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China a key digital-investment, start-up ecosystem: MGI
Aug '17
China is now one of the most active digital-investment and start-up ecosystems in the world, according to a new discussion paper from the McKinsey Global Institute (MGI). The country is the world’s largest e-commerce market, a major global force in mobile payments and is in the global top three for venture-capital investment in key digital technology types.
MGI, the business and economics research arm of McKinsey & Company, was established in 1990 to study the evolving global economy.
The paper, ‘China’s digital economy: A leading global force,’ says China is among the top global players for venture-capital investment in prime digital technology, including virtual reality, autonomous vehicles, 3-D printing, robotics, drones and artificial intelligence.
Its e-commerce market, the world’s largest, accounts for more than 40 percent of the value of worldwide e-commerce transactions, up from less than 1 percent about a decade ago. Its mobile payments transaction value is now 11 times that of the United States. One in three of the world’s 262 unicorns (start-ups valued at over $1 billion) is Chinese, commanding 43 per cent of the global value of these companies.
Chinese government’s active support, activities of the country’s three Internet giants Baidu, Alibaba, and Tencent, and a bigger and younger Chinese market are the three factors propelling the expansion of digital China, says the paper jointly authored by MCI director Jonathan Woetzel, chairman James Manyika, senior fellow Jeongmin Seong, partner Michael Chui, senior partner Kevin Wei Wang and consultant Wendy Wong.
The bigger, younger China market is enabling rapid commercialization of digital business models on a large scale. The sheer scale of China’s Internet user-base encourages continuous experimentation and enables digital players to achieve economies of scale quickly. The share of Internet users in China making mobile digital payments is around 68 per cent, compared to a mere 15 percent in the United States
Baidu, Alibaba, and Tencent, collectively known as BAT, are driving technical performance, such as computing efficiency, to set new world standards and touch almost every aspect of human life. In 2016, BAT provided 42 percent of all venture-capital investment in China, a far more prominent role than Amazon, Facebook, Google, and Netflix, which jointly contributed only 5 per cent of US venture-capital investment in that year, the paper notes.
The Chinese government moved to regulate the digital sector only after a delay, which gave innovators plenty of space to experiment, it says. Over the past two years, China’s top three Internet companies made 35 overseas deals, compared with 20 by the top three US Internet companies. (DS)

Fibre2Fashion News Desk – India

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