TMCnet News
Internet is the new driver of China's economy [China Daily: Europe Weekly](China Daily: Europe Weekly Via Acquire Media NewsEdge) The rapid development of the mobile online sector will underpin solid annual growth With China this year set to overtake the United States in terms of overall economic size (in price-adjusted purchasing power terms), Chinese economic growth data have become one of the global market's big movers. From Hong Kong to New York and London, market economists are all expected to have instant, up-to-date opinions on where the Chinese economy is going. But changes in economic management introduced by the new leadership in China have made forecasting China's growth rate more difficult. Quality of growth has become a priority, and market processes are being introduced into the heart of the Chinese economy. These structural changes will introduce more dynamism and resilience into the economy, but are making the old ways of measuring Chinese growth less accurate and meaningful. In the face of a steady slowing growth trend, many of the economists in London and New York have projected a continuation of the slowdown, to 5 percent or 6 percent, or even less. But anyone who travels around the country can see that the Chinese economy is still growing and evolving at a fast rate, and that changes that used to be seen only in the major cities are now evident in thousands of smaller cities and towns. In fact, the latest set of published economic numbers show that the Chinese economy has stabilized. The official annualized Chinese economic growth number of 7.5 percent for the April-June period, published on July 16 in Beijing, was a stronger outcome than many economic forecasters were predicting a few months ago. Clearly China's economy is not getting weaker, as many had thought it would. Certainly, as many argue, the government has applied a modest economic stimulus by keeping monetary policy reasonably loose and by supporting key areas of need like small business and housing for the less well-off. But there is another key driver that is largely ignored by commentators. E-commerce is playing an increasingly important role in driving China's consumption and economic growth. A recent report (from mobile Internet analysis company Umeng) indicated that the number of smartphones in China rose to 780 million in the first three months of 2014, and that over half of these were being used in tier-three cities. E-commerce sites, led by Alibaba's Tmall and Taobao and recently listed JD.com, are showing huge increases in activity because Chinese consumers with bank cards who wanted to buy consumer goods, but were not able to because the nearest shopping mall was far away, can now do so without leaving their homes. The Chinese Internet has started to generate smartphone applications, or "apps", which connect the huge latent demand of Chinese consumers to all kinds of e-commerce activities: shopping, entertainment, education, tourism and job search. In the 1980s and 1990s, the appearance of the personal computer surprised economists by changing the United States economy and producing a surge in productivity that underpinned strong growth. Today in China, something similar is taking place: A Chinese army of young Internet entrepreneurs, led by famous pioneers like Pony Ma of Tencent and Jack Ma of Alibaba, are capturing the Internet's power to enable many millions of Chinese to access and share information, to enjoy entertainment and to consume. As China's suppressed consumer spending power meets the new attractive, convenient smartphone apps that are linked securely to Chinese bank cards, Chinese private consumption is responding. China still has some way to go to meet the proportions of GDP occupied by consumption in developed economies, of around 70 percent. There is plenty of room for China's household spending to continue growing at a faster rate than the economy as a whole. The Chinese economy started to rebalance only in the part two years, as the service sector started to catch up with foreign trade and fixed asset investment as the main economic driver. The online world, led by the three Chinese corporate champions known as "BAT" Baidu, Alibaba and Tencent is playing an important role in that rebalancing. The Chinese mobile Internet commerce market is projected to total 1 trillion yuan ($160 billion) in three years, and this is almost certainly an underestimate. Against a background of retrenchment and restructuring in China's state sector, cooling down in the real estate market and small increases in exports, the fast development of China's mobile Internet industry will underpin solid Chinese annual economic growth. It is creating a huge industry in which China is already a leader, in which young Chinese professionals can display their talent and imagination to the rest of the world. Alibaba's forthcoming initial public offering of equity on the New York Stock Exchange may be the largest ever recorded. Most global economists don't yet understand this exciting trend yet, and consequently many underestimate China's growth potential. But they will soon, as China's growth continues to surprise them. The author is a visiting professor at Guanghua School of Management, Peking University. The views do not necessarily reflect those of China Daily. (China Daily European Weekly 07/25/2014 page9) (c) 2014 China Daily Information Company. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info). |