China’s 2021 internet sector in 5 snapshots, from tighter regulations to bumpy IPOs and shifting demographics
Bitcoin mining required so much energy that the sector would rank ninth among China’s 10 biggest carbon-emitting industrial urban centres by 2024, a dubious honour that explains why the Chinese government came down so hard this year to ban the creation of the largest cryptocurrency.
The use of energy-sapping computers to solve cryptographic problems to create bitcoin – known as “mining” – is expected to generate 131 million metric tonnes of carbon dioxide by 2024, just behind the coal-mining city of Ordos in Inner Mongolia and ahead of the steel-producing hub of Handan in Shandong, according to the 2021 China Internet Report, citing data provided by the Cambridge Bitcoin Electricity Consumption Index.
The energy usage and carbon emissions by bitcoin mining explains the crackdown on the industry, coming “amid China’s growing green ambitions as it aims to reach peak emissions by 2030 and carbon neutrality by 2060,” according to the report by SCMP Research. “Though already on the decline before the crackdown, China still claimed 46 per cent of the world’s bitcoin mining, which consumes a great amount of electricity. The government is concerned that the volatility and speculative nature of bitcoin could also create disruptive spillovers into society.”
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China’s cryptocurrency crackdown, which has caused bitcoin’s value to see-saw earlier this year, is one of the major trends of 2021 identified in the 138-page Pro Edition report about the world’s largest technology and internet market. The report chronicled the tightening regulations on multiple fronts that resulted in a bumpy road ahead for Chinese technology stock offers (IPOs), forcing companies to alter their overseas growth strategies and re-examine underserved segments because of demographic changes, with renewed focus on private-domain traffic.
China’s regulators fired the first salvo of their scrutiny on technology last November when they foiled the US$39 billion initial public offering by Ant Group – the affiliate of this newspaper’s owner Alibaba Group Holding – a mere 48 hours before shares were due to start trading in Shanghai and Hong Kong. Since then, dozens of regulations had been issued, and billions of yuan worth of penalties were meted out to scores of technology companies across a range of internet-related industries from fintech to gaming, ride hailing to meal delivery, and education.
Part of the heightened scrutiny can be explained by regulators’ plan to break up the outsize market shares of the biggest companies to protect consumers. Another concern was over the data security, resulting in the unprecedented move by the Cyberspace Administration of China (CAC) to insert itself into the offshore fundraising approvals process for companies that amass data troves of more than 1 million users. Dozens of China-domiciled technology start-ups have since halted their offshore IPOs.
Market shares across some sectors. Source: 2021 China Internet Report by SCMP Research alt=Market shares across some sectors. Source: 2021 China Internet Report by SCMP Research
While the road to New York, the world’s largest capital market, became bumpy – made more hazardous by speed bumps put up by the US Securities and Exchange Commission (SEC) – Southeast Asia has come into focus, both as potential hunting grounds for acquisitions and as locations for regional hubs. Alibaba, ByteDance and Tencent Holdings have all made a number of acquisition and opened spacious offices in the region.
Still, shifting demographics within China created new business opportunities for tapping the so-called silver economy, as the number of internet users older than 60 years jumped to 11 per cent of total netizens in 2020, from just 4 per cent in 2016. Scores of products, applications and services have sprouted in the past year, with “senior-friendly” features, targeted content, supplemented by courses to help the elderly keep up with the digital economy. Another demographic change was the rapid rise of the “sheconomy,” which attracted start-ups to shift their focus to cater for women’s consumption patterns and tastes. Cosmetics, apparels, food and beverages, and lifestyle are four of the product categories that best illustrate this shifting trend.
The pace of China’s e-commerce growth has slowed from its breakneck pace amid a larger customer base. That has shone the light on private-domain traffic as a solution for companies to communicate directly with customers and engage them directly to drive repeat repurchases. Tencent’s WeChat super application has been the dominant source of this traffic due to its 1 billion user base, and its ecosystem that include messaging, social networking, e-commerce and payments.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.
Text source: MCC.EXCHANGE
