Tag Archives: Technology

Coronavirus Could Nudge US-China Decoupling

Image of Apple iPhones by 3D Animation Production Company from Pixabay.

APPLE’S WARNINGS THAT its revenues are likely to fall short of expectations this quarter because of the impact of the coronavirus Covid-19 is a blunt reminder that supply chains, as well as sales, have been no more immune from disruption by the outbreak than any other aspect of the economy.

In truth, the economic disruption of the coronavirus is likely to be temporary, and firms cannot reconfigure overnight their supply chains nor the skillsets and relationships that underpin them. However, it offers foreign firms that might already be re-evaluating their supply chains in China one more excuse to pull back.

Reasons for doing so are various, from worries about the Trump administration’s protectionist trade policy to environmental concerns over carbon footprints and concentration risks from being over-reliant on a small set of suppliers in one country. Diversifying and shortening supply chains, even to the point of re-shoring production in the case of companies selling into the US market, makes sense to mitigate all those risks, even if it may bring new ones in the form of more complex and demanding management requirements and more possible points of failure and IP theft.

Regionalisation or domestication of global supply chains would be in line with the current trend of ‘deglobalisation’ but not without consequences. For one, it would solidify emerging regional trading blocks and patterns of trade. An East and Southeast Asian trade region with China as its hub is already coalescing. It would also weaken the interdependency between China’s economy and the United States.

In the pre-Trump era, trade was considered a matter of commerce and not national security. China provided manufacturing capacity, production engineering expertise, logistics capabilities and, decreasingly, low-cost labour in return for superior US intellectual property, design and innovation skills, branding and, decreasingly, an end-market. This equilibrium has been disrupted by both sides’ emphasis on national security and economic nationalism and the heightened role of technology as a dimension of the two nation’s contestation.

It is not unfair to say that the West underestimated how China’s ability to transform from fast follower to frugal innovator would be followed by its rise as a frontline innovator. That, the theory went, could not happen in authoritarian regimes where the government, not the market picked commercial winners, rote learning stifled innovative minds and, to use a Japanese phrase, the nail that sticks out gets hammered down.

However, that was not true for Japan at a comparable stage of development and is proving not to be the case with China, especially in areas such as artificial intelligence and quantum computing.

This is to the consternation of many in the United States where the assumption that US technological superiority is unsurpassable dies hard. China hawks in the Trump administration are consequently pursuing a range of initiatives to crimp China’s technological progress.

The campaign against Huawei, tightened further last week with more charges against the company of industrial espionage, is the most visible aspect. Yet this is just the spearhead of a range of initiatives to keep US technology, especially advanced and emerging technologies, from falling into Chinese hands by legal and illegal means.

Beijing’s response has been to accelerate the development of indigenous technology, both civilian and military, although the distinction is becoming less and less. The Made in China 2025 programme is the poster child for this.

Huawei has already shown it can produce smartphones without US chips. The bigger question that will be answered over the next couple of years is whether Chinese companies more broadly will be able to design and manufacture competitive end-products.

The risks to the United States are twofold. First, the loss of their Chinese markets to indigenous products would cut so deeply into their sales that it crimps their ability to spend on R&D needed to stay innovative. This would be amplified if China then dominated emerging third-country markets.

Second, and more seriously, this technological decoupling would be asynchronous: China would become innovative on par or better with US firms, but US firms would not necessarily regain their lost manufacturing and production engineering skills.

Reskilling a workforce is the unglamourous slog of long-term public policy-making for which the current US administration has little appetite.

Tim Cook, chief executive of Apple, once famously remarked that if he called together all the manufacturing production engineers in China, it would fill a couple of football stadiums; the same meeting in the United States wouldn’t fill a couple of rooms.

In an extreme but not inconceivable scenario, China’s reliance on the West could become the West’s reliance on China.

3 Comments

Filed under China-U.S., Economy

China Has Long Used Government Procurement To Foster Innovation

A FINANCIAL TIMES’ report that China ordered government agencies earlier this year to replace foreign, i.e., US computer hardware and software with indigenous alternatives over the next three years — the so-called 3-5-2 plan — is being cast in the Western press as a further technological decoupling of the world’s two largest economies. Yet it fits into a long-standing pattern of Beijing using government procurement to promote domestic innovation.

The Government Procurement Law (GPL) of 2002 requires, with some exceptions, central and local governments to buy goods and services produced in China. It excludes military procurement and does not cover state-owned enterprises (SOEs) and any public works they undertake; SOEs are subject to the Tendering and Bidding Law of 2000.

Official procurement statistics cover only procurement under the GPL, which is why government procurement in China looks low by international standards. In 2018, at $507 billion, it represented 4% of GDP, in contrast to the 10-15% typically seen in most countries. Local governments accounted for 95% of all government procurement under the GPL, according to the Word Trade Organization (WTO)’s 2018 biannual review of China’s trade policies. The GPL applies to most but not all provinces.

In 2006, it became formal policy to use government procurement to boost the creation and commercialization of home-grown ideas and technology, under the Medium- and Long-Term National Plan for Science and Technology Development (2006-20). During a visit to the United States in 2011 — following the release the previous year of draft implementation regulations for the 2002 law — then-President Hu Jintao said that policy would be ended and it became an agenda item of the Strategic and Economic Dialogue between the two countries.

Officially, no conditions regarding indigenous innovation have been attached to government procurement since 2016. However, in practice, the drive for domestic innovation, particularly in technology goods and services continued with strong policy support.

At the time, although China had started its application to join the WTO’s Government Procurement Agreement (GPA) as far back as 2007, it had not signed on. Thus was not in violation of its WTO membership. The GPA enshrines non-discrimination as a bedrock principle for member governments’ procurement.

China revised the GPL’s implementation measures in 2014 to bring the law more, if not wholly in line with the GPA, changes that took effect in March 2015. Further amendments were made in 2017.

However, most notably, the ‘buy domestic’ preference survives. One thing that has remained ambiguous throughout is what counts as domestically produced. Authorities have said that domestic and foreign-invested enterprises in China are treated the same and that there is no discrimination with regards to the degree of foreign affiliation or ownership as long as the goods or services are produced in China. However, none of that is codified, leaving ample scope for administrative interpretation, as a circular earlier this year implicitly acknowledged.

China has still not signed on to the GPA. Sticking points include non-sensitive military procurements, sub-central government entities and SOEs, all of which the United States wants to be included, which would mean they would have to fall under the GPL.

China has indicated that it may make some concessions in these areas. In October, state media said Beijing’s seventh revised offer for joining the GPA included some military procurement for the first time, and added more provinces, SOEs and universities to the institutions covered by the GPL. Those would likely be wrapped up in the some-day-one-day-maybe-never trade agreement being negotiated between the two countries. Meanwhile, China remains, in the WTO jargon,’ in the process of acceding’ while having observer status on the WTO’s government procurement committee as it has had since 2002.

1 Comment

Filed under Economy, Trade

China’s Social Media Propagandists Limber Up For US Elections

WORD ARRIVES FROM our man in Washington about the growing concern there about China’s expanding disinformation campaign targeted at the United States.

Facebook, Twitter and Google’s YouTube have taken down accounts on their social media platforms they say are linked to Chinese state interests and that have been seeking to discredit Hong Kong protestors. Twitter and Google have also said they would no longer sell advertising space to media that are financially and editorially controlled by nation-states. Netizens in China have accused the US social platforms of political censorship.

In Washington, the disinformation campaign over Hong Kong is being perceived as the first significant social media-based disinformation campaign that China has geared toward US audiences. The accounts Twitter disabled are a mix of bot- and human-based ones, with some dating back to 2009, suggesting long-standing preparation. The concern among lawmakers in the United States is that this is a dry run for Beijing’s propagandists for the 2020 US presidential and Congressional elections.

That offers the unpredictable prospect of both China and Russia meddling in a US election, but possibly on different sides, with Moscow supportive of US President Donald Trump and Beijing taking the opposite tack, although Democrats are no longer as dovish on China as they once were.

Both, though, are likely to contribute to the declining US confidence in its democratic institutions, which may be success enough in Moscow and Beijing.

Leave a comment

Filed under China-U.S., Media

US-China Trade Talk Progress Seems Real If Ill-Defined

VICE-PREMIER LIU HE will be back in Washington next week for a further round of trade talks with the United States.

This follows a lightning round in Beijing on Thursday and Friday with US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer. Afterwards, both sides talked up the progress made particularly, it is widely reported, over ‘forced technology transfer’, the requirement for foreign investors to yield intellectual property in return for market access.

There is still no official word on the chapter and verse of this progress, and the use of words such as ‘constructive ‘and ‘candid’ to describe the talks suggest significant sticking points remain, particularly over enforcement mechanisms, as we have noted before in regard to China’s proposed new foreign investment law. So this Bystander will reserve judgment for now.

Regardless, it does seem that Beijing is engaging with the issue to a degree that it has not before. Its old argument that there was nothing to talk about as forced technology transfer did not happen, has been abandoned for the threadbare nonsense that it always was.

The outstanding questions now are to what extent will Washington gloss over some of the unresolved matters and how far it will be prepared to go in making concessions that will let China’s top leadership not lose face domestically.

There will also need to be a close reading of the Chinese- and English-language versions of whatever final text of a deal is agreed for each of the six areas of discussion: forced technology transfer and cyber theft; intellectual property rights; services; currency; agriculture and non-tariff barriers to trade. Many a slip…

1 Comment

Filed under China-U.S., Technology, Trade

US-China Trade Deal: The Devil Is In The Enforcement

BEIJING AND WASHINGTON are both talking up progress by their trade negotiators as they each look to come up with a formula for avoiding the damaging consequences of the imposition of tariffs on US-China trade that will otherwise occur at the end of next week.

News that the Chinese team led by Vice-Premier Liu He will be extending this week’s two-days of talks in Washington can be read either way: that agreement is nearing and just needs a final push; or that it remains elusively far away.

On one superficial level, this Bystander believes, it is the former, but deeper down it remains the latter.

What is likely to be agreed by March 1, the deadline to conclude an agreement set by Presidents Xi Jinping and Donald Trump over dinner at last autumn’s G20 meeting in Buenos Aires, is a framework for further talks with six tracks: currency, cyber theft and forced technology transfers, services, agriculture, intellectual property and non-tariff barriers.

Each track would have binding objectives in terms of structural economic change in China. In addition, there would be an agreement to cut China’s bilateral merchandise trade surplus with a number of immediate big-ticket buys of US goods and produce, notably soybeans, which had been a $12 billion a year sale for US farmers before the tariff tit-for-tat started. Energy and industrial goods will also be on China’s shopping list.

The sections in the agreement for the six tracks would have been called memoranda of understanding in the old diplomatic language. Donald Trump does not like the term, and slapped down the US Trade Representative Robert Lighthizer for using it. Trump is a ‘dealmaker’, not a memorandum of understanding sort of guy; and to be fair to the president, touting that he has secured the ‘greatest memorandum of understanding  — ever’ just does not have the same ring as being able to boast of the making the ‘greatest deal — ever’.

Trump’s intent is to tie the big red bow on a deal at a meeting with Xi sometime after his summit with North Korean leader Kim Jong Un in Hanoi on Wednesday.

The six areas are all ones in which Beijing will be prepared to agree binding objectives. They are aligned with the structural changes it anyway needs to make to rebalance the economy. The sticking points are how far and how fast Beijing is prepared to go at this point, and, crucially, what monitoring and enforcement mechanisms it is prepared to accept.

Each of the six tracks has obstacles of differing degrees of difficulty to overcome. The currency one has already reportedly been settled. It was probably the easiest to tackle, given that China has a managed float for its currency in place and the yuan-dollar rate provides a clear and transparent measure, even if there is plenty of scope for argument over what constitutes a ‘fair-value’ rate.

On the other five, finding the right language that meets the Trump administration’s tough demands for structural change yet gives Beijing the room to soft-peddle has been proving as difficult as would have been expected.

The most progress has been made on intellectual property rights and improved market access; the least, on the role and practices of state-owned enterprises, subsidies, forced technology transfers from US companies operating in China and, thorniest of all, cyber theft of US trade secrets.

That last one goes to the heart of the issues between the two sides. If China is to succeed in ‘catching up’ with the US economy industrially and rebalancing its economy so the next phase of growth is driven by high-value manufacturing and services based on the next generation of industries, then it will need to acquire the technology to do so by fair means or foul and nurture the national champions to develop and exploit it.

Those priorities will not be given up lightly.

For Trump, a big political win on China, one of his core issues in the 2016 presidential election campaign, is essential going into his 2020 re-election bid. With the newly energised Democrats snapping at his heels, he needs headline concessions that sound grand and victorious to his electoral base, especially in the tightly contested states of the (formerly) industrial MidWest.

Xi, too, needs to demonstrate domestically that he has got the measure of Trump and that he is not yielding any sovereignty to Washington over the reform process. Any sign of the latter will be seized upon by his political critics.

So for both men, perceptions at home are critical. That is what an agreement at or around the end of the month will deliver above all.

Negotiating the details of implementation of what is agreed will take far longer. China will drag its feet on that to the extent that it can get away it until if and when US attention switches elsewhere whether under the current president or his eventual successor. Even a two-term Trump would be out of office ahead of the delivery year for Made in China 2025.

For that reason, this Bystander will be reading closely the details of the enforcement and monitoring procedures that are agreed.

1 Comment

Filed under China-U.S., Economy, Trade

No Endgame In Sight As China-US Trade Tension Escalates

THE SLIDE IN commodity prices over the recent day or so portends investor concern about the prospects for and impacts of a US-China trade war that has yet entirely to materialise in currency and equities markets.

Energy markets, in particular, are skittish. Between them, China and the United States account for one-third of world oil demand, which will fall if the spillover from the trade measures taken so far slows global economic growth. Traders are also starting to speculate about the possibility of a seismic realignment of global energy markets should China price US energy out of its market.

Metals markets were also hit, as China is the biggest consumer of most metals, used as raw materials for its exports. Similarly, agricultural commodities, such as soybeans.

The White House announced on Wednesday an additional $200 billion-worth of tariffs to be introduced in September at 10% on for the most part Chinese consumer-goods exports, but also components and semi-manufactures.

Beijing’s reaction was predictably along the lines that Washington’s trade actions would hurt everyone; seventy of the top 100 exporters from China are foreign companies, Zhu Haibin, chief China economist at JPMorgan, told the Financial Times.

The commerce ministry said that it would have no choice but to respond to the latest US move. It also said that it would take the matter to the World Trade Organization, a jibe at US President Donald Trump’s reported wish to remove the United States from the world trade body but not one that veers too far from the generally measured tone taken so far (to the point of sanctimoniousness).

A question for this Bystander is, what is the Trump administration’s real endgame?

It says the tariffs are to get China to end its ‘unfair’ trade practices and open its markets. But the president in his public comments has fixated on the size of the US merchandise trade deficit with China. That would imply a grand trade deal between the two nations that would reduce the headline number of that deficit.

That would give the US president a trade war win that would be straightforward to promote to his electoral base. However, there is no sign at this point of such a deal being in the making.

But it would not solve the other complaint that the United States has against China, over technology transfer, both as a quid pro quo required by China for foreign firms for market access or through straightforward theft of intellectual property.

Washington has a legitimate case on both fronts. It might be able to use its trade war as leverage to get concessions on the first, under the rubric of a deal over market opening.

However, tariffs do little to remedy the second. With technology development so fundamental to China’s economic future, Beijing will hold out to the last over striking any deal that would be effective in curtailing something that it anyway denies doing.

In 2015, President Xi Jinping reached a ‘common understanding’ with Trump’s predecessor President Barack Obama that their governments would hold back on cybertheft of intellectual property for commercial gain.

The formulation was always vague — Xi’s definition of its scope was much narrower than Obama’s — and there was no formal mechanism of verification or enforcement. Both that and its provenance would prevent its embrace by the current US president.

Leave a comment

Filed under China-U.S., Trade

One Trade War, Two Playbooks

WHAT IF CHINA and the United States are playing a different game over trade even as they stare each other down over tit-for-tat tariffs?

US President Donald Trump may well be following his well-tried playbook of creating maximum chaos with hardball threats and maximalist demands and then playing matters by ear as he seeks to negotiate the deal he wants.

Trump indeed hints at working on “a massive deal” with China, but China says there are no such negotiations and Trump’s new chief economic advisor, Larry Kudlow, confirms that, telling Bloomberg TV that he hopes there will such discussions in the next couple of months.

China, on the other hand, may just be waiting by the river, knowing that if it waits long enough, as the Sun Tzu playbook has it, the bodies of its enemies will float by.

If, as this Bystander believes, this is all really about control of the technologies that will determine economic prosperity in the future, then the long game is the one to be playing.

Little need to win the trade battle when the goal is to win the economic war.

Leave a comment

Filed under China-U.S., Trade

Surprise Seizure In South China Sea

THE SEIZING OF a US Navy underwater drone by the PLA-Navy points to the potential for a small incident to take on greater import as Sino-American relations become more uncertain ahead of Donald Trump assuming the US presidency.

The drone was conducting a military oceanographic survey to map underwater channels in what the US claims are open waters some 160 kilometres off the Philippines, but China considers to be its own.

The incident comes hard on the heels of the publication of satellite photographs showing anti-aircraft batteries on seven of China’s artificial islands in the South China Seas and US President-elect Donald Trump’s questioning of Washington’s commitment to the ‘One China’ policy and his taking of a telephone call earlier from Taiwan’s President Tsai Ing-wen.

Having had the unpredictability card played against it, Beijing may be countering in kind.

Leave a comment

Filed under China-U.S.

Droning On

DJI Phantom 2 drone with GoPro camera. Licenced under Creative Commons.

IT IS A sign of the increasing sophistication of the country’s technology that Beijing is imposing controls on exports of some advanced drones and supercomputers. Or at very least a sign that Beijing wants its technology so regarded.

From the middle of this month, export licenses will be required for drones that can fly 1,500 meters high, stay airborne for longer than an hour and handle strong winds. Licences will be granted or withheld on grounds of national security, which will, in the manner of the times, inevitably be judged case by case.

There is also a bit of tit-for-tat at play. The export licensing scheme also covers supercomputer chips and follows US restrictions on computer hardware that can be sold to China. China’s Tianhe-2 is currently the world’s fastest supercomputer though the Obama administration has announced a programme to reclaim that title for the U.S. The Americans have concerns that the Tianhe-2 is being used for nuclear-weapons development

Meanwhile, China has become a leader in drone manufacturing. DJI Technology, the Shenzhen-based company whose drones have been flown (uninvited) into the White House grounds in Washington and onto the roof of the office of the Japanese prime minister in Tokyo, had sales of $500 million in 2014, more than any another maker of unmanned aircraft.

Sales of its best-selling Phantom line of commercial drones (seen above mounted with a GoPro camera) are unlikely to suffer from the new regulations, and so DJI will remain on track to become this year the first drone maker to record $1 billion in sales.

Update: DJI has 70% of the world market for commercial drones and is valued at $10 billion, according to an FT interview with one of its earliest outside investors, Neil Shen, who runs the China arm of the Silicon Valley investment firm, Sequoia Capital.

Leave a comment

Filed under China-Russia, China-U.S., Industry

How Sino-Centric Is The World Wide Web?

As Mark Zuckerberg, the founder of Facebook, wanders around Shanghai, he will no doubt reflect, and not for the first time, on the fact that China accounts for barely 500,000 of his highly successful social network’s 400-plus million users around the world. He might also like to consider this: by 2016 China will have more internet users, at nearly 800 million, than the U.S., the U.K., France, Germany, India and Japan — combined.

That forecast comes from The Connected World, a Boston Consulting Group report published at the time of the annual Davos shindig in January. If more than a quarter of the 3 billion people in the world the report reckons will be online by 2016 are in China, compared to a tenth in the U.S., should we be thinking of China as being at the center of the Internet and the global digital economy rather than the U.S.?

It may be misguided to think of anything as distributed as the Internet as having a center. Yet sheer weight of population is fast swelling the China node, and challenging the notion that China, by its own volition, can be a web world of its own.

The first e-mail sent from China contained the message, “Across the Great Wall, we can reach every corner of the world” — even if the opposite hasn’t proved particularly to be the case. Yet more and more of that world is increasingly inside the Great Wall. With a population of 1.3 billion and an internet penetration rate of 38.3% at the end of last year, there is plenty of scope for grow the ranks of netizens. In raw number of internet users, China passed the U.S. in 2008, though fewer than one in four Chinese was online then compared to almost three out of four Americans. Between 2007 and 2010 China added more Internet users than exist in the U.S. It now has 513 million netizens. The U.S. has 245 million. If China now had America’s current online penetration level (78.3%), it would already have more than 1 billion internet users.

China, like other emerging economies, is also riding a second underlying trend, a world going digitally mobile. It doesn’t have to put a PC on every desk to get its citizens online, just put a smartphone in their hand. Two-third’s of China’s online population accesses the Internet via mobile phone. This year, for the first time, more smartphones will be bought in China than in any other country. China can leapfrog the desktop just as some emerging economies skipped the landline in telephony.

It can also go straight to the social Web. Tencent’s QQ messaging service is what set the company on the road to becoming China’s largest Internet company by market capitalization. Its Weibo (microblogging) service is easing ahead of rival Sina’s (they have more than 500 million users between them). Its Weixin mobile app took barely 400 days to acquire 100 million users. Social networking is a substitute for having no siblings to talk to at home, we are told. Well perhaps. More likely, weak IP protection and weak competition from TV has driven heavy use of the Internet in China for entertainment, particularly online music and videos, and the conversations that follow that. Tencent has adeptly cashed in on that with online games and entertainment. Consumers expect to pay for mobile phone services. They have grown used to them being free on a PC, to the detriment of any business in a country that was an early adopter of desktop computing.

China has also walled off its domestic market to censor and protect domestic industries. There are only two major economies where Facebook isn’t the leader in social networking and Google in search. One is Russia. The other is China, where Renren leads in social, and Baidu in search. Google’s problems in China are too well documented to need rehearsing here, but it is worth noting that Zuckerberg’s 500,000 Facebook users in China constitute a 0.0004% local market share. It has 50% in the U.S.

China’s Internet companies have been in the happy position of being fast followers of the leading global companies, able to learn from them without facing undue competition from them and all the while riding a fast growing economy playing catch-up in Internet use. It seems inevitable that there will be foreign pressure to open up China’s Internet market, just as there has been to open up other sectors of the economy. Domestic Internet companies are starting to position themselves for that eventuality. The recently announced proposed merger of the online video sites Youku and Tudou is sector consolidation to that end.

% of online population whose first language is English or ChineseEach country will fashion the Internet in its own image to a certain extent. Whether the Internet more globally is Anglo- or Sino-centric is determined not only by users but also by usage and content. More than half the content on the Internet is still in English. That is despite the fact that the share of all Internet users who count English as their first language is shrinking (the blue line in the chart to the left). In 2000, it was almost two in five. As of March last year, the latest available figures, it is, at 27%, barely one in four. Over the same period the share of native Chinese speakers (the green line in the chart) has risen to 24%, or almost one in four, from 9% or one in eleven. Native Chinese language speakers are the second largest group online after English speakers. (Japanese, Spanish and German round out the top five languages online, accounting for a dominating 68%).

Where Chinese’s sway falters is that English is the dominant second language and language of business. Even if the official push to promote China’s culture increases the volume of Chinese language cultural and entertainment material online, the international audience for it will be relatively limited. A tonal language like Chinese is ill-suited to the battering it gets when spoken by non-native speakers. English has proved far more robust. It has even spawned a variant, Globish, for just that purpose.

A shift in geographic center towards the emerging economies is not the only change shaping the Internet. Bits and bytes now follow the Brics, as trade once followed the flag, perhaps. Reflecting the shift from nation states to a global economy bestrode by mulitnationals, it is also forming around digital ecosystems that have companies at their center, such as Google, Facebook and Apple in the U.S., Tencent and Baidu in China and Yandex in Russia. They are shaping an Internet economy that cuts across old national boundaries. BCG forecasts the Internet economy will be worth $4.2 trillion in the 20 richest nations by 2016. By that time, IBM has forecast, 1 trillion devices, from phones to fridges and control systems will be connected to it. BCG says the Internet economy will account for 8% of G-20 nations’ GDP, up from 4.1% in 2010. That would be like adding another Italy or Brazil to the G-20 (we are a sucker for such analogies; and, yes, we know GDP figures are probably not adept at capturing Internet economic activity).

Yet China’s Internet giants have a long way to become the corporate hubs of global digital ecosystems. The commercial growth to come domestically may act as a deterrent to them becoming so. In 2010, the search engine market was worth $1.75 billion and is forecast to reach $14.5 billion by 2015. But over the same period, e-commerce is forecast to expand from $75 billion to $315 billion, at which point it would pass the value of e-commerce in the U.S., estimated to grow from $180 billon to $304 billion in 2010-2015.

China’s sheer size makes national bricks and mortar retailing difficult. E-commerce is further boosted by cheap shipping and high rates of urban broadband penetration, already on a par with America’s at 68%. However, as BCG says, broadband infrastructure alone isn’t enough to push a country to the forefront of the Internet economy. Also needed are “a favorable regulatory environment, strong payment systems, consumer protection for e-commerce transactions, and a willingness on the part of governments, business and consumers to go online”.

Forecasts about the Internet in China should always carry a large caveat not only about the commercial environment, but also about the political uncertainties surrounding them. China censors its social networks internally and the wider web externally with its Golden Shield, more familiarly known as Great Firewall. Leaders brought up in the era of state-run broadcasters and newspapers have very different hopes, fears and aspirations for the Internet than the generation that is growing up with it. China’s digital natives have just as much scope to use it to change society and commerce as their equivalents elsewhere. The question is the degree to which they will be constrained from doing so. What is certain is that the rising tides of the global web, like those of the global economy, are shifting in their direction.

Leave a comment

Filed under Media, Politics & Society