China's Digital Ecosystem

How China’s digital ecosystem is moving ahead of the rest

Last Updated on June 11, 2024

China’s digital economy has always been ahead of its time. When the rest of the world started paying attention to QR codes and live commerce platforms because of the pandemic, Chinese citizens had long been utilizing these trends for their daily needs.

The rise of the local digital trade has led to rapid economic growth. It’s a development that Chinese companies have continued to leverage over the past decade. And by mid-2023, the government recorded over one billion foreign businesses operating in the country’s thriving consumer market.

With a wave of new technologies and digital capabilities, China is still making headlines up to this day. Join us as we discuss what sets this virtual business landscape apart.


Consumer Behavior in China’s Digital Ecosystem

Demographic Dynamics

The rapid growth and development of China’s digital economy are primarily because of its active consumer market, with around 884 million people shopping online.

As a country with more than one billion internet users, having more than 80% of this demographic ready to spend on local e-commerce platforms is a value businesses rarely find in other markets.

With the active support of the government and stringent market regulation, consumer confidence in China ranges around 87 points. Despite the effects of the pandemic, the consumer base’s reliance on China’s digital economy seems unwavering, as e-commerce covers 40% of the country’s GDP.


China's Digital Consumer Market Profile


Engagement vs. Consumption

China’s efforts and initiatives to supply virtual consumer needs eventually resulted in high engagement rates, where 30% of local internet users became content creators. The willingness of online shoppers to actively engage has led to the increased importance of user-generated content in the local market.

Unlike traditional industries, social commerce platforms enable users to share ratings and reviews about their purchased products. These posts serve as valuable resources, giving a business enough data on consumer references to improve its marketing strategy.

The notable shift from passive consumption to active engagement and content creation has made Key Opinion Leaders a powerful force in China’s digital ecosystem. Today, they stand as credible sources of information capable of swaying their followers’ online purchasing decisions.

The influence of KOLs on China’s digital infrastructure becomes more evident as years pass by, with 86% of Statista respondents admitting to buying products promoted by online influencers.


Xiaohongshu KOLs collaborations

KOLs collaboration on Xiaohongshu social commerce platform


Impact on China’s Digital Economy

Besides its significant contribution to the country’s GDP, China’s high digital consumption and engagement rates can impact what locals look for when shopping online.

With the changing consumer needs, popular online marketplaces like Tmall and don’t just focus on niche-specific product listings. Today, their offerings range from daily necessities to luxury goods.

The extensive availability of products in social commerce platforms signals an advantage to China’s digital economy. With more goods available online, the digital economy can drive growth to external industries such as logistics, payment processing, and digital advertising.


Source: China Daily


The online data localization efforts, pushed by the Chinese government, fostered an environment ripe for innovation. It eventually resulted in the development of new services, ranging from social media to online games, live-streaming channels, and artificial intelligence.

The distinct infrastructure within China’s digital economy opens new opportunities for small and medium-sized enterprises (SMEs). It also eases the market entry process of foreign brands and enhances their ability to reach a wider audience locally.


Accessibility in the Chinese Digital Ecosystem

High Internet Penetration

China has the most extensive online market in the world, so it’s no surprise that its user base constantly seeks a wide range of new technologies and services.

The scale of internet usage in China is so massive that it covers 76.4% of the country’s actual population. Given this data, global brands entering this digital economy must be ready to cater to varied audiences that belong to different age groups, income levels, and interests.


Internet Penetration in China from 2012 to H1 2023

Internet Penetration in China from 2012 to H1 2023 (Source: Statista)


While high Internet penetration did contribute to the rapid growth of the digital ecosystem in China, it’s worth noting that the rate of web usage isn’t equal in all regions. Urban areas typically have higher penetration rates compared to rural places.

Nevertheless, maximizing China’s internet services is the key if you want to gain traction in the local business scene. The scale of your marketing strategy could range from a localized website to an active social media presence.


The Smartphone Revolution

The technology that brought the Chinese digital ecosystem to the forefront of innovation was the introduction of smartphones. In fact, according to recent data, approximately 99.6% of online users in China are browsing the internet through mobile devices.

Today, the majority of internet connections in China happen via smartphones. This technology makes online shopping, social media interaction, and digital content consumption more accessible to Chinese audiences.

Given the high smartphone penetration, a mobile-first strategy is essential for any foreign brand entering China. If you look at your domestic competitors, you’ll notice that their websites and content are optimized for mobile devices and often focus on mobile-friendly marketing campaigns.

Most social media platforms are also predominantly accessed through smartphones, making them a critical element to consider when creating promotional content.



Affordable Digital Technologies

Local mobile manufacturing companies like Xiaomi, Huawei, Oppo, and Vivo are major market players that have revolutionized the smartphone market in China.

Through the affordability of these mobile options, a considerable percentage of the local market can access the Internet. It also enabled people living in lower-income and rural areas to become part of the Chinese digital ecosystem.

As more consumers utilize affordable digital technology, the online user base in China is becoming more diverse. It now includes individuals from various backgrounds with a wide range of interests. This shift brings forth evolving preferences and needs. Such demand has become the primary driver of increased e-commerce, mobile payments, and social media usage.


Top Trends That Shaped China’s Digital Transformation

Mobile Payments and QR Codes

China is at the forefront of several mobile technology innovations, including virtual payments. It involves the widespread usage of e-payment solutions like Alipay and WeChat Pay, which has made the country a largely cashless society.

Based on recent data, around 943 million online shoppers in China use mobile payments. Looking at this statistic, it’s obvious how much it contrasts many Western countries where credit/debit cards and cash still dominate.


WeChat pay & Alipay


Alipay and WeChat Pay account for most of China’s mobile payment transactions. The development of these apps ultimately transformed how local consumers make transactions online and, by extension, the digital infrastructure of the Chinese market.

QR codes emerged as the core of this innovation. They are used for almost everything, from retail purchases to restaurant bookings, utility payments, and personal money transfers. Their versatility has made them an integral part of every modern consumer’s daily transactions.


The Great Social Commerce Integration

The evolving consumer needs have always been front and center when it comes to China’s digital development. Because of this, social commerce has become a pivotal trend in almost every platform, facilitating the incorporation of online shopping experiences with active community engagement.

Some of today’s most popular social commerce platforms in China are Little Red Book, WeChat, Douyin, Pinduoduo, and Tmall. Unlike traditional virtual marketplaces in the West, a brand’s success on these sales channels relies heavily on user-generated content, reviews, live streaming, and influencer recommendations.

The scale of technology integrated into these platforms has made them an effective tool for determining current consumer trends and preferences. Marketers can generate analytic reports from these apps and utilize them to refine marketing strategies and product offerings.


China social media and social commerce landscape


The Growing Influence of China’s Social Media Platforms

The way Chinese people use social media in China has always been a bit unique from the rest of the world. While Western apps focus on specific functions, platform options in China often cover all-in-one features such as messaging, social media, e-commerce, payment services, etc.

The integration of all these resources within a single app gives users a seamless experience, making them more actively engaged. In a super app like WeChat, an average user spends at least one hour and twenty minutes daily.

Many statistical reports over the years support the idea that social media content influences a local shopper’s purchasing decisions. A 2022 survey from Statista even showed that one out of every five Chinese respondents discovers new products and brands through these platforms.

The continued reliance of the local consumer market on these digital channels shows how important it is for companies to maintain an active social media account as part of their marketing efforts.

Don’t forget that localization is also a must when promoting on these social media apps. As these platforms have a predominantly Chinese audience, their algorithm often prioritizes content written in the local language with considerations of cultural references, trends, and slang.


Brand localization examples for the Chinese New Year

Examples of brands’ localized posts for the Chinese New Year


China Digital Ecosystem: Challenges & Policies

One of the major challenges foreign businesses may face in the Chinese digital ecosystem is the constant changes in regulations and requirements. It’s not a secret that the local government places a high emphasis on consumer welfare, prompting them to censor content that may mislead or disservice its people.

A good example of regulations you should watch out for is the local advertising laws. Unlike the Western digital business scene, the Chinese government forbids exaggerated marketing terms like “the best” in online promotional materials. Specific sectors, like healthcare, are also more regulated digitally than other industries.

Foreign brands should also adhere to the policies under the local Cybersecurity Law and the Personal Information Protection Law (PIPL). As they operate in the Chinese market, these regulations will require them to store data generated in China locally and adhere to strict privacy rules.

On top of that, intellectual property infringement is another concern that could affect your future in China’s digital landscape. We advise marketers to register their trademarks and patents immediately and enforce their IP rights to avoid overlaps and mishaps.


Quick Q&A

Is China a digital country?

Yes, China is extensively digital. It has one of the world’s largest internet user bases, with over one billion people surfing the web. The virtualization of the country’s consumer market is reflected through the increased usage of e-commerce, mobile payments, and social media.

How big is China’s digital economy?

China’s virtual economy is still continuously growing, with an estimated value of 50.2 trillion yuan or $6.9 trillion. In a 2022 report, the country’s digital trading landscape accounts for 42% of the country’s GDP. These statistics indicate the significant role digital technology plays locally.

What are the challenges of the Chinese digital economy?

Navigating stringent internet regulations and content censorship is a challenge every brand will face in the Chinese digital landscape. On top of that, the intense domestic competition will require foreign marketers to conduct more thorough market research. This process may include understanding unique consumer behaviors, managing language barriers, and maintaining the brand’s unique selling points.


Your Trusted Digital Marketing Partner in the Chinese Market!

The current state of China’s virtual ecosystem may seem different from other countries, but it’s important to note that global trends can still influence its landscape. And if we take into account the growing consumer spending within the local market, it’s safe to say that it’ll continue to change as time goes by.

At Sekkei Digital Group, we can guide you through the industry’s every twist and turn, unlocking your brand’s full potential and ensuring resounding success in this dynamic landscape.


Sekkei Digital Group Services


Whether it’s launching marketing campaigns on social media platforms or opening an e-commerce store, SDG has your business needs covered! Contact us today to learn more about navigating the local digital ecosystem and using it to your brand’s advantage.


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