Readers of our TLD blog are all familiar with the phenomenal growth China has made in tech and internet.
There are many contributing factors: large population which is relatively homogenous in language and user habits, significant middle class with consumption power, as well as good infrastructure.
The part about infrastructure is interesting – especially when you look at the success of the mobile internet sector in China: smartphones were introduced to the world at roughly the same time, why did China particularly grow in leaps and bounds?
You might recall the stimulus package China launched 10 years ago – the famous 4 Trillion RMB (US$586 billion, with today’s exchange rate) liquidity released into the market mainly for infrastructure projects, including rebuilding part of Sichuan province damaged by the 2018 Earthquake.
You might not know that local governments added in their own investments – and the total money invested in that round of stimulus is estimated to be as much as 30 Trillion RMB (US$ 4.37 trillion, with today’s exchange rate).
And of course, with many of the government initiatives in China, western media found it hard to figure out the details. And of course, as always, if the local governments in China get zealous, lots of investment goes to waste.
Build, build, build
Well, if you notice the following timelines, you would start to see some real effect:
Late 2008, the first high speed railway opened; and in 2009 the first long distance high speed railway started operations. By end of 2017, China was operating 25,000 kilometres of high speed rail, or 66% of the world’s total.
The speed of expressway building also accelerated, by more than 100%. The network expanded from 53,600 kilometres at the beginning of 2008 to 136,500 kilometres by end of 2017.
More than 100 civil aviation airports were built during the same timeframe.
End of 2008, State Council (China’s cabinet) decided to start issuing 3G licences. Three major state-owned telecom companies received their licences in 2019. By 2018, China already has 1.8 million 4G base stations, forming the biggest mobile data network in the world.
Not mere coincidence
When you travel on the high speed railway between Shanghai and Beijing – you would often hear someone in the carriage talking about term sheet over the phone. Also, many VC investment managers fly as much as 5-6 times each week.
Without the railway and civil aviation infrastructure, VCs will not be as efficient as they are now, in screening deals and raising funds from LPs in different cities. Of course, they would probably not complain about flight delays as much as they do now.
Without the prevalence and stability of 4G network, of course many of the familiar mobile internet business models would not be as successful as they are now.
There would also not be as much data for artificial intelligence.
There are indeed a lot of positive externalities from such infrastructure leap.
There is also another interesting effect of the stimulus. As lots of investment went into subsidies for car purchases – China’s car population surged from 57 million in 2007 to 217 million in 2017.
Mobile-based second hand car marketing places grew exponentially in the past 3-4 years, precisely about 4-5 years after the start of the surge in car population.
Jio’s turn now?
Of course, other governments in the developing world are most likely not able to mobiise as much resources and put down as much investment as China did.
Nonetheless, Jio, India’s latest telco owned by Reliance Industries, is achieving something similar with private money.
Since its start in 2015, it has delivered 4G network to vast areas of internet previously only covered by 2G, or nothing at all.
Tens of millions of people are now connected to fast internet – a fabulous opportunities for mobile internet businesses and entrepreneurs.