The new digital force from East Asia
25 NOV 2018
When it comes to the digital world, Silicon Valley is defining the present. But the future of the digital world is being created in China.
A new technology leader
What do paper, gunpowder and the compass have in common? All of them were invented in China. And all have had a profound impact on the history of mankind. China has always been an innovative country and has meanwhile largely shed its reputation of being a copycat.
Over the past several years, China has transformed itself into a true innovation leader, particularly in the digital economy. This applies equally to artificial intelligence, blockchain, robotics, and 5G. In an opinion piece for the New York Times, L. Rafael Reif, President of the Massachusetts Institute of Technology, wrote: “China is likely to become the world’s most advanced technological nation and the source of the most cutting-edge technological products in not much more than a decade.”.
One of the most important drivers of China's breathtaking economic growth is digitalization. In an extremely short period of time, local giants have emerged in China that are at eye level with Google, Amazon, Facebook, etc. The Chinese tech giants Alibaba, Baidu, and Tencent are now familiar names to most of us.
The example of the online retailer Alibaba shows that the Chinese digital economy has not only stood up to the West, but has already surpassed it. On this year's Singles Day, a date on which Chinese traders lure customers with special discounts every year, Alibaba booked sales of US$ 1.4 billion - in the first two minutes. After 24 hours, sales reached roughly US$ 30.6 billion. By comparison, in the United States, online Black Friday sales by all retailers totaled “only” US$ 6.2 billion.
Astronomical sums like these would of course not be possible without a huge domestic market. Yet other measurement criteria show that the world’s most populous country is playing a leading role when it comes to digitalization. For instance, in terms of R&D spending, China ranks second in the world in R&D spending and has the highest number of new patent applications after the United States. With US$ 65 billion invested in its venture capital market, China ranks second globally, right behind the United States. China is meanwhile also home to 84 companies valued at more than US$ 1 billion. Three of these so-called unicorns even rank among the top ten in a global comparison. The boom is creating more and more billionaires in China, as a study by UBS and PwC shows. According to this, on average two Chinese people become billionaires every week and most of them are successful entrepreneurs.
This success did not happen by chance. The Chinese government is undertaking enormous efforts to modernize its economy. For instance, the Internet Plus initiative is driving the integration of digital technologies such as cloud computing, Big Data and IoT forward in conventional industries – the key word here is Industry 4.0. With the so-called "Made in China 2025" strategy, the Chinese government is also specifically promoting innovative key industries such as electromobility, robotic technology and biomedicine.
A question of attitude
Crucial to China's new digital pioneering role, however, is not only the support of the state, but also the willingness of Chinese society to embrace technology. 788 million Chinese have mobile Internet service. Most Chinese already regularly use their smartphones to pay at the checkout by smartphone, QR codes to rent public bicycles or apps to order a taxi.
Another key factor in the rapid development of the Chinese digital economy is the huge amount of data available to Chinese tech companies thanks to their massive user and customer base. Especially in the field of artificial intelligence, large amounts of data create a superb basis for the further development of the technology. Despite all the euphoria, I don’t want to deny the fact that in terms of data protection and privacy, China does not meet the standards applicable in Europe. In this area, the country has a great deal of catching up to do.
Investing in the future
Yet my visit to the first-ever China International Import Expo (CIIE) in Shanghai confirmed to me that China is prepared to reach out to the West . In his speech, China’s President Xi Jinping promised to further open the Chinese market and to eliminate trade barriers.
For Merck KGaA, Darmstadt, Germany, China has long been one of our most important growth markets, which is why we have been continuously investing here for many years now. Just recently we announced that we plan to open a new Innovation Hub in Guangzhou in 2019. Further examples of our engagement include the cooperation agreement with Alibaba Health as well as the inauguration of the new technology center for OLED material customers and a further innovation hub in Shanghai. Additionally, in 2019 we plan to open a new Life Science Center close to our new pharmaceutical production facility in Nantong.
Through our engagement, we want to make use of the innovative strength that the vibrant Chinese ecosystem of established companies, start-ups and research institutions has to offer while contributing to the further development of the Chinese economy.
With this in mind, 我们走吧! (Chinese for “Let’s go!”).