HONG KONG, 31 August 2021 – The South China Morning Post released its new annual China Internet Report 2021 today, offering an extensive study on Beijing’s crucial role in shaping the country’s technology ecosystem and unveiling new trends and insights impacting China’s fast-growing internet industry.
The fourth edition of the China Internet Report examines timely and highly-debated trends in China’s tech industry, analysing risks, challenges and new opportunities as businesses adapt to shifting market dynamics, while revealing emerging new customer segments and demographic shifts. Some of the year’s most significant insights include:
- Tightening Regulations on Multiple Fronts: Sweeping regulatory crackdowns since the second half of 2020 have focused on four main areas — antitrust, fintech, data protection, and cryptocurrencies.
- Bumpy Road Ahead for Chinese Tech IPOs: Chinese tech companies weigh the risk of removal and strict regulations by listing overseas for the economic opportunity or join the growing number of companies going public domestically.
- Changing Overseas Expansion Plans amid Geopolitical Tensions: Companies are increasingly forced to switch their focus to Southeast Asia or downplay their Chinese origins to look outside their established markets, because of growing tensions between China and other countries.
- Shifting Demographics Highlighting Underserved Internet User Segments: The evolving demographic of internet users has created the rise of new niche customer segments. The ‘silver economy’, ‘sheconomy’ and under-penetrated sinking markets in third-tier cities and rural areas are heated battlegrounds for businesses competing for growth.
- Growing Focus on Private-domain Traffic: eCommerce brands opt to create private-domain traffic and build direct communication channels with customers because of rising customer acquisition costs.
“Given the sheer size of China’s internet sector and its intertwined relationship with the global financial system, evolving regulations and market fundamentals will have significant implications for the entire world,” said Gary Liu, CEO of the South China Morning Post. “This year’s edition provides essential reading on the new phase of change in this digital ecosystem and a curated look behind those trends.”
“Technology transforms how every industry operates in China,” said Edith Yeung, General Partner with Race Capital and co-creator of the China Internet Report. “With over 1,800 companies raising over $41.1 billion in 2020, China is a leading market for technological development and investment, so it’s essential for investors, CEOs and operators to learn and gain insights on the Chinese market to stay ahead of the innovation curve.”
Race Capital is a supporting partner of the China Internet Report 2021.
Download the free China Internet Report 2021 at http://sc.mp/cir-2021. A more comprehensive China Internet Report 2021 Pro Edition is also available for purchase here, which includes additional, exclusive deep-dives into ten key sectors of the tech market with in-depth case studies and expert commentaries that provide unprecedented insights from technology insiders and industry leaders.
China Internet Report 2021 – Executive Summary
The China Internet Report 2021 provides an annual update on the industry and is a must-read for global businesses and investors, finance professionals, policy-makers, marketing, technologists, academics.
Following a period of rapid growth and innovation, the China internet sector enters a new phase of development with both push and pull factors driving internet companies to evolve. Tightening regulation, increasingly saturated domestic markets with changing demographics, and geopolitical tensions are influencing companies to look outside their established markets, pivot business models, focus on new customer segments, and adapt to shifting dynamics to remain competitive and capture funding opportunities.
China is the world’s biggest digital market with 989 million internet users that is larger than the populations of the U.S.A, Russia, Mexico, Germany, UK, France, and Canada combined. It remains on a growth trend with 85 million new internet users in the past year alone.
Here are the top five trends from this year’s China Internet Report:
Tightening Regulations on Multiple Fronts
China’s tech industry has been hit by sweeping regulatory crackdowns since the second half of 2020, driven by Beijing’s desire to better align the country’s technology development with national strategic goals and public interests. The tightening has focused on four areas — antitrust, fintech, cybersecurity and data privacy, as well as cryptocurrencies.
Bumpy Road Ahead for Chinese Tech IPOs
Chinese tech companies are facing increasingly difficult decisions on where to go public. Geopolitical tensions and relaxed listing rules in Hong Kong are leading to more listed companies seeking secondary listings closer to home. For start-ups, China’s tightening screws on overseas listings and regulatory oversight in the mainland are adding further complications.
Changing Overseas Expansion Plans amid Geopolitical Tensions
Chinese tech companies are changing their global expansion strategies to cope with intensifying geopolitical tensions. Some find success by switching focus back to Southeast Asia while a new generation downplays their Chinese origins.
Shifting Demographics Highlighting Underserved Internet User Segments
China’s demographics are quickly changing, creating new niche segments to compete over. The silver economy, the sheconomy, and “sinking” markets are three of the most heated battlefronts.
Growing Focus on Private-domain Traffic
E-commerce brands have relied on paid ads offered by platforms to acquire and re-target customers. Slowing growth has pushed up the cost of customer acquisition. Brands are now paying more attention to private-domain traffic as they look to build direct communication channels with customers and engage them directly to drive repeat repurchases.
ABOUT SOUTH CHINA MORNING POST
The South China Morning Post is a leading global news company that has reported on China and Asia for more than a century. Founded in 1903, SCMP is headquartered in Hong Kong, where it is the city’s newspaper of record, with a growing correspondent staff across Asia and the United States. SCMP’s vision is to “Elevate Thought” and our mission is to “Lead the global conversation about China”. It is the recipient of hundreds of awards for its journalistic excellence, from such prestigious organisations as the World Association of News Publishers and the Online News Association. A digital-first media organisation, SCMP is also home to Goldthread, a content platform with a focus on food, travel and culture in China, and publishes a portfolio of premium lifestyle and fashion titles in Hong Kong including Cosmopolitan, ELLE, Esquire and Harper’s BAZAAR. In 2020, SCMP became the first news organisation in Asia to join the Trust Project, a consortium of top news companies developing global transparency standards for credible journalism.
ABOUT RACE CAPITAL
Race Capital in an early stage venture capital fund focuses on investing in exceptional founders who are building market-transforming companies in the data, enterprise, infrastructure, and fintech sectors. Our previous investments include FTX, Goodnotes, Opaque Systems, Social Chat, Polysign, Slack (NYSE: WORK), Agora.io (NASDAQ: API), Solana, and many other great companies.
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