The rapid growth of the Chinese internet and where its headed Gary Liu
Once every 12 months,
the world’s largest human migration
happens in China.
Over the 40-day travel period
of Chinese New Year,
three billion trips are taken,
as families reunite and celebrate.
Now, the most strenuous
of these trips are taken
by the country’s 290 million
migrant workers,
for many of whom
this is the one chance a year
to go home and see parents
and their left-behind children.
But the travel options are very limited;
plane tickets cost nearly half
of their monthly salary.
So most of them, they choose the train.
Their average journey is 700 kilometers.
The average travel time
is 15 and a half hours.
And the country’s tracks
now have to handle 390 million travelers
every Spring Festival.
Until recently,
migrant workers would have to queue
for long hours – sometimes days –
just to buy tickets,
often only to be fleeced by scalpers.
And they still had to deal
with near-stampede conditions
when travel day finally arrived.
But technology has started
to ease this experience.
Mobile and digital tickets
now account for 70 percent of sales,
greatly reducing the lines
at train stations.
Digital ID scanners
have replaced manual checks,
expediting the boarding process,
and artificial intelligence
is deployed across the network
to optimize travel routes.
New solutions have been invented.
China’s largest taxi-hailing platform,
called Didi Chuxing,
launched a new service called Hitch,
which matches car owners
who are driving home
with passengers looking
for long-distance routes.
In just its third year,
Hitch served 30 million trips
in this past holiday season,
the longest of which
was further than 1,500 miles.
That’s about the distance
from Miami to Boston.
This enormous need of migrant workers
has powered fast upgrade and innovation
across the country’s transport systems.
Now, the Chinese internet has developed
in both familiar and unfamiliar ways.
Just like in Silicon Valley,
some of the seismic shifts
in technology and consumer behavior
have been driven by academic research,
have been driven by enterprise desires,
with the whims of privilege and youth
sprinkled in every once in a while.
I am a product
of the American tech industry,
both as a consumer and a corporate leader.
So I am well acquainted
with this type of fuel.
But about a year and a half ago,
I moved from my home
in New York City to Hong Kong
to become the CEO
of the South China Morning Post.
And from this new vantage point,
I’ve observed something
that is far less familiar to me,
propelling so much of China’s innovation
and many of its entrepreneurs.
It is an overwhelming need economy
that is serving
an underprivileged populous,
which has been separated for 30 years
from China’s economic boom.
The stark gaps that exist
between the rich and the poor,
between urban and rural
or the academic and the unschooled –
these gaps, they form a soil
that’s ready for some
incredible empowerment.
So when capital and investment
become focused on the needs of people
who are hanging to the bottom rungs
of an economic ladder,
that’s when we start to see the internet
truly become a job creator,
an education enabler
and in many other ways, a path forward.
Of course, China is not the only place
where this alternative fuel exists,
nor the only place where it is possible.
But because of the country’s sheer scale
and status as a rising superpower,
the needs of its population
have created an opportunity
for truly compelling impact.
When explaining the rapid growth
of the Chinese tech industry,
many observers will cite two reasons.
The first is the 1.4 billion people
that call China home.
The second is the government’s
active participation –
or pervasive intervention,
depending on how you view it.
Now, the central authorities have spent
heavily on network infrastructure
over the years,
creating an attractive
environment for investment.
At the same time, they’ve insisted
on standards and regulation,
which has led to fast consensus
and therefore, fast adoption.
The world’s largest pool
of tech talent exists
because of the abundance
of educational incentives.
And local, domestic companies,
in the past, have been protected
from international competition
by market controls.
Of course, you cannot observe
the Chinese internet
without finding widespread censorship
and very serious concerns
about dystopian monitoring.
As an example:
China is in the process of rolling out
a social credit rating
that will cover its entire population,
rewarding and restricting citizens,
based on highly
qualitative characteristics
like honesty and integrity.
At the same time,
China is deploying facial recognition
across many of its 170 million
closed-circuit cameras.
Artificial intelligence is being used
to predict crime and terrorism
in Xinjiang province,
where the Muslim minority
is already under constant surveillance.
Yet, the internet has continued
to grow, and it is so big –
much bigger than I think
most of us realize.
By the end of 2017,
the Chinese internet population
had reached 772 million users.
That’s larger than the populations
of the United States, Russia,
of Germany, of the United Kingdom,
of France and Canada combined.
Ninety-eight percent of them
are active on mobile.
Ninety-two percent of them
use messaging apps.
There are now 650 million
digital news consumers,
580 million digital video consumers,
and the country’s largest
e-commerce platform, Taobao,
now boasts 580 million
monthly active users.
It’s about 80 percent larger than Amazon.
On-demand travel, between bikes and cars,
now accounts for 10 billion
trips a year in China.
That’s two-thirds of all trips
taken around the world.
So it’s a very mixed bag.
The internet exists in a restricted,
arguably manipulated form within China,
yet it is massive and has vastly improved
the lives of its citizens.
So even in its imperfection,
the growth of the Chinese internet
should not be dismissed,
and it’s worthy of our closer examination.
Let me tell you two other stories today.
Luo Zhaoliu is a 34-year-old engineer
from Jiangxi province.
Now, his home region used to be
extremely important to the Communist party
because this was the birthplace
of the Red Army.
But over the decades,
because of its separation
from the economic and manufacturing
centers of the country,
it has slid into irrelevance.
Luo, like so many in his generation,
left home at a young age
to look for work in a major city.
He ended up in Shenzhen,
which is one of China’s tech hubs.
As the young migrate,
these rural villages
are left with only elderly,
who are really struggling to elevate
themselves above abject poverty.
After nine years, Luo decided
to return to Jiangxi in 2017,
because he believed that the booming
e-commerce marketplace in China
could help him revive his village.
Like many rural communities,
Luo’s home specialized in
a very specific provincial craft –
making fermented bean curd, in this case.
So he started a small factory
and started selling
his locally made goods online.
There have been many years
of consumption growth
across China’s major cities.
But recently, technology has been driving
an explosion in craft goods sales
among China’s middle and upper classes.
WeChat and other e-commerce
platforms allow rural producers
to market and sell their goods
far beyond their original
distribution areas.
Research companies
actually track this impact
by counting what is called
“Taobao villages.”
This is any rural village where at least
10 percent of its households
are selling goods online
and making a certain amount of revenue.
And the growth has been significant
in the last few years.
There were just 20
Taobao villages in 2013,
212 in 2014,
780 in 2015,
1,300 in 2016
and over 2,100 at the end of 2017.
They now account for nearly
half a million active online stores,
19 billion dollars in annual sales
and 1.3 million new jobs created.
In Luo’s first year back home,
he was able to employ 15 villagers.
And he sold about 60,000 units
of fermented bean curd.
He expects to hire 30 more people
in the next year,
as his demand rapidly rises.
There are 60 million left-behind children
scattered across China’s rural landscape.
And they grow up with at least one parent
far away from home,
as a migrant worker.
Alongside all the general
hardships of rural life,
they often have to travel
vast and dangerous distances
just to get to school.
They account for 30 percent
of the country’s primary
and high school students.
Ten-year-old Chang Wenxuan
is one of these students.
He walks an hour each way
every single day to school,
across these deep ravines,
in an isolated landscape.
But when he arrives at the small
farming village in Gansu province,
he will find just two other students
in this entire school.
Now, Chang’s school is one
of 1,000 in Gansu alone
that has less than five
registered students.
So with limited student interaction,
with underqualified teachers
and schoolhouses that are
barely furnished and not insulated,
rural students have
long been disadvantaged,
with almost no path to higher education.
But Chang’s future has been
dramatically shifted
with the installation
of a “Sunshine Classroom.”
He’s now part of a digital
classroom of 100 students
across 28 different schools,
taught by qualified and certified teachers
live-streaming from
hundreds of miles away.
He has access to new subjects
like music and art,
to new friends
and to experiences that extend
far beyond his home.
Recently, Chang even got to visit
the Frederiksborg Castle museum
in Denmark –
virtually, of course.
Now, online education has existed
for many years outside of China.
But it has never reached
truly transformative scale,
likely because traditional
education systems
in other tech centers of the world
are far more advanced and far more stable.
But China’s extreme terrain and size
have created an enormous and immediate
need for innovation.
There’s a tech start-up in Shenzhen
that grew to 300,000 students
in just one year.
And by our best estimation at the Post,
there are now 55 million
rural students across China
that are addressable and accessible
by live-streaming classes.
This market of need is larger
than the entire US student population
between kindergarten and grade 12.
So I’m extremely encouraged to find out
that private investment
in ed-tech in China
now exceeds one billion dollars a year,
with another 30 billion dollars
in public funding
that is committed between now and 2020.
As the Chinese internet continues to grow,
even in its imperfection
and restrictions and controls,
the lives of its
once-forgotten populations
have been irrevocably elevated.
There is a focus on
populations of need, not of want,
that has driven a lot
of the curiosity, the creativity
and the development that we see.
And there’s still more to come.
In America, internet
population, or penetration,
has now reached 88 percent.
In China, the internet has still
only reached 56 percent of the populous.
That means there are
over 600 million people
who are still offline and disconnected.
That’s nearly twice the US population.
An enormous opportunity.
Wherever this alternative fuel exists,
be it in China or Africa,
Southeast Asia or the American heartland,
we should endeavor to follow it
with capital and with effort,
driving both economic
and societal impact all over the world.
Just imagine for a minute
what more could be possible
if the global needs of the underserved
become the primary focus
of our inventions.
Thank you.
(Applause)