China’s Internet Boom

It’s tempting to portray the rapid growth of the Chinese Internet as just one more example of China’s efforts to catch up with the West: Alibaba is the eBay of China, Baidu is the Google of China, Didi is the Uber of China, and so on. But China is actually conducting some fascinating experiments with the Internet (see “The Best and Worst Internet Experience in the World"). You just need to look outside the tech sector to notice them.

The most significant innovation is happening not among Chinese Internet companies but in the country’s so-called “real” economy. Corporations in old-school sectors like construction, agriculture, transportation, and banking are pursuing new business models based on big data, social media, and the Internet of things.

These are some of the largest firms of their kind in the world, yet many are young enough to be helmed by their original owner/founders. They’re like ­Rockefeller, Ford, or Carnegie with access to smartphones.

So it’s China’s largest residential-­property developer—not a tech company—that is pioneering the integration of Internet-based technology and services into fully wired communities. Vanke wants to create urban hubs that supply residents with gardens, safe food, travel, entertainment, and medical and educational services, all enabled by the Internet.

China’s insurance and banking industries have also embraced the Internet. Firms like Ping An Insurance recognized early on the opportunity to build customized models for risk assessment based on information gleaned from 24/7 tracking of physical and online activities.

Regulatory and finance structures in the West militate against this kind of experimentation, but China’s corporate culture encourages the broad reach. Asia specializes in big-tent conglomerates with protean areas of interest: a boat maker goes into semiconductors; a snack vendor might have an automotive division. In China, every big company can be an Internet, software, or device company, too.

China’s tech companies are similarly uninhibited. Xiaomi, a handset manufacturer, has taken a global leadership position in deploying the Internet of things. Tencent founded the online-only WeBank, which analyzes data from hundreds of millions of WeChat users to assess risk and extend small consumer loans without loan officers or physical branches. Alibaba is using its unprecedented knowledge of small business to provide financial services with an information advantage that no traditional bank has.

If Google did banking, these would doubtless be called the “Chinese banks of Google.” But it doesn’t—that’s the point. Information, entertainment, retail, and communication were the easy plays for U.S. companies, the real-economy sectors that the Internet could infiltrate without too much trouble. Chinese companies will be first to bring the Internet to the other realms of life and industry.

Then the West could be playing catch-up with the East.

Edward Jung is the founder and chief technology officer of Intellectual Ventures.