A “Developing Country” Gets Online

In 2009, China watchers Doris and John Naisbitt published China’s Megatrends: The 8 Pillars of a New Society. The bestseller discussed just about everything under the sun — except for the internet, smartphones, and digital corporations. This was not (only) due to the limits of the authors’ vision. It’s also a striking indication of just how rapidly — and seemingly out of nowhere — the digital realm has blossomed in China.

Thirteen years later, China is now a world leader in the adoption of new technologies. The populace is extremely digitally savvy – the smartphone has taken root in everyday life there more deeply than almost anywhere else in the world. Online shopping and many digital communication services shape everyday life, and almost all Chinese internet users regularly use mobile payment methods.

The Beginnings

To understand the history of China’s internet, we have to go back 40 years. China’s policies of reform and opening-up, introduced under party leader and head of state Deng Xiaoping, were organized around market-based mechanisms and allowed the creation of private companies. Prior to 1978, the private sector had been practically non-existent. Today, private companies account for around 70 percent of Chinese GDP.

The establishment of special economic zones (areas in China where special regulations apply such as low taxation, low customs duties, and simplified administrative procedures) from 1980 onwards, of which Shenzhen is the most renowned, is also one of the most prominent components of China’s policies of reform and opening-up. Moreover, technology played a decisive role in the Chinese leadership’s vision for modernizing the country from the outset. Deng Xiaoping, who had spent a number of years abroad, once described technology as a “primary productive force”.

One of the first people to take advantage of the new possibilities was Liu Chuanzhi, an engineer who had studied at the Chinese Academy of Sciences. In November 1984 he founded a computer company that manufactured one of the first Chinese personal computers, the Great Wall 0520CH. It was compatible with IBM PCs (some call it an IBM knock-off). The model was produced in 13 factories, with an initial run of 10,000 units.

Even if expensive consumer goods or status symbols such as cars remain inaccessible to most people for the foreseeable future, internet services are available even in the most remote regions.

Today, Chuanzhi’s company is known as Lenovo and is one of the world’s largest computer manufacturers. In 2005, Lenovo even took over the PC division of IBM, the world’s oldest computer company. The Chinese newcomer took over the PC business of the US company that once struck a historic deal with Microsoft, an important early milestone in the triumphant development of the personal computer as an everyday product, three years before Chuanzhi founded his company.

But daring entrepreneurs like Chuanzhi are just one part of the picture. Initiative was also required in politics and administration. Scientist Hu Qiheng played an important role in the development of the Chinese internet, as she organized China’s connection to the World Wide Web. In May 1994, China’s very first web server went online at the Chinese Academy of Sciences. Hu later headed the China Internet Network Information Center (CNNIC), which is responsible for managing the .cn domain name. She was inducted into the Internet Hall of Fame in 2013.

Back then, China had a lot of catching up to do: in 1995, more than half the US population had access to the internet at home, work, or school. At the beginning of that year, there were only around 3,000 internet users in China. Six months later, there were 40,000. In 2000, 22.5 million people were online in China, and by the end of 2010 — just 15 years after the first steps were taken — there were 547 million, meaning China’s online community surpassed the size of the entire US population.

Lucrative Freedom?

Both the technical and political foundations for today’s digital China were laid in the 1990s. In addition to internet access for broad sections of the population, this entailed China joining the World Trade Organization (WTO).

Both developments were well received by the West. It was believed that an economic rapprochement with the West would ultimately lead to China’s adapting to the market economy and the neoliberal Washington Consensus. And the internet would also do its part in winning the Chinese people over to “freedom and democracy”.

In a speech in 2000, then-US President Bill Clinton said of China: “In the new century, liberty will spread by cell phone and cable modem.” He was certainly not alone in this belief: the idea that the internet would take democracy to the furthest corners of the globe and open up lucrative new markets was widespread at the time. The critic of digital capitalism Evgeny Morozov gave the name “cyber utopianism” to the belief that the internet has the power to democratize and “improve” societies, i.e. to transform them in the interests of capital.

As Graham Webster, editor-in-chief of the DigiChina project at Stanford University’s Cyber Policy Center, argues: “The West was convinced that communications technology would promote democracy.” At the same time, Silicon Valley tech companies hoped to do a roaring trade in China once they had provided their services to its billions of people. Webster continues: “American tech companies expected to make fortunes by dominating the Chinese market”.

The Role of Digital Corporations

But things turned out quite differently. Although the Communist Party of China did initiate a capitalist dynamic, it managed to avoid the neoliberal shock therapy applied in the former Soviet Union — including when it came to digitalization. Sooner or later, all major American internet companies like eBay, Google, and Uber ended up withdrawing from the Chinese market.

Chinese companies like Alibaba, Tencent, and Baidu ultimately prevailed. Protected by the Great Firewall (i.e., the isolation of the Chinese internet) as well as protectionist measures to secure the domestic market, for which South Korea and Singapore in particular served as role models, powerful digital corporations have emerged. Their services have become an indispensable part of everyday life for the digitally savvy Chinese population.

The Chinese digital corporations Alibaba, Tencent, and Baidu can now keep up with the competition in Silicon Valley in terms of user numbers, data volumes, and turnover. In addition, there is a culture of independent start-ups and experimentation — few companies are as agile in responding to customer desires and changing conditions as Chinese ones.

Digital Prosperity

China is still an emerging country, with annual per capita GDP, purchasing power adjusted, of 19,000 US dollars, well behind Singapore with 93,000, the US with 60,000, Germany with 51,000, and much closer to a country like Iran with 17,000. Just a few years ago, China was level with Brazil, which is now at 6,823 dollars per capita. But despite still being far from the developed countries in terms of general prosperity, China is one of the leaders in the digital realm.

According to the World Bank, 1.032 billion people are online in China today, or 73 percent of the population (for Germany, the figure is 90 percent). But that also means that 370 million people still lack access, which is particularly true in rural areas. A digital divide is opening up — as with the extremely unequal distribution of wealth in the new China. This is particularly serious because internet-based services for finance, trade, and transport have become an important factor in everyday social life in China. Yet when it comes to connection speeds, China is doing very well. For broadband connections, it ranks third worldwide (Germany is forty-second), while for mobile connections it ranks tenth (Germany is thirty-second).

A 2016 study by the Chinese smartphone manufacturer Huawei also shows that the Chinese population has a positive attitude towards digital technology. Eighty-two percent of people surveyed reported having a positive attitude towards digital innovations.

In order to understand modern China, it is essential to also keep an eye on digital China and its dynamics.

Overall, China’s prosperity is still far removed from that of Western countries, especially the US. Yet in the digital realm, the Chinese enjoy top-class infrastructural wealth. Even if expensive consumer goods or status symbols such as cars remain inaccessible to most people for the foreseeable future, internet services are available even in the most remote regions.

Take the example of cars: in the US, there are 439 cars per 1,000 inhabitants, while in China, the figure is half that. This contrasts with a high level of acceptance and actual use of ride hailing services (i.e., for booking transport using digital applications). In a global survey by McKinsey management consultancy, 90 percent of those surveyed in China stated that they used apps to arrange journeys at least once per week.

Overtaking in the Digital Lane

The Chinese leadership’s decision to bank on the IT sector is also linked to the parallel between prosperity and digital developments. The country has established the digital infrastructure on which such developments are based. An example is the 5G mobile communications standard, in which China is a global leader — the country is currently home to two-thirds of the world’s 5G base stations.

It’s thus no coincidence that China’s prosperity and digitalization booms over the past 30 years have been synchronous. The party leadership supported the domestic digital economy, while benefiting from the satisfaction of its immense user base, and even adopted its language: in his speech marking the adoption of the fourteenth five-year plan in March 2021, President Xi Jinping emphasized the importance of digital China, saying the country must “work faster to develop a digital society, a digital government, and a healthy digital ecosystem”.

A lot has been written about China’s technological development, digitalization, and digital corporations, especially in English-speaking countries. Yet this plays less of a role in left-wing debate. In order to understand modern China, it is essential to also keep an eye on digital China and its dynamics. After all, the digital sphere plays a crucial role in China’s long-term goal of becoming a technological leader with moderate prosperity for all people.

Graham Webster sums up the situation with particular clarity when he writes that “the internet in China develops within the context of a political regime finding mechanisms to ensure continued control — not a government sleepwalking into a digitally driven revolution”.