Young people expect 'smart' mobile service

New generation is driving the growth in use of phones to access Internet for shopping, travel and education

At the end of last year, China's Internet users stood at just under 700 million - by far the world's most numerous - according to official statistics released on Jan 22.

Of that number, half a billion people use their smartphones for everything from shopping and transaction payments to social networking and entertainment.

In fact, China has become the smartphone center of the universe.

According to Global Media and Entertainment Outlook 2015-2019 by professional services group PricewaterhouseCoopers, China will account for 733 million smartphone connections by 2019, making up 47 percent of the world's mobile connections. And the number of tablet devices in China is expected to surge to 283 million by 2019.

Smartphone Internet usage is now growing almost three times as fast as fixed broadband and is becoming the preferred choice, especially among young people.

Nowhere in the world is more connected to mobile devices than China, where consumer spending using mobiles is expected to top $43 billion by 2018, according to PwC.

"The growth in mobile Internet usage is being driven by the broader demographic - both in age and economic standing," said Marcel Fenez, president of advisory group Fenez Media.

"Many of these are doing so to engage in the growing online retail sector, which grew more than 40 percent in 2015," he says.

When referring to mobile Internet usage in China, Fenez says, one must also take into account the increasing importance of domestic smartphone manufacturers such as Huawei.

"That's yet another area where they are getting the right strategic, organizational and operational alignment around it right."

Several Chinese tech firms, led by Jack Ma's Alibaba, have become multibillion-dollar giants in recent years as the country's online population has boomed.

In January, Nomura issued a report, China's Internet and Media: Bucking the Trend, saying that China's post-1990s generation will be behind continued Internet growth.

"We see this demographic as a powerful driving force for the Internet economy given that it is a generation of dot-commers that can embrace the Internet more deeply than the older generations," Nomura says.

"(China's young generation) has growing representation in the rapidly expanding middle class, where there is generally a greater penchant for consumption and stronger spending power."

Shopping online

While China's macro economy is expected to slow, the company added, the online economy will likely prosper over the next decade, driven by an expanding tech-savvy middle class.

China's online shopping market is forecast to grow at around 33 percent over the next two years, while travel and finance are also seen as significant growth areas, according to Nomura.

In a recent report on China's e-commerce boom, investment bank Credit Suisse said online shopping "continues to grow in China, driven by the relatively affluent younger generation".

"The Chinese youth turns to the Web for convenience's sake and due to the lack of shops in rural areas," the report said.

Dick Wei, regional head of Internet research with financial services firm Credit Suisse, points to the young generation's ease of multitasking on their mobile devices.

"About half of the Chinese born in the 1990s check their cell phone every 15 minutes and handle more of their daily tasks through the apps downloaded onto their phones: Job searching, information about leisure activities, chatting, shopping, gaming, planning holidays and much more."

"They also extensively shop online," Wei adds in a note.

The value of China's mobile Internet market is expected to exceed 3 trillion yuan ($455 billion) this year, in terms of business generated across all sectors, according to the China Centre for Information Industry Development.

"Internet technology services, including mobile Internet commerce, smart homes and mobile offices, will become new growth engines, helping entrepreneurship and innovation," the center says in a statement.

China's online travel agency market alone is expected to grow by more than 27 percent over the next five years with revenue tripling from $54 billion to $171 billion, according to Nomura.

The online finance sector has been a popular area for many Chinese Internet companies, and the focus has largely been on Internet banking, consumption lending and mobile payment.

Internet banking has so far made little progress due to tight regulations but Internet consumption loan services are booming, helping to fuel the core business of many e-commerce companies.

The mobile payment segment recently expanded from two players - Alipay and Tenpay - to three, with the entry of Apple Pay.

Online education is another growth area due to the absence of geographic restrictions, a high degree of standardization, and economies of scale from reuse of content.

Smartphone surfing

As such, the prevalence of online education is likely to increase, with the Chinese consultancy iResearch forecasting an online education revenue growth of 20 percent over the next two years.

Much of the use of smartphones and other mobile devices such as tablets is being led by China's booming youth market.

A report by the China Internet Network Information Center said of China's Web users, 90 percent gain online access through smartphones.

William Long, an independent IT blogger based in Shenzhen in South China, attributed the growth in online users to the recent boom in Internet-enabled devices.

"The lower cost of smartphones, especially some cheap ones with the Android operating system, makes it easier for people to surf online," he told The Wall Street Journal recently.

Expanding smartphone usage and mobile payments have benefited not only e-commerce, but also public services - taxis, for example. About 96.6 million Chinese people, or one in 14, ordered a taxi via the Internet in 2015, with most using smartphones to do so, CNNIC said.

Other public sectors, like online education and medical consulting, reached 110 million and 152 million users respectively.

These sectors are now operating on a larger scale, the CNNIC said, adding that the Internet is "effectively enhancing public services" and "promoting social harmony".

Contact the writers through karlwilson@chinadailyapac.com

(China Daily Africa Weekly 02/05/2016 page29)