China Business – Internet Plus almost everything

Internet Plus – the new engine for sustainable growth – was the hottest word during my recent business trip to China.

Premier Li Keqiang unveiled the internet Plus Action Plan during parliamentary sessions in March.

“The plan aims to integrate modern manufacturing with mobile internet, cloud computing, big data and the internet of Things. It will also encourage the healthy development of e-commerce, industrial networks, online banking and help internet companies increase their international presence,” he said.

Examples of internet Plus include internet Plus Education, internet Plus Healthcare, internet Plus Transportation and internet Plus Entertainment.

Actually, Chinese are adding the Plus to everything you can imagine.

This is a very smart move for the Chinese Government. First, the internet itself is an infrastructure.

If the Chinese government has spent billions on motorways for “catching up”, then spending the money for internet backbones is leading the way worldwide. The internet era has just started.

In China, still, many fee-charging highways are very light, as people prefer the alternate free road. But everyone has to use this digital highway. There is no alternate route.

The Chinese Government is facing the same issue as we are in building this digital highway. The Government can only build the backbone. To use the full potential of fast internet, offices, homes and public places have to be connected to the network. This is a huge job.

China recently opened that market to private sector. It makes sense that Hope King recently launched its production line in Auckland to manufacture optic fibre connection related elements primarily for the Chinese market.

Secondly, this platform is very flat and extremely easy to enter. Everyone can leverage it as long as you have an idea that is appealing to your customers or consumers.

China needs to find a new way of keeping the employment rate at a stable level. Large SOEs can no longer fulfill the purpose. When many lower end, labour intensive factories have been forced to close down, this platform is perfect for the younger generations – they are less concerned about money, willing to work for themselves and very flexible.

This platform is also perfect for innovation, with lower entry costs. Statistics show that in 2014, 13 million new jobs were created in China, many of them in internet related businesses.

Alibaba is a perfect example, serving small and medium enterprises for buying and selling physical goods. A less well known platform for many New Zealanders is the Himalaya online radio station. Within 21 months of its launch, it has over 140 million registered users and thousands of radio stations.

A majority of the hosts are freelance, and some of them have attracted over 20 million followers. Those are impressive numbers.

Again, this probably can only be achieved in China due to its population. I would imagine the big data behind Alibaba and Himalaya have more commercial values, just like eBay, Google and Facebook.

The internet has also created a huge digital market, particularly for mobile games. Tecent, the largest games company in China, had online game revenue of RMB44,756 million in 2014, a 40 per cent increase over the previous year.

Social network revenues increased by 43 per cent to RMB18,554 million. The increase was primarily driven by in-game item sales within mobile platforms. New platforms, new technology and new devices have driven changes in behaviour.

Thirdly, this platform has no boundaries, or at least if you comply with Chinese Government rules and regulations, what you put online and what they put online is visible to everyone no matter where you are on the planet.

This may be less important for New Zealanders as we are so used to an open environment. For Chinese, this is a perfect platform to put their names on the international stage.

Only the internet could make Psy’s Gangnam Style so popular and so famous in such a cheap way and short time. The third industry revolution has built many production lines for mass market.

Chinese call the internet as the fourth industry revolution. Based on data analysis, it will provide service and products that fits individual needs.

New Zealand has to position itself well for this important turning point in the Chinese market.

We need to diversify our engagement with China. More effort needs to go into entering China’s huge, emerging mobile digital market. In this digital world, our goods and services are delivered in seconds, no Free Trade Agreements, no customs clearance.

The recent signing between Kiwa Digital and Beijing Kaku Media Co is a baby step for entering China’s mobile digital education/entertainment market. Kiwa is a specialised company focusing on publishing interactive digital books. Kaku is a media company with its own TV channel, animation company, retail shops, games company and offline children’s programme.

To fully leverage the relationship built with Kaku, we need to work with other New Zealand companies. One of my big take-aways from my recent trip to China was that Chinese companies now want to build strong partnerships instead of competing with each other.

New Zealand is a small country: do we have the luxury to compete with each other in this huge market?

Dr Xiaoying Fu, Director Kiwa Digital Ltd