The number of people using the internet in China has surpassed 298 million. The nation now has more internet users than any other country in the world, with the total number nearly equal to the entire population of the US. This represents a huge opportunity for foreign investors, although political and cultural differences must be taken into consideration.
According to a report issued by the state-run China Internet Network Information Center (CNNIC), 88 million Chinese went online for the first time in 2008, a rise of 42% over 2007. With this increase, the number of people using the internet in China has surpassed 298 million. The nation now has more internet users than any other country in the world, with the total number nearly equal to the entire population of the US.
Notably, the CNNIC also reported a 113% increase over 2007 in the number of people that access the internet using mobile devices, making a total of 117 million, or nearly 40% of the country's internet users. Not surprisingly, when it comes to mobile internet access, students are the largest demographic group; 44% use their mobile devices to check their email, read news or download music. This trend is likely to grow; last week, the government awarded the country's first licenses for third-generation (3G) mobile networks to three telecom vendors: China Mobile, China Telecom and China Unicom. The 3G rollout will result in an investment of CNY280 billion in network upgrades and expansion before the end of 2010; by 2011, the vendors expect to have rolled out 3G services across the entire country. Coupled with the decreases in internet costs - China Mobile recently lowered its prices by over 60% - there will surely be a significant increase in internet users, particularly those using mobile devices.
While these figures will no doubt have an impact on every sector, there are particularly important implications for the government, given the country's communist system and the prevalence of the state in citizens' day-to-day lives. While the Chinese are by no means global leaders in e-government, the state's goals in this regard are ambitious, although well within reach. Certainly there is no shortage of funding or political will to achieve such a goal; 2006 saw the launch of Beijing's 11th Five Year Plan, which calls for e-government initiatives to be launched aggressively around the country. Due to the unchallenged authority of the state, all provincial and local governments are cooperating closely with the mandated plans.
The 2008 Olympic Games were perhaps the most prominent example of the Chinese commitment to investing in e-government. Over $23 billion was spent on providing digital services within the city leading up to the games, with Beijing's local government benefiting to a large degree: most constituent services are now being offered online, and there were numerous implementations of systems such as enterprise resource planning and enterprise content management in local agencies.
The massive internet-savvy population, coupled with the ambitious plans of the state, is certainly a boon for the prospects of Chinese e-government, and presents great opportunities for foreign technology vendors. In particular, the investment in e-government has not yet paid off, and vendors can capitalize on this fact. For example, in a recent survey by the People's Daily newspaper's website, 70% of internet users were unaware that there were online channels seeking public opinion. Of those that knew of the channels, a staggering 97% felt that they were ineffective. Accordingly, vendors with experience implementing and promoting effective e-government initiatives have an opportunity to leverage their experience in helping the government to educate the populace on the existence of online public services and how to use them.
In addition, while the technological literacy obviously exists, there are still issues of equity of access that must be addressed. While 73% of people in the US have used the internet, the 298 million Chinese users represent only 23% of the country's population. (An encouraging sign for China, however, is that 2008 was the first year that its percentage of users surpassed the global average of 22%.) Providing broadband access to the remaining 77% of the country is a massive opportunity for vendors, in particular given the state's willingness to fund such rollouts as part of its e-government plans. The fact that 40% of Chinese users access the internet from a mobile device means that wireless providers should consider investing in what is a massive greenfield.
At the same time, companies working in the Chinese market must tread carefully, and be ever mindful of political and legal factors that could affect the way that they operate in the country. Vendors must be aware that the political environment in the country has a significant impact on the way that the state is run; from an e-government perspective, such initiatives in China come from different motivations than they do in democratic countries. For example, while the website of the governing political party in a democracy is very distinct from a state-run site, the distinction in China is perhaps not as prominent. E-government in China is in essence the Communist Party's portal to providing services to citizens of the country. While in democracies the technology is rolled out with the intent of increasing transparency and enhancing constituent service, China's e-government initiatives are more geared towards touting state accomplishments or informing citizens which duties they can perform online, such as registering vehicles or paying fines.
From a legal perspective, vendors must be familiar with the 2003 Government Procurement Law, which states that domestic vendors must be used to meet the IT requirements of government agencies. International vendors are only permitted in cases where domestic companies cannot meet the requirements, essentially making it mandatory for foreign vendors to partner with Chinese firms when seeking public sector contracts.
Due to the burgeoning internet use in China, coupled with the decreasing cost of broadband access and the state's investment in e-government, Datamonitor believes that companies interested in capitalizing on opportunities in China would be well served to familiarize themselves with the country's operating environment in order to capitalize on the opportunities in the public sector. In particular, vendors must understand the subtle differences between the e-government goals of democratic countries - transparency and enhanced constituent service - and those of China, which plans to use the technology to promote state accomplishments and constituent duties.