IT seen as key driver of economic growth
Print Edition
Let me try and review the most influential events that happened in the Chinese IT industry last year, rather than highlight the shining new gadgets. The logic is simple: the events I am talking about are expected to make an impact this year and in the coming years, and will likely bring about changes in the economy, the industry structure and influence the daily life of millions of consumers.
The 2015 events cover government policies such as the national support for innovation and entrepreneurship, the development of the information technology industry, and creating “unicorn” start-ups.
“Unicorns” are private tech firms with a market valuation of more than US$1 billion.
The top three Chinese dot-com giants — Baidu, Alibaba and Tencent — expanded their territories with massive capital investments, making mergers and acquisitions stories look passé.
The domestic smartphone vendors also strengthened in the market. Handsets became affordable, giving consumers lots of choices to choose from. The popularity of mobile services and cross-industry integration between IT, finance and auto companies are expected to change the daily life of people in the very near future.
1 National policies to encourage innovation and entrepreneurship
China spelled out its national policies in March last year to encourage innovation and entrepreneurship, and hoping that IT innovation and consumption would shore up industrial development and growth. Premier Li Keqiang sees the emerging sectors as strong growth drivers for the economy, especially during a weak growth climate.
In 2015, China invested heavily in IT infrastructure like 4G and family broadband networks. It encouraged development of cloud computing, big data and smart cities.
With upgraded IT infrastructure, consumers will get to enjoy rich and high quality information services, featuring new technologies like public cloud computing, NFC (near field communications) and VR (virtual reality). Industry 4.0 — integration between IT and manufacturers — will thrive on robots and 3D printers.
2 Booming merger and acquisition events
M&A became the trend in the Chinese O2O (online to offline) market in 2015. The top three M&A stories were: Didi and Kuaidi that created the country’s biggest taxi-hailing application with more than 80 percent of market share; Dianping and Meituan offering restaurant coupons, film tickets and take-out services, and the merger of Ctrip and Qunar which became the country’s two biggest online tourism websites.
Baidu, Alibaba and Tencent were the major M&A players.
This year, the top three are expected to expand into entertainment, retail and finance sectors through M&As and strategic investment. The aim is to grab users and online traffic by offering one-stop services similar to Apple, Google and Facebook in the US market.
3 Apple’s media and payment services available in China
Apple Inc struck a deal with China UnionPay in December to introduce Apple Pay, the company’s electronic-payments service in China — Apple’s second biggest regional market. After regulatory approval later this year, consumers can pay just by tapping on their iPhones or Apple watches.
Samsung followed suit and signed up with China UnionPay as well to play a role similar to Visa and MasterCard in China. In 2015, Apple also got the approval to launch iTunes services in the country and will offer online music and video streaming services.
Overseas Internet firms are hoping for a relaxed 2016. There is talk too that Google Inc would make a return to China this year. Car-hailing app Uber is expected to cover more cities in China while Amazon’s cross-border e-commerce and public cloud computing services are tipped to grow.
4 The Fintech Wave
Fintech means integration between finance and technology. Online finance, especially online P2P (peer-to-peer) lending generated enough capital and attention in China in 2015 but a lack of regulation and risk control measures were cause for concern. On the other hand, entrepreneurs and start-ups were able to raise funds much easier for their expansion plans. They have more choices including OTC (over-the-counter) market and an innovation board that was launched in Shanghai last month to target high-tech firms.
In 2016, online finance will cover more consumers with stricter regulation for risk control and credit record systems. Tech start-ups are expected to be better connected to the capital markets.
5 The surge of China-brand smartphones
Globally, Chinese firms took three positions among the top-five brands last year. Huawei, Xiaomi and Lenovo grabbed market shares in the global smartphone markets.
Huawei sold more than 100 million phones in 2015, the first Chinese firm to achieve the target after Samsung and Apple. Lenovo also announced that it was paying US$2.9 billion to acquire Motorola Mobility from Google.
Smaller brands like ZTE, OnePlus and Zuk also made inroads into the overseas markets. Some Chinese brands also managed to break into the middle and even high-end market segments (above US$500) overseas. In 2016, global expansion will be a key strategy for the majority of domestic brands. They will invest heavily to get core technologies in the handsets covering chip and operating systems.
6 Cyber security remains a top issue
President Xi Jinping attended the World Internet Conference in December, where he called for cooperation in respecting Internet sovereignty, safeguarding cyber security and improving Internet governance.
Chinese IT companies are also taking action to defend the country against the risk of cyber attacks, seen as an increasing threat to national security. State-owned CETC (China Electronics Technology Group Corp) signed agreements with Microsoft and Russia-based Kaspersky Lab on securing Windows systems and fighting against computer virus. In 2016, cyber security will play a part in national security in the information society age and increasing flow of data.
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