Developers & computer science in China – Daxue Consulting – Market Research China https://daxueconsulting.com Strategic market research and consulting in China Tue, 04 Aug 2020 23:39:41 +0000 en-US hourly 1 https://wordpress.org/?v=5.4.2 https://daxueconsulting.com/wp-content/uploads/2012/06/favicon.png Developers & computer science in China – Daxue Consulting – Market Research China https://daxueconsulting.com 32 32 The online education market in China is in a critical period https://daxueconsulting.com/online-education-market-in-china/ Sun, 09 Aug 2020 23:37:00 +0000 http://daxueconsulting.com/?p=48873 The online education market in China underwent a 5-year period of exponential growth from 2013 to 2017 and reached maturity in 2018. China’s online education industry entered a “gold rush” boom around 2013, with surging venture capital and increasingly segmented products such as question banks, O2O tutoring, and children’s English. Companies such as 51Talk and […]

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The online education market in China underwent a 5-year period of exponential growth from 2013 to 2017 and reached maturity in 2018. China’s online education industry entered a “gold rush” boom around 2013, with surging venture capital and increasingly segmented products such as question banks, O2O tutoring, and children’s English. Companies such as 51Talk and Liulishuo have been listed one after another. By the end of 2018, the crazy gold rush era in the e-learning industry had ended, and was largely centered on English classes.

However, against the backdrop of the COVID-19 pandemic outbreak, the e-learning market in China experienced a surge in market demand. With the school summer break commencing in July 2020, various online education institutions entered the battleground of recruiting students for extracurricular tutorials. The competition is intense since the online education market in China is filled with a large number of players, and the market share gained by each player is fairly small. The bottleneck of achieving profitability has not been loosened, according to Caixin. China’s e-learning market looks for more in-depth development and more complex technology to promote the next round of development.

The e-learning market’s competitive landscape has taken its initial shape with K12 online education sector growing rapidly

After 20 years of devious development, China’s e-learning industry realized large-scale monetization with the support of “live-streaming” in 2017. In 2018, with the initial formation of the competitive landscape and the intervention of the government, the online education industry began the initial stage of maturity. Market competition in 1st tier cities is saturating, while 2nd tier cities became the new battleground. 

Market size of online education in China is growing as more players enter the market

Data Source: Statista, Market size of online education in China is growing as more players enter the market

As of 2018, the online education market in China reached 251.76 billion yuan, and the number of paying users reached 135 million. The major players in the online education market in China are Yuanfudao, Zuoyebang, Xue’ersi, and Baicizhan. Higher education and vocational training account for 75% of the total market share.

The K12 education sector in China has grown rapidly, and its share has almost doubled in the past 6 years. K12 online education apps also occupy a far larger share in terms of the number of MAU in all fields of education. As of November 2018, the top three e-learning apps with leading MAU are all K12 online assignment-based apps. This is probably related to the “excessive assignments tactic” in many elementary and middle schools in China, wherein students are encouraged to hone their skills with an abundant amount of homework.

 K12 online education is growing in market share

Data Source: iResearch, K12 e-learning is growing in market share   

It is also worth noting that in 2018, online education has also been officially included in the scope of supervision of the education industry. The Chinese government has issued national standards and evaluation schemes for online courses, in which engagement is listed as an important dimension.   

Under quarantine, the online education market in China revitalized, but the core issues remain unresolved  

Due to the COVID-19 pandemic, schools of all types were postponed following the Chinese Ministry of Education’s notices. From February 10th to 28th 2020, the Chinese Ministry of Education issued a series of notices to provide guidance and measures to prevent and control the pandemic in the field of education.

Baidu Index, Searches for online education surged during self-isolation period (Jan.- Feb. 2020, varies by cities) in China

Data Source: Baidu Index, Searches for online education surged during self-isolation period (Jan.- Feb. 2020, varies by cities) in China

Searches for online education on Baidu surged from late January to early February 2020. Moreover, searches for online education applications on the Apple Store, such as Zuoyebang and Xue’ersi, also increased significantly during this period of time. Yuanfudao, a leading online education platform, had advertized heavily on CCTV channels during COVID-19, leading to an increase of searches on the app store. 

earches for Zuoyebang, Xue’ersi, and Yuanfudao searches on the Apple Store rose significantly during the COVID-19 self-isolation period. Zuoyebang remained the most popular online education application, whereas Yuanfudao showed the most dramatic growth thanks to its massive advertisements during the self-isolation period.
earches for Zuoyebang, Xue’ersi, and Yuanfudao searches on the Apple Store rose significantly during the COVID-19 self-isolation period. Zuoyebang remained the most popular online education application, whereas Yuanfudao showed the most dramatic growth thanks to its massive advertisements during the self-isolation period.

Data Source: Qimai.com, Searches for Zuoyebang, Xue’ersi, and Yuanfudao searches on the Apple Store rose significantly during the COVID-19 self-isolation period. Zuoyebang remained the most popular online education application, whereas Yuanfudao showed the most dramatic growth thanks to its massive advertisements during the self-isolation period.

Despite market growth, homogenization, rough user experience, and fuzzy results still remain the core issues that hinder in-depth expansion of the online education market in China. With the intensification of homogenized competition, injecting huge capitals to boost growth has gradually weakened, whereas promoting growth through word-of-mouth and operation have received more attention. Online science eduation in China has lagged behind English tutoring, however we look at how COVID-19 boosted this market.     

Education System for Sciences in China is exam-oriented and routine   

The education system for sciences in China is  routine-oriented. From Year 1 to Year 6, students study Maths as a compulsory subject. After students enter secondary schools, all have to study Biology in Year 7, Physics in Year 8, and Chemistry in Year 9, in this order. Basic skills of Computer Science are taught from Year 7 to 9. These subjects are also tested in the Senior High School Entrance Examination, along with Chinese, Maths, English, Moral Character, History, Geography, PE.

When students enter Year 10 study, they have not yet chosen their orientation. Hence, students have to study all the subjects until Year 11, when they choose between either arts or sciences. Subjects under the sciences stream are Physics, Chemistry, and Biology, along with Chinese, Maths, and English. Students who chose the sciences stream don’t need to study arts subjects (Politics, Geography, and History). In Year 12, students continue to study the subjects under their chosen path.

In the College Entrance Examination, science students are tested on Physics, Chemistry, and Biology, along with Chinese, Maths, and English for the written part. It’s worth noting that arts students and sciences students work on different maths exam papers in the college entrance examination. Generally speaking, science education in Chinese high schools are fairly routine and exam-oriented, wherein students practice heavily on designed questions.

Limited scope of science education in schools gives birth to China’s online science education market; online Maths education market burgeoning

Due to the limited scope of science education in China, some parents will get their children involved in extracurricular learning clubs, such as robotics and coding. The ages of children attending such extra-curriculars is getting younger. In recent years, there are increasingly more K12 online sciences education platforms for the youth, especially online Maths education platforms.

The market segment and course types provided by online Maths learning platforms are quite similar, reflecting fierce competition in a homogenous market.

The market segment and course types provided by online Maths learning platforms are quite similar, reflecting fierce competition in a homogenous market.  

By October 2018, there were four financing activities in the K12 online programing education sub-sector and 11 in online Maths learning sub-sector. 7 out of 11 suppliers gained capital, and most of them have large amounts of capital with over 10 million RMB. Compared to the online English learning market, which was developed much earlier and has entered into saturation, online maths education and programming training have become the hotspots of capital.

Zuoyebang, Xue’ersi, and Yuanfudao are the three leading online education platforms. However, instead of specializing in sciences education, these platforms provide full-disciplinary learning guidance services for elementary and middle school students. Yangcong Xueyuan (Onion Academy) is a leading online education platform focusing on K12 sciences education in China. Chengzhangbao is focusing on the training of children’s logical thinking and mathematical logic.

An interesting phenomenon is that people tend to enroll in classes across different platforms. Although these platforms are offering similar products and services, they still have minor differentiations regarding human resources, technology, user management, and foci of study.  

The prospect of online education market: An investment opportunity?

While there still remain core issues to solve in the online education market, we have seen emerging trends these years. The majority of online education platforms in the market offer an integrated solution to students, i.e. a comprehensive range of subjects, after-class homework, tutors, and online communities. There are increasingly more platforms specializing in science education, especially Maths learning, which are attracting significant investements. Moreover, the market has witnessed emerging trends of programing learning in early ages and adults learning data analysis for vocational needs.  

A survey results show that code/programming training starting from primary school as well as data analytics training and STEM education are considered to be the key accelerators for education development in Shanghai, China.

Data Source: YouGov, A survey results show that code/programming training starting from primary school as well as data analytics training and STEM education are considered to be the key accelerators for education development in Shanghai, China.    

Third-party (B2B2C) online education platforms, such as CCtalk, Tencent classroom, jioayu.taobao.com, which focus on adults education, also displayed a competitive advantage over traditional platforms in the market. Such platforms generally do not provide courses directly, but assume the role of middlemen, allowing the free inflow of a diversity of course types. They partner with educational institutions or individual teachers on one side and deliver content to end-users on the other.

The courses provided by these platforms varied from e-commerce marketing, Java to interior design, to name just a few. While the traditional B2C online education players tryied to differentiate in various segmentations, such platforms, backed by their Internet parent companies, aim at covering all usage scenarios and leverage online traffic to enter the market.

It’s expected that the growth rate of the online education market in China will remain at about 20% in the short term, with higher education and vocational training continuing to lead the market. However, there were many e-learning companies undergoing a state of loss, including Liulishuo and 51Talk. Loss is common in the e-learning market in recent years. However, the rate of loss has narrowed, and profitability is not indefinite. 

 In the future, online education companies are expected to achieve profitability, but the premise is to solve the fundamental problems of rough user experience and unpredictable results in order to further realize the survival of the fittest, increase market concentration, and ensure steady growth.


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Cloud computing in China https://daxueconsulting.com/cloud-computing-china/ https://daxueconsulting.com/cloud-computing-china/#respond Wed, 20 May 2020 19:31:00 +0000 http://daxueconsulting.com/?p=12557 What is Cloud computing? Cloud computing is the storage and processing of data on remote data centers. Cloud storage reduces the burden on computers which makes possible more work flexibility. A large tech savvy population and need for data security drive the development of cloud computing in China. China has the largest online population in […]

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What is Cloud computing?

Cloud computing is the storage and processing of data on remote data centers. Cloud storage reduces the burden on computers which makes possible more work flexibility. A large tech savvy population and need for data security drive the development of cloud computing in China.

China has the largest online population in the world, with over 800 million internet users. Therefore it is no surprise that China generates an enormous amount of data that must be stored securely. Cloud-based servers are more scalable, affordable, and secure than on-site servers, so they perfectly satisfy China’s huge demand for flexible data storage.

The technology is being rapidly developed in various sectors and is already generating over five billion dollars in revenue annually. Generally the three main types of business delivery models available for cloud computing are Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS). Meanwhile, data can be stored from the public cloud, private cloud and hybrid cloud.

The Economic Times, Depiction of the Cloud Ecosystem
[Source: The Economic Times, Depiction of the Cloud Ecosystem]

Sizing the Chinese cloud computing market

In 2018, the Chinese cloud computing market was second in terms of overall size. It accrued approximately $13.4 billion dollars in annual revenue compared to $53.4 billion of the US. Despite this, the Chinese government is dedicated to pushing the market to approximately $64 billion by 2020, creating major business opportunities for cloud computing providers. At any rate, China’s cloud computing industry is projected to exceed 300 billion yuan ($42.3 billion dollars) by 2023, by which time an estimated 60% of domestic companies and government agencies will be using cloud computing services.

China’s cloud computing market size

[Source(s): Statista, IDC, China’s cloud computing market size]

According to the Chinese Ministry of Industry and Information Technology (MIIT), from 2015 to 2019 officials have been working to more than double the scale of China’s cloud computing industry. Many analysts predict that public cloud usage rates could grow more than 20% annually to 2023.

Large enterprises, government agencies and financial institutions accelerate the pace of cloud application

Furthermore, according to an interpretation of the MIIT’s Action Plan, China’s cloud computing industrial structure continues to optimize. Key technologies such as large-scale concurrent processing, mass data storage and data center energy-saving have achieved great breakthroughs in standards. Also, backbone enterprises are working to develop more strategies to improve their business categories. With many large bodies like enterprises and government institutions relying on cloud computing in China, the technology is applied into an increasingly wide range of industries.

According to data from market research firm IDC, cloud computing and artificial intelligence will more than double the rates of innovation and productivity at Chinese companies and organizations by 2021. For these reasons, cloud computing is considered a crucial infrastructural force in China’s push for an industrial upgrade as it moves to embrace new technologies like artificial intelligence, internet of things, and big data.

The graph below portrays IaaS as the segment with the biggest market share in cloud computing in China. The forecasted market size of software-as-a-service (SaaS) will continue to be the largest among the three with CRM and Mail management as the most widely used application types.

Cloud Computing in China - Statistics & Facts

[Source: Statista, Cloud Computing in China – Statistics & Facts]

Chinese Government’s Cloud Computing Industry Development Mandate

As part of a larger development strategy for advancing Chinese software and information technology services, the Chinese government plans to continue to make large investments over the next few years to drive domestic cloud computing development.

Through the ‘Internet Plus’ strategy, introduced in 2015, the Chinese government is pushing for the development of the domestic cloud computing industry to modernize manufacturing and other domestic industries. In short, this strategy promotes the integration of cloud computing with big data and IoT.


China’s cloud computing market is still at the nascent stage; however, it is likely to witness tremendous growth across all the industry verticals with public sector, manufacturing, retail, and healthcare sectors among major adopters of cloud computing services. Also, fast pace deployment of 4G LTE mobile network across China is anticipated to support further penetration of cloud computing services among end user organizations. The cloud market has particularly strong growth potential, underpinned by government initiatives and major investment by vendors in infrastructure and human capital. A new cybersecurity law will protect local cloud and hosting players from growing international competition.

Government support for the Chinese cloud computing market will see strong growth continue. Domestic firms have been set the target by China’s Ministry of Industry and Information Technology’s goal of increasing cloud revenues by at least 50% annually over the next few years, including a focus on generating revenues for cloud services from international sources and building China’s presence in the global cloud computing market. There is also an eight-point initiative that includes the creation of a national industry data recovery center and a national safety control service center for China’s data security.

Trends in the Cloud Computing Space

The future of cloud computing looks vast, connected and increasingly fast. While the concept and initial design of cloud computing began in the United States as a way to store data, networks, intelligence and more over the Internet, the refinement of cloud-based platforms and services are spreading widely in China. From individual consumer cloud services for storing photos, to multibillion-dollar corporations that need to house intelligent data, this technology has become internationally ubiquitous in the last ten years.

Globally, the cloud computing industry is dominated by American companies such as Amazon, Microsoft, and Google, which controlled a combined 57% of the overall market in 2018. According to Wikibon Research, the global cloud market hit $237 billion in 2018 and is estimated to reach $814 billion by 2027. With mega corporations like Google, IBM and Amazon mostly running cloud systems in the U.S., it’s easy to overlook China’s market for now. Data shows, however, that companies like Alibaba (which currently ranks fifth in the global cloud computing market), Tencent and Huawei have worked their way up the ranks and are growing rapidly.

Synergy Research Group, Global market share of leading cloud providers

[Source: Statista, Synergy Research Group, Global market share of leading cloud providers]

China’s cloud computing market will be the largest in the world

China’s cloud market is set to become the largest in the world by 2023. But right now, it remains nascent and insubstantial compared with its respective sectors in mature economies. The Chinese market is roughly one-tenth the size of the US equivalent. The market is expanding but remains fragmented, which means that much of it is up for grabs. Domestic tech heavyweights Alibaba and Tencent, along with international players like Amazon and Microsoft, all want a piece of what will eventually become a very large pie.

Despite the challenges presented by the Chinese market, several large, well-resourced U.S. cloud providers have established operations in China through joint partnerships with local companies. For example, Microsoft has partnered with 21Vianet, a Chinese data services firm, to roll out public cloud. Other U.S. companies are also operating in China. Amazon is partnering with ChinaNetCenter to offer cloud services and IBM is teaming with 21Vianet to offer its hybrid cloud platform.

Tense domestic competition drives growth

Furthermore, in the decade since e-commerce giant Alibaba became one of the first domestic players to tap into the market in 2009, China’s internet giants have been pouring resources into building up their cloud infrastructure services. Companies like Huawei, Tencent, and Baidu are now working feverishly to deploy their own cloud computing-based services. Among Chinese tech players, the excitement surrounding cloud computing’s potential as a growth driver is real.

Thus, local competition is another significant factor to take into consideration. Several Chinese companies are well-positioned in their domestic market. E-commerce giant Alibaba’s Aliyun is already a notable competitor, servicing 1.4 million customers directly and indirectly. China Mobile, China Unicom, China Telecom, Baidu, Tencent and ZTE among others, are also well-positioned in the market.

Chinese and Foreign players in the Chinese cloud computing market
[Source: Personal Graphic, Chinese and Foreign players in the Chinese cloud computing market]

The Chinese cloud computing market is dominated by local players

China’s cloud market is dominated by local players, with IDC figures showing Alibaba Cloud as holding 42% of the public cloud marketplace in 2018, followed by Tencent Cloud at 12%, China Telecom with 9%, and Amazon Web Services (AWS) close behind with 6%. The total market for cloud infrastructure and software in the world’s second-largest economy reached $5.4 billion in the first half of 2019.

As you can see below, they are leading in each of the four key market segments: data center hardware/software, cloud computing services, colocation and CDN.

Chinese Cloud and Data Center Market

[Source: Synergy Research Group, This graph shows the market size (greater to the right) and annualized growth rate (high growth will place at the top of the chart) for the Chinese Cloud and Data Center Market]

Where is the growth and opportunities in the Chinese cloud computing market?

China has been a frontrunner in many different tech industry verticals, from AI and the Internet of Things (IoT), to smart cars and virtual reality (VR) services. As a direct result, the Chinese government and businesses have worked to also strengthen cloud computing technologies to support the data infrastructure of many of these emerging technologies.

According to Zhang Feng, chief engineer with China’s Ministry of Industry and Information Technology, China’s overall cloud industry reached a scale of $48 billion, and the IoT industry surpassed $174 billion in 2018. In other words, there are many businesses in many industries looking to implement cutting edge cloud computing technologies. Thus, increased development by Chinese companies on their cloud services offerings will continue to support the domestic market’s growth.

Along with this, the SME market in particular continues to offer strong growth potential and will be an important driver of demand for cloud computing in China. With security being a key hurdle, Chinese SMEs will likely continue to favor Chinese cloud providers for their IT services expansion. The SME cloud market was a key area of growth over the previous years and the fastest growth rates were for hosted communication and collaboration services, but in terms of total demand, it is Infrastructure-as-a-service (IaaS) and business applications that dominated.

Chinese companies are sensitive about their data

In the past, concerns over cost, security and logistics meant many Chinese businesses were reluctant to migrate to the cloud. Chinese companies are extremely sensitive when it comes to their data, with the vast majority still preferring it to be stored in-country.

However, encouraged by decreasing costs and Chinese government policy, a growing number of Chinese firms, unhampered by decades of outdated IT infrastructure, are now adopting cloud-based alternatives to on-site enterprise hardware and software. This is especially the case with China’s burgeoning number of SMEs, which typically have smaller budgets and therefore prefer the lean business models supported by SaaS. Customer relationship management software (CRM), office automation software (OA), intelligent manufacturing software (IM) and office collaboration software top their shopping lists.

Alibaba Cloud Leads China’s Cloud Computing Market

It opened up to third-party customers in 2009 and offers a comprehensive suite of cloud services, including web hosting, elastic computing, data migration, database, storage and content delivery networks, large-scale computing, security, and management and application serves.

Alibaba Cloud is China’s largest public cloud service provider with the most advanced cloud network, including 11 data centers and more than 2,300 CDN nodes in mainland China. Although being the world’s fifth biggest player in having just 5% of the global cloud market, it holds a 40% share of China’s domestic market and provides international companies with seamless access to China through Alibaba Cloud’s

China Gateway solution. Alibaba Cloud’s ongoing focus on innovation and internationalization has allowed it to outperform major Cloud vendors in the Asia Pacific market.

Overview of Alibaba’s Cloud Products and Solutions

[Source: Deloitte, Overview of Alibaba’s Cloud Products and Solutions]

Alibaba Cloud’s Recent Performance

In its December 2019 4Q earnings, Alibaba maintained its leadership position in the Chinese cloud computing market by developing technology and business solutions that enable the digital transformation of businesses across industries in both the public and private sectors. During the quarter Alibaba Cloud reached two important financial and technological milestones.

62% YOY growth

First, their cloud computing business generated, for the first time, over 10 billion RMB in revenue, growing 62% year-over-year. This was driven by increased revenue in its public cloud and hybrid cloud businesses.

Applying public cloud infrastructure

Second, ahead of last year’s 11.11 Shopping Festival, Alibaba Cloud enabled the migration of the core systems of their e-commerce businesses onto their public cloud. During the festival, Alibaba Cloud provided a highly scalable, reliable and secure public cloud infrastructure that handled a single day GMV of RMB 268.4 billion (US$38.4 billion). Its public cloud infrastructure and technologies enabled Alibaba to process over 544,000 orders per second at peak and 970 petabytes of data without disruption for the full 24 hour period during the festival.

The company believes that the migration of the core systems of Alibaba’s e-commerce businesses onto the public cloud is a major milestone that not only will generate greater operating efficiencies for Alibaba but also will encourage more customers to adopt their public cloud infrastructure.

Cloud computing now represents more than 7% of all of the company’s revenues as Alibaba continues to cement its cloud position in China and in the Asia Pacific region.

A Promising Future for the Chinese Cloud Computing Industry

China still has a complex regulatory environment with intense local competition. However, the market opportunity is attractive to a point where foreign firms are willing to invest heavily in the cloud sector and take necessary measures to be compliant. Massive investments from both public and private actors also support this trend as it enables higher speed connections in remote areas and better wireless connectivity in the whole country.

Huge private sector investment, strong government backing and young talent are together rallying behind the growth of China’s cloud computing industry. The thirst for big data and information on consumer trends from corporate marketing departments will likewise drive demand for cloud-based database technology.

The other primary driving force will be market demand. Given the growing appetite for on-demand video, short-videos and live-streaming, mobile gaming and online content in China, content providers will need to invest in elastic computing services, auto-scaling, content delivery networks and server load balancers in order to provide uninterrupted service and fast download speeds. Demand for cloud products will also increase as companies invest in new technologies such as O2O services, IoT integration and online payments, or expand into overseas markets.

Mobile security will be another priority for the industry. As the world’s largest smartphone market, China is regarded as a mobile-centric market, and different to PC-centric markets found in the West. China’s tech savvy population is leading the way in adopting mobile payments, O2O services, mobile gaming and designing their lives around their smartphone. While Android is the leader in powering mobile applications for the China market, its operating system also remains highly susceptible to external attacks. To address data security and the concerns of Chinese mobile users, foreign companies will need to invest in mobile security, while still offering fast load speed and high availability to users.

Public vs. Private Cloud

Spending on public and private cloud computing in China

[Source: Technode, Mckinsey, Spending on public and private cloud computing in China]

Although Chinese businesses are beginning to ramp up investment in cloud computing, they use cloud computing services at a lower rate than companies in the United States and other developed markets. While Chinese companies generally prefer the private cloud (i.e., data is stored on a company’s intranet), rather than the public cloud (i.e., data is stored by the provider), China’s public cloud market is set to grow over 20% by 2020 as more Chinese companies adopt public cloud services.

For foreign cloud firms, the local ecosystem features several peculiarities that have so far restricted them from securing significant market share on a global level. In addition to standard regulations that prohibit foreign cloud providers, they also face a market unready for widespread public cloud adoption. Unlike more mature cloud markets, firms still prefer private cloud solutions, which allow them to maintain full ownership and control of physical resources. However, the public cloud model is slowly waking up in China and in the future hybrid cloud models will likely become mainstream as more businesses choose both solutions for different ends.

What are the opportunities and concerns for foreign businesses?

Given the growing importance of data in business operations, cloud computing is a must for MNCs operating in China. However, setting up cloud computing solutions in China presents unique challenges including legislative and technical aspects of MNC cloud options. Despite the uncertainties and challenges, global cloud providers cannot afford to ignore China’s large and growing market. Increasingly competitive domestic players are finding their niche, but multinationals still have an opportunity to shape the market. As a market player it is time to identify target segments and invest in solutions for this customer base, as China’s IT buyers decide how they will take advantage of what the cloud has to offer.

Current regulations stipulate that foreign cloud providers must partner with local Chinese companies to serve customers in China, and the cloud computing industry is still regulated. The main challenges facing cloud computing within, from or to China stem from the information security aspect. This involves issues such as data cross-border transfer, personal information protection, data processing and mining among others.

While its tech market is growing, China still needs to enhance its core cloud technologies and encourage its adoption across markets. According to a recent report by Alibaba, areas that Chinese businesses require the most cloud assistance include IoT integration, mobile security and expansion into overseas markets. However, the convergence of emerging cloud technology trends and China’s increasing demands for the use of cloud services will open cross-border business opportunities. The tech sector will benefit tremendously from collaboration and partnership initiatives between firms in China and the rest of the world.

Mastering the Cloud Economy

How to navigate your approach?

Two characteristics of China’s cloud market may help enterprise vendors navigate their approach.

  • Technology providers selling cloud software, services and hardware can strengthen their value proposition by developing a better understanding of cloud economics, customer preferences, and the impact of the cloud’s ascendance in legacy and disruptive technologies.
  • State-owned enterprises account for a large share of total IT spending and are highly concentrated in government, banking and financial services. In these sectors, most IT spending focuses on large, complex, highly integrated legacy systems that cannot easily move to the cloud. A large and dynamic start-up scene has emerged in China, and is spending on the cloud. However, that still represents only a small fraction of total IT spending. In the U.S., cloud providers are addressing mainstream companies across industries, but that’s more difficult to do in an economy dominated by state-owned enterprises.

Choosing a Provider

When entering the Chinese cloud market, Alibaba maintains that website load speed is crucial anywhere, but particularly important in the mobile-centric market like China. Thus, the best option to minimize latency, improve SEO visibility, and provide high availability is to host in Mainland China.

The clear local market leader, Alibaba has earned the title of trusted partner for Chinese firms expanding into European availability zones. And with the growth of China’s cloud industry and now with China Gateway, it’s looking to do the same for companies moving in the other direction. Selina Yuan, president of international business of Alibaba Cloud Intelligence says that the “primary challenges foreign organizations face are “security, connectivity and demanding cross-border digital infrastructure setup issues.”

Therefore, for any multinational vendors or business it is important to assess how your business can fit into the proper Chinese ecosystem from both a technology and business perspective.

Author: Jeffrey Craig


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China’s ambitious artificial intelligence vision | Daxue Consulting – Market Research China https://daxueconsulting.com/chinas-artificial-intelligence-vision/ https://daxueconsulting.com/chinas-artificial-intelligence-vision/#respond Wed, 12 Dec 2018 02:00:27 +0000 http://daxueconsulting.com/?p=40385  China has embarked on an unprecedented effort to master artificial intelligence. AI is an important facet of Beijing’s ‘Made in China 2025’ blueprint. Supplementary to this endeavor, in 2017, China published its “Next Generation Artificial Intelligence Development Plan” (新一代人工智能发展规则) which laid out China plans to become the world leader in artificial intelligence, with a domestic […]

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 China has embarked on an unprecedented effort to master artificial intelligence. AI is an important facet of Beijing’s ‘Made in China 2025’ blueprint. Supplementary to this endeavor, in 2017, China published its “Next Generation Artificial Intelligence Development Plan” (新一代人工智能发展规则) which laid out China plans to become the world leader in artificial intelligence, with a domestic AI industry worth almost US$150 billion. Thus, China’s sweeping vision for global AI ascendancy has resulted in an extraordinary monetary and policy commitment from the government. On top of this national level led investment, the country’s top tech companies, led by the Internet giants Baidu (百度), Alibaba (阿里巴巴), and Tencent (腾讯), are currently nurturing large levels of talent and expertise in artificial intelligence, building new research hubs for innovation and development, and investing into capabilities to develop these technologies to rival those operated by Amazon, Google, Facebook, and Microsoft.

China has some big advantages in AI. For one, it has a wealth of talented engineers and scientists. It also is rich in the data necessary to train AI systems. With fewer obstacles to data collection and regulations on widespread usage, China is amassing huge databases that don’t exist in other countries. The results can be seen in the growth of facial-recognition systems based on machine learning: that now identify workers at offices and customers in stores and authenticate users of mobile apps.

The future of artificial intelligence depends on the conjoined evolution of the algorithm and the data to best accommodate the needs in production enhancement. Thus, China has enacted a three-step plan in the advancement of its artificial intelligence initiatives: firstly, it must be able to keep pace with all leading AI technology by 2020. Part two is to make major breakthroughs by 2025 in medicine, city infrastructure, manufacturing, agriculture, national defense, construction, and insecurity and control assessments. And part three, to establish China as the world leader in AI by 2030.

What is Artificial Intelligence?

By definition, Artificial intelligence (AI) is an area of computer science that emphasizes the creation of intelligent machines that work and react like humans. Artificial intelligence (人工智能) makes it possible for machines to learn from experience, adjust to new inputs, and perform human-like tasks. Most AI examples that we hear about today, from chess-playing computers to self-driving cars, all rely heavily on deep learning and natural language processing. Using these technologies, computers can be trained to accomplish specific tasks by processing large amounts of data and recognizing patterns in the data. Early work in artificial intelligence paved the way for the automation and formal reasoning that we see in computers today, including decision support systems and smart search systems that can be designed to complement and augment human abilities.

Nowadays, examples of AI design and use include speech recognition, learning, planning, and problem-solving. However, research associated with artificial intelligence is highly technical and specialized. The core problems of AI that still remain prevalent today include programming computers or machines to possess certain traits such as knowledge, reasoning, problem-solving, perception, learning, planning, and the ability to manipulate and move objects. However, it is widely acknowledged that initiating common sense, reasoning and problem-solving power in machines is a difficult and tedious task. This aspect of AI will remain a challenge in the following years for the top innovators in the field.

AI excellence in China: The Big Three – Baidu, Alibaba, Tencent

World artificial intelligence conference in Shanghai

Chinese Vice-Premier Liu He speaks at the World Artificial Intelligence Conference in Shanghai (Source: Reuters)

At this year’s World Artificial Intelligence Conference in Shanghai, the government announced that AI projects and platforms will be offered financial support of up to 100 million yuan. In addition, AI enterprises will be granted further access to data resources in areas including education, health care, and tourism. These announced measures signify Shanghai’s efforts to promote the AI industry in China with a particular focus on attracting more talent, capital, and to optimize the use of big data. “Shanghai needs to seize the opportunity that the AI industry has created, and take full advantage of the city’s abundant resources in scientific research, talent, data, and policy support to implement more new AI technologies,” said Ma Chunlei, deputy secretary-general of Shanghai municipal government. Thus, we can see that the AI industry in China is being propelled forward on all fronts and has become a hot buzzword within the broader society today. The government is in the process of laying the base for a new Chinese economy with AI integrated into transportation, financial services, retailing, agriculture, eco-friendly manufacturing, health/medical care and many other applications.

World internet conference

Xinhua’s first English #AI anchor makes debut at the World Internet Conference that opens in Wuzhen, China. (Source: Xinhua

Furthermore, the top industries in China to be disrupted by AI are autonomous vehicles, online and offline commerce, financial technology, and healthcare. Baidu and Didi Chuxing are leading the former category with their advanced self-driving technologies, Alibaba the second category with a greater focus on using AI to enhance product personalization and customer service. Regarding the last two, China’s Fintech startups using AI to improve security in ID authentication, and in healthcare, with startups using AI to provide computer-assisted medical diagnoses.

Specifically, Baidu chief executive Robin Li Yanhong noted the Chinese government’s supportive state and industry polices as major factors contributing to the rise and success of his internet company and the development of artificial intelligence (AI) in China. Beijing-based Baidu operates China’s dominant search engine and has pushed into artificial intelligence, notably in autonomous cars where it is striving to build an open-platform for self-driving car technologies. Baidu is also part of a group of five companies including Tencent, Alibaba, iFlyTek and SenseTime, tasked with building “open innovation platforms” in their respective fields. Baidu’s focus is on autonomous driving, Alibaba’s cloud computing division is tasked with a smart city project to improve urban life, while Tencent’s focus is on computer vision for medical diagnosis. iFlyTek, a dominant player in voice recognition, is tackling voice intelligence and SenseTime is working on intelligent vision.

Thus, we see that AI has a major role to play in transforming healthcare, agriculture, and education where AI will help find better cures for diseases, democratize access to healthcare, improve crop yields, and help personalize education for all. AI is also likely to boost traditional industries like telecom, retail, advertising, automotive, business services, and the consumer market. The public sector is also expected to be one of the biggest beneficiaries of AI in the Asia Pacific region, helping cities leapfrog their Western counterparts in terms of smart intelligent services and improved standards of living.

China is attracting AI investments worldwide

The Artificial Intelligence market in the Asia Pacific region as measured in 2017 is expected to grow from $6 billion dollars to $136 billion by 2025. Below shows the size of the artificial intelligence market in China from 2015 to 2020. China’s AI market was worth 23.74 billion (US$3.55 billion) yuan in 2017, up 67 percent from the year before, with computer vision, voice, and natural language processing accounting for most the market. It has been estimated that China’s AI market will grow 75 percent in 2018 and is forecasted to grow to around 10 billion U.S. dollars in 2019.

size of the AI market in China

Sources: China Money Network, Statista estimates 2018

Two-thirds of global investment in artificial intelligence is being allocated towards the Chinese AI industry, which alone has helped the AI industry in China grow by 67% last year alone. China Money Network, a leading source of information on China’s technology sector, recently announced in a report the top 50 AI companies to watch. In this report, they included 14 “unicorns,” i.e., start-ups with a valuation of $1 billion or more, totaling an approximate monetary worth of $40.5 billion. With the Chinese government heavily backing many of these companies, it is hoping that artificial intelligent uses will reach a domestic valuation of 1 trillion yuan ($146 billion) by 2030.

Highest valued AI companies in China in 2018

Sources: China Money Network, Statista 2018

Thus, with recent initiatives to improve China’s in-depth knowledge and better understanding in artificial intelligence along with a high level of prospective growth in the industry, China has become one of the most attractive markets for attracting AI investments worldwide.

Lastly, another reason why this industry is so significant is due to artificial Intelligence projecting to have a profound impact on the future GDP growth in China. By 2030, Artificial intelligence is forecasted to enhance the gross domestic product of Chinese energy, utilities and mining industries by 11 percent in terms of productivity. For the consumer goods, accommodation and foods services, as well as in the TMT, financial and professional services, AI will enhance these sectors’ contribution to the total GDP of China by 30 percent respectively. What this means is there are tremendous opportunities for higher access to research and development in the field of AI along with a plethora of AI-powered technologies across all industries. Thus, for foreign firms looking to abstract this emerging resource and to access these burgeoning technological localities along the east coast of China, China presents a golden opportunity for AI-based collaboration and innovation in the products and services.

How is Artificial Intelligence used in China?

Health in China

The medical fields have been one of the primary benefactors of AI-based technologies as well as one of the first industries to embrace AI. One of China’s leading AI startups in health is Infervision, an artificial intelligence high-tech company committed to applying deep learning technology to assist medical image diagnosis as efficient and accurate solutions. Infervision effectively uses various types of medical data to create clinically valued products and promotes precision analysis in the medical field especially in assisted image diagnosis. Based on years of research preparation, they launched the world first artificial intelligence precise healthcare platform and is the first to release intelligent X-ray assisted diagnosis products and intelligent CT assisted diagnosis products. These products are already in trials at Shanghai Changzheng Hospital, Tongji Medical College of HUST in Wuhan, and Dalian Zhongshan Hospital.

The company is also engaged in academic research and has established a deep cooperative relationship with top institutions in Chinese Radiology, combining both medical science and medical technology while laying a solid foundation for artificial intelligence breakthroughs in the medical field. Infervision has established cooperative business partnerships with close to 20 Tertiary Grade A hospitals and has successfully broken the barriers between medical data, technology, and application scenarios in China, creating a unique system of an artificial intelligence computing platform and precise healthcare intelligence system.

Driverless-vehicles in Mainland China

Driverless-vehicles in China

Although China possesses the world’s largest car market – both for conventional and electric vehicles – it still lags behind the US in terms of developing driverless vehicles for the road. For this industry component, the Chinese government has set the goal of having a manufacturing industry in place for sensors and embedded chips with a value exceeding the US $1.4 billion dollars by 2020.

An example of the practical application of artificial intelligence in this industry can be witnessed through the Chinese company Didi and its innovation motives to “Revolutionize the World’s Transportation and Automotive Technology through machine learning.” With the tremendous amount of data Didi collects every day, they are in a unique position to tackle traffic congestion and optimize navigation routes with AI technology. They launched the Didi Smart Transportation Brain that combines video camera and sensor data from Didi’s cars with data from the government and other partners. The objective is to create a city traffic management system powered by AI and cloud technology. The idea is that this will ultimately will result in smart traffic lights and monitoring systems that can be used in any metropolis with road congestion.

Furthermore, new technologies to enhance the rider’s experience such as an app-based augmented reality (AR) navigation service that helps passengers find their way through buildings, malls and train stations to reach a vehicle pick-up location, illustrate Didi’s dedication to remaining the transportation leader in China. In cars, a voice-activated digital assistant offers a wide range of services including audio and video content as wells as locations for fuel, recharging or repair services.

Computer-chips in China

China makes more than 90 percent of the world’s smartphones, 65 percent of all personal computers and 67 percent of smart televisions. However, the country relies on imports for most of the chips in these devices, valued at the US $260 billion last year. This facet outlines perhaps the biggest gap in China’s AI arsenal and explains this year’s move by the big Chinese tech companies into hardware. Specifically, Baidu, Huawei and Alibaba are among those working on building their own AI chipsets, with the e-commerce group spearheading a drive into quantum computing. Alibaba wants to have its first artificial intelligence chips on the market next year, although there remains ample skepticism over these companies’ ability to accelerate development in the field. For now, the chips driving much of China’s AI are from US chipmakers such as Qualcomm or Nvidia, including the software being largely foreign in origin.

In contrast, however, the Financial Times recently reported that Horizon Robotics, one of China’s leading designers of artificial intelligence chips, is raising up to $1bn in a funding round that will value it at between $3 and $4 billion. The three-year-old company, which is backed by Intel, is one of the leading Chinese groups focused on developing AI chips for self-driving vehicles, surveillance cameras and other internet-connected smart devices. Horizon, which was co-founded by Yu Kai, who led the self-driving project at Baidu, has a partnership with Audi to develop self-driving cars in the eastern city of Wuxi (无锡). Another of Horizon’s chips runs facial recognition algorithms and enables cameras to identify faces from a database in the device of up to 50,000 faces. The fundraising is one of the biggest in China’s nascent AI chip sector and comes as the nation is aggressively building up its semiconductor industry.

Chips in China Future with chips in China

Financial in China

China’s national banks are testing AI applications for wealth management and fraud prevention. China’s robot-advisory market – platforms that provide automated, algorithm-driven financial planning – is expected to be the world’s largest by 2020. Globally, the segment is expected to expand to the US $6.5 trillion by 2025, up from the US $100 billion in 2016. Alan Qi, the chief data scientist at Alibaba Group mobile payments affiliate Ant Financial, said his company relies on artificial intelligence to improve customer service, assess the creditworthiness of applicants for its micro-loans, and calculate risks of issuing its insurance products. Artificial intelligence, he noted, enables Ant to serve the 900 million customers with fewer than 10,000 employees.

China national banks AI robot-adisors in Beijing

Facial-recognition in China

China is developing a facial recognition system with a database of 1.3 billion ID photos that can be matched in seconds, with an accuracy rate of 90 percent. Recently, SenseTime became the most valuable AI start-up in the world. The company drives China’s ambition to dominate global AI.

Facial-recognition in China Sense Time AI start-up China

Retail in China

Retail in China

In 2017, 42 percent of global e-commerce transactions took place in China, more than France, Germany, Japan, Britain, and the United States combined. Big retailers have embraced online stores and chat-bot technologies, which can recommend products and predict when users will need certain products based on their online history and behavior. Alibaba drove the US $30 billion of sales over 24 hours on Singles’ Day in 2018, due to a combination of factors including consumer analytics using AI, machine learning, and cloud computing.

Robots in China

Robots in China

The Chinese robot market is forecast to grow at an average annual rate of 23.4 percent in the four years to 2019, much faster than global shipment growth of 13 percent, according to the International Federation of Robotics. China’s robot makers aim to supply 50 percent of the domestic market by 2020, rising to 70 percent by 2025. One of the most immediate and already live applications for robotics and artificial intelligence, in general, has been in using unmanned robots in warehouses and other environments, where they replace humans in repetitive jobs such as sorting and moving objects from A to B. In recent news, Beijing-based robotics startup Geek Plus (aka Geek+) says that it has raised $150 million dollars to seize that growing opportunity.

To date, Geek Plus says that it has delivered more than 5,000 robots across some 100 robotics warehouse projects in China, Hong Kong, Taiwan, Japan, Australia, Singapore, Europe, and the United States. Current customers include Alibaba’s Tmall and VIP.com out of Asia. Thus, we see that technology is revolutionizing the supply chain, and Geek+ is one of the leading technology companies that are able to combine robotics, big data, AI and other cutting-edge technologies to solve the pain points of the traditional supply chain. As it accumulates more data and continues to optimize algorithms and expand into other industries, companies like Geek+ will continue to lead the revolution and innovation in the space within the Chinese market.

Embracing Growth in China’s AI industry

It is widely evident that the nation’s political and business leaders are betting that AI can jump-start the Chinese economy, especially during these times of geopolitical uncertainty and macroeconomic instability. However, as we are witnessing a slowdown in manufacturing growth, the country is now looking towards a future built around advanced technologies. Applying artificial intelligence may be the next step in this technologically-fueled economic miracle. While many in the West worry about AI eliminating jobs and worsening wealth and income inequality, China at the current moment seems to believe it can bring out positive outcomes and improve the world. Thus, transforming from a manufacturing powerhouse into an innovation-oriented digital economy will take a deep understanding of technology trends and thorough preparation in terms of capital, human talent and infrastructure.

Author: Jeffrey Craig


Eyetracking in China is one of the technological methodologies developed by Daxue Consulting.

The purpose of such methodology is to track and understand the behavior of Chinese consumers in specific situations. Through eye-tracking in China, our teams analyze the patterns of your target consumers according to different displays or stimuli.


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[Podcast] China paradigm #13: How to grow a web agency in China from 0 to 3 million USD https://daxueconsulting.com/podcast-web-agency-china/ https://daxueconsulting.com/podcast-web-agency-china/#respond Fri, 30 Nov 2018 00:52:28 +0000 http://daxueconsulting.com/?p=39971 In this episode of China paradigm, Matthieu David, CEO of Daxue Consulting, interviews Aurélien Rigart, Co-founder of IT Consultis a Shanghai-based digital Agency. Rigart shares with us practical-based tips for starting a web agency in China. IT Consultis has done 450 projects with clients ranging from startups to large companies like Budweiser and Decathlon and […]

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In this episode of China paradigm, Matthieu David, CEO of Daxue Consulting, interviews Aurélien Rigart, Co-founder of IT Consultis a Shanghai-based digital Agency. Rigart shares with us practical-based tips for starting a web agency in China.

IT Consultis has done 450 projects with clients ranging from startups to large companies like Budweiser and Decathlon and has 70 full-time employees in three offices in Asia.

We learn how to hire the right tech people, how to manage the constantly changing tech scene in China, what are the challenges of opening in new locations like Ho Chi Minh City and Singapore.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.


Make the new economic China Paradigm positive leverage for your business

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

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[Podcast] China paradigm #8: How can businesses keep up with China’s changing mobile scene? https://daxueconsulting.com/china-paradigm-chinas-mobile-scene/ https://daxueconsulting.com/china-paradigm-chinas-mobile-scene/#respond Wed, 07 Nov 2018 09:29:49 +0000 http://daxueconsulting.com/?p=39262 In this episode of China paradigm, Matthieu David interviews Thomas Meyer, co-founder of Mobile Now Group. Thomas teaches us how businesses can keep up in China’s changing mobile scene, the best social commerce practices to do on WeChat, and some advice on getting to a good agreement with co-founding partners. Mobile Now Group has the […]

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In this episode of China paradigm, Matthieu David interviews Thomas Meyer, co-founder of Mobile Now Group. Thomas teaches us how businesses can keep up in China’s changing mobile scene, the best social commerce practices to do on WeChat, and some advice on getting to a good agreement with co-founding partners.

Mobile Now Group has the practical goal of helping companies build the best apps and responsive websites out there. They provide guidance, assistance and direction to you at each stage of your mobilisation strategy, including game consultancy, UI design and UX design.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.


Make the new economic China Paradigm positive leverage for your business

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

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Who can benefit from smart warehouses in China? https://daxueconsulting.com/smart_warehouses_in_china/ https://daxueconsulting.com/smart_warehouses_in_china/#respond Mon, 08 Oct 2018 00:50:39 +0000 http://daxueconsulting.com/?p=38436 In recent years, the smart warehouse market has boomed in China. China has the largest logistics market in the world with the total market value of 252.8 trillion CNY. Warehouse management is a significant part of modern logistics industry and also the most important part of many companies’ daily operations, but most of them are […]

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In recent years, the smart warehouse market has boomed in China. China has the largest logistics market in the world with the total market value of 252.8 trillion CNY. Warehouse management is a significant part of modern logistics industry and also the most important part of many companies’ daily operations, but most of them are still troubled by the low efficiency and high costs of traditional warehouses. Therefore, optimizing warehousing is the mission of many Chinese companies and smart warehouse has been considered the best solution.

As the key part of modern logistics, smart warehouse helps enterprises automatically storage and manage goods, saving costs and improve the utilization of warehouse space. Along with the “Industry 4.0” and “Made in China 2025” launched by the Chinese government, smart warehouses have been considering as one of the most important efforts for technology implementation in Chinese logistics market. In 2016 there were about 180 main companies participating in smart warehouse market. According to the research from GGII, the market size of smart warehouses has exceeded 59 billion CNY in 2017, and it will keep the trend of increasing the in next several years. Besides, smart warehouses have been applied widely in many fields in China such as pharmaceuticals, food and drinks, cross-border e-commerce, healthcare products and etc.

Smart Warehouse Market China

Source: GGII

Currently, automatic warehouses are the main model of smart warehouses in China. By the end of 2016, the number of automated warehouses has exceeded 3000 in China, up 19.3% compared 2015. During the same period, the total value of the automated warehouse system and relevant products has exceeded 39 billion CNY in China with 20% year-on-year growth. According to the “Forward the Economist” (前瞻经济学人), in the next 5 years, it will exceed 110 billion CNY with 10%-18% growth speed.


The e-commerce and delivery industries are promoting the development of smart warehouse

Costs and efficiency are the main issues of warehousing aspects for e-commerce and delivery companies and smart warehouse is the best solution for them.

  1. High costs of traditional warehousing

Since the rapid development of e-commerce industry, China’s logistics has been facing high costs for years and the costs of warehousing occupied a large account of them. By the end of 2017, the total costs of logistics have reached 12.1 trillion CNY in China, up 9.2% compared with 2016. Among all costs, storage fee has reached 3.9 trillion CNY, up 6.7% compared 2016. In the meantime, management costs have reached 1.6 trillion CNY, up 8.3%. The costs of warehousing mainly consist of storage and management expenses, thus, the share of warehousing costs have exceeded 40% among total logistics costs in 2017 in China. Besides, traditional warehouses normally cover a wide area, their high land costs is another issue.

For delivery companies, its boom is closely related to the growth of e-commerce in China. Based on the data from the National Bureau of Statistics, in 2017, the number of finished parcel deliveries has exceeded 40 billion, and there were 70% of them created by e-commerce. The most experienced part of delivery companies is sorting in warehouses, which takes 40% of their total costs. Especially for large delivery companies, they have to hire a large number of experienced employees to deal with the increasing number of parcels.

  1. Low efficiency of traditional warehousing

Due to online shopping is extremely popular among Chinese people, the demand for warehousing is getting higher and higher. During the well-known event “Double 11” (双11) in 2017, the number of delivery orders exceeded 657 million. But, traditional warehouse relies on a lot of experienced employees who are hard to hire and could cause the wasting of human resources. Also, it is hard for the traditional warehouse to avoid errors during the peak period of logistics.

In order to decrease the costs and improve efficiency, e-commerce and delivery companies have started to build smart warehouses since they have obvious advantages to achieve the targets. For instance, in September 2017, “JD” (京东商城) firstly introduced its smart warehouse system, the unmanned warehouse “No1. Asia” (亚洲一号). According to the data from JD, the storage efficiency of the unmanned warehouse is 5 times of traditional warehouse and it can make full use of warehouse space with a way of high-density storage. In the sorting step, the sorting machines in unmanned warehouses have capable of sorting 40 thousand goods per hour with the accuracy of 99.99%, which has exceeded 10 times of manual sorting in traditional warehouses. By building and using unmanned warehouses with the highly automated system, JD succeeded in reducing labour costs and effectively relieves the stress from popular shopping events in China, such as Double 11 and 618.

Sorting robots in JD's warehouse

Sorting robots working in JD’s unmanned warehouse

Except for JD, other e-commerce and delivery companies like Alibaba, ShenTong (申通快递) and Shunfen (顺丰快递) also joined the smart warehouse market. Also in September 2017, “Cainiao” (菜鸟网络), the largest logistics platform under Alibaba Group, started to launch smart warehouse system with a group of robots in China. In 2016, ShenTong, the well-known delivery company in China, has started to use automated sorting robots in their warehouses.

High-tech automatic equipment is essential for smart warehouses in China

Smart warehouses are the representative of automation and robot usage in Chinese logistics market. The key part of a smart warehouse is to replace people with highly automated machines. By using automatic robots, a smart warehouse can save around 70% labour costs. Nowadays it is not difficult to produce and purchase automatic robots benefited from the development of the automation industry in China, and the one mostly used by smart warehouses is an automated guided vehicle (AGV). Based on the different purposes in smart warehouses, AGV can be divided into 4 major kinds.

  1. Picking robots

Picking robots are used to move goods shelves to certain administrators and areas based on the orders they received.

Suning warehouse robots

Picking robots are moving shelves in Suning’s smart warehouse

  1. Sorting robots

After receiving orders, by scanning a barcode, sorting robots will automatically choose routes and move different kinds of products to their own processing areas.

Smart warehouse sorting robots

Sorting robots are working in a smart warehouse of ShenTong

  1. Handling robots

By using vision-based navigation technology, this kind of robot can auto-complete any transforming task between any two points in the smart warehouse

smart warehouses handling robot china

Handling robot designed by JATEN Group

  1. Palletizing robots

Palletizing robots are mainly presented as robot arms, they can be used to automatically stack and pack goods in a smart warehouse.

smart warehouse robots in china

Most common palletizing robot


This kind of emerging sector (unmanned warehouses, but also unmanned stores for instance) is also a support for the development of high-end tech in China, where the objective is clearly to lead the worldwide market: facial recognition, AI, automated robot, drones, data processing etc. —— Thibaud Andre, Daxue consulting


Automatic technologies also bring costs and challenges to smart warehouses in China

For building a smart warehouse, the main costs and challenges also come from automated machines and technologies behind them. According to the data from some providers and e-commerce platforms such as Taobao, unite price range of palletizing robot is between 20 thousand CNY to 100 thousand CNY. The average unit price of sorting robot is around 150 thousand CNY. However, the prices are only for reference, the actual price is closely connected with the functions, quality and quantity of those automatic robots. Moreover, in order to build a smart warehouse, hundreds of automatic robots are necessary. Thus, the costs of building a highly automatic system are hard afforded by small companies.

Due to the purpose of smart warehouses is to replace human staff by automatic machines, the most important parts are controlled and organize hundreds of robots to build a highly efficient group and deal with a large number of packages. As we know, the technologies used in smart warehouses mainly consist of automatic control technology, intelligent robot technology, intelligent information management technology, mobile computing technology, data mining technology etc. But, many manufacturers and providers still have to import some core technologies such as automatic control technology and mobile computing technology. In some circumstances, part of companies even needs purchase hardware from overseas such as highly automatic sensors on robots. In addition, the key problem for palletizing robot is the control system, the control system used by domestic companies has obvious disadvantages on control precision and quick response. For solving those issues in smart warehouses, domestic companies have to focus on R&D and importing with high costs.


Industrial and intelligent robots manufacturers will benefit from the development of smart warehouse in China

China has been the world largest robots consumption market as early as 2013, but domestic manufacturers only owned 30% market shares and most of them only confined to low-end products. Along with the rising of smart warehouse market, the demand for industrial and intelligent robots has been growing for years in China. More and more capable e-commerce and delivery companies will start to build smart warehouses to improve their efficiency of logistics, thus, domestic providers and manufacturers will achieve great benefits from smart warehouse market if they can develop products with more advanced technologies.


China Paradigm Episode #6: How to get China’s largest companies behind your tech startup

For deeper insight into China’s smart warehousing, see the China Paradigm podcast interview with Shuyang Cao, one of China’s leading experts and entrepreneurs on smart warehousing robotics. Shuyang is the co-founder of Malu Innovation, a company that is revolutionizing warehousing in China and the rest of the World. This interview covers starting a warehouse robotics company from scratch, the journey of building the robots, and how the founders convinced JD.com to invest in their business.

China Paradigm is brought to you by Daxue Consulting


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Daxue Consulting has developed an extensive experience and network among the Chinese smart city ecosystems and related industries, including projects in data processing systems, connectivity offer monetization, and smart lighting and urbanization models. Our team can answer your need for information and leverage our knowledge of the market to provide key strategic insights on your implementation in China. Contact us for more information and set up a call with one of our senior research directors.

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App Market in China https://daxueconsulting.com/app-market-in-china/ https://daxueconsulting.com/app-market-in-china/#comments Wed, 08 Jul 2015 10:30:54 +0000 http://daxueconsulting.com/?p=17575 As Chinese continue equipping themselves with mobile phones at a very fast rate, the app market in China is enjoying a similarly large growth. Today there are 1.29 billion mobile users in China, and that mobile phone market is fueling the app market. Recently, with the success of the iPhone 5 (featuring a larger screen), […]

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app-market-china-daxue-consulting-3

As Chinese continue equipping themselves with mobile phones at a very fast rate, the app market in China is enjoying a similarly large growth. Today there are 1.29 billion mobile users in China, and that mobile phone market is fueling the app market. Recently, with the success of the iPhone 5 (featuring a larger screen), the number of apps downloaded on the IOS store has reached record levels in China. This has been pushed to the extent that the Chinese are now downloading more IOS apps than the US. The app market is one of the most dynamic markets in China and is producing sky-high revenues.

The huge potential in app development is clearly demonstrated by the $200 million invested by Alibaba group into Snapchat and the $15 billion raised for the development of China’s largest Uber rival, DiDi DaChe. For example, more than 75% of the Chinese game industry’s revenue is attributed to mobile game apps. Apps are delivering new opportunities that are inspiring the largest entrepreneurial groups in China.

Trends in the Chinese app market

Despite having many apps imitated from the US such as Baidu browser, Baidu Maps and Baidu Photo Wonder, effectively identical in function and sometimes even look to Google apps, the Chinese are welcoming unique and innovative apps. China is displaying an advantage in terms of payment apps over any other region, partly because credit cards are not very widespread in the country. These payment apps are powered by the demand for getting things delivered at home. Alipay saw the fastest growth in the last few years, however new apps are taking over, such as Tenpay, Bestpay and Lakala. This year Lakala is seeing a growth of 20%. Another type of app that is particularly successful on the app market in China concerns language classes. According to China Internet Network Information Center (CINNIC), in 2013 there were more than 200 million people using their mobile device to access some form of Mobile Learning content.

The app market stretching business implementations

In addition to using phones frequently and in large quantities, China has the largest 3G subscriber population in the world. Their number is estimated to be 1.4 times greater than the US. As a result, apps requiring access to 3G Internet are developing with more ease in China. Wechat, for example, has reached 549 million monthly active users, with the vast majority located in China. The QQ international app is the 2nd largest messaging app and accounted 321.8 million users. The popularity of those apps is enabling new opportunities for businesses, as they are more than just messagins apps. Brands are using social media apps to reach the young generation, suggesting discounts, as well as developing and promoting the image of the business.

Chinese app market transformations

The Chinese app stores are performing 2/3rd of world’s downloads and amongst them 2/3rd of apps downloaded are in Chinese language. Translating an app into Chinese before promoting them on the Chinese app market is essential to ensure large download amounts. Furthermore, QR codes are very popular and commonly used to spread apps to consumers. Their utilisations should be analysed closely in order to promote an app in China. Unlike the West, Android users on the app market in China have a choice of more than 200 android app markets. Some surprising apps appear across the platforms. For example, an app called Didi Da Ren (Didi hit people) enabled customers to hire a thug to beat up a chosen target, in a rather twisted reinterpretation of the Didi Dache car hiring service. This app has since been banned, but it does show that there is space in the app market for virtually any sort of service, and launching on an app store is comparatively simple.

The perspective of the rise of a new, highly profitable and difficult to control market is being eyed closely by the Chinese government. For the first time, the Chinese government has put into place regulations for messaging apps: from now on all Wechat users must agree to comply with a strict set of regulations governing online behaviour. According to Chinese representatives the regulation will ensure “building a clean cyberspace.” Government tampering is likely to cause significant damages to the app market, though a thriving grey market is expected to continue growing.

Sources:

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Branding China: How Lenovo started: 11 engineers and 200,000 yuan capital https://daxueconsulting.com/how-lenovo-started/ https://daxueconsulting.com/how-lenovo-started/#respond Sun, 28 Sep 2014 15:24:00 +0000 http://daxueconsulting.com/?p=14722 Branding China: How Lenovo started: 11 engineers and 200,000 yuan capital Lenovo is originally a Chinese company, founded in 1984 by Liu Chuanzhi in Beijing. Starting capital of the company was 11 engineers and 200,000 yuan. All 11 founders of Lenovo were middle-aged graduates and members of the Institute of Computing Technology, Chinese Academy of […]

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Branding China: How Lenovo started: 11 engineers and 200,000 yuan capital

Lenovo is originally a Chinese company, founded in 1984 by Liu Chuanzhi in Beijing. Starting capital of the company was 11 engineers and 200,000 yuan. All 11 founders of Lenovo were middle-aged graduates and members of the Institute of Computing Technology, Chinese Academy of Sciences. The original name, assigned to the company, was the Chinese Academy of Sciences Computer Technology & Research Institute New Technology Development Company.

Lenovo start was difficult, because of lack of managerial and branding strategy

Lenovo China

The first few initiatives, including digital watches and importation of televisions, were not successful due to insufficient demand. The very first major success of Lenovo came after one year of existence. The company attempted to create a circuit board, which made it possible for IBM computers to process Chinese characters. The biggest problem, the company came up with at the first stages of its development, is the lack of business competence, in particular to build the brand in Chinese consumer minds. Liu Chaunzhi commented on it: “Our management team often differed on which commercial road to travel. This led to big discussions, especially between the engineering chief and me. He felt that if the quality of the product was good, then it would sell by itself. But I knew this was not true, that marketing and other factors were part of the eventual success of a product…we were mainly scientists and didn’t understand the market…we just learned by trial-and-error, which was very interesting—but also very dangerous”. The biggest challenge, the company came across on its way to success, was the lack of specialists in the areas of marketing and economics. As Liu said, team members were all engineers without any knowledge of economy. Moreover, at that time it was not so easy to find information about market trends, business models, branding and effective promotion campaign in China. The company emerged at the time, when this information did not formally existed making it more difficult to grow globally.

Effective marketing process leaded Lenovo to go global

Branding ChinaHowever, Lenovo did so. It now has operations in more than 60 countries, while selling its brand in over 160 countries. The first major attempt to employ high-quality specialists in various areas was made in May 1988. The company placed an advert on the front page of China Youth News, which was not common in China at that time. 500 young professionals were competing for 16 places. As a result of various test and interviews, 58 jobs were offered. Yang Yuanqing, current chief executive officer, was among them. In 1988, the company started to expand by opening a new subsidiary in Hong-Kong. 5 other workers, who moved to work there, were encouraged to save money, used for companies’ development; they were walking to work rather than taking public transport. After 1944, Lenovo became publicly traded; as a result of this, it earned almost US$30 million.

Nowadays, Lenovo is a multinational corporation, which has its headquarters in Beijing and Morrisville, in the US. The company does all range of activities from designing to manufacturing. Its products include tablet computers, smart phones, televisions and personal computers. In 2013, Lenovo was the largest personal computer vendor in the world by the volume of sales and its branding strategy is seen as a reference among Chinese firms.

 

For further reference, go to:

http://www.tmd-oxford.org/sites/www.tmd-oxford.org/files/publications/SLPTMD-WP-059.pdf

http://www.techradar.com/news/portable-devices/other-devices/lenovo-debuts-its-prototype-smart-glasses-1258891

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Tencent introduced WeChat payments for foreigners in China https://daxueconsulting.com/wechat-payments-foreigners-china/ https://daxueconsulting.com/wechat-payments-foreigners-china/#comments Wed, 24 Sep 2014 12:36:58 +0000 http://daxueconsulting.com/?p=14667   Tencent introduced WeChat payments for foreigners in China When it comes to WeChat and its business optimization, Thomas Graziani is probably one of the most significant voices in China. We have met the co-founder of WalktheChat in Beijing. We discussed about Wechat payments for foreigners in China. WeChat is aggressively trying to expand outside […]

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Tencent introduced WeChat payments for foreigners in China

When it comes to WeChat and its business optimization, Thomas Graziani is probably one of the most significant voices in China. We have met the co-founder of WalktheChat in Beijing. We discussed about Wechat payments for foreigners in China.

WeChat is aggressively trying to expand outside China. Its main targets are South America, Africa and other Asian countries. Therefore, it seems natural that foreigners can use WeChat payments in order to handle their purchases. This function is also available for foreigners living in China and using Chinese banks, although not with all banks.

Where to find WeChat payment?

You can access WeChat payment through the “Me”=>”My Bank Cards” tab of WeChat. If you can’t find this tab, you might want to switch your WeChat settings to Chinese for a bit in order to see if it solves the problem.

Wechat payments

What can I do with WeChat payments?

WeChat payments offer a lot of extremely convenient functions, including for foreigners in China:

–       Order taxi (Didi dache) enables you to conveniently call a taxi from most big cities in China. It is the software that you keep hearing in cabs in Beijing getting calls from customers everywhere in the city

–       Mobile Top Up (wonderful function, no more need to go online or buy tons of top-up cards)

–       e-commerce, in partnership with Jingdong in which Tencent recently took a 15% stake

–       Money transfer to other WeChat accounts

–       Go Dutch

–       Integration with Dianping to buy “groupon-style” meals (in which Tencent also invested)

–       Movie ticket booking

–       Air ticket booking

–       Financial products

–       Lottery

–       Charity donations

–       Train Ticket Booking

–       Find a Didi, the Chinese Uber

–       Order food

–       Pay your utilities bill

Needless to say integrating your bank card to WeChat can simplify your life quite a bit.

Which banks can I use to register myself on WeChat payment?

Not all banks let foreigners sign-up on WeChat payment. Some of them will require a Chinese ID and you’ll get stuck in the process. Here is data as of the 1st of February 2018 for major Chinese banks:

–       China Merchants Bank: possible with both debit and credit cards

–       Agricultural Bank of China: only for credit cards

–       All Mastercard, Visa and JCB cards: possible (although foreign bank cards can’t be used for all purpose. For instance p2p money transfers aren’t possible with foreign accounts)

 

How to register a new card?

When you entered the “My Bank Cards” panel the process is very straightforward: simply select “Cards” on top top-left corner and then “add a card”.

You will be prompted to enter your card details: enter your card number, personal details and phone number and there you go.

online strategy China

New swipe card function

WeChat just introduced a “swipe card” function (competing with Apple Pay) that you can use in order to pay at the cashier. The function displays a QR code that the partner vendors can scan and which will directly charge any amount bellow 300 RMB without having to enter a password (you however will have to input one for amount above 300 RMB).

This function will soon be combined with more after-sale services enabling you to get discounts or track your previous purchases. So WeChat will make your shopping experience more integrated even beyond the payment systems.

 

To learn more about WeChat and the Chinese market, contact us or follow us on Twitter:


 


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Entry of Xbox, Nintendo and PlayStation in China https://daxueconsulting.com/xbox-nintendo-and-playstation-in-china/ https://daxueconsulting.com/xbox-nintendo-and-playstation-in-china/#respond Tue, 05 Aug 2014 08:46:13 +0000 http://daxueconsulting.com/?p=14046 Entry of Xbox, Nintendo and PlayStation in China In January 2014, China has lifted a 14-year-old ban on foreign gaming consoles: based on the concern that it might have negative impact on children, the ban was lifted within Shanghai’s free-trade zone, and consoles, can now be sold all across Mainland China. Our focus is on […]

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Entry of Xbox, Nintendo and PlayStation in China

In January 2014, China has lifted a 14-year-old ban on foreign gaming consoles: based on the concern that it might have negative impact on children, the ban was lifted within Shanghai’s free-trade zone, and consoles, can now be sold all across Mainland China. Our focus is on the market entry strategy of Xbox, Nintendo and PlayStation in China.

Xbox, Nintendo and PlayStation set up China market entry strategy

A frenzy after the announcement, the largest gaming consoles company have made their moves : although under-developed right now, the video-gaming-console market in China is promising and appealing for internationally renowned firms willing to give a try at prompting Chinese players, used to play on their personal computers or tablets, to migrate towards video gaming consoles. As such, Microsoft with their Xbox, Nintendo and Sony with their PlayStation have carefully begin to craft their Chinese market strategy.

Xbox enter China market through local partnership

Xbox in China

Microsoft first announced they’d begin selling their Xbox One video-game console through their partnership with BesTV New Media Co, and aiming at establishing « an innovation program that will enable creators and developers to build, publish, and sell their games on Xbox One in China ». In July 31, they’ve begun taking preorders through Tencent’s WeChat & QQ, competing with Alibaba through this promising partnership. Consoles will be delivered starting from September. With a deposit fee of 499 RMB, and their preorder method, Microsoft has clearly defined their target clientele: young and sophisticated Chinese consumers, well-off enough to afford paying for the Xbox One (500$ in the U.S., it’s a price range that’s quite high in China) and already using their smartphones or tablets to play. The firm will most likely continue its market strategy in this direction, launching games and advertisement campaigns targeting essentially this clientele.

Nintendo relies on innovation to suit Chinese consumers patterns

Nintendo China

After Microsoft’s announcement, Nintendo also stepped up its game : CEO Satoru Iwata claimed that they « wanted to make new things, with new thinking rather than a cheaper version of what [they] currently had, the product and price balance must be made from scratch. » Indeed, though China might become the largest video-game market in the world, it seems not yet ready to take on the sophisticated and pricey consoles sold in the West: right now, most players are used to playing on their phones, tablets and personal computers, and are quite satisfied with it. In order to appeal to them, video game console companies must try to innovate and create new content that will ease them into the video gaming console world. That’s Nintendo’s strategy, and it seems their new console will target all BRIC countries, not only China. Launching the one machine that would suit the newly born Chinese video gaming market could help the company cover the massive losses they experienced due to their western launch of the Wii U, and hopefully announce a brighter tomorrow for Nintendo.

PlayStation will face the piracy challenge in China

Playstation in China

As for the PlayStation in China, Sony agreed to form two ventures with Shanghai Oriental Pearl Group Company, which would be held responsible for making and selling their trusty consoles. Following Nintendo’s take on the Chinese video gaming console market, many thought PlayStation in China would take a similar turn ; however it’s still unclear whether their market strategy will be closer to Nintendo’s or to Microsoft’s. What’s clearly stated though is that Sony will take on the piracy challenge head-on: console makers will be faced with the unavoidable issue of having to sell pricey hardware to a generation of gamers used to a free online model, and tempted by easy piracy.

Through diverse market strategies, the top three largest video gaming companies have delved into the new and appealing Chinese video gaming market, hoping to take on the difficult challenge that might eventually crown them as the ruler of the largest video game console market of the world.

[More about Market entry strategy in China]

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