3 next steps for China’s mobile revolution

According to recent Chinese government data, consumption was the top contributor to the country’s economic growth in the first half of 2014, ahead of the traditional leading import/exports and investments sectors.

It is an encouraging sign that the new government’s effort to make the economy more consumption-driven is on track, with the brightest spot in information consumption, which topped 1.35 trillion yuan ($218 billion) in the January-June period, up 20% from a year earlier.

Since the State Council of the People’s Republic of China – the country’s main administrative authority – issued the blueprint to promote information consumption in late 2013, China’s digital economy has accelerated its mobile transformation.

The following are three areas that have had and are continuing to have a powerful impact on new growth and productivity gain.

1. Hardware and infrastructure upgrades. Nearly 200 million smartphones were shipped between the first half 2014, accounting for 87% of total mobile phone output, according to China’s Ministry of Industry and Information Technology. Chinese producers have posed a threat to Samsung and Apple as they sell affordable Android handsets with competitive technological features to millions of consumers replacing their basic cellphones with smartphones, both in China and overseas.

Meanwhile the “Broadband China” strategy, accompanying the information consumption blueprint, has significantly improved the country’s information infrastructure. Most notably, China’s 4G users have already reached 14 million, seven months after the issuance of 4G licenses last December to China Mobile, China Telecom and China Unicom. The network advantage in 4G will continue to pay dividends for the years ahead.

2. Consumer shift to mobile internet services. Chinese consumers are growingly accustomed to go online to collect consumer goods information, share such in social networks, and place purchase orders. For first half 2014, the traditional telecom voice service’s growth was relatively flat, but mobile data volume and revenue both jumped around 50%.

As such, mobile apps for online shopping are more popular than ever on smartphones. To add a Chinese characteristic of e-tailing, according to CNNIC data, 13.9% and 10.6% customers, respectively, purchase goods on smartphones while riding public transportation and waiting in lines.

3. Internet ecosystem developments. The mobile economy is becoming more sophisticated as subsectors in mobile gaming, videos streaming and internet movies are making big leaps, with 4G network capable of handling faster data-heavy applications.

Meanwhile, mobile apps have also reached the finance sector. For example, online deposit products are making China’s financial system more efficient, improving the flow of lending to small businesses, and stimulating upgrades at traditional banks. Further, productivity gains and positive spillovers have reached traditional sectors such as taxi, healthcare and real estate.

In the 20 years of the internet in China, 2014 will most likely be the most important inflection point. The mobile economy and information consumption will transform the broad economy with productivity and innovation.

Author: Winston Wenyan Ma is a Managing Director and Head of the North America Office of the China Investment Corporation (CIC). He is a World Economic Forum Young Global Leader.

Image: A man talks on the phone as he surfs the internet on his laptop at a local coffee shop in downtown Shanghai. REUTERS/Carlos Barria