China has one of the world’s fastest-growing digital economies, presenting a golden opportunity for British tech. CBBC’s Kiran Patel explores how British companies can take advantage of the opportunities in fintech, software as a service, education and more
China’s Ministry of Industry and Information Technology published the 14th Five-Year Plan for Information Communication Development in November 2021, following on from the national 14th Five-Year Plan. The macro trend for technology in China is to focus on digital transformation: the mainstream integration of intelligent technology throughout industry to increase efficiency and align development with the 14th Five-Year Plan.
Digital transformation affects operations, business models, and the B2B and B2C customer experience, and whether directly or indirectly, is a key part of the value proposition that the UK can offer China through our vibrant tech and digital sectors.
China is one of the world’s fastest-growing digital technology markets with over 900 million internet users and a growing cohort of leading ‘frontier technology’ companies operating in key growth areas such as big data and AI. In 2021, the value of China’s digital economy reached RMB 47.94 trillion, and by 2025, it is expected that the digital economy will account for 10% of China’s total GDP, increasing from 7.8% in 2020. The integration of intelligent technology has expanded into many areas of business and has presented an array of new opportunities for British companies to support transformation and growth across China’s digital economy. Opportunity areas include software, fintech (including cross-border transaction solutions, reg-tech, wealth management, underwriting and risk assessment, and insure-tech), software as a service (SaaS), and ed-tech.
China also presents a unique set of challenges to navigate for UK businesses investing in this sector , and in the past year, the Chinese government has introduced several new regulations such as data security and personal information protection laws that have required companies to take appropriate actions to manage data in China. There is however, still a growing consensus amongst UK companies, many of which sit at the forefront of the data industry, that these new laws provide a sound and stable framework for businesses to operate within.
Moreover, the UK is still a key partner for China and is ranked third globally for investment in emerging technologies such as AI, robotics, IoT and cybersecurity – accounting for 15% of all investment into the technology sector. Together with the support from the British Government on the development of the industry and its regulatory environment the UK, will continue to be an attractive partner to work with. Frontier technologies such as robotics will continue to play an growing role in both the UK and Chinese economies, and it is likely that businesses will continue to utilise these technologies to improve the delivery of services to their respective customers.
What opportunities are there for collaboration in the digital economy?
It is predicted that digital transformation will be the biggest single contributor to China’s GDP growth over the next five years. Significant opportunities exist for UK tech firms to assist clients in the manufacturing, banking, healthcare and agriculture sectors with their digital upgrading.
Green tech, sustainability and smart Cities
China is increasingly deploying tech to face the considerable environmental challenges it faces. A growing focus on green tech is driving investment in electric vehicles and smart cities, with the aim of reducing emissions and creating a cleaner, greener environment.
Consumer tech
With a middle-class numbering 400 million and over 900 million internet users, China is a vibrant and fast-growing market for consumer tech. From lifestyle apps, VR and wearables, to digital health, educational software and media streaming services, there are many opportunities to serve the consumer market.
Software
China’s software sector has seen significant growth in recent years, quadrupling its value from RMB 2,479 billion in 2012, to RMB 9,550 billion less than a decade later in 2021.
Chinese buyers are increasingly focused on software performance over price, but many sectors and applications are not yet fully served by local vendors, thus creating opportunities for international software providers. These opportunities span a range of sectors and application areas, including business analytics, system-on-chip applications, finance, healthcare, and the IoT.
Fintech
China is a world leader in digital payments, with 853 million users of mobile payment methods, 74% of whom make payments every day. The financial services sector is in the process of continual liberalisation as it evolves to meet the increasingly sophisticated needs of its consumers, and with the UK as a global leader in fintech, British firms are increasingly finding opportunities for collaboration in areas including:
- Cross-border transaction solutions: Chinese firms can find it difficult to receive and make cross-border payments. This means there is strong demand for payments, foreign exchange, trade finance and other transaction solutions.
- Regtech (aka regulatory technology): There is growing demand from Chinese companies for platforms that can provide compliance and risk assessment technologies.
- Wealth management: Chinese banks and brokers are looking to international firms to help develop wealth management and trading platforms.
- Underwriting and risk assessment: As China continues to develop its credit rating system, and as the insurance market grows, there will be opportunities for foreign companies to participate in these areas.
- Insuretech: With increasingly diverse insurance products on offer, risk control and data management services are required in China.
SaaS
China’s software as a service (SaaS) sector has experienced rapid growth in recent years and, by 2023, is expected to be ten times the size it was in 2015 – from RMB 5.53 billion to RMB 55.51 billion. Despite this, the SaaS market in China remains relatively small in international terms, currently accounting for less than 10% of the global market.
Growth in the take-up of SaaS in China is driven in part by the country’s increasing embrace of cloud computing, with it now having a market for cloud computing that is second in size only to that of the US globally.
EdTech
Edtech is developing rapidly in China and opportunities for the UK are most apparent in apps, audiovisual software, intelligent toys, robots, assessment software, professional development software, campus security systems, staff and information management software and AR/VR technology.
Case study: CBBC Member successes in localisation
For British companies operating in China, there is growing recognition of the need to localize their approach either through investing into dedicated R&D centres or by entering into partnerships or joint ventures with local digital technology or big data companies to combine their respective strengths.
For example, the UK’s largest IT technology company, MicroFocus, entered a joint venture in Shandong with local partners in 2020. This new venture, established through the support of CBBC, combines the resources of three partners to provide cloud-based testing service for SaaS software leveraging MicroFocus IP with local big data and technology.
Wireless Logic has teamed up to form a joint venture with China Mobile to develop connected autonomous vehicle technology – again, combining their respective strengths in technology with local partners worldwide which have access to big data.
Joint ventures proved to be an effective form to leverage foreign technology and knowledge with local content and market. In the past 40 years, RELX, a UK analytics firm, has formed over 10 joint ventures in China. Its exhibition division RX has six JVs in China. KeAi, its JV in the STM publishing industry, has developed into a top Open Access journal publishing business in China, with more than 130 high-quality STM journals in the past 15 years.
How CBBC is supporting the bilateral development of the digital economy
In response to the growing demand for engagement between UK business and our partners across Government and local business here in China, CBBC has launched a digital and data working group. The group will consist of leading British data and technology companies, focus on addressing the various regulatory obstacles, and support the development of new initiatives such as pilot projects and commercial partnerships.
The working group was announced as a key outcome of the June 2022 meeting between the ministers of the UK’s Department for Business, Environment and Industrial Strategy (BEIS), and China’s Ministry of Industry and Information Technology (MIIT).
CBBC’s Data & Digital Working Group will strive to promote greater collaboration between the UK and China on digital economy based on the following three core pillars:
- Advocacy: Form a single voice for UK business to advocate to the ministries, regulators and relevant departments of the Chinese Government responsible for developing China’s digital and data economy. Through this engagement, the working group will seek to become the leading group for Chinese government bodies to consult when seeking input on related policy, regulation and guidelines.
- Cooperation: Promote cooperation between UK-China business and Government in the digital and data economy including commercial partnerships, joint research, draft regulation, and other forms of collaboration. Although membership will be limited to CBBC members, the working group will aim to engage a broad range of stakeholders including international and local businesses as well as third country governments.
- Information sharing: Become the leading platform for information sharing in the UK-China data and digital governance and commercialisation.
If you would like to find out more or get involved, please contact Mark Xu (mark.xu@cbbc.org)
As the role of frontier technologies expands in the UK, China and globally, new opportunities will continue to emerge for growth. IP will, of course, underpin much of this activity as companies look to leverage new and existing technologies together with the growing pools of data. It is, however, critical that Governments remain focused on encouraging innovation and provide a supportive regulatory environment for business to succeed.
CBBC will continue to facilitate engagement between UK business and our partners here in China to help overcome obstacles and support the development of new partnerships.
Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out how CBBC’s market research and analysis services can provide you with the information you need to succeed in China.
