategist at TH_NK

Technology China Innovation

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TH_NK is a digital transformation agency. We work with clients like Shop Direct, ASOS, LV=, Channel 4, Pottermore and Atom Bank to set and realise their digital ambitions.

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