Payment methods
International Card Processing
Concierge Support
About Luup
Our Customers
Contact Luup
Luup Blog
 View all articles
December 12, 2017

China: An Internet Driven Economy

China is one of the most connected countries on the planet, having been highly disconnected just a few years ago. Due to it’s size and enormous population, it’s ecommerce and efinance companies are some of the biggest in the world. China now has the largest number of internet users in a country at over 700 million. Their consumption online is also the 2nd highest in the world at $967 billion USD in 2016. Ahead of China in terms of online spending was the USA, at $1.13 trillion USD. 

Countries With The Most Internet Users 2016 (billion people)

Countries With The Most Internet Users 2016 (billion people)

Top 10 Countries By Online Spending in2016 (billion USD)

Top 10 Countries By Online Spending in2016 (billion USD)

Furthermore, China is behind only South Korea with it’s percentage of GDP coming from online spending and ecommerce at 6.9% (with South Korea at 8%).

Internet Spending as a % of GDP

Internet Spending as a % of GDP[/caption]

Company & Industry Structure

By market capitalisation, 5 of the top 10 internet companies in the world are based in China. The other 5 are American. 

Top 10 Internet Companies By Market Value 2016 (billion USD)[/caption]   There are 211 Internet companies with a market value of over $1 billion USD. There are referred to as “unicorns”. 50% of unicorns are based in the US, and 29% are in China. By value, US Unicorns account for 46% and Chinese Unicorns account for 41%.   

Internet Industry Structure 2016
Internet Industry Structure 2016

   Because of the scarcity of companies providing goods and services offline, Chinese companies grow to Unicorn status more quickly than American companies who face long standing competition from offline entities. It takes the average Chinese unicorn 4 years, whereas American unicorns take around 7 years. Chinese consumers are much more reliant on internet companies for their shopping and investment purchased. American consumers, on the other hand, rely on internet companies in the public and service industries more.

Internet Finance

The Chinese eFinance sector is not only bigger than its American counterpart, but it is also much more developed in terms of its online credit and mobile payment system. 34% of revenue from the eFinance sector in China comes from mobile payment companies like Alipay from Alibaba, and WeChat Pay from Tencent. In the USA, only 13% of eFinance revenure comes from mobile payment services like Paypal, Apple Pay and Google Wallet. Much of this is due to the adoption of credit and debit cards. American consumers are so used to paying by card that they have been slow to adopt mobile payments. 

Card Ownership Per Capita
Card Ownership Per Capita
POS Ownership Per Capita (set per 10,000 people)
POS Ownership Per Capita (set per 10,000 people)

Since China bypassed cards and went straight to mobile between 2011 and 2015, the amount of transactions conducted in cash fell from 65% to 47%. At the same time, online payment rose from 18% to 28% and mobile payments rose from 0% to 10%. In the USA, the figure for cards rose from 41% to 49%, whilst online and mobile payments rose by just 1% to 15%. eCommerce eCommerce accounts for 16.4% of the retail market in China, 1.5x larger than the proportion in the US. eCommerce in China grew so quickly due to the high volume of consumers connected to the internet, and also partly due to the inefficiency of offline retail and logistics in the country. 

Proportion of eCommerce in Total Consumer Goods Sales


China’s largest ecommerce firms have expanded into the logistic sector. They have used big data and economies of scale to become innovators in the field and compete with more established firms. These innovations have been made possible by a convenient environment for quick & low cost deliveries:

Due to this, Chinese firms can provide a lower cost, faster service that is point to point between more locations  

Continue reading