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The secret to mastering China's digital landscape

The People's Republic of China is one of the world's most lucrative markets for Australian businesses. Discover the secret to mastering China's unique digital landscape.

Australia’s exports to China were valued at $95 billion in 2017, reports the Australian Government’s Department of Foreign Affairs and Trade, so understanding China’s distinct digital economy is vital for Australian businesses looking to expand throughout Asia. 

a cityscape at sunset

Today, China’s uniquely attractive marketplace is just as much the result of the dizzying pace of its innovation and social adoption of new technologies as its industrial capacity.

China was once known as the world’s “bicycle kingdom” but take, for example, the influence of both rapid growth and digitisation on its capital city Beijing. In 2000, as many as 38 per cent of Beijing’s citizens rode a bike to work every day, according to the Guardian. But after a decade of double-digit GDP growth, cycling became unfashionable. By 2015, only an estimated 12 per cent of the city rode to work – a 15-year decline of 68 per cent.  

However, in the years since the launch of bike-sharing scheme Ofo in June 2015, cycling has once again gripped the city, with more than 2.5 million bikes lining its streets, according to The Economist. There are now so many bikes that the city’s government has recently banned the services from adding more bikes to their inventory for fear of rising footpath congestion.

While most of the planet’s digital world is dominated by GAFAM (Google, Apple, Facebook, Amazon and Microsoft), China’s most important players are BATX (Baidu, Alibaba, Tencent and Xiaomi), with a combined market capitalisation of $US900 billion:

  • Baidu: China’s largest search provider, with more than 75 per cent of the domestic search market. In addition to being a world leader in artificial intelligence and driverless vehicles, Baidu hosts a large ecosystem of consumer services, from online music to food delivery.
  • Alibaba: The world’s largest retailer, with B2B and B2C operations in more than 200 countries – famous for its role in building the 11:11 Global Shopping Festival (originally called ‘Singles Day’) into the world’s largest shopping day. As well as ecommerce, Alibaba operates a wide variety of services across payments, logistics, entertainment and China’s largest cloud-computing platform, Alibaba Cloud.
  • Tencent: A digital services and applications provider, Tencent is the owner of WeChat, China’s largest social application, and WeChat Pay, which accounts for 37 per cent of mobile payments in China. Tencent’s ecosystem of digital services includes search, music, cloud storage and microblogging.
  • Xiaomi: The youngest of the four players was only founded in 2010 but is already China’s largest smartphone manufacturer and the world’s fifth largest. The company also has a wide variety of consumer electronics offerings, including loT and smart devices for the home, for which it is a market leader.

Together, these four companies are leading the way for China’s rapid digital change, from shopping guided by virtual reality to blockchain wine certification and facial recognition payments.

All these things are happening, not in the future – but now in China.” 

Raymond Ma, General Manager, Alibaba Cloud, ASEAN and ANZ.

Speaking at a seminar curated by the Australia China Business Council, Raymond Ma, General Manager of Alibaba Cloud, ASEAN and ANZ, provided his insights into the future of Chinese innovation.

“In Shanghai, we recently applied the first facial-recognition, self-service public transport system, which means that people don’t have to touch a screen to buy a ticket, you just talk to a kiosk,” Ma said. “After you’ve chosen your ticket, you use facial recognition to pay and simply step aboard.”

Ma also believes facial recognition is set to change the retail landscape just as China’s mobile payments ecosystems have (these are currently valued at more than $US5 trillion annually, according to the New York Times).

Man on phone in transit

“With a self-service shop, there’s no need to pay, just take goods from the shelves and the system will recognise you. All these things are happening, not in the future – but now in China,” Ma said.

For BATX, this expansion of connectivity into traditionally offline, or “off-ecosystem” transactions is producing an explosion of valuable customer data.

“At Alibaba, we emphasise that we’re in the data technology era,” Ma said. “While we work with AI [artificial intelligence], we prefer the term data intelligence, because the real value of data is it that it can be translated into practical intelligence.”

The Chinese government is ramping up efforts to regulate customer data protection, including implementing a well-publicised law that recently came into effect requiring businesses operating in China to store personal data domestically.

“On one hand, we are seeing Chinese consumers getting very worried about where their data is going,” explains the CEO of digital marketing agency Isobar APAC, Jane Lin-Baden.

“But on the other hand, more and more young consumers really aren’t concerned about their data. They are willing to provide detailed personal information in exchange for better value and information that’s useful to them. The government is strengthening its policies, while the new generation is embracing the opportunities data sharing can provide.”

With the International Monetary Fund forecasting another healthy year for the People’s Republic - 6.6 per cent GDP growth in 2018 - it’s an opportunity Australian businesses cannot afford to ignore.

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