The Biggest Mobile Market in the World? Hint: It's Not the US

The Biggest Mobile Market in the World? Hint: It's Not the US

Why you should care

Companies might brave China’s censorship rules for a crack at its 800 million-strong market.

China has more than 800 million internet users, according to government figures published earlier this week, cementing the country’s status as the world’s biggest market for tech companies — larger than the U.S. and India combined — and enabling the birth of Alibaba, Tencent, Baidu and a raft of other online giants.

Of China’s 802 million internet users, 788 million access the web via mobile devices such as smartphones, according to the China Internet Network Information Center, a government agency. As a result, the country generates the biggest mobile app sales in the world. According to market research company App Annie:

In 2017, Chinese users spent $1 out of every $4 generated globally through app stores, in-app purchases and mobile commerce.

That means China’s mobile market remains particularly attractive for foreign tech groups, despite its stringent censorship requirements. Over the past year, Facebook and Google have launched new apps to try to re-enter the mobile market.

Google has also been developing a censored search engine to re-enter the market — a project that led to staff protests at the search company. The Silicon Valley group has been shut out of China’s app revenues because its Google Play store remains blocked in the country. Its potential revenues from breaking back in are vast: One-third of the world’s users of Google’s Android smartphone operating system are in China.

Here are four charts showing how Chinese people access the internet and what they use it for.

Internet data in China is provided by the big three state-owned telecom companies — China Mobile, China Unicom and China Telecom — meaning the government retains ultimate control over the pricing of data. This year, Beijing ordered them to slash the cost of mobile data by 30 percent, as well as cancel data roaming charges for users when they travel between China’s provinces.

The measures are part of a push to advance the digital economy, which the government sees as the major driver of growth. China’s traditional heavy industries are in deep decline and Beijing wants to stimulate domestic consumption of high-tech services rather than relying on export-driven manufacturing.

As mobile internet access has become ever more affordable, data-intensive services such as online music, video streaming and livestreaming have become popular forms of entertainment.

Most Chinese internet users access the web through mobile devices. Xiaomi, Huawei, Oppo and Vivo, the country’s biggest smartphone companies, accounted for roughly two-thirds of domestic sales last year. Those brands are now looking to take on foreign competitors to lure high spending consumers, but it was their lower cost devices, selling for less than $100, that enabled the country’s mass take-up of smartphones.

Many consumers, especially those in rural China, leapfrogged the fixed-line era of desktop computers and went straight to surfing the internet on their phones. This phenomenon kickstarted China’s mobile payments and e-commerce revolution.

The payments infrastructure for mobile e-commerce is more developed and pervasive in China than elsewhere. That has spurred Ant Financial and Tencent, the country’s leading mobile payments providers, to seek growth in foreign markets.

Millennials dominate the Chinese internet. Three-quarters of users are under the age of 40, with a heavy concentration of 20-something consumers.

Internet companies are increasingly shifting their focus to serving the tastes of the generation born after the 1990s. Tech investors often praise Chinese customers for rapidly adopting new online consumption habits, from using their phones to unlock shared bicycles to scanning QR codes for payment. China’s millennials epitomize this behavior.

Millennials led China’s mobile payment revolution by switching from cash to mobile wallets earlier than most, and are also taking up online financial technology services. Although Chinese households traditionally have a very high savings rate, younger consumers are more willing to take out loans online.

It may be unsurprising that instant messaging and internet search are the most popular online activities, but there are also some country-specific habits.

Chinese users spend the most time in their apps, both as a country and per capita, according to App Annie. In the last quarter of 2017, they spent 200 billion hours doing it — more than 4.5 times longer than India, the next largest country.

The largest chunk of time was spent in Tencent’s WeChat, an all-in-one platform that combines social messaging, mobile payments and in-app mini-programs that are portals for shopping, gaming and more. Half of WeChat’s 750 million users last year used the app for more than 90 minutes each day.

No wonder, then, that 70 percent of mobile internet users in China make mobile payments and go shopping on their smartphones when they can do so much within one app.

Video streaming is also popular. The rise of internet video platforms has led to the fragmentation of China’s television-watching audience, which used to be concentrated in the rigidly censored state-owned television broadcasting platforms.

As many as 74 percent of people online also watch short videos, a format spearheaded by Douyin, which allows users to upload 10-second bursts of video that have proved addictive for Chinese consumers.

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By Yuan Yang

OZY partners with the U.K.'s Financial Times to bring you premium analysis and features. © The Financial Times Limited 2018.

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