In part 1 of this series, I covered Chinese mobile habits, apps and ads. In part 2, I will examine China’s history, economy and politics. This is the bigger background story of China’s Mobile Revolution.
The Upheavals
The story began in 1949, when the Chinese Communist Party founded a new country — the People’s Republic of China. By then the country had been ravaged by a century of war and unrest. For the first time in a long time, people were hopeful. Little did they know, the good years wouldn’t last long.
In the late 1950s, paramount leader Mao Zedong launched a series of disastrous economic policies that caused one of the worst famines in history, starving tens of millions to death. He was ousted by the Party. In 1966, to wrangle power back, he launched the Cultural Revolution — a cult of personality movement that quickly turned into anarchy. By the time of his death in 1976, the country was in ruins, both culturally and economically.
The most valuable item a family would own would be a bicycle or a small portable radio.
My dad told me about his life in the 1970s, during his school years. Most food was bought with stamps, which were often rationed to only provide a bare sustenance. Nobody owned homes, as all land belonged to the state. People rode bicycles everywhere, and the few cars on the road all belonged to the state too.
But the world he knew would soon turn on its head.
In 1978, the new party leadership under Deng Xiaoping saw the state of desolation China was in. They opted for economic reform. Soon the tight ideological control on the economy was loosened. A second wave of revolution was brewing, this time it involved the free market.
In the early 1980s, my dad, who was a university student by then, saw Coca-Cola for the first time in a department store. He vividly remembers seeing a few bottles displayed in a glass counter, along with the hefty price tag of ¥0.45 (RMB) per bottle.
Coca-Cola was a luxury item — each bottle was nearly 5% of an average worker’s monthly salary.
What did it taste like? He wondered. In the years to come, people’s salaries gradually increased and they bought more and more Coca-Cola. Today it’s become just a common soft drink. The transformation of Coca-Cola, arguably the embodiment of American-style capitalism, symbolizes what happened in all facets of Chinese life, both ideologically and economically.
Miraculous Transformation
Since Deng, the Chinese Communist Party has by and large found a way to stabilize its governance, instill general rules for leadership transitions, and abandon Mao’s ideological fervor. Government officials were promoted based on two measures — level of economic growth and level of stability. The country thrived. People were eager to escape the horrors of Mao’s era to pursue economic freedoms.
The sustained stability and economic reform has fostered a period of insane GDP growth — one that has been dubbed the “single most impressive poverty alleviation achievement in history.”
This macro-level miracle manifests itself most notably in the material surroundings of everyday people. In 1976, television sets were a rarity. The ones that did exist were shared with the entire community. Fast forward twenty-six years to 2012, TVs were so common that an average household owned 1.6 sets. The number is still behind the west, but considering where China came from, it is quite astounding .
People’s physical surroundings went through a profound transformation. It feels like science fiction. Mega cities were born out of barren nothingness, seemingly overnight. In 1987, a photo was taken in the Bund, Shanghai, overlooking the district of Lujiazui. Twenty-six years later, a Reuters photographer recreated the shot.
Shenzhen, arguably China’s most successful Special Economic Zone, provides a similar example. Within thirty years, it transformed from a small farming town known for its proximity to Hong Kong to a mega city of 11 million people, best known for being the Silicon Valley of Hardware.
Inflection Point
In a way similar to TV adoption, technology products such as washing machines, refrigerators, landline telephones, mobile phones, and even cars quickly entered people’s lives — mostly during the 1990s to 2000s, as reflected by the steep GDP climb.
Though technology adoption happens later in China, once it starts, it sweeps across the country like wildfire.
A recent “wildfire” was in the adoption of smartphones. When I visited in 2010, my two older cousins were using feature phones from Nokia and Motorola. When I visited again in 2013, they had already switched to smartphones from Apple and Samsung. Indeed by 2013, China overtook the U.S. as the world’s top smartphone market.
What became clear to me this year, was that China has moved even further along its upward trajectory, surpassing the West in realizing a mobile-oriented, app-centric world, so much so that Facebook’s recent Messenger Bots platform looks like a carbon copy attempt at emulating the tremendous success WeChat enjoys with its 10 million bot-like “official accounts”, a platform it launched in 2012.
Perhaps Tencent well understood the “wildfire” tendency of the Chinese consumer, when it asked a new internal team, in 2010, to create a new mobile messaging app. This app became WeChat.
Tencent had long dominated the Internet messaging space in China, winning the hearts and minds of consumers with its desktop messaging app — QQ, which had 647 million monthly active users by then. Unlike Facebook’s approach of porting over the desktop app to mobile, Tencent built a new mobile-oriented product, and kept it separate from QQ.
WeChat was built for a smartphone-powered world, without the baggage of a legacy desktop app.
Fast forward six years, you’ll notice that in China, outside of the young and the elderly, anyone who can afford a smartphone already has one, and anyone who has a smartphone is already on WeChat. With 700 million monthly active users, WeChat is not too far off from Facebook Messenger’s 900 million. While Facebook’s users are spread across the entire globe, WeChat users are concentrated in China.
This is unprecedented — nowhere else can you find a product with this kind of ubiquitousness multiplied at this kind of scale.
China Scale
700 million is a perfect example of “China Scale” —a number big enough to be indicative of the world, but on a closer look, only represents one country, China. In this sense, China seems to be in a world of its own.
Depending on the urban area measured, China has between half a dozen to two dozen cities bigger than New York. As urbanization continues, Chinese cities will get even bigger.
To sustain these growing mega cities, governments at all levels have been building infrastructure at breakneck speeds. China is now home to 24 subway systems, the most in the world (compared to United States’ 15 and Japan’s 14), the longest highway network with 123,000 km (compared to 77,017 km of the U.S. Interstate Highway), and the longest high-speed rail network, more than the rest of the world combined.
What’s shocking is that this is just the beginning. Out of the 33 subway systems being built right now in the world, 14 are in China. By 2020, China’s high-speed rail network is to be expanded to 30,000 km, a 55% increase from its current length.
These enormous building projects have made China both the top producer and consumer of the world’s cement. In the three years from 2011 and 2013, China used more cement than the United States did in the entire twentieth century.
This is China Scale in a nutshell — things are so big, you can’t even wrap your mind around them.
Open and Closed
One might think with all these changes, China must be open for business. The answer is that it highly depends. China is both open and closed. It’s open in that commerce and entrepreneurship are accepted and encouraged in most cases.
It’s closed in that industries such as banking, energy, telecom, and railway are still tightly regulated, (perhaps rightfully so) and they are directly controlled by the government.
The sense of closure can be see in the treatment of NGOs and civil rights lawyers in the news. Historically, the status of these have been in a grey area. Since the new leadership under Xi Jingping, the line is becoming increasingly clear.
The line is crossed if one happens to start a company or organization that moves the country towards a civil society, whether directly or inadvertently. In the last month, the government announced new rules that will force out 7000 foreign NGOs and it arrested a number of civil rights lawyers.
Tied up in all of this is Peter Dahlin, a Swede who co-founded an NGO in China that provided legal aid to those who needed it. The lawyers working with him were detained in the crackdown and he too was detained. Later he was forced to make a TV confession, reminiscent of Mao’s Cultural Revolution. Peter was later expelled from China. This event sent shockwaves in the expat community, especially to those who work in similar areas.
Civil society aside, the rise of the information sector is also viewed as a thorny issue by the government. In the old days, the state controlled all media, and sanctioned all content. Today, information is currency (literally the case for Alipay and WeChat Payments) and the free flowing of that currency is vital for the economy.
Open-source is the new standard, and digital communication is the new norm.
In 2013, the government briefly banned Github. This caused an uproar in China’s tech community. The government rescinded the ban in a matter of weeks. The leadership understands that the Internet drives the economy, yet at the same time it is afraid of its power in coordinating the masses. This is also why VPN still works (though intermittently). The government understands that the elites need VPN to access information vital for commerce, research and innovation, yet it feels very strongly that VPNs must be kept away from the masses.
In this delicate balance, Chinese entrepreneurs have found a way to not only survive but thrive; however the consequence is that they must also cater to the demands of the government for censorship and control.
The Internet works fine in China, unless you try to visit foreign sites … or look up certain keywords, for which you’ll be presented with an error page.
What’s noteworthy is that while the elites are “tunneling” in and out of the Great Firewall every day, a significant portion of Chinese Internet users don’t care about censorship, contrary to what the government believes. They are showing little interest in consuming news content originating outside of China. But the government is not taking chances. In fact it has been doubling down on censorship since 2013.
What is clear is that as the world becomes more digital, issues related to the Internet will become more acute in China.
State of Paranoia
You may wonder why the Chinese leadership is so paranoid about dissent and the coordination of individuals, when mostly positive things have been happening in the country. Many offered arguments citing fundamental differences in attitudes and values between China and the West.
While these arguments have some merits, I think the fear comes from the Party’s own sense of legitimacy. In 1949, the Communist Party’s legitimacy stemmed from its gun barrel and its promise to deliver radical change to poor peasants. It did so for a few years, but like most Communist experiments in the 20th century, the system produced a dictator who drove the country into disarray. To save China from perpetual desolation, the next leadership embraced market economics. However, this left a big question unanswered —
If the Communist Party is no longer Communist, then what is it?
Indeed, this question became the focal point in 1989 when inflation, corruption and liberal-democratic sentiments brought tens of thousands of people to Tiananmen Square. A corresponding struggle within the top echelons of the Party ensued. The pro-reform side lost out. The hardliners crushed the protests with absolute force.
The crackdown also swept away hopes of real political reform. In the years since, the political environment tightened and freedom of speech was curbed. The state was determined not to let 1989 repeat itself.
This was the turning point in China’s history of reform.
In 1992, Deng revived the economic reform initiatives. Essentially the Party made an unspoken deal with the people then— “shut up about democracy and we’ll give you economic growth.” Both sides did their part for the next 27 years — the people kept themselves busy trying to get rich, while the government stimulated growth at all costs.
The Party too went on a treacherous but nevertheless successful path of adaptation and self-correction, most notably in assimilating business people, setting term limits to 10 years, and working out a system of promotion that mixed factional struggles with meritocracy.
Chinese Dream
But China’s economy is slowing down. The pressing question faced by the current Party leadership is now this —
If the Communist party is no longer driving economic growth, then what is it good for?
This is the reason, China’s new president Xi Jingping brought up the notion of the “Chinese Dream”. It echoes the American Dream in that it’s also about reaching personal prosperity through hard work and determination, but Xi’s version includes realizing “the great revival of the Chinese nation”, which means returning China to a place of importance that it once held in history. Of course, all this is under the pretense of The Chinese Communist Party leading the way. When scratching beneath the surface, one will realize that this dream is deeply nationalist and traditionalist — in that this has been been the same goal deeply engrained in the historical Chinese notion of governance.
As professor and writer Clay Shirky points out in his book Little Rice: Smartphones, Xiaomi, and the Chinese Dream, the real question here is whether the capitalized Chinese Dream proposed by the State, is shared by everyday people in their lowercase Chinese dream.
Indeed, many Chinese people do identify with with the capitalized Dream. They are very proud of the country’s achievements.
My little cousin, a recent university grad and an avid fan UEFA football, asked me why the West demonizes China.
He’s frustrated. I don’t blame him. Western media often fall into the trap of meta-narratives in pitting China’s system against the West, while politicians often use China as a talking point, a ruse to showcase their toughness. For my cousin, who is unaware of the events in 1989 and much of China’s bitter history under Mao (as a result of the historic amnesia manufactured by the Party), the Chinese Communist Party has done mostly great things, and the country deserves more recognition and respect from the world.
On the other hand, he also embodies the lowercase Chinese dream. Fresh out of school, he is quick to recognize the harsh realities of being a city dweller without family resources (in real estate properties or connections to the rich and powerful). To him, everything is expensive but competition is still fierce even for low-paying jobs. Rent is high but the commute is still long. He aspires to own a home and a car some day but at the rate he’s saving, that day may never come.
Perhaps he is not so worse off in the grand scheme of things. There are tens of millions of Chinese people whose lives are much harder than his. This is the deeper issue of China today — disparity. There are many regions along the coast (most notably in the Yangtze river delta and Pearl river delta) where development levels (in GDP, life expectancy, access to social services) rival those of New York and London, but there are inland regions where these indicators are much closer to Myanmar and Ghana. It is often those people who suffer the most — they bear little fruit from the China’s growth but still absorb the full costs of breakneck development — exploitative labour practices, dangers from pollution, and the loss of centuries’ old traditions.
This is the tougher issue facing China today. What makes it even more interesting is that the growing disparity might be a connected global phenomenon. Like America, the majority of China’s wealth is controlled by a small number of well-connected, powerful families and individuals. As confirmed by the recent Panama Papers, while the world’s wealthy and powerful have benefited together from globalization, the people at the grassroots have suffered the negative consequences.
This is the story of China — a perpetually interesting place with dynamic idiosyncrasies. Miraculous transformations have taken place at an unprecedented speed and mind-bending scale. However, as China’s economy slows down and becomes more information-driven in the second decade of the 21st century, unresolved historical baggage is leading its ruling party to double down on censorship and control.
Moreover, forces of globalization that once connected the world’s economies have also created a global ruling class. Economic issues faced by individual countries thirty years ago are now global ones. Just like what happens America affects the world, what happens in China is impacting the rest of us in one way or another.
We all have a stake in China’s future, and the stakes have never been higher.
In part 3 of this series, I will focus on the winning strategies of two Chinese tech giants, whose combined market cap is more than $100 billion USD. I will cover how WeChat “productified” and “gamified” a centuries-old tradition, how Xiaomi spends $0 on advertising. Read part 3 here.
