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Mobile Internet Shakes Up Stodgy China Industries
Mobile Internet Shakes Up Stodgy China Industries

By Joe McDonald
May 9, 2014 9:36AM

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With 81 percent of China's 618 million Internet users now going online wirelessly via tablets and smartphones, companies such as Alibaba that arose in the era of the desktop computer-based Internet are scrambling to roll out mobile-friendly services. The fiercest competition is among a trio of tech and business giants: Alibaba, Tencent and Baidu.
 



Alibaba, the e-commerce giant planning a blockbuster share sale in the U.S., shook up China's vast but sleepy retailing industry by popularizing online shopping. Now it and China's other Internet companies are mounting challenges in areas from banking to broadcasting.

The new wave of change was triggered by the abrupt shift of Chinese Internet users to surfing the Web via smartphones or tablets. Some 81 percent of China's 618 million Internet users now go online wirelessly. Companies such as Alibaba that arose in the era of the desktop computer-based Internet are scrambling to roll out mobile-friendly services.

The services Web users flock to are usually privately owned, while they are leaving behind traditional state-owned companies that control many industries. Video websites compete with state TV, online financial services draw deposits away from banks and instant messaging apps take revenue from government-owned phone carriers.

"I try to buy everything online," said Cao Ying, a 30-year-old software engineer in Shanghai.

Like many young professionals, Cao lives through her smartphone. Grocery shopping, paying bills, finding a taxi: whatever Cao needs is just an app away.

"I'm one of those people who are driving shopping centers out of business," she said.

Some Chinese leaders welcome the competition as a tool to make the government-dominated economy more productive. In the 1990s, Beijing encouraged desktop computer-based online commerce that shook up retailing. Today, China's leaders are allowing a wave of disruption to flow from mobile Internet. Still, it is unclear how far the trend will be allowed to run if politically favored companies are threatened. A commentator for state television called online financial services "parasites."

The shift to mobile Internet is "putting a lot of pressure on traditional retailers and banks to offer a better service," said Ben Cavender, an analyst for China Market Research Group, a consulting firm in Shanghai.

The fiercest competition is among a trio of giants that dominate China's Internet: Alibaba Group in e-commerce, Tencent Holdings in games and Baidu Inc. in search.

Since the start of last year, they have spent more than $7 billion to create or acquire e-commerce, social networking and other mobile services. The flurry of deals is also bringing them into head-to-head competition with each other for the first time.

"These three used to be like three mountains in the Chinese Internet business. But now they have to get into a major war against each other," said Bing-Sheng Teng, a specialist in corporate strategy at the Cheung Kong Graduate School of Business in Beijing. (continued...)

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© 2014 Associated Press under contract with NewsEdge. All rights reserved.
 

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