The Digitization of Business in China

Sacha Cody

The transformation of China’s business environment in the 21st century has been profound. Manufacturing as a share of GDP has declined by 10 per cent while agriculture’s share of employment has halved. Workers’ wages have increased by over 1,000 per cent while the number of people employed in tertiary industries surpassed those employed in primary and secondary industries. The Internet, e-commerce and all manner of digitally-enabled business platforms and services have proliferated across the nation: Baidu, Alibaba, and Tencent alone have transformed business practices in urban and rural communities and become household names in the process. Today, China is home to over one-third of the world’s ‘unicorns’; tech start-ups valued at more than USD 1 billion.

These developments are partly explained by the government’s ambitious initiatives and bold policy bets; Made in China 2025, for example, aims to automate and digitize China’s manufacturing industry and establish new ‘smart’ industries powered by intelligent computing. Moreover, the promotion of ‘mass entrepreneurship’ is heralding profound changes in traditional industries; young Chinese are embarking on careers in agriculture as technicians rather than farmers. In short, business in China today is not the same as it was only 15 years ago. It is unlikely to be the same in 10 years.

Many questions arise from these observations and Young-Chan Kim and Pi-Chi Chen’s edited volume The Digitalization of Business in China: Exploring the Transformation from Manufacturing to a Digital Service Hub is timely. Yet while the volume contains several insightful contributions it fails to articulate a clear point of view or deliver a comprehensive assessment on this important topic.

Let us first explore the insightful contributions. Michelle Wong’s chapter on China’s online Peer-to-Peer lending platforms (Chapter 2) is very interesting. Wong highlights how fintech innovation is helping small and medium-sized enterprises and poorer rural businesses access capital in an environment where risk-averse banks prefer to lend to larger state-owned enterprises. This is an important topic for a country that strives to nurture entrepreneurship. In explaining this fascinating industry, Wong highlights the challenges entrepreneurs encounter in a nation where financial literacy can be low and fraud is rife.

Peng Gao’s chapter on online crowdfunding (Chapter 3) is equally intriguing for what she reveals about social trust; Chinese are willing to help out strangers in trouble and are happy to donate money in small amounts on a regular basis. I was amazed to learn that China accounts for just over half of the world’s USD 100 billion crowdfunding market. Built through thousands of small donations over time, Gao highlights the gift-like nature of China’s crowdfunding industry and challenges Western perspectives that impersonal calculations characterize modern relationships in Chinese cities today.

Finally, Pi-Chi Chen’s chapter on China’s social networking and monolith app WeChat (Chapter 5) and Young-Chan Kim’s contribution on Alibaba and Jack Ma (Chapter 9) are also noteworthy because they interrogate two key economic institutions driving transformation across China’s business environment (note: Chen and Kim are the book’s editors). Chen discusses the penetration of WeChat – which currently has almost 900 million users – across Chinese society, its censorship, and surveillance practices as well as the ambiguous feelings Chinese may have toward the the app (they can feel trapped but continue nonetheless). Kim’s exploration of Alibaba is interesting for its original perspective; he claims Alibaba’s success is not linked to strategy but resides in political connections: Jiang Zhicheng’s (grandson of former President Jiang Zemin) private equity firm Boyu Capital bought Yahoo!’s 40 per cent share of Alibaba, helping the firm attain duty free industry rights; Winston Wen (son of former Premier Wen Jiabao) has significant shares in Alibaba as does He Jinlei (son of the former Secretary of the Central Commission for Discipline Inspection, the party's anti-corruption agency, He Guoqiang) via his roles in key state-owned investment firms.

Aside from these insightful chapters, the volume has several flaws. First, it lacks focus and fails to articulate a clear theme or argument. Its stated aims are the problem: to examine ‘the digitalization of Chinese businesses both theoretically and practically. Taking a fresh and unique approach, the authors seek to adopt individual theories for each empirical case explored and investigate the dramatic digital transformation that Chinese firms have undergone in recent years’ (back cover). In allowing ‘individual theories for each empirical case explored’, Kim and Chen avoid tackling core topics that I argue are crucial to understanding digitalization in China, such as surveillance, censorship, class relations as well as China’s international assertiveness. The volume fails to draw important international comparisons or address sticky issues: how accurate is the Western media’s portrayal of surveillance capitalism in China?; what can we learn from China's growing digital prowess in matters pertaining to geopolitics and geoeconomics?; are network effects the same in China as in the West?

Second, the book’s introduction and conclusion are weak. The introduction appears to have been written for another publication and purpose a long time ago; it uses outdated data from 2012 (a lifetime ago if one wishes to understand digitalization in China) and uses advertisements from the early 2000s as major case studies. The conclusion is essentially a stand-alone chapter that suddenly discusses cross-border e-commerce, a topic not previously mentioned.

Third, several contributions are irrelevant. I struggled, for example, to see what a detailed linguistic analysis of luxury hotel websites in Hong Kong (Chapter 4) explicates about the digitalization of Chinese businesses. I also struggled to appreciate a highly technical discussion of digital dentistry tools (Chapter 8). I am not criticizing the scholarship – these chapters are meticulously researched and written – but rather their inclusion; the former is relevant for a linguistically-focused audience while the latter seems written for a technical audience (or even practicing dentists). Other chapters are similarly ill-suited for the volume; Chapter 7 discusses brand image and trust in the Vietnam tourism industry without really mentioning digitalization or China. And chapter 6 claims to discuss Chinese consumers in Indonesia but a close reading does not yield anything tangible on this topic. While an analysis of China’s digital impact across the region is important, these chapters fall short.

In summary, while there are several strong stand-alone chapters, the reader will not gain anything approximating a comprehensive understanding of the digitalization of business in China; the contributions are too unrelated.