With the inaugural MEF Connects China just over a week away, Rimma Perelmuter, CEO at MEF, takes a look at the staggering growth of the country’s unique mobile industry.

As a mobile market, China has grown rapidly to establish itself as a global mobile industry leader with a sophisticated mobile ecosystem. There are good reasons for its meteoric rise; a huge domestic addressable market, the widespread availability and adoption of smartphones and highly evolved mobile apps and services.

China, perhaps more than any other country, continues to demonstrate how the balance between these elements lays the groundwork for a sustainable mobile future.

By the end of 2015, China had matched its 1.357 billion people with 1.3 billion mobile subscriptions, making it the world’s most populous country with the highest saturation of mobile subscribers. Nearly everyone in China owns a mobile device, with 30 per cent being 4G users (according to the latest data from the Ministry of Industry and Information Technology).

In tandem, China’s reform post Tiananmen Square has opened the country up to global markets, which have had far reaching socio-economic effects. Not least a growing and increasingly affluent middle class and a significant spike in the millennial cohort that is growing up with mobile as the primary way to transact, communicate and get online.

Putting that into perspective, Pew Research indicates that Chinese Millennials account for 385 million or 28 per cent of the population. By comparison the US has 75 million Millennials and India, which is comparable in terms of population, has 700 million.

  Facebook’s recent announcement around introducing bots to its Messenger platform is a similar acknowledgement — albeit a few years later — that chat apps are rapidly becoming both app and browser for essential mobile services. 

Millennials are characteristically comfortable with embracing new technology trends and expect the brands and services they interact to achieve a high bar of mobile usability. Yet unlike Millennials in other countries, the Chinese post nineties generation has its own unique characteristics and contradictions. On one hand individuals want to live in the moment and pursue their passions and on the other, there is a legacy of a more closed and regimented society – albeit one that is changing. As a result Millennials align more closely with brands and services that resolve this cultural dichotomy.

Mobile clearly has an important role to play in this dynamic and for brands, getting it right by fostering relationships with Millennials on these terms today is a strategy for long-term loyalty.

China is also the world’s largest smartphone market. Users of smartphones in China now make up two-thirds of the country’s mobile connections at 913 million or 68 per cent of the 1.3 billion domestic mobile connections (Europe averages at 55 per cent).

Whilst Apple and Samsung have a significant smartphone market share accounting for a sizeable combined 22 per cent of smartphone shipments, home-grown Chinese manufacturers are holding their own domestically. And with a near saturation of handsets in China itself, it’s unsurprising that Chinese manufacturers are challenging for a slice of global revenues with firms like Xiaomi, Huawei, Oppo and Gionee pursuing sales opportunities, particularly in emerging markets.

Last year, Xiaomi for example launched its mid-range smartphones in India and Brazil and recently announced leading a $25 million investment into Bollywood digital entertainment leader Hungama. The migration from feature phone to smartphone in emerging markets is well underway, Perhaps that is why Chinese brands accounted for over 40 per cent of the 1.29 billion global smartphone shipments last year with seven of the top ten global manufacturers coming from China.

In terms of its app economy, China is also expected to become the world’s largest app market by revenue in 2016. App metrics firm App Annie pegs the global value of app downloads (across all app stores) at $51 billion and for the first time, China will surpass the US in terms of its share of that figure.

The vast majority of the revenue that is generated in China is of course from home-grown app companies, social networks like Weibo or other Chinese online businesses like Tencent, in particular in the retail sector. And their success in part is due to China’s massive user base and an implicit knowledge of the mobile consumer.

At the same time, with widespread adoption of smartphones, mobile services are soaring. Mobile payments and mobile money in particular have captured the collective Chinese consumer imagination, catapulting the country onto a world stage.

Thanks to Alibaba’s Alipay and MEF member Tencent/WeChat, consumers are already habituated to making payments by phone both online and in store. Alipay and WeChat together accounted for almost 90 per cent of all third-party domestic mobile payments last year with overall mobile payment services reaching 4.5 billion transactions valued at US$2.83 trillion.

In other words, mobile payment is an established part of the mobile ecosystem in China making it a very challenging sector for new entrants like Apple and Samsung to penetrate.

In the case of WeChat it’s also interesting that the firm has long since been successfully acting as a proxy for the Internet itself. Since chat apps are rapidly surpassing time spent in social networks, the firm has been quick to understand how its users congregate within its chat service (on average 40 minutes spent in WeChat per-user per-day) and now offers it as a platform for communications, entertainment – and payments.

Facebook’s recent announcement around introducing bots to its Messenger platform is a similar acknowledgement — albeit a few years later — that chat apps are rapidly becoming both app and browser for essential mobile services.

As with China’s smartphones, there is a growing appeal for its mobile services in global markets. Outside of China, WeChat has over 100 million users and Alibaba’s Alipay recently announced that it is launching in Europe to allow the growing number of Chinese tourists to pay for things abroad. Moreover, the app recognizes where the user is in Europe and sends notifications about where to eat, shopping offers and places to see.

The growth of Alibaba and WeChat perfectly demonstrates how innovation is baked in to the ‘Chinese way of doing things’ with both firms comfortable with experimentation to drive new services and market expansion.

Taken together, the huge addressable domestic market, smartphone penetration and the availability and success of mobile apps and services in China provide a perfect storm for a dynamic and healthy mobile ecosystem. We are already starting to see how these factors are helping home-grown firms to innovate, take position in global markets and advance new mobile business models.

Rimma Perelmuter

CEO

MEF

  

On the face of it, China offers tremendous potential for companies looking to expand their business in Asia and gain access to the world’s largest market. But doing business in China is complex. To meet this need and nurture new partnerships, MEF is holding its inaugural MEF Connects China in Beijing on the 27^th of April.

Co-located with GMIC Beijing 2016, the event will bring together some of China’s biggest tech companies and MEF members to discuss the opportunity of China. Alongside networking and a panel debate on doing business in China, Wei Jiang, Chief Marketing Officer of Google, Greater China will keynote on – ‘The lure of the China Kingdom: Why foreign Internet and tech companies succeed/fail in China.’