All of my China impressions are to be taken with a fairly big grain of salt as I only spent 12 days there and was mostly a tourist. I am sure people who have been living there for years and/or have started businesses will be more reliable sources of information. With that caveat out of the way here is one of my most important impressions. China has the opportunity to grow its Internet sector by leapfrogging development stages common in the US and other Western economies. This is particularly obvious in two areas: mobile and e-commerce. Much has been said about the growth of mobile in China already so no need to add to that.
At first I was struck by the tremendously fast growth of some of the e-commerce companies in China. But the second one goes outside the center of the big cities one can discover an interesting reason: there is no highly developed bricks and mortar retail sector. Even in residential areas of large cities there are far fewer stores than we are used to. The US by contrast had a long time period to perfect bricks and mortar retailing and on top of that people living in rural areas here have cars to get themselves to stores. While China is adding cars at a pace that is causing all sorts of problems (more about that in another impressions post) the vast majority of the population is relying on other modes of transport. So e-commerce, accessed from a mobile device, can be native purchasing behavior for many Chinese instead of requiring a behavioral switch.
I have not tried to do this, but it might be a useful exercise to go through Mary Meeker’s latest report which has a wonderful section on “re-imagining” of various activities and see which ones of these might be subject to leapfrogging in China. One company that demonstrates how powerful leapfrogging can be is Xioami, which makes an Android phone and sells it directly via the Internet. Google tried this in the US but the existing behavior pattern of buying a subsidized phone from a carrier was way too strong. Xioami by contrast is apparently selling hundreds of thousands of their phones in a single one-day flash sale!
