10 Most Promising Areas For Chinese Entrepreneurs Based On Premier Li's Government Work Report
摘要： On March 5, 2016, China’s premier Li Keqiang delivered the annual report on the work of the government at the opening ceremony of the Fourth Session of the 12th National People's Congress of the People's Republic of China. What can the Chinese tech industry and startups learn from Premier Li’s report? What business opportunities are out there? Based on the report, we carefully sort out the following 10 promising areas.
On March 5, 2016, China’s premier Li Keqiang delivered the annual report on the work of the government at the opening ceremony of the Fourth Session of the 12th National People's Congress of the People's Republic of China. In the report, Premier Li provided new directives for entrepreneurs in China and mentioned the power of Internet several times in deepening reform.
What can the Chinese tech industry and startups learn from Premier Li’s report? What business opportunities are out there? Based on the report, we carefully sort out the following 10 promising areas. But are you ready to seize the opportunity and make a difference in the Chinese Internet market?
The report stresses that the government will continue to “strengthen the foundational role of consumption in promoting economic growth”. According to the report, one of the major tasks of the government in 2016 is to cut import tariffs on some consumer goods, increase the number of duty-free stores, ensure people are able to take their paid vacations, strengthen the development of tourist and transport facilities, scenic spots and tourist sites, and recreational vehicle parks, see to it that the tourist market operates in line with regulations and usher in a new era of mass tourism.
According to Yicai.com, the report has set out the basic trend for the Chinese tourism industry in 2016. For example, some OTAs have begun to offer 2.5-day holiday routes. Last year, the government released the “Several Suggestions on Encouraging Investment in Tourism and Consumption” and suggested that: “We should actively guide organizations, enterprises and institutions to adjust the summer vacation system based on their own conditions and create favorable conditions for workers to go out to travel all the way from Friday afternoon to Sunday.
“The Chinese tourism market is still going to develop rapidly in 2016. The total number of Chinese tourists will reach 4.38 billion, an increase of 10%, the total revenue will hit 4.55 trillion RMB, while the total investment will also reach 1.2 trillion RMB, an increase of 20% year-on-year. In addition, the total transaction volume in the Chinese tourism market reached 4.13 trillion RMB in 2015, with a penetration rate of 13.1% in terms of online transaction. It is expected that the ratio is going to rise significantly again in 2016, and the mobile internet will continue to transform the Chinese tourism industry,” Qunar.com’s CEO Shen Zhenyu predicted.
Crowd innovation, crowd support, crowdsourcing, and crowdfunding
The report also points out that platforms will be created for crowd innovation, crowd support, crowdsourcing, and crowdfunding (“four crowd”), and mechanisms will be built to encourage new types of business startups and innovation-making through cooperation between enterprises, institutions of higher learning, research institutes, and makers.
In September, 2015, the State Council released “Guidelines on Expediting the Establishment of Platforms to Support Crowd Innovation and Crowd entrepreneurship” and set out specific measures about how to establish platforms in favor of “four crowd”, in hopes of boosting innovation through pooling crowd innovation, increasing employment rate through pooling crowd support, encouraging entrepreneurship through crowdsourcing and boosting development through pooling crowdfunding.
A year ago, Premier Li pointed out “crowd innovation and crowd entrepreneurship” for the first time in that year’s work report of the government, which significantly stirred up people’s enthusiasm towards innovation and entrepreneurship. Now that “four crowd” was again stressed in this year’s government work report, the Chinese government must attach great importance to platforms in favor of innovation and entrepreneurship. It is expected that social wealth will continue to flourish with the overflow of labor, knowledge, technology, management and capital.
The report also suggests that:
“This is the crucial period in which China currently finds itself, and during which we must build up powerful new drivers in order to accelerate the development of the new economy. We need to move faster to develop new technologies, industries, and forms of business, boost the development of a sharing economy through institutional innovations, create sharing platforms, and develop emerging industry clusters such as high-tech and modern service industry clusters, thus creating strong new engines. We will use network-based information technology and other modern technologies to drive changes in models of production, management, and marketing, create new industry chains, supply chains, and value chains, and transform and upgrade conventional drivers, thus injecting them with new vitality.”
Two days ago, Richard Ma, the founder and CEO of Tencent, voiced his support for sharing economy in an interview during the Two Sessions. He pointed out that sharing economy was to become the new engine for economic growth. According to Tencent Institute’s estimate, sharing economy has already accounted for 3.15% of the added value in the Chinese tertiary industry.
In 2014, the number of companies focused on sharing economy increased by 300% year-on-year. Obviously, sharing economy has already entered a “booming stage” in China: from ride-sharing platforms to car-rental platforms, from kitchen-sharing platforms to equity crowd-financing, from C2C second-hand car exchange platforms to sharing office work, etc.
In 2015, sharing economy continued to developed rapidly in China: from bus-sharing platforms to second-hand goods sharing platforms, from takeaway platforms to travel-sharing platforms, etc.
Tencent Institute estimated that the market volume of the Chinese sharing economy has already reached around 164.4 billion USD, and that sharing economy has accounted for 1.59% of China’s GDP in 2015. At the same time, sharing economy has already taken up 1.3% of British GDP in 2013, and the figure is to reach 15% within five years. In 2014, sharing economy has already accounted for 3% of America’s GDP.
In addition, the government vows in the report that “we will expand trials in cross-border e-commerce, support enterprises in developing overseas warehouses for export products, and promote the development of enterprises that provide comprehensive foreign trade services.”
As a matter of fact, the report lays a special focus on cross-border e-commerce. Premier Li Keqiang pointed out that: “Faced with continuously weak foreign demand, we need to take a combination of measures to stop the decline in imports and exports. First, we will move faster to improve and implement policies. We will improve the structure of export tax rebate rates, ensure rebates are paid promptly and in full, and crack down on fraudulent claims.”
According to FreeS Report, the transaction volume of China’s cross-border e-commerce market reached 4 trillion RMB in 2014, an increase of 31% year-on-year. In addition, it is expected that China’s cross-border e-commerce market will continue to rise steadily in the next a few years, and the market volume will reach an amazing 8 trillion RMB in 2017.
At present, Chinese cross-border e-commerce retailers can be roughly divided into two groups: those who serve as platforms, such as eBay, Amazon, AliExpress, Wish, etc., and those who stand on its own, such as OSELL, LightInTheBox, Deal Extreme, etc. While the former kind of platforms make profit mainly by charging commissions, retailers of the latter kind have to bear a high operation and marketing cost.
Internet + government services
Moreover, the report suggests that the government is to carry out the "Internet Plus government services" model and promote better information sharing between government departments, so that the public and businesses need to make fewer visits to government departments to get things done, find procedures simpler, and find the service satisfactory. Furthermore, the government will cut red tape and root out illegalities to ensure that the people have more equal opportunities and greater space for creativity.
Premier Li came up with the concept “Internet Plus” during last year’s two sessions, and carried on to coin the phrase "Internet Plus government services" this year. On Feb. 2nd(shortly before traditional China’s Spring Festival), Premier Li went to Ning Xia autonomous region to see if poverty alleviation projects were carried out and if workers’ salary was paid in time. He was quite satisfied with the trip and commented that: “We should make fulI use of the Internet and make the government ‘smarter’ when serving the people.”
E-commerce in rural areas
In addition, the report makes it clear that the government is to encourage the introduction of e-commerce into rural areas and that 50,000 administrative villages will be linked up to fiber-optic networks, thus enabling more urban and rural residents to enjoy a more digital way of life. For sure, the e-commerce market in rural areas is to be significantly boosted by work report and enjoy a prosperous future. As a matter of fact, the State Council released “Suggestions on Expediting the Introduction of E-Commerce in Rural Areas” as early as last year, which showed the strong support of the central government over e-commerce in rural areas.
According to CNNIC, the number of e-shoppers in rural areas has already reached 77.14 million as of December, 2014, with an annual growth rate of 40.6%. In comparison, the number of e-shoppers in urban areas has already reached 284 million as of December, 2014, with an annual growth rate of merely 16%. According to AliResearch’s latest report, the ratio of packages sent to rural areas grows from 8.65% in the Q1 of 2013 to 9.64% in the Q1 of 2015. The top five types of goods sent to rural areas include major domestic appliances, smartphones, women clothes and kitchen appliances. At present, rural areas have already become a common battleground for major Chinese e-commerce platforms, including Suning, JD and Alibaba. Can they really make things a lot easier for villagers? The inconvenient truth is that logistics remains a major problem for e-commerce in rural areas.
Second-hand and new energy vehicles
The Chinese government also promises to work to stimulate the second-hand car market and move faster to build urban car parks and install charging facilities for new-energy vehicles in this year’s work report.
Let’s first have a look at charging devices for new energy vehicles in China. In 2015, the number of newly-manufactured new energy vehicles reached 380,000, making the total number of new energy vehicles hit 500,000 and China the largest market of new energy vehicles. Although the Chinese government has been actively promoting new energy vehicles, few Chinese are willing to buy them. In this case, expediting the establishment of charging facilities can not only boost industries related to new energy vehicles in the short term, but also improve the service standards of new energy vehicles in the long run.
Fortunately, improve. Statistics suggest that there are altogether over 780 charging stations, 31,000 charging piles across China as of the end of 2014, providing charging services for over 120,000 new energy vehicles in China. With the release of several government documents in favor of the establishment of charging facilities, an increasing number of enterprises have started to build charging facilities across China.
What about the Chinese second-hand vehicle market, then? Statistics suggest that as of 2015, the total number of automobiles owned by Chinese households reached 172 million, which means that there could be a huge market for second-hand vehicles. For example, all the major 18 second-hand vehicle exchange platforms including Renrenche, Youxin, Guazi and Youche raised, quite shockingly, 1 billion USD in 2015.
However, problems still persist. Some insiders pointed out that it could be quite money-burning for second-hand vehicle exchange platforms to advertise themselves and stand out in the primary stage. Only those who manage to provide excellent after-sale maintenance, finance, insurance service can finally survive in the market.
The Chinese government also promises in this year’s work report that the government will increase natural gas supply, improve policy support for the development of wind, solar, and biomass energy, and increase the proportion of clean energy in total energy consumption.
For example, the government will endeavor to control air and water pollution from the source and increase the proportion of clean energy in total energy consumption. In addition, the Chinese government will increase natural gas supply, improve policy support for the development of wind, solar, and biomass energy, which means that there is huge market potential for industries related to clean energy.
Statistics suggest that the import volume of coal dropped by 35% as of December, 2015. At the same time, the total investment volume into renewable energy reached 110 billion USD in 2015.
Consumer credit products
Furthermore, the Chinese government promises to strengthen the foundational role of consumption in promoting economic growth, carry out nationwide trials to set up consumer financing companies and encourage financial institutions to develop new consumer credit products.
As far as we know, Chinese consumers can lend money quite easily from platforms such as Alipay Lending and Ali Micro-Lending, JD Credit Note, etc.in various scenarios. As a matter of fact, the market potential could be extremely huge in the future. For example, the number of JD Credit Note’s users increased by 800% during last year’s Double 11 shopping festival. At the same time, several banks have already carried out all kinds of personal consumer credit products.
According to iResearch, the total volume of the Chinese consumer credit market has already reached 15.4 trillion in 2014, an increase of 18.4% year-on-year. It is expected that the market will continue to grow by 20% annually from 2016 to 2019. In 2019, the market volume is expected to double to 37 trillion RMB. Still, the ratio of consumer credit to total debt volume is merely around 20%, while that figure is commonly 50% or higher in developed countries in Europe and North America.
According to the work report, the Chinese government will encourage interaction between the online and the offline and encourage physical stores to transform themselves through innovation. Many physical stores applaud for such appeals, and have already started to transform themselves, whether by providing more diversified services or developing their own e-commerce platforms.
“Interaction between the online and the offline has already become a trend in China. For example, Intime started such endeavors long ago, and has already cooperated with Alibaba over several projects,” Niu Wei, the vice president of Intime Superstore, told Yicai Daily.
BetterLife’s chairman Wang Tian agreed so, and suggested that O2O had already become the popular trend in the Chinese business world. To adapt to the trend, BetterLife has already established its own e-commerce platforms and opened several O2O experience store across China.
[The article is published and edited with authorization from the author @TMTpost-Chinese, please note source and hyperlink when reproduce.]
Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.