ChinaTech #9 Ultimately, it is about the people
This new segment by Shobhankita Reddy is your go-to newsletter for updates and perspectives on China’s tech ecosystem.
Since starting this newsletter sub-section, I have asked myself the same question multiple times: What makes China's science and technology ecosystem tick? What explains China's rise as a technology superpower?
This edition explores a fascinating facet of what might constitute an answer.
An HBR article posits that the answer may lie in China's large and savvy consumer base.
It's that aspect of China's innovation ecosystem—its hundreds of millions of hyper-adoptive and hyper-adaptive consumers—that makes China so globally competitive today. In the end, innovations must be judged by people's willingness to use them. And on that front China has no peer.
As of 2024, China had a billion users on its payment platforms, compared to 350 million such users in India, even though both countries have similar population sizes.
The article delves into the rich online brand experience that Chinese consumers have come to expect from their tech platforms -
In Chinese grocery and convenience stores, it is now commonplace to see rows of QR codes below meat and produce. Scanning a QR code with a smartphone will reveal the product's entire story, from, say, where a cut of salmon was sourced to how far it was shipped. Similarly, scanning a tech product in a store can bring up the brand video and user ratings.
Almost all multinationals in China offer the above or similar digital-first strategies. Back in 2019, as a final-year engineering student, I was surprised to see the applications of artificial intelligence in retail commerce emerging from China.
Imagine walking down a street and seeing a hoarding of a fashion model wearing a dress that catches your fancy. You could pull out your phone, snap a photo of this hoarding and be guided to URLs on online marketplaces of dresses with similar materials, textures, prints, colours, designs and cuts. All you had to do was add one of these recommendations to the cart, pay online and voila! This was six years ago.
Several business models in social commerce are unique to China, and although they have been attempted in the West and other geographies (including India), they haven't gained much traction.
Examples include group buying, which allows consumers to form groups and order products together; the larger the group and the larger the order value, the higher the discounts; live streaming, where influencers promote products that get sold in real-time; and several super apps that combine e-commerce, social media, digital payments, and lifestyle services in one platform.
Sure, the Chinese state has contributed to conditioning its citizens to expect less data privacy, unlike the American and European governments. But there is more to the story.
.. the Lived Change Index, which uses lifetime per capita GDP to track how much economic change people have lived through. As the exhibit "The Lived Change Index" illustrates, to have lived in China since 1990, broadly speaking, is to have lived in a country that is moving faster and changing more quickly than any other place on earth.
The author posits that, yes, the changes in the country's physical landscape are dramatic, but what tends to get neglected is what some of this means for the mental landscape of the Chinese people.
Since 1990, Americans have seen US per capita GDP grow by roughly 2.7 times, which sounds impressive until you realize that somebody born in China in 1990 has seen per capita GDP grow by 32 times—a whole order of magnitude greater. In 1990 China's GDP represented less than 2% of the global total. By 2019, its share had jumped to nearly 19%.
Consider some of the specifics. In just three years, from 2011 to 2013, China poured more concrete than the United States had poured in the entire 20th century. In 1990 China's rural population had one refrigerator per 100 households; today that number is 96 per 100. (Food preservation is a common benchmark for development.) In 1990 China had only 5.5 million cars on the road; today it has 270 million, of which 3.4 million are electric, representing 47% of the global electric fleet. In 1990 three-quarters of the country's population was rural; today nearly two-thirds is urban, an increase of more than half a billion people.
Imagine living in a world like this and what it would mean for the good life you have and have come to expect vis-a-vis what the previous generations did.
Add to this the international linkages and global exposure that China benefitted from. Since the Chinese economic reforms of the 1980s, the number of Chinese students abroad and foreign researchers in China has increased rapidly. Over the decades, many Chinese-Americans chose to move back to their home country, contributing to China's high-tech capabilities in what may be called "brain circulation." Many of these were also lured back to China with plush salaries and incentives.
Today, there is increasing evidence of more "push" reasons from the US (owing to geopolitical tensions and the increased distrust of Chinese citizens) vs "pull" factors from China that lead these Chinese citizens to choose to move back. It seems that it is very early-career researchers or those more senior level and closer to their retirement that move back, owing perhaps to mid-career professionals' children's schooling considerations stopping them from making the move.
Ultimately, it comes down to human capital. A more tech-savvy and exposed citizenry may help explain China's technological innovations—both domestic citizens (accustomed to great products and demanding a rich online experience) and international Chinese (such as Western-trained scientists and researchers).