By Kevin Lings*
On 22 January 2016, China Internet Network Information Center (CNNIC) released its 37th Statistical Report on Internet Development in China. According to the Report, as of December 2015, China had 688 million internet users, accounting for half of the total population of the country, with an internet penetration rate of 50.3%. As recently as 2005, China internet penetration was a mere 8.5% (see chart attached).
China’s internet penetration rate of 50.3% compares with 92.3% in South Korea, 91.6% in the UK, 90.6% in Japan, 87.4% in the United States, 88.4% in Germany, and 83.8% in France. At the opposite end of the scale, Africa’s internet penetration is worryingly low at only 28.6%. (South Africa is at 49%, while Kenya has the highest penetration rate in Africa at 69.6%).
According to the latest CNNIC report, mobile phones are becoming an increasingly important means to accessing the internet in China, and the main factor for driving the growth of the size of internet users. As of December 2015, the number of mobile internet users in China had reached 620 million, and 90.1% of the internet users used mobile phones to access the internet. This does not mean all these people only used mobile phones to access the internet, but rather mobile phones have become a key means of accessing to the internet. (The number of internet users in China who only used mobile phone to access the internet reached 127 million at the end of 2015, accounting for 18.5% of the total internet users of the country).
One of the factors that have helped to boost internet penetration in China, is the development of “Smart City” and “Wireless City” public access wireless networks in China’s major cities. Up to 91.8% of the China’s internet users are now able to access the internet via Wi-Fi, up 8.6% compared with June 2015. WeChat has been a major beneficiary. Furthermore, as of December 2015, the number of mobile online payment users in China had reached 358 million, with an annual growth rate of 64.5%. The utilisation ratio of mobile online payment has increased from 39.0% at the end of 2014 to 57.7% at the end of 2015. In addition, the growing number of internet users has triggered the development of a wide range of internet applications. For example, in 2015, 110 million Chinese internet users received online education, 152 million users received online medical services, and 96 million people hailed taxi via the internet.
Crucially, China has easily surpassed the United States as the world’s largest online retail market, driven by younger individuals. For example, in 2015 China’s online retail sales is estimated at $673 billion. This is up a massive 42.1%y/y. (See previous email on “Singles Day” in China). In 2015, China’s e-commerce spending represented an estimated 15.9% of all retail sales, with M-commerce rising strongly. (In South Africa, online retail sales represents around 1% of total retail sales). In comparison, online retail sales in the United States totaled around $347.3 billion in 2015, which is around 8% of total retail sales.
The rapid growth in China’s E-commerce is another clear example of the country’s ability to transition from a largely production/fixed investment based economy towards an economy that is more balanced in favour of consumption/services. This remains one of our key areas of economic research.
- Kevin Lings, chief economist at Stanlib
