Why China’s ‘Sil­i­con Delta’ will lead dig­i­tal rev­o­lu­tion

Kuwait Times - - TECHNOLOGY - Chief Ex­ec­u­tive, Guang­dong, HSBC By Mont­gomery Ho,

The next gamechang­ing idea in global tech­nol­ogy will likely come from China’s Sil­i­con Delta, a clus­ter of cities in Guang­dong prov­ince where many of the coun­try’s most in­no­va­tive com­pa­nies are based. It’s re­ally just a mat­ter of time. The com­bi­na­tion of en­trepreneuri­al­ism, cre­ativ­ity, mar­ket struc­ture, com­mu­ni­ca­tions in­fra­struc­ture and sheer scale found in main­land China’s tech­nol­ogy sec­tor should soon make the coun­try’s lead­er­ship a re­al­ity. The clues are easy to spot, es­pe­cially in the Pearl River Delta.

Home to some of the world’s largest high-tech com­pa­nies, Shen­zhen and the en­tire Pearl River Delta re­gion has now evolved into a world-lead­ing dig­i­tal and ad­vanced man­u­fac­tur­ing ecosys­tem. The cat­a­lyst for the Sil­i­con Delta’s re­mark­able growth is the rapid up­take of tech­nol­ogy in China. Ac­cord­ing to HSBC’s re­cent Trust in Tech­nol­ogy sur­vey, 100 per­centof re­spon­dents in main­land China own a smart­phone, 82 per­cent of them have used fi­nance pro­grams over so­cial me­dia and 43 per­cent own a smart speaker de­vice.

It’s not sur­pris­ing that, in April, Shen­zhen-based in­ter­net firm Tencent be­came the world’s tenth largest listed com­pany, fol­lowed by e-com­merce gi­ant Alibaba in eleventh place. In the west­ern world, smart­phone users have dif­fer­ent apps - What­sapp, Ama­zon, Face­book, Uber and AirBnb - to cater dif­fer­ent needs. In China,Baidu, Alibaba and Tencent - col­lo­qui­ally re­ferred to as BAT have built univer­sal ex­pe­ri­ences on a sin­gle plat­form. There’s no jump­ing from one app to an­other - al­most ev­ery­thing you need is built in.

When Tencent’s WeChat launched six years ago, it was a mere chat app. Now, WeChat of­fers so­cial me­dia, pay­ments, dat­ing, news and mes­sag­ing, among other op­tions, to more than 900 mil­lion ac­tive users. Think Snapchat, What­sapp, Skype, In­sta­gram, Paypal, Face­book Live, Yelp, Tin­der and Ap­ple Pay all rolled into one. By con­trast, WeChat’s west­ern coun­ter­parts give their users rel­a­tively lim­ited ex­pe­ri­ences on a sin­gle plat­form.

But don’t make the mis­take of as­sum­ing that WeChat has pro­duced a con­ve­nient col­lec­tion of ser­vices that are mere fac­sim­i­les of those of­fered by its ri­vals. Far from it. From their hum­ble be­gin­nings a mere ten years ago, China’s in­ter­net com­pa­nies have be­come lead­ers in cre­ative think­ing in the global tech­nol­ogy sec­tor. Us­ing three ba­sic apps, you can get al­most any­thing, do al­most any­thing and meet al­most any­one. WeChat can even give you a real-time heat map show­ing how crowded a shop­ping mall is be­fore you go there.

Shen­zhen: Nexus of ven­ture cap­i­tal­ists

China’s in­creas­ingly ur­ban­ized young peo­ple con­tinue to be highly re­cep­tive to dig­i­tal tech­nol­ogy and in­no­va­tion. Ac­cord­ing to our sur­vey, 90 per­cent of the re­spon­dents in China be­lieve tech­nol­ogy makes their life eas­ier and 89 per­cent agree that ad­vances in tech­nol­ogy will make the world a bet­ter place. In­deed, Chi­nese con­sumers are ex­cited by the po­ten­tial that new tech­nolo­gies rep­re­sent. The sur­vey shows that 79 per­cent pre­fer to do most things us­ing new tech­nol­ogy when they can - in fact peo­ple in China (40 per­cent) are the most en­thu­si­as­tic adopters of fin­ger­print tech­nol­ogy with In­dia (31 per­cent) sec­ond.

At the other end of the scale, just 9 per­cent of peo­ple in France and Ger­many and 14 per­cent Cana­di­ans have used fin­ger­print tech­nol­ogy to iden­tify them­selves. The ‘BAT’ and other Chi­nese tech­nol­ogy com­pa­nies are in­vest­ing heav­ily in in­no­va­tion. They are at the fore­front of re­search into ar­ti­fi­cial in­tel­li­gence, a tech­nol­ogy pre­dicted to some­day have as much im­pact on our lives as the in­ven­tion of elec­tric­ity by pow­er­ing prod­ucts from med­i­cal de­vices to self-driv­ing cars and to pay­ment ser­vices.

China has also cre­ated the phys­i­cal in­fra­struc­ture needed to trans­mit the mass of data gen­er­ated by its in­ter­net gi­ants, which far out­strips those of some de­vel­oped economies.

Vil­lages in the most ru­ral prov­inces en­joy 4G con­nec­tiv­ity and faster in­ter­net speeds than many Euro­pean cap­i­tals. This has greatly en­hanced the ex­pe­ri­ence of on­line shop­pers, whose pur­chases are brought to their doorsteps by ef­fi­cient de­liv­ery com­pa­nies along a mod­ern net­work of high­ways.

Per­haps most im­por­tantly, the sheer size of China, with its 1.38 bil­lion con­sumers, means that in­ter­net and tech­nol­ogy com­pa­nies can scale up rapidly. For promis­ing start-ups, cap­tur­ing a frac­tion of users in this vast mar­ket­place at­tracts ven­ture cap­i­tal funds on the ba­sis of their po­ten­tial alone.

This is ex­actly what is hap­pen­ing in the Pearl River Delta. In­spired by Sil­i­con Val­ley, Shen­zhen has be­come a nexus of ven­ture cap­i­tal­ists, ac­cel­er­a­tors and tech gi­ant alumni, ready to build the next suc­cess­ful startup.

All these fac­tors have cre­ated a “per­fect storm” of in­no­va­tion that is up­end­ing com­monly held per­cep­tions. As Chi­nese in­ter­net com­pa­nies ex­pand glob­ally, whether through ac­qui­si­tions (such as Chi­nese travel gi­ant Ctrip buy­ing Skyscan­ner) or or­gan­i­cally (Alibaba’s Ali­pay build­ing a global net­work of mer­chants), it ap­pears that the next gen­er­a­tion of global in­ter­net be­he­moths will be Made in China. So, if Sil­i­con Val­ley ex­ec­u­tives ever find them­selves short on ideas, they can al­ways pay a visit to China’s Sil­i­con Delta - and I am sure many more will in the years ahead.

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