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Since 2013, China has attracted world attention to its comprehensive improvement in network infrastructure which has generated rich and diverse content and shaped a clearer cyberspace to benefit its people, to its flourishing digital economy, and to its great leaps in emerging technologies.
China's digital economy has been enjoying a remarkable boom since 2013. Through mutual reinforcement and collaboration, it has created a brand new industrial ecosystem with the Internet sector where the population dividends are still to be fully tapped, thus forming the platform effect. It has also integrated deeply with the real economy: a booming digital economy has brought about historic opportunities for the upgrade from Made in China to Intelligent Manufacturing in China and a strong boost for the modern service industry.
The cyberspace sees continuous improvement and networks cover more users. By October 2019, China posted 452 million subscribers with access to the broadband Internet and 1.31 billion to mobile Internet. [1] The network connection is also faster. Of all the fixed broadband subscribers, 416 million or 92% of them used FTTH/O, and 370 million or 81.8% of them had the access rate of 100 Mbps or above. [2] Users pay less for the network service. Not only are the trans-provincial roaming charges gone for mobile users, but the three major telecom operators in China have slashed more than half of their per unit charges for mobile network services on average.
Basic network resources have seen an increase in both quality and quantity. The transition to the next-generation Internet addresses has been smooth. As of June 2019, China's IPv6 addresses had totaled 43,985 blocks/32, the largest in the world, with the six-year compound growth rate reaching 22.9%; China's domains had totaled 48.001 million, with the six-year compound growth rate of 21.8%, including 21.852 million .cn domains, the biggest group of country-code top-level domains in the world; its websites grew to 5.177 million, with the six-year compound growth rate of 9.9%.
Chinese digital economy is well developed and exerts a sizeable influence worldwide. According to the Digital Economy Report 2019 by the United Nations Conference on Trade and Development (UNCTAD), the digital economy in the narrow sense has taken up 6% of China's gross domestic product (GDP), beating the global average of 4.5%; in the broad sense, 30%, which is 14.5 percentage points higher than the world average and 8.4 percentage points higher than the US. In the information and communications technology (ICT) sector, China is second only to the US in terms of value added created for the world; in the ICT manufacturing industry, it tops the world with 32%, surpassing the US by 13 percentage points. China is also among the world's top ten creators of value added in the communications and computer service industries.
Chinese digital economy is one of the biggest in the world, contributing more and more to the national economy. Since 2013, China has seen a soaring growth of the Internet economy, a boom of application services and ever-growing contribution of the digital economy to its GDP. From 2014 to 2018, Chinese digital economy grew from 16.2 trillion yuan in value to 31.3 trillion yuan, with the annual compound growth rate of 17.9%, and its contribution to GDP was also up from 26.1% to 34.8%. [3] China's digital economy is one of the biggest in the world and its contribution to national economy has been greatly improved. [4]
Figure 1: China's Digital Economy and Its Proportion in GDP
China boasts the world's biggest digital consumption market.
From June 2013 to June 2019, China saw its online shoppers growing rapidly from 271 million to 639 million, with the annual compound growth rate of 15.4%. China has topped the world for five consecutive years in terms of online retail transactions. Its mobile payment market is also the biggest and one of the most influential in the world.
The digital economy has become an important force for stimulating growth and stabilizing employment. A rapidly growing digital economy has created many more and better jobs. In 2018, Chinese digital economy hired 191 million people, accounting for 24.6% of the total workforce of that year, a year-on-year increase of 11.5%, much higher than the national workforce growth at the same period. [5]
Digital trade has become a new drive behind opening up on a higher level.
Cross-border e-commerce and other forms of digital trade have been growing rapidly and taking up an increasing share of trade, which is key to elevating China's status along the value chain of global digital economy. In 2018, the customs' cross-border e-commerce platform registered retail imports and exports worth 134.7 billion yuan, an increase of 50%, including 56.12 billion yuan of exports, up by 67% and 78.58 billion yuan of imports, up by 39.8%.
Since 2013, China has made great leaps in the indigenous innovation capacity of information technology. As the world is about to adapt to several major technological revolutions and brand-new industry ecosystems are being shaped by the cross-sectoral integration of cutting-edge technologies, China's information technology and related industry are facing golden opportunities rarely seen in history.
Since 2013, China has made breakthroughs in 5G research and sped up its commercialization. Breakthroughs have been made in the core R&D and standardization of 5G technology and several 5G technology solutions proposed by China have been adopted by the international community as core norms. China is leading the world in its speed and effect in driving the development of 5G technology. In China, governments at all levels have tightened coordination to implement policies for the commercialization of 5G technology in an orderly way. The 5G technology is already being applied in the market.
Since 2013, China's government, research institutes and enterprises have been advancing the development of quantum information technology. Support policies are rolled out, basic research advanced and the commercial use mode explored. All these efforts have built up China's technological prowess in this field.
Since 2013, the maturing artificial intelligence (AI) technology has proved helpful in the transformation and upgrade of Chinese industries. By 2019, China had registered over 4,000 AI enterprises, ranking second in the world, and maintained a significant edge in natural language processing, computer vision and adaptive AI technology. AI is playing an increasingly prominent role in target marketing, product and service customization, reshaping the supply behavior and improving the productivity. A technology-driven ecosystem is taking shape.
The number of listed Internet companies continues to grow. By 2018, Chinese Internet companies listed at home and abroad had totaled 120, a year-on-year increase of 17.6%, of which 46 are listed on Shanghai and Shenzhen stock exchanges, 48 in the US and 26 in Hong Kong, with the combined market value of 7.89 trillion yuan.
Unicorns in the cybersecurity and IT sector are developing rapidly.
There are 113 unicorns in China's cybersecurity and ICT sector,
92.1% of which are concentrated in Beijing, Shanghai, Guangdong and Zhejiang, showing a promising sign of cluster development.
Network products and services continue to contribute substantially to poverty reduction. Thanks to the ongoing five major projects to extend network coverage, develop rural e-commerce, online education and information services, and pool online charity resources, rural access to networks are continuously improved and rural netizens continue to grow in numbers. From 2013 to 2018, the rural Internet penetration rate jumped from 28.1% to 38.4%, up by 10.3 percentage points.
The Internet is the carrier of people's wish for a better life. Since 2013, mobile apps have seen explosive growth. As of December 2018, there were 4.49 million detected mobile apps on shelf in China. They meet users' demand for consumption, entertainment, information, socializing and travel in their workplace or at home, and to a certain extent lures more people in the third- and fourth-tier cities and rural areas online.
High-quality content is mushrooming in the industry. From June 2013 to June 2019, the users of online videos in China soared from 389 million to 759 million, with the annual compound growth rate of 11.8%; users of online music service from 456 million to 608 million, 4.9%. The user generated music content and presentation, driven by the integration of online music, socializing and short-video services, has become a focus of innovations.
The proposition of building a community with a shared future in cyberspace has won extensive support worldwide. It was first proposed by Chinese President Xi Jinping in his address to the Brazilian Parliament in July 2014, calling for constructing “peaceful, safe, open and collaborative cyberspace”and “multilateral, democratic and transparent international Internet governance system”. In December 2015, at the Second World Internet Conference, Xi further laid out “four principles” and “five propositions” , offering Chinese wisdom and solutions to global Internet governance.
The Online Silk Road strongly is boosting informatization along it. As a priority project of the Belt and Road Initiative, the Online Silk Road has been facilitating the connectivity of countries and regions along it. In recent years, China has made considerable progress in Internet cooperation with other Belt and Road countries. The Chang'an China-Europe freight train has dedicated schedules for cross-border e-commerce goods; Chinese companies like West Electronic Business Co., Ltd. and SRP Group are promoting information technology and services in Egypt, Jordan and United Arab Emirates; multilateral and regional ICT cooperation mechanism continues to deepen and ICT infrastructure is connecting more and more countries and regions along it. Cross-border e-commerce sells high-quality Chinese products to the world and introduces premium goods from abroad, opening the gate to online cross-border trade. It also enables many competitive cybersecurity and IT enterprises to go global, bring Chinese capital, technology and manpower to other Belt and Road countries, provide the latter with high-quality information and communications services and products, and in this way strongly drive their economy and society to go digital.
Data
shows that in 2018, China registered a mobile cellular subscription rate as high as 115.5%, far above the global average of 10.1%, and beating some developed countries such as Canada(89.6%), France (108.4%) and Ireland (103.2%); its fixed broadband subscription rate was 28.54%, 13.7 percentage points higher than the global average. The popularization of mobile phones and the continuing penetration of broadband use have paved the way for the fast growth of Internet in China.
China has one of the largest Internet user populations in the world, producing a strong scale effect. Data
shows that in 2018, China had 829 million Internet users, far more than the combined total in the EU and the US, and its Internet penetration rate was 59.6%, 6 percentage points higher than the world average; its mobile Internet users reached 817 million (98.6% of the country's total Internet users), compared with 343 million (79%) in the EU and 262 million (91%) in the US. The huge user base has created a vast space for Chinese Internet companies to seek innovation, and in turn, the great diversity of Internet applications has extended the Internet coverage.
In 2019, seven Chinese companies, namely, Alibaba, Tencent, Meituan Dianping, JD.com, Baidu, NetEase and Xiaomi,
made it to the world's 30 most valuable Internet companies, and their combined market value accounted for 16% of the total of the top 30. Internet companies are a key pillar supporting the industry development, and their tentacles have spread to fintech, e-commerce, culture, entertainment and many other areas. Their constant pursuit of innovation has driven the robust growth and stimulated the vitality of the market.
The transition of IP addresses has been smooth and China owns the world's most IPv6 addresses. As a key basic Internet resource, the number of IP addresses is a core indicator measuring a country's IT strength and Internet potentials. In 2011, as all the IPv4 addresses were divided, countries around the world, including China, started to regard the transition from IPv4 to IPv6 a priority in developing basic network resources. Since 2013, the number of IPv6 addresses has soared in China. By June 2019, China had 386 million IPv4 addresses and 50,286 blocks/32 IPv6 addresses, ranking second in the world. From June 2013 to June 2019, IPv6 addresses grew at an annual compound rate of 22.9%, providing strong support for the rapid development in related application areas.
Figure 2: Total IP Addresses in China
China's ownership of domain names keeps increasing. From 2013 to 2016, the total of domain names in China continued to grow. The Administrative Measures for Internet Domain Names promulgated in 2017 provides a detailed administrative system for domain name-related services, curbing the registration of false, incomplete and incompliant domain names. By June 2019, China owned 48.001 million domain names, including 21.852 million top-level .cn domain names, the largest group of country-code domain names in the world. The ever-growing ownership of domain names and the improving domain name service system have combined to strengthen China in guarding against risks of network address translation.
Figure 3: Number of Domain Names in China
The numbers of websites and web pages have grown rapidly and the website content has been much improved.
As the Internet use environment keeps bettering, Chinese Internet users find more and more Internet resources accessible. From June 2013 to June 2019, the number of websites
totaled 5.177 million, with the annual compound growth rate of 9.9%. As state authorities tighten up efforts to identify and crack down on harmful Internet resources, the websites see not only improvement in their content quality, but also noticeable increase in quantity thanks to the flourishing application market.
Figure 4: Websites and. CN Websites in China
As the Broadband to Home project unfolds, China's broadband subscriber group has grown into the largest in the world.
Since 2013, an integrated, ubiquitous, safe and green broadband infrastructure has basically taken shape in China, bringing optical fibers to urban homes and broadband to rural homes, and strongly supporting the promotion of information technology in both urban and rural areas and the higher-quality development of economy and society. As the broadband access continues to improve, it has become the most common way for computer users to surf the Internet. The number of FTTH/O
subscribers in China grew from less than 50 million in 2013 to 411 million by the third quarter of 2019, and their proportion in fixed broadband subscribers also jumped from 21.6% to 91.4%, a hefty increase of 69.8 percentage points.
[6]
Figure 5: Population and Proportion of Broadband Subscribers Using FTTH/O
China continues to sharpen its ability of international connectivity and speed up cross-border optical cable business. From 2013 to 2018, China's international Internet gateway bandwidth spiked from 3.407 million Mbps to 8.947 million Mbps, with an annual compound growth rate of 21.3%; its optical cable length from 17.45 million kilometers to 43.58 million kilometers, [7] 20.1%, maintaining a rapid growth momentum. The Belt and Road Initiative has also boosted China's cross-border optical cable business. In recent years, China has had its network directly connected to that in the US, Japan, Singapore and the UK, been making considerable progress in building optical cable channels linking Myanmar, Pakistan, Kyrgyzstan and Russia, respectively, and built over 30 cross-border land cables and a dozen international marine cables along the Belt and Road, with the international communications access capacity amounting to 87.6 Tbps. China is playing an increasing role in providing high-quality information and communications services and promoting global communications connectivity and the development of the Internet of Things along the Belt and Road.
Figure 6: China's International Internet Gateway Bandwidth
China has been constructing communications facilities in a steady manner and sees remarkable growth in mobile data flow consumption. Since 2013, China has considerably picked up the pace of mobile communications infrastructure construction, leading to ever-improving network services, wider network coverage and the 4G network overtaking the 3G one to become the mainstream carrier network for mobile broadband data flow. Meanwhile, online and offline services are increasingly integrated. As mobile Internet business expands, mobile apps for payment, travel, live broadcast, food ordering and so on have been growing fast, stimulating the rapid growth of the dataflow of usage (DOU)of mobile Internet users. From 2013 to 2018, the DOU of mobile Internet jumped from 1.27 billion GB to 71.1 billion GB, registering a staggering annual compound growth rate of 123.7%; from January to November 2019, the figure totaled 110.7 billion GB; the DOU per mobile Internet household jumped from 0.13 GB per month to 4.42 GB per month, with the annual compound growth rate of 102.4%. [8]
Figure 7: Mobile Internet Dataflow and the Growth of Dataflow of Usage per Household per Month
The popularization of smart mobile devices has driven the rapid growth of mobile Internet and its users. Since 2015, China has been basically covered by the 3G network and moving to the 4G one. From December 2013 to November 2019, Chinese mobile Internet users soared from 401.61 million to 1.31 billion, and their proportion in mobile phone users rose from 32.7% to 81.7%, an increase of 49 percentage points. [9]
Figure 8: 3G/4G Network Subscribers in China
Chinese Internet economy enjoys unique advantages for development and the public-private partnership has stimulated market vitality. First, a huge and active market is the basis for a strong Internet economy. China's Internet market is not only gigantic, but also dominantly young, which is conducive to the faster, more efficient commercialization of information technology. Second, the clustering effect of urbanization has expanded the Internet economy. China has 22 cities with a population over five million, compared with one in the US and four in the entire EU block. The huge and dense urban population in China is a magnet to investors and entrepreneurs, which in turn gives birth to a number of digital technology innovations. Third, active investments and startups have guaranteed the development of the Internet economy. From 2013 to 2018, the investment and financing in Chinese digital economy was estimated to grow from 44.9 billion yuan to 772.4 billion yuan, with an annual compound growth rate of 76.7%. In 2019, thanks to the implementation of favorable policies, the investment and financing in Chinese digital economy rebounded: in Q3, the quarter-on-quarter growth was 12.6%, and in Q4, 14.6%, showing signs of recovery. Fourth, the Chinese government has reserved sufficient space for the trial and error of Internet companies and the “accommodative and prudent” regulation creates enough space for the development of new technologies and applications, which has provided strong support for the development of Internet economy.
Many Chinese Internet companies have made it to the top rung in the world. Chinese Internet companies have shown a robust growth trend, with revenue continuing to increase rapidly. By December 2018, Tencent, Alibaba, Baidu, NetEase, Meituan Dianping, JD.com and Pinduoduo were rated among the world's top 20 Internet companies, with the combined value of US$ 906.294 billion, 27.1% of the total of the top 20. [10]
Table 1: The World's 20 Biggest and Most Valuable Internet Companies
Source: The Report on the Development Trend and Prosperity Index of China's Internet Industry 2019
Internet has enabled efficient resource allocation. Since 2013, the development of Internet has stimulated that of shared economy, leading to more efficient social resource allocation. With the help of Internet, the shared economy can better tackle the information asymmetry problem, achieve optimal, rational allocation of such factors as means of production, expertise, monetary capital and market resources, maximize the value of social resources, substantially increase the market supply, curb price fluctuation, and improve the role of market mechanism.
The ongoing Internet Plus project has produced positive outcomes in driving the deep integration of Internet innovations and the real economy and the transformation and upgrade of traditional industries. From 2016 to 2018, industry digitalization in China grew from 17.4 trillion yuan to 24.9 trillion yuan in value, up by 43.1%; the digital economy's contribution to value added in such sectors as agriculture, industry and services grew to 7.3%, 18.3% and 35.9% respectively. [11] Internet is increasingly playing a basic, strategic and stimulating role in developing agricultural modernization, intelligent industry and digital services.
Figure 9: Proportion of the Digital Economy in Primary, Secondary and Tertiary Sectors
Internet has helped increase the yield and income of agriculture. In recent years, thanks to the integrated application of Internet and information technology, remote sensing satellite and Internet of Things, smart agriculture has been advanced steadily and more and more innovative production and sales modes are introduced into agriculture. First, state/provincial-level big data platforms are constructed to match suppliers and consumers. Second, through intelligent control, the growth environment of crops can be adjusted in real time and the risk of pests/insects alerted, so as to save farmers from the mercy of unpredictable Nature and produce more and better agricultural products. Third, as the autopilot system is applied to more and more agricultural machinery, the cost of labor and materials is slashed and unmanned farms are taking shape. Fourth, there is a fast-rising trend of using drones for plant protection, which can make pesticide spraying much safer and thus better prevent and control pesticide. With the help of intelligent production technology, traditional farming is transitioning to visualized, intensive farming with precision.
Internet has helped industrial companies reduce costs and improve efficiency. In recent years, information technology has penetrated to more areas of industrial sector, driving the comprehensive upgrade of design, process, equipment, management and services, and the development of flexible manufacturing, network manufacturing, green manufacturing and intelligent manufacturing. [12] In 2018, 39.4% of digital production equipment was networked and 45.9% of production equipment digitalized in the Chinese manufacturing industry, up by 2.1 percentage points and 3 percentage points respectively, from 2015. [13] More and more industrial apps are developed and circulated in the market; for the development and application of commercial engines alone, there are more than 600 industrial apps. [14] Some pilot enterprises in trying the industrial Internet have seen labor productivity up by over 20% and comprehensive energy consumption per 10,000-yuan industrial output down by more than 6%. [15] On the whole, Internet can promote collaborative research & development of products, digital manufacturing process and intelligent factory management, thus greatly reducing the cost and improving the efficiency in the industrial sector.
Internet has helped the service sector accelerate growth and improve quality. In 2012, the service sector beat the industrial sector for the first time in terms of value added contribution to GDP and became the biggest pillar of China's national economy. Driven by its vast size, rapid growth and low technical barrier to integrate with Internet, the service sector has been outpacing the industrial and agricultural sectors in going digital. Meanwhile, some manufacturers are using Internet to reinvent themselves as service suppliers. In 2018, the digital economy took up over 40% in such niche markets as insurance, radio & television, capital market services, public administration, postal services and education, showing promising signs of sustained growth. With the help of Internet platforms, the logistics and transportation industry can save 80% of the waiting time and cashiers can work 60%faster on average. On the whole, Internet can boost the efficiency, benefits and quality of the service sector to better meet the diverse demands for production and household purposes.
Internet has contributed to industrial restructuring through integration with regional economy. In recent years, Internet and regional economy have been more prominently reinforcing each other. For example, China has formed a big data industry led by eight state-level big data comprehensive pilot zones and supported by the collaborative development of four cluster zones in the Beijing-Tianjin-Hebei region, Yangtze River Delta, Pearl River Delta and Central and West China; the Digital Silk Road project has brought opportunities for the opening-up and development of Tibet and Xinjiang. Regions involved are playing their geographical advantage, actively advancing port information infrastructure construction, deepening economic and trade contact in the high-tech areas, launching technology exchange over the Internet of Things, satellite navigation and intelligent environmental protection, and expanding areas of cooperation. On the whole, Internet can break the spatial and temporal barriers and promote the flow of factors, information sharing and industry transfer, to drive the collaborative development of East, Central, West and Northeast China and form more reasonable labor division.
Internet has contributed to rural vitalization through integration with agriculture and rural economy. Since 2013, Broadband China and Internet Plus projects have been extended to rural areas, bringing e-commerce, shared economy and other emerging business to them, and driving agriculture and rural economy to grow by leaps and bounds. First, the Internet Plus project has driven the integrated development of rural industries to create an integrated industrial chain and a shared value chain and better the rural industrial structure in all respects. Second, Internet has helped converge the capital, technology and intellectual resources introduced to rural areas and build a platform for farmers to seek innovations and start businesses, which has attracted over eight million migrant workers to return to their hometown to start their own business, thus stimulating the vitality for the development of agriculture and rural economy. Third, rural e-commerce has grown into a key driver behind the construction of a new countryside. In 2018, rural e-commerce transactions amounted to 1.37 trillion yuan, an over-seven-fold increase from 2013, and online retail sales of agricultural products totaled 230.5 billion yuan, a nearly fourfold growth from 2013. [16] On the whole, Internet has created new space for the development of agriculture and rural economy and contributed to urban-rural coordinated development.
From June 2013 to June 2019, China's online shoppers grew from 271 million to 639 million, with an annual compound growth rate of 15.4%, and their proportion of Internet users was also up from 45.9% to 74.8%; the number of those shopping on mobile phones spiked from 76 million to 622 million, with an annual compound growth rate of 41.8%.
Figure 10: Number of Users and Utilization Rate of Online Shopping in China
China has topped the world for five consecutive years in terms of online retail sales.
From 2014 to 2018, Chinese online sales jumped from 2,789.8 billion yuan to 9,006.5 billion yuan, but the annual growth rate lowered from 49.7% to 23.9%. In recent years, China's cross-border e-commerce has grown rapidly and become a key driver behind online retail sales, building up a global influence. In the first half of 2019, Chinese cross-border retailers imported goods worth 45.65 billion yuan, up by 24.3% year-on-year.
Meanwhile, a number of favorable policies were announced to drive the rapid development of the industry. In 2019, the State Council designated a number of pilot cities in addition to the existing 35 comprehensive cross-border e-commerce pilot zones, and urged to implement the policy of “exempting the value added tax and consumption tax for invoice-less imported goods” and introduce more convenient measures for collecting and accounting the corporate income tax. So far, China has formed the e-commerce cooperation mechanism with 22 countries and organized several government-business dialogues to promote exchange and make new ground in pursuing opening up on all fronts.
Figure 11: Online Retail Sales and Growth
Online retail has promoted the consumption upgrade and supply-side reform. The online retail market is no longer price-driven, but service-driven, leading to remarkable improvement in payment, customer and logistics services and fashioning a new trend of quality-valued, smart and green consumption. In recent years, thanks to the continuing online-offline integration and the accelerating application of such technologies as big data and AI, efficiency has been much improved in the production, circulation and sale of goods. The rising “new retail” mode is contributing to the supply-side reform.
From June 2013 to June 2019, Chinese Internet users grew from 591 million to 854 million, with the annual compound growth rate of 6.4%, maintaining a steady growth despite a huge user base; the Internet penetration rate also increased from 44.1% to 61.2%, 7.6 percentage points higher than the world average. The continuous Internet popularization in China is driven by intensified network infrastructure construction, the popularization of mobile devices with access to Internet and the growing diversity of network applications.
Figure 12: China's Internet User Population and Internet Penetration Rate
China has seen an explosive growth in mobile Internet users. Since 2013, China has kept expanding the coverage of mobile Internet, reducing the mobile dataflow charges, lowering the threshold for access to mobile Internet, and improving the mobile Internet environment, thus giving birth to the explosive growth of mobile Internet users. From June 2013 to June 2019, Chinese mobile Internet users increased from 464 million to 847 million, with an annual compound growth rate of 10.6%, far above that of Internet users (6.4%); the proportion of mobile Internet users in all Chinese Internet users also grew from 78.5% to 99.1%.
Figure 13: Population and Proportion of Chinese Netizens Surfing on the Mobile Phone
Internet has contributed to poverty reduction, narrowing the urban-rural gap. From June 2013 to June 2019, Internet users in rural China grew from 165 million to 225 million, with an annual compound growth rate of 4%. In recent years, China has vigorously promoted the use of Internet in poverty reduction, coordinating and engaging a wide array of stakeholders from across society. For example, the government has launched fixed-point assistance projects to pair the contributors with beneficiaries, guided cybersecurity and IT companies to increase investment in developing more cost-effective Internet products and services and reforming the Internet Plus poverty reduction mode, and gone all out to extend Internet coverage, develop e-commerce, online education & training, and information services in rural areas and promote online charity. Moreover, through media convergence, the general public is mobilized to contribute to the fight against poverty and rural vitalization.
Internet has penetrated in many areas of daily consumption, including shopping, food ordering, taxi hailing, train ticket booking, and tour booking, making daily consumption much easier.
Internet has made travel much easier for consumers. From June 2013 to June 2019, the number of Internet users who booked a flight ticket, hotel, train ticket or travel/vacation product online increased from 133 million to 418 million, with an annual compound growth rate of 21.1%, and their proportion in all Internet users jumped from 22.4% to 48.9%. Online ticketing is not only more time-saving but also fairer than offline ticketing. Online ride-hailing service which was an instant hit in 2013 not only saves users the time waiting for a ride, but also helps taxi companies adapt to the Internet technology and reduce the useless running rate. It satisfies the general public's travel demands and has set an example for driving efficiency improvement in traditional industries with network technology.
Figure 14: Population and Proportion of Internet Users Booking Travel Services Online
Internet has made food ordering much easier for consumers. From June 2016 to June 2019, Internet users who ordered food delivery online increased from 150 million to 406 million, with an annual compound growth rate of 41.2%, and their proportion in all Internet user jumped from 21.1%to 49.3%; those using a mobile phone to do so increased from 146 million to 417 million, with an annual compound growth rate of 41.8%. In recent years, food ordering platforms have tightened the screening of tenant applicants and provided such service as food safety insurance to better guarantee food safety, and applied AI technology to upgrade the dispatch engine and improve delivery efficiency. Moreover, based on the existing delivery system, they have picked up the race of extending to the lifestyle service category, covering such areas as groceries, fresh-cut flowers, medicines and fresh produce. As the basis of lifestyle services, food delivery is integrating deeply into new retail business and stringing more and more lifestyle service scenarios to drive the collaborative development of the ecosystem.
The rapidly growing online education has made it much easier to access knowledge. From June 2016 to June 2019, users of online education services increased from 118 million to 232 million, with an annual compound growth rate of 25.4%, and those on the mobile phone from 70 million to 199 million, 41.9%. Thanks to the advancements in voice recognition and cloud storage technologies, online classrooms are able to imitate the offline classroom mode as much as possible and recognized and favored by online education platforms and users. The rapid popularization of smart devices and the upgrade of mobile Internet have created opportunities for online education. Light, fragmented and structuralized knowledge is more suitable for mobile learning scenarios and can be accessed in a more efficient, convenient way.
Figure 15: Population and Proportion of Internet Users Using Online Education
The online search service has strongly strengthened users' access to information. Search engines search for, collect, categorize and present information online and have become a great help for users to access information at low cost. They have significantly strengthened users' access to information and help them access online information faster. Meanwhile, the use of online search service is generally purpose-specific, which accumulates data for companies to expand their network services more conveniently. From June 2016 to June 2019, the users of search engines increased from 470 million to 695 million, with an annual compound growth rate of 6.7%, and those of mobile search engines from 324 million to 662 million, 12.6%.
Figure 16: Population and Proportion of Internet Users Using Search Engines
Cloud computing, social networking and big data technologies are penetrating faster into the financial service industry, giving birth to many novel financial services. For example, online financial services including online payment, online wealth management, crowdfunding, and online insurance have reached more target groups, improved the overall efficiency of financial services and better met consumers' demand for personal financial services.
China has seen an explosive growth of online payment users. From 2013 to 2018, online payment users increased from 244 million to 633 million, with an annual compound growth rate of 17.2%, and their proportion in Internet users grew from 41.4% to 74.1%; mobile payment users from 79 million to 621 million, 41.0%.
Figure 17: Size and Proportion of Internet Users Using Online Payment
Online payment supports not only deposit management but also online and offline consumption, and is fueled by a growing momentum created by constant pursuit of innovation. For one thing, as online-offline integration picks up pace and companies subsidize the use of online payment by businesses and consumers, online payment is accepted by more and more physical stores and used in much more offline scenarios. By bundling bank credit and deposit cards with their online payment service, users can apply for consumption loans, loans for small- and medium-sized enterprises, small-account wealth management and other financial services, which has won the favor of many users with its flexibility and novelty. For another, through deep integration with biometric identification and networked sensing technologies, many online payment services have become independent of the mobile phone. For example, online payments based on facial recognition, ETC, and others have been growing rapidly and promoted for commercial use.
Figure 18: Population and Proportion of Internet Users Using Online Wealth Management Services
Internet-based wealth management, with its increasing diversity, has changed the traditional wealth management market. From June 2014 to June 2019, the population of Internet users using Internet-based wealth management services increased from 64 million to 170 million, with an annual compound growth rate of 21.6%, and the percentage was up from 10.1% to 19.9%. Internet-based wealth management has the long-tail effect, can gather scattered deposit of individual accounts, and thus effectively reduce the management and operational cost. With high returns, low threshold and fast liquidity, Internet-based wealth management can better cater to the general public's demand than traditional wealth management products and the deposit market.
Internet, especially mobile Internet, breaks the limits of time and space and allows its users to communicate, exchange and share with each other anytime anywhere, capturing them in the social network all the time. No longer dependent on physical social sites, the social network becomes people-centered and greatly meets all sorts of social networking demands of Internet users.
Microblogs are developed based on user connections and for information sharing. Their hallmark is interaction, not only between individuals but also between individuals and organizations. They form an open social platform for Internet users to share and communicate with each other. From 2013 to 2018, the population of microbloggers shrank and then expanded. As of 2018, it had reached 351 million, or 42.3% of Internet users.
Figure 19: Population and Proportion of Internet Users Using Microblogs
Mobile instant messaging applications, represented by WeChat, are deep social platforms based on strong connections, greatly meet the social needs among acquaintances, and have covered nearly all eligible age groups of Internet users. By December 2018, WeChat had attracted 94.3%, or 781 million of Chinese Internet users.
Online literature has developed rapidly, with revenue significantly increased. From June 2013 to June 2019, the online literature readership increased from 248 million to 455 million, with an annual compound growth rate of 10.6%, and their proportion in Internet users grew from 42.1% to 53.2%; for those who access online literature on their mobile phone, the growth was from 204 million to 435 million, with an annual compound growth rate of 14.5%. Numerous high-quality literary works are produced online, and special readers and mobile apps are maturing to meet the reading needs with such forms as texts and voices. Meanwhile, the fast-growing revenue from copyright has become the main driver of profitability of online literature companies.
Figure 20: Population and Proportion of Internet Users Reading Online Literature
Online films and televisions pay increasing attention to quality and short-video business stands out in the market. From June 2013 to June 2019, the audience of online videos (excluding short videos) jumped from 389 million to 639 million, with an annual compound growth rate of 8.6%, and their proportion in Internet users increased from 65.8% to 74.7%. In recent years, big data and AI technologies have been employed by online video platforms to rapidly identify user demands and push content accordingly. Based on in-depth analysis of content and goods consumption, they are tracking the true user demands and use the result to help produce high-quality content. Meanwhile, the rising short-video business has been viewed by online video websites and major Internet companies as key to their own entertainment ecosystem. By June 2019, online short videos attracted 648 million audiences, or 75.8% of Internet users. As the content production for short videos becomes more and more specialized, high-quality content in subdivided categories is gaining popularity, the market is maturing and homogeneous content is losing ground; high-quality content has become the core corporate competitiveness. Moreover, as short videos are believed to be true to real life and straightforward, many companies have increased advertising input in them to market goods and services and speed up purchase. Short-video business is integrating deeply with such fields as e-commerce and tourism.
Figure 21: Population and Proportion of Internet Users Watching Online Videos
Mobile games have grown into a pillar of the maturing online games industry. From June 2013 to June 2019, the population of online gamers rose from 345 million to 494 million, with an annual compound growth rate of 6.1%; of them that of mobile gamers increased from 161 million to 468 million, 19.4%. In recent years, the online PC games have been sluggish, registering nearly zero growth, but mobile games have been growing rapidly, with a significant increase in users and usage rate. The revenue of mobile games has also far outgrown that of online PC games. The boom of mobile games is jointly driven by the growing willingness of users to pay, the rising proportion of paid business income, the market favor for subdivided game categories, the ever-enhancing software and hardware, and the improved gaming experience.
The legal system governing the Internet has been improving. Since 2014, China has introduced laws, administrative regulations, departmental rules, judicial interpretations, normative documents and policy documents governing the Internet, providing a solid legal basis for strengthening Internet governance. In 2014, China proposed actions to “strengthen Internet legislation, better laws and regulations governing online information services, cybersecurity protection and online social administration, and regulate cyber-behavior according to law.” In June 2017, the Cybersecurity Law was officially put into effect; in January 2018, the Anti-Unfair Competition Law added terms governing cyberspace operators; in January 2019, the E-Commerce Law was put into force.
The proportion of Internet users who encountered cybersecurity problems has been declining drastically. From 2016 to 2018, the proportion of Internet users who had not encountered any cybersecurity issue spiked from 29.5% to 49.2%, meaning that nearly half of the Internet users were safe from cyberattack in 2018 alone. Meanwhile, the proportion of those who had encountered online fraud, personal data leakage, account or password theft, or virus/Trojan attack had also been declining, to a varying degree. In particular, the proportion of those whose devices were attacked by Trojan or other viruses fell by over 20 percentage points in those two years.
Figure 22: Cybersecurity Issues Encountered by Internet Users
In July 2014 at an address to the Brazilian Parliament, Chinese President Xi Jinping put forward China's proposal for global Internet governance for the first time, sharing China's wisdom and proposal. In recent years, China has been active in international exchange to make its voice heard in Internet governance.
While the world economy has been undergoing profound adjustment in recent years, China boasts a relatively complete information industry chain, high productivity and strong security guarantee. Chinese cybersecurity and IT companies are making continuous improvement in indigenous innovation and already capable of importing IT solutions to the international market. As IT is being further promoted in countries and regions along the Belt and Road, rare opportunities will arise for Chinese cybersecurity and IT companies and it will not only stimulate the development of IT industry in Belt and Road countries and regions, but also integrate local resources to bring the dividends of the digital economy to more people.
First, the 5G network is soon to be put into commercial use on all fronts, which will drive the reform in the age of the Internet of Things. Compared with the previous four generations of communications technology, the 5G technology can transmit more data faster, with low delay, thus laying the underlying technology basis for the massive application of the Internet of Things. The issuance of 5G licenses for commercial use by the government marks the maturing of related industry chains and the beginning of the commercial use era of 5G technology. It is expected that in the following years, China's enhanced Mobile Broadband (eMBB) will be among the first to embrace the 5G technology to empower audio-videos, online games and many other rich media applications with its super transmission rate, and create a multi-angle, high-definition immersive user experience. Moreover, the use of 5G technology in massive Internet of Things, industrial automation and telemedicine will give birth to a number of novel applications and business forms, continue to change the way the society is connected, improve the efficiency of resource allocation, reduce overall operational costs, and strongly boost the all-factor productivity in related industries.
Second, IPv6 will be deployed comprehensively and attract many more users. IP addresses are a key fundamental resource of Internet. China is advancing the smooth evolution and upgrade to the next-generation Internet which will support IPv6 in all networks, applications and terminals. By December 2018, China's IPv6 addresses hit 41,079 blocks/32, growing by 75.3% year by year. It is expected that in the upcoming three to five years, China will make breakthroughs in key areas of IPv6, continue to upgrade Internet applications, connect IPv6 backbone networks, expand the capacity of international access to IPv6 networks, and upgrade data centers and cloud service platforms to IPv6. Besides the above priorities, China will also encourage and support commercial websites to upgrade to and deploy IPv6, and thus expand the IPv6 user base.
China is on the eve of major technological changes which will lead to a period of rapid growth. A new ecosystem is shaped by the booming Internet Plus project fueled by the application of cutting-edge technologies. Technological breakthroughs in frontier areas such as basic physics, materials, biology, brain science and cognition science will push the rapid development of emerging technologies such as 3D printing, quantum communications, neural network chips and AI, and stimulate the endless supply of novel means of production, industry forms and business modes in the cybersecurity and IT sector. Meanwhile, the new-generation information technology, represented by big data, AI, global Internet of Things and cloud computing, is restructuring future computing and urging deeper integration between the innovation chain and the industry chain, and will create rare golden opportunities for China's collaborative innovation.
China's personal Internet application market still has great potential to tap and will maintain the positive trend and drive the rapid development of the digital economy. First, there is still a population dividend in the Internet area. As of December 2018, 562 million Chinese were still not connected to Internet, including the elderly, young children, and residents in third- and fourth-tier cities and townships. Second, applications such as instant messaging, online shopping, online news and search engines are still among the most used, and have gradually expanded into e-payment, online games and O2O business as well as more extensive services such as information, commerce, lifestyle, culture and entertainment services, building up their ecosystem and platform effect. Third, e-payment, online food ordering and online wealth management applications will continue to grow rapidly and remain a major source of revenue for Internet companies.
Traditional companies are seeking to reinvent themselves as platforms while platform companies are trying to build business ecosystems. Along with the development of the new-generation information technology represented by cloud computing, big data and AI, novel digital business paradigms will push forward business transformation and direct the market competition focus from technology, products and supply chains to ecosystems. For one thing, traditional companies will accelerate to reinvent themselves as platform companies so as to effectively shorten the industry chain and streamline the information communication process. For another, platform companies are evolving into business ecosystems. By exploring cross-sectoral integration and restructuring, they are making new ground in resource clustering and win-win cooperation. Meanwhile, Internet allows companies to go beyond traditional organizational boundaries, operate resources and commercialize their R&D results in new ways, and build cross-regional, multi-party crowdsourcing and mass-maker platforms, so as to form a highly open and collaborative industrial innovation ecosystem and stimulate innovation vitality of the digital economy.
First, the digital economy has become a new drive behind modern manufacturing industry. Though young, Chinese digital economy has been growing rapidly and highly innovative. As the integration between the real economy and the digital economy deepens, digital technology will increasingly reshape the manufacturing industry and inject full momentum into it, which is significant for the latter to upgrade, improve labor productivity and build a bigger emerging market. It is expected that in the future, the new-generation technology represented by Internet, big data, AI and robot will further empower the manufacturing industry in such emerging areas as smart factories, manufacturing network platforms, and telework or tele-collaboration, create new types of network-based collaboration organizations, and cultivate a large workforce armed with digital awareness and skills.
Second, the digital economy has provided a strong momentum for the development of modern service industry. The new-generation information technology has become a key driver behind the digitalization of traditional service providers, and will drastically change the business logic and operation mode in traditional industries, which is already happening in some areas. For example, the rising new retail focuses on the consumer experience, and employs big data and AI technologies to realize seamless connection of users, goods and services, digitalize the supply chain and better the production, circulation and sale processes, and in this way reshape the entire ecosystem integrating online services, offline consumer experience and goods delivery. It is expected that in the following three to five years, more and more modern service suppliers will ally with Internet to integrate online and offline resources; the upgraded supply side will speed up the circulation of resources, and thus improve the supply chain efficiency and upgrade traditional service business.
With the help of advanced digital technology, public services will be more convenient, inclusive and equal. Along with the rapid development of the digital economy, lifestyle services such as clothing, food, housing and travel, and education, medical, employment and elderly care services will all go digital, which will significantly improve the supply efficiency and benefit of social resources. This is a key area for the digital economy to work on besides increasing productivity and promoting the transformation and upgrade of the real economy. For example, the blockchain technology can be applied to identity verification, public information storage and sharing, among others, to bring public services to a higher level; digital public education platforms which cover such areas as basic subjects, occupational skills, ethics and psychology will continue to provide high-quality education resources to more groups in various forms; and the Internet-based smart medical service which is data-driven and individual-centered will introduce AI assistants and work with smart wearable devices to provide more accessible and people-oriented services of higher quality.
The focus of inter-city competition will shift from physical resources to digital ones. A city's development has been long dependent on its resource endowment and geographical location, but in the digital era, Internet opens up new channels to connect the world and the information flow-based cyberspace has become another strategic front following the physical and social spaces. As emerging technologies accelerate to penetrate into social operation and administration, a host of city data will lay the foundation for constructing a digital twin city that mirrors and integrates with the physical one and thus help improve the city's digital administration and competitiveness. Meanwhile, from the fast-growing digital economy will come a tremendous, integrated information flow with the significant spillover effect, penetration and dispersion effect, and Matthew effect, which will continue to gather the technology flow, capital flow, talent flow and materials flow, and provide a new momentum for urban development with digital infrastructure, digital consumers and a digital business environment.
The governance capacity for both real and virtual societies will move up to another level. The virtual society in cyberspace is anonymous, open and self-organized, and its problems are often intertwined with conflicts in real society. A new type of public social space is formed with online-offline interaction, raising new requirements for social governance. Hence the social governance mode should reflect the development characteristics of the times, diversify the governance parties and paths, take into full account the characteristics of and connection between the real and virtual societies, handle hot social issues timely and efficiently, and properly respond to people's public interest demands. In the future, as China keeps bettering laws, regulations and policies governing the cyberspace and the multi-party collaborative governance system, it will see significant improvement in governance capacity and effect.
[1] Source: The Statistical Bulletin for the Communications Industry 2018 released by the Ministry of Industry and Information Technology
[2] Source: The Economic Operation Status of the Communications Industry from January to October 2019 released by the Ministry of Industry and Information Technology
[3] Source: Digital China Construction and Development Report (2018) released by the Cyberspace Administration of China
[4] Source: Digital China Construction and Development Report (2018) released by the Cyberspace Administration of China
[5] Source: White Paper on the Development and Employment of China's Digital Economy 2019 released by the China Academy of Information and Communications Technology
[6] Source: The Statistical Bulletin for the Communications Industry 2018 and The Economic Operation Status of the Communications Industry in the First Three Quarters of 2019 , released by the Ministry of Industry and Information Technology
[7] Source: The Ministry of Industry and Information Technology's Statistical Bulletin for the Communications Industry (from 2013 to 2018)
[8] Source: The Statistical Bulletin of the Communications Industry 2018 and Key Indicator Performance of the Communications Industry from January to November 2019 , released by the Ministry of Industry and Information Technology
[9] Source: The Statistical Bulletin of the Communications Industry 2018 and Key Indicator Performance of the Communications Industry from January to November 2019 , released by the Ministry of Industry and Information Technology
[10] Source: The Report on the Development Trend and Prosperity Index of China's Internet Industry 2019 released by the China Academy of Information and Communications Technology
[11] Source: White Paper on the Development and Employment of China's Digital Economy 2019 released by the China Academy of Information and Communications Technology
[12] Zeng Yu. Driving the Development of China's Digital Economy with New-generation Information Technology. Economic Daily . May 24, 2018.
[13] Source: Data Map for China's Integration of Informatization and Industrialization released by Contemporary Service Platform for Integration of Informatization and Industrialization
[14] Source: White Paper on the Development of Industrial Internet Applications released by China Industrial Technology Software Industry Alliance
[15] Source: White Paper on the Development and Employment of China's Digital Economy 2019 released by the China Academy of Information and Communications Technology
[16] Source: E-commerce Research Center's Report on E-commerce Development in Rural China