McKinsey sees big digital share of industry revenue
Digital forces may evolve and create value equivalent to 10 to 45 percent of overall industry revenue by 2030 in China, according to a recent McKinsey & Company report.
The country is already a major player in digital technologies at home as well as abroad, the report noted.
China’s great potential for digitalization may be attributed to three major factors: one, a large and young Chinese market that enables rapid commercialization of digital business models; two, a rich digital ecosystem; and three, relaxed space for digital companies to experiment and invest, consume digital technologies, according to the report.
China now accounts for 40 percent of the value of worldwide e-commerce transactions (versus 1 percent a decade ago), which is now larger than that in France, Germany, Japan, the United Kingdom and the United States combined.
About 68 percent of the consumers in China used mobile payments in 2016 to part with a combined $790 billion, 11 times that of the US e-commerce sales.
One in three of the world’s 262 unicorns (privately held startups valued at more than $1 billion) is Chinese, commanding 43 percent of the global value of these companies.
China is also among the world’s top three destinations for venture capital investment in virtual reality, autonomous vehicles, 3-D printing, robotics, drones, artificial intelligence.
“Conventional measures of digitalization in China suggest that the nation is only in the middle of the pack but when you take into account China’s powerful industry dynamics and the vibrancy of its consumer markets, its potential is far larger than most observers realize,” said Jonathan Woetzel, a McKin- sey & Company senior partner and a director of the McKinsey Global Institute.
In terms of digitalization in specific industries, consumerfocused industries, including retail and entertainment, are ahead of other sectors such as hospitality and construction.
Omni channel, data-driven business models are helping consumer-focused industries to meet evolving demands. Sharing economy and dematerialization, such as 3-D printed goods, will help serve niche demands.
In some sectors, Chinese enterprises lag behind their counterparts in advanced economies on digitalization, but the gap is closing rapidly.
In terms of capital-intensive industries such as oil and gas, and localized and fragmented sectors such as agriand culture and personal services, spending on digitalization and digital employment may further catch up in China, the report said.
Application of digitalized technologies may grow fast in China’s manufacturing sectors, said a research note from Haitong Securities.
“Internet of things (IoT), digitalized controlling and visualization of manufacturing process will be one of the next growth drivers for digitalization in the country,” the Haitong report said.
Use of robotics in industries will also grow fast in China. According to data of the International Federation of Robotics, density of robots, or number of robotics among 10,000 workers, was 49 in 2015. The number is expected to grow to 150 in 2020.