11 Apr Where is China’s creation economy going and what’s fuelling it?
Over the past decade, the energy and intelligence powering China’s economy have given rise to a new breed of rockstar geek, revered and rewarded for their innovation.
Key factors driving China’s creation economy include new wealth and China’s love affair with mobile technology. Today China has thousands of nimble upstarts in an ecosystem with eye-watering evaluations and access to capital that rivals Silicon Valley.
More than 40% of The Honey Partnership’s revenues are from China and we see a pace of unrivaled technological evolution unmatched in Europe or the USA. Point your GPS at Shenzhen, because that’s the innovation hub working on an algorithm to eat your lunch.
Why has this happened so fast? One aspect dates back to China’s one-child policy – it drove the adoption of social media. Lonely children could connect with other lonely children thousands of miles away – hence why Tencent’s QQ hit 100 million users in two years – 20 years ago.
Several years later, Tencent launched WeChat, which hit 100 million users in one year and now boasts one billion users. Compare that to Facebook, which took four years to reach 100 million users.
WeChat is the gold standard for social networks, although it is more than a platform, it is a bundle of everyday needs in one super app that includes payments, booking engines for every conceivable need – and you can chat to friends. 84% of Chinese people can leave the home without a credit card – taking only their mobile phone. WeChat makes Facebook look like Friends Reunited.
Railway infrastructure investment also drove mobile technological innovation. Just like railways in the west brought cities together, high-speed rail encourages mobility. In order to stay connected, mobile became important to Chinese travelers, so much so that mobile now exceeds landline usage, and 5G will arrive in China quicker than anywhere else in the world.
Another is China’s overwhelming, often Government-backed, resources and motivation spurred by a new generation of entrepreneurs. President Xi gave a directive: “Start-ups by most, innovation by all”, backed by tax breaks, co-working spaces, and a whopping start-up fund. In return China’s innovators don’t demand a 10x return, they expect IP.
Aside from direct investment from state-run Chinese VC firms, the PRC is hoovering up patents and will spend $200 million in the next three years on AI. Research centres within the U.S. will see collaboration between Stanford, Baidu, and Tencent, plus partnerships with Alphabet, MSFT and Tesla.
China operates on a different paradigm. You have to remove your western lens to fully understand its contribution to modern society: from the AI revolution, smart tech and open source cloud computing, to shared bikes, high-speed rail, e-commerce and mobile payments. Nowhere else on earth does this at such pace and scale.
Since China opened its doors to the world in 1980, Shenzhen has been the most visible symbol of the country’s astonishing economic growth. Shenzhen is Hong Kong’s younger but bigger brother just across the border in Guangdong province. Less than 40 years old, it’s a booming metropolis that exploded from 60,000 in 1980 to more than 11 million today.
Shenzhen is the world’s maker hub, a place where people go to create things, usually electronic. Its Huaqiangbei market is famous as the place where you can buy anything and everything in quantities from one to one million.
Among many household names such as TP-Link, Huawei and OnePlus, Shenzhen is also home to mobile internet companies such as Xiaomi. Xiaomi is also in millions of homes as well as pockets thanks to a strong ecosystem powered by the fan economy and crowd wisdom.
Crowd wisdom is open source product development that accelerates research and development. Xiaomi asks users to suggest new features and then lets them vote each week on which to incorporate into the operating system. Every Friday at 5 pm Beijing time, Xiaomi issues an update to the company’s Mi phone user interface (called MIUI). The Android-based operating system that runs on Xiaomi smartphones now has 300 million activated users.
This impressive momentum and infrastructure mean that Shenzhen – and all of China – will play a critical role in how the technology that we use around the world develops.
2018 marks the beginning of the end of traditional smartphones. During the next decade, we will start to transition to the next era of computing and connected devices, which we will wear and will command using our voices, gesture, and touch.
The transition from smartphones to smart wearables and invisible interfaces – earbuds with biometric sensors and speakers; motion-sensitive rings and bracelets; information display smart smart glasses – will change how we experience the physical world. This doesn’t necessarily signal a post-screen existence, but Shenzhen will almost certainly create foldable and scrollable screens for portable, long-form reading and writing.
The Chinese government is investing hundreds of billions of dollars into artificial intelligence, green technologies, renewable energy sources and space exploration. Given the industrial policies already in play and how China has quietly and strategically acquired IP via joint ventures and minority investment structures, it has a tactical business advantage over other nations. The country’s amazing capacity for both developing and adopting new ideas and technology means that its economy is already racing towards the future with an unparalleled force, scale and velocity.