“The United States welcomes the rise of a prosperous, peaceful and stable China,” said President Obama yesterday as he traveled to the country for the annual meeting of the Asia-Pacific Economic Cooperation summit. The US president’s trip is intended to smooth over a sometimes-rocky relationship between the world’s biggest economy and the world’s newest economic powerhouse. On Monday, the two countries announced a new visa agreement, which extends student visas to five years and tourist and business visas each to 10 years, in an effort to boost tourism and foster economic cooperation. This could be great news for the global tech industry, especially as developers and device manufacturers in both nations have a great deal to gain from increased openness.
But visa extensions aren’t all that’s on the President’s mind this week. Here are some of the financial and technological trends affecting China and its residents’ activities on mobile:
Twitter, Facebook, YouTube and, most recently, Instagram, are all banned in China, as Chinese censors don’t have control over the content, which the country fears could feed political uprisings. LinkedIn, however, has seen in a 12% jump in stock value in large part due to its increased penetration in China (because “professional content” is viewed as less controversial than most social media), rising from 4 million members in February to a reported 6 million. Blocked in China since 2009, Twitter has announced a new office in a seemingly unlikely city: Hong Kong. Meanwhile, Evernote is proving to be a powerful tool in mainland China to read coverage of Hong Kong’s recent pro-democracy protests, which are censored from traditional news publications.
Obama’s visit (and his gum chewing offense) isn’t the only news coming out of China today. The world’s biggest e-commerce holiday is today in China – called “Singles Day” – is based on the celebration (or lamentation) of celibacy. This 24-hour online sale is similar to “Black Friday” in the US, except much bigger. Last year, Alibaba made $5.8 billion on this day alone. This year, the e-commerce giant boasted $2 billion in revenue during just the first hour of the holiday and as of this morning, Alibaba reported sales surpassing $9 billion, with some 43% generated from mobile. Compare that to the combined $3.7 billion e-commerce sales during Thanksgiving Day, Black Friday and Cyber Monday. Happy Singles Day!
In China, there are 620 million active Internet users, and 527 million of them go online primarily using a smartphone. Alibaba also reported 46% of sales made on mobile devices in its first hour of the Singles Day sale (compared to 21% last year) and Baidu, China’s top search engine company, recently reported more mobile traffic than computer traffic last quarter, further demonstrating mobile’s dominance in the region.
Smartphone vendors in China have been playing musical chairs: in September, China’s own Xiaomi reported that its market share in China had drastically increased since last year, tripling from 5% to 16%. Xiaomi recently surpassed LG and Lenovo to become the third-largest smartphone vendor in the world, without even leaving the Chinese market. Only Apple and Samsung beat Xiaomi worldwide.
Speaking of Apple, the newest iPhone’s average selling price in China is a staggering $995 for a 64GB iPhone 6 or 16GB iPhone 6 Plus. Despite the high prices, a new China Brand Research Center report says Apple is now China’s leading mobile brand in terms of awareness and loyalty, stealing the top spot from Samsung, which still holds the title as the world’s leading smartphone vendor. Meanwhile, initial iPhone 6 pre-orders in China are expected to generate $3 billion in revenue, making Apple even more attractive to Alibaba’s CEO Jack Ma.
On the Economy
China has made recent efforts in opening its doors to international commerce. Next week marks the beginning of China’s game-changing “Shanghai-Hong Kong Stock Connect” program, where foreign retail investors can invest in mainland Chinese equities for the first time. What’s more, China also recently announced its “Silk Road” strategy to open up trade connections with countries in Central Asia and Europe and rival Obama’s Trans-Pacific Partnership.
However, recent whispers of deflated currency have led President Xi Jinping to explain that this risk is “not that scary” due to a projected $1.25 trillion in outbound investment over the next 10 years. Since 2012, smartphone sales in China (the largest and most competitive smartphone market in the world) have quadrupled, but this period of so-called “hypergrowth” is past. According to numbers from multiple sources, including smartphone makers like Lenovo and industry research group IDC, smartphone sales in China have slowed, and are projected to slow to 10% by 2015.
This isn’t great news for smartphone manufacturers, but it’s not a death knell. China represents a huge market with a good deal of clout, but other growing countries in Asia, like India, the Philippines and Indonesia, and in Latin America, like Brazil and Argentina, show great potential for drastically increased smartphone penetration, a fact that has not been lost on manufacturers like Chinese smartphone makers: Lenovo’s recent purchase of Motorola positions the brand favorably in Latin America, while Xiaomi targets Brazil, Mexico and Southeast Asia.
Despite the US and China being the world’s top two economies, the countries remain largely different. While the President Obama puts his weight behind new neutrality, China remains largely censored. As China shines in e-commerce, and mobile commerce in particular, the US lags in mobile purchasing. And when the US pushes forward with global partners, China is just now beginning to open its door to foreign investors. The two countries have different strengths and “special responsibilities to embrace,” Obama said at the 2014 Asia-Pacific Economic Cooperation (APEC) CEO Summit. But “if China and the United States can work together, the world benefits.”