New technology will advance internet revolution in ways that are unimaginable

Alibaba, one of China's Internet companies, is set to break the record for the biggest-ever initial public offering in New York.

China missed out on the British-led Industrial Revolution of the 1800s and the spectacular US-led technological developments of the 1900s, starting with the telephone and the aircraft, and culminating in the computer and the Space Age.

But China has become a leader in the new key technology that allows all kinds of human interaction to take place electronically over the Internet, via mobile phones.

China's vibrant Internet industry has been developed by private Chinese individuals, many of whom returned to China after an overseas spell of education and work experience, mostly in North America.

Recognizing the new Internet technology as an opportunity to make their fortunes back home in China as entrepreneurs, some brought back to China their experience of Western markets, successfully marrying these foreign experiences with their own Chinese values and perceptions, to create Chinese brands like Sohu and Ctrip.

But of the 24 Chinese Internet companies listed since 2000 in Hong Kong or on Nasdaq in the United States, eight have come to the market since July 2013. 4G, a new global mobile standard that reached China late in 2013, has brought much faster upload and download speeds that, at last, fulfill the huge promise of mobile Internet.

Already, 80 percent of China's online users access the Internet by wireless. This large mobile Internet user base forms a huge Chinese market for an exciting range of services offered by the new Chinese Internet companies. Tencent's instant messaging service WeChat has already had an enormous impact on Chinese society, by encouraging communication nationwide between people, and groups of people previously unknown to each other. Entertainment and leisure is a major mobile Internet market segment, with mobile games (Shanda, Perfect World, Qihoo and YY), music (YY) and tourism (Ctrip).

But it's online business, or e-commerce, that's likely to bring the greatest impact over the next few years to the Chinese Internet world, because the volumes of business are so large. Today's leader in Chinese e-commerce, Alibaba, started in Hangzhou in 1999 with an international business-to-business service, which allowed overseas buyers to search and conduct transactions online with factory suppliers based in China.

It was only when Alibaba started to tap the purchasing power of the Chinese consumer in 2006, with its online business-to-consumer platform Taobao, and later with TMall and Juhuasuan, that the company began to leverage the Internet's unique power to network between millions of Chinese consumers and suppliers.

Now Alibaba, still dominated by its charismatic founder Jack Ma, is famously going to list its shares in New York at a valuation around $200 billion, and raise $20-30 billion, making it probably the largest initial public offering ever. The value placed on Alibaba's shares by the investing public in the United States seems very high. Yet the Chinese online bookstore DangDang trades today at 20 times projected earnings for 2015. Alibaba has an unmatched dominance in the Chinese e-commerce market, at least for the moment.

Many commentators have compared the current boom in Chinese Internet stocks to the stock boom in 1999-2000, which ended badly in a bust for many companies and investors. But the mobile Internet revolution presents life-changing opportunities.

Currently, the three large companies, Alibaba, Tencent and Baidu, that dominate the Chinese Internet scene are competing head-on in new business segments: video, mapping, e-investment and online payment. Alibaba's online bank deposit service Yu E Bao, launched in June 2013, already has 81 million users, and handles 540 billion yuan ($86.6 billion) in online deposits. Alibaba in 2013 had 231 million users across its different C2C, B2C and B2B Internet sites, generating $8 billion in revenue, 85 percent of which came from domestic e-commerce transactions.

Fast-moving developments in Chinese Internet-based information, messaging, entertainment and e-commerce services point the way to a new era in which technology changes the way we live by speeding up and simplifying most forms of human interaction, whether conversational or commercial, whether based on entertainment and leisure, or on work.

Already, we can communicate instantly across continents at the touch of a button, in ways unthinkable only a decade ago. Today's boom in Chinese Internet stocks simply reflects the fact that new technology will continue to advance the Internet revolution in ways that we can already see, and in other ways we cannot yet imagine.

At the same time, China's Internet entrepreneurs are bringing new life to a Chinese economy still dominated in many strategic areas by old-style, government-controlled enterprises. In the past few months, Internet finance has started to revolutionize the Chinese financial sector. We can expect to see many other areas of Chinese commerce affected by the increasing power of the mobile Internet. We're at the beginning of a social and commercial revolution that will be bigger than the Industrial Revolution of two centuries ago. This time, though, China is at the front.

The author is a visiting professor at Guanghua School of Management, Peking University.

(China Daily European Weekly 05/23/2014 page9)