China's mobile revolution

As headlines suggest China's mobile phone market place could soon top 1 billion subscribers, Dr Dave Sloggett explores the phenomenal growth in the user base in China and the drivers behind it

China's mobile revolution

In 2012 China became the world’s leading market for smart phones. In a matter of two years China went from being a very small user of smartphone technologies to having nearly 200 million users. 

Initially, the growth of this market had been inhibited by a slow roll-out of 3G technologies and a lack of subsidies for users. Customers typically had to pay the equivalent of two months’ salary to buy a smartphone

Prices have tumbled, however, and an Android phone can now be purchased for $100 and the monthly subscriptions are around $30 for 3G. This has brought the technology within reach of a much greater number of people. By the end of 2013 it is estimated over 500 million Chinese will own smartphone technology. One characteristic of this rapid market development is the growth of the urban marketplace for mobile phone services.

Figures published by the National Bureau of Statistics in Beijing show that in 2004, the number of fixed-line telephone (311.6 million) and mobile subscribers (334.82 million) was almost equal. Every year since then the ratio has grown in favour of mobile services. 

Fixed-line telecommunications subscriptions peaked in China in 2006 (367.79 million) and have steadily declined since dropping to a figure of 325.98 million by August 2009. At its peak in 2008 the rate of growth was equivalent to 7.82 million new subscribers a month. 

Mobile phone subscriptions saw significant growth in 2007, 2008 and 2009. Over the five-year period between 2004 and 2009 the level of mobile subscriptions doubled. This is significant as the first 3G services in China were only brought into operation in 2009.

One important factor lies behind this rapid growth. In January 2012 the Chinese Government announced that, for the first time, the percentage of the population living in urban areas exceeded those that lived in the rural environment. This rapid raise in the urban population is having a major impact upon the rural economy. 

To partially help address this problem China’s Government needs to find ways of developing high-speed rural telecommunications systems. How it achieves that poses some dilemmas. 

For the Chinese Government, which arose from the masses involved in the agrarian economy, any sense of rural apartheid is one that could open deep wounds in Chinese society. As it tries to navigate its own course towards a unique economic model, the telecommunications industry has been at the heart of its thinking.

A key focus of its development strategy has been the investment in internet-related technologies, with a positive impact upon the take-up of internet-enabled mobile phone technologies. Many 3G services have been quickly introduced adapting existing 2G infrastructure. This has facilitated the wider growth of the market, with broadband wireless usage growing from 46% of the mobile phone market to 58% between 2011 and 2012. 

Whilst these developments are broadly welcomed in China by the government, they are wary of the potential dangers that exist. In Beijing, the way social networking sites played a role in the start of the Arab Spring will not have gone unnoticed. As they look to the future the Chinese Government also has to ensure that the telecommunications infrastructure supports the next stage of economic growth as its focus moves from export-led growth to developing the internal consumer market. 

The rapid rate of growth of the mobile telephony market is just one indication of this move towards consumerism. From 2009 to 2012, the rate of growth in mobile phone subscriptions started to slow. However, some commentators still suggest that by 2014 there will be over 1 billion subscribers, with figures climbing to 1.2 billion by 2016. 

One of the most important factors in this increase is the rate of subscriptions to Apple’s iPhone. Its penetration of the Chinese market place has been helped by the commercial arrangements that enabled Apple to use the Baidu search engine developed in China, allowing users to chose to access internet services through their phone rather than computers.

Any visitor to China would be struck by the increasing numbers of people who chose to spend their spare time playing online games. Whilst the shift towards greater consumerism will inevitably fuel the development of the broader applications market in China, it is the games industry that has huge potential to grow. 

Ease of access

However, to support this growth the industry will have to enable Chinese citizens interested in online gaming to make contact with each other. Couple this with a strong brand and ease of access to smartphone technology and the gaming industry could be in a position to exploit a huge online market. 

With China’s three state-based telecommunications industries announcing a $4.7bn investment in the creation of the world’s largest cloud computing base in Chengdu at the city’s Tianfu software park, the potential for other online applications to develop is also clear. 

Other applications have a more practical focus. China’s weather can be subject to extremes, and meteorological bureaus across the country have been teaming with telecommunications providers to broadcast warnings of impending bad weather. As a result of these developments, meteorological authorities in 17 provincial-level regions, including Hebei, Shanxi and Jiangsu, can now send text messages to residents when an orange or red weather warning is issued. 

Weather forecasting blogs are also popular. Over 600,000 people follow the Guangdong Meteorological Bureau’s micro-blog. As torrential rains caused havoc across China
in early September 2012, meteorological services increased their rate of reporting from twenty-four hourly updates to six hourly reports. In south west China, over 656,000 people were affected by rains which destroyed over 8,500 houses.

China is also a country that is vulnerable to other forms of natural disaster. It still holds the unenviable record for being the country that has suffered the worst death toll in an earthquake in the last century when the city of Tangshan was struck in 1976. 

Whilst the death toll in Haiti in January 2010 at 316,000 was higher than the official figure of the 242,769 people that died at Tangshan, unofficial estimates put this much higher at close to 600,000. In time, as geophysicists become increasingly able to forecast earthquakes, mobile phone technologies could also be used to alert populations. 

These applications are the tip of what could become an iceberg. But for the Chinese Government, focus remains on economic growth. China’s rise as an economic superpower is forecast to make it the world’s largest economy by 2030. If it achieves that position it will have done so through a carefully planned series of investments in its telecommunications infrastructure. 

For many countries in the west whose economies are blighted by a lack of growth, there may be some lessons to learn from China. The statistics of its investment and market development are something worth studying.

Written by Wireless magazine
Wireless magazine

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