Behind China's Great Firewall, the Internet Is Booming

When I asked a Beijing-based venture capitalist who travels to the U.S. frequently what foreigners 
need to know to understand the Chinese internet, he sent me a stream of comments he hears all the time:
“I thought without freedom of expression you can’t innovate. I thought with censorship you’d always be confused what product you can do. I thought American companies would be successful if it weren’t for Chinese protectionism,” ran his list. “I thought Chinese people would really want to see American websites if they could.”
While censorship, protectionism and copying are often the first things that many foreigners associate with Chinese tech—and they’re undoubtedly important factors—thinking beyond them is vital to understanding the Chinese internet.
China leads the world in many ways: It is now the world’s largest e-commerce and mobile-payment market. Of China’s roughly 700 million mobile-internet users last year, half paid with their smartphones in stores and restaurants, 28% ordered meal delivery and 44% read online fiction, according to a government report.
Here’s what you need to know about the Chinese internet and how it’s influencing the rest of the world.
1. Chinese aren’t clamoring to bypass government internet filters to visit websites such as Google, YouTube and Facebook.
Yes, China heavily censors the internet. Many people are frustrated by the limits on life and work imposed by what’s collectively called the Great Firewall.
Still, the majority of Chinese aren’t focused on what they can’t reach because domestic websites more than fill the void.
When a 13-year-old relative from the mainland came to visit me in Hong Kong earlier this year, I asked her if she wanted to watch videos on YouTube. No, she said, she prefers Chinese video sites. It’s not about the language barrier; her English is excellent. It’s about familiarity. She grew up watching Chinese TV dramas and variety shows online.
2. Even when foreign apps aren’t blocked, Chinese competitors win because so many people are using their products that they become indispensable.
Internet calling and messaging apps Skype, WhatsApp and Slack are accessible, but they’re just no substitute for Chinese products that locals are using in droves. Take WeChat, the social-messaging app from Tencent Holdings Ltd. that has more than 900 million accounts.
“China runs on WeChat. So do our startups,” says Ji Ke, program director at HAX Accelerator. The venture firm brings mostly North American and European hardware startups to Shenzhen to take advantage of the city’s proximity to manufacturing facilities and supply chains. One of the first things HAX does with those foreign transplants, Mr. Ke says, is put them on WeChat so that they can communicate with locals, make payments and organize events.
They tried to use Slack several times, he says, but reverted to WeChat after a few days because many of the people they were talking to didn’t have Slack.
3. Once a technology or a business model is out there, Chinese nimbly adapt it to the local market—which in China is known as “micro-innovation.”
Oppo and Vivo, the No. 1 and No. 3 smartphone brands by market share in 2016, appeal to young people and residents in smaller, less-wealthy cities. Their phones look like iPhones and pack many of the same features, but with China’s lower cost base for manufacturing, they cost less than half the price of an iPhone.
That has helped Oppo and Vivo double their market share, while Apple’s has fallen by 13% to the fourth position.
Meituan Dianping started as a copycat of Groupon, the daily-deals site. Now, Meituan delivers meals, books hotels, sells movie tickets and offers a Yelp-like rating service. Groupon remains, well, a daily-deals site.
4. Rapid adoption is creating demand for new products and business models.
Mobile payments, nearly nonexistent in China five years ago, are now everywhere—restaurants, taxis, convenience stores—making it possible to live a cashless life.
China’s mobile-payment volume rose by almost fourfold in 2016 to 58.5 trillion yuan ($8.6 trillion), according to iResearch. Some $800 billion of that went to ride services, games and shopping. By comparison, mobile payments in the U.S. rose 39% to $112 billion in 2016, according to Forrester Research.
That’s spawning new services, like shared bikes. Users can make payments and unlock the bikes via apps so there’s no need for credit or stored-value cards or docking stations. The bikes have taken over Chinese cities.
5. Now the copying has reversed—in some ways.
Facebook followed WeChat’s footsteps in adding e-commerce, friend-to-friend money transfers and ticket buying—which the website Tech in Asia called “Facebook’s WeChat-ification.” Apple announced this past week that its iMessage service will also support a friend-to-friend payment transfer feature.
When my Wall Street Journal colleagues reported last week that fast-food chains and high-end restaurants in the U.S. are expanding lunch-delivery services, my first thought was, “This is so China in 2015.”