Digital Lifestyles — Digital Transformation of China’s Economy

DIGITAL PAYMENT


Unlike people in the US who like to make payments using a credit card, mobile payments, specifically Alipay and WechatPay, dominate the digital payment market in China. Mobile payment has become the top preferred way of daily transactions between customers and sellers. Even the smallest merchant on the street has a QR code in their store, and people just scan with their phones to make the payments. In the news, homeless people in China always bring a QR code to collect alms. According to the news agency Xinhua, in the first 10 months of last year, China processed a whopping $12.8 trillion in mobile payments, which is 38% higher than for all of 2016.

Not only the payments but also the investment in China has a trend of toward the digital. Similar to other digital payment apps in China such as Meituan Pay, both Alipay and WeChat are “super apps”, which means customers can install and open “mini-programs” inside these two apps. The “app-within-an-app” concept was introduced by these two companies that attempted to create an ecosystem around the apps themselves. One major mini-program is called “Yu’eBao” in Alipay, which means “leftover treasure”. People always have a small amount of money left in the digital wallet, and they can put the money in the “Yu’e Bao” as an extra investment opportunity. “Yu’eBao” became the world’s largest money market fund in 2013. Currently, Yu’E bao had 1.03 trillion yuan in assets under management at the end of June or an equivalent of $144 billion based on exchange rates.

A few months ago, China announced its digital RMB or e-CNY to the public. It was issued by China’s central bank, the People’s Bank of China. It is the first digital currency to be issued by a major economy. The digital RMB is legal tender and has equivalent value to the other forms of CNY. Although there is no much info about it, with e-CNY introduced, Alipay and WeChat pay are facing new competition in China.

E-COMMERCE WITH LIVE STREAMING

China is the world’s largest e-commerce market, propelled by e-commerce subsidiaries of Alibaba Group, include Taobao, and Tmall, plus competitors JD.com and Pinduoduo. According to reports, around 710 million people shopping digitally in China, and consumers in China will spend around $3 trillion online this year, which is more than 50% of retail sales.

In recent years, a new form of e-commerce becomes popular in China – live streaming e-commerce. Livestreaming e-commerce is promoting and selling goods through influencer streams on their own social media channels, including social media platforms such as Douyin, the Chinese version of Tiktok, and e-commerce platforms such as Taobao, the Chinese version of eBay. Products featured are primarily cosmetics and beauty aids, fashion, and foods, but sometimes the rocket and the house too. The two most famous live streamers/influencers are Jiaqi Li, also known as the “Lipstick King”, “a former L’Oreal, physical retail salesman who is now worth a reported $5 million” and Wei Ya, who promotes to send a small payload into space for the Chinese company Casi Rocket Technology at $6.1 million. In 2020, Wei Ya set a record high sale worth 5.32 billion RMB within 1 day, and Jiaqi Li set a record high sale worth 3.87 billion RMB within 1 day.

Not only the influencers but also world well-known retailers started to enter the live streaming e-commerce market in China recently. Estee Lauder’s live stream sells an estimated $300 million of products on “Singles Day 11/11” with a 2 for 1 discount. Tiffany and Hermes are also turning to the sales channel. Tiffany sold over 300 necklaces with each worth 3500 dollars within hours of live streaming. Lanvin and Louis Vuitton have also launched live streaming promotions in China.

DIGITAL ART


Lastly, the digital art world. Originally from Tokyo, Japan, TeamLab created a digital wonderland in Shanghai, China, an immersive clubbing experience that connects humanity with the digital world. TeamLab Borderless Shanghai has a 6600 square meters space with around 50 digital art areas, including the ones first introduced to the world. The exhibition space doesn’t have any maps, and people can walk around inside the different areas. The exhibition is called a “new social entertainment model” and delivers experiences that are enlivened by “3-D objects” around the space people into.

7 comments

  1. sayoyamusa · ·

    It’s so funny and smart that homeless people are a step ahead and carry a QR code! This reflects the fact that mobile payment really prevails in China, and I’ll use this interesting anecdote to explain the Chinese excellence in technology! I didn’t know “Yu’eBao,” but this also looks a brilliant idea to develop digital money market. I knew about live streaming e-commerce, yet their huge earnings are mind-blowing. Maybe it’s time for KIRIN to do live streaming e-commerce in the Chinese market, showing delicious-looking beer!? Anyways, I’ve been always impressed with Chinese ingenious ways to take advantage of technologies and I really hope to stay learning from you! Keep me posted even after our graduation, Lewis!

  2. therealerindee · ·

    Wow. Super informative. I am still blown away by the fact that the US has not expanded faster into digital and mobile payments. You should really be able to pay with your phone absolutely anywhere as you are in China. One of the coolest things you highlighted was the app within an app where Yu’eBao basically just collected your leftover money and invested it to become a huge money market fund. This is brilliant and since everyone was already using digital payments, a seamless experience unlike Acorn or other apps where you link your banking information to yet another app in order to invest leftover funds. Very interesting to learn about all the ways China is moving towards and embracing digital.

  3. lisahersh · ·

    Awesome post! It’s so interesting to see how Chinese culture is really advancing this movement towards digital currency and e-commerce and how its prevalence is felt at all levels of society (excellent example of the homeless man with a QR code!). I also think it’s so cool how the Chinese government is really supporting this rapid transition to digital legal tender – potentially solves a lot of the volatility issues we discussed surrounding Bitcoin. Your post also reminded me of one of the Group A readings a few weeks back that mentioned how there’s a whole bunch of physical money (possibly gold) that the US stores with a label more or less stating “Property of France.” I rarely if ever have cash on me, and with ApplePay I don’t even really need to have any cards on me either anymore. I wonder if the days of physical money are going to one day disappear entirely…

  4. Scott Siegler · ·

    This was a lot of fun to read, thanks for sharing all of this excellent info and data. I think positioning digital payments in a live stream is a really cool concept, and I’m so curious about the psychological differences behind impulse buying during a recorded message / commercial vs. a live stream. I feel like investing so heavily in digital payments across an entire country in this way is a fantastic strategy as it removes friction from transactions to an even greater extent and promote a lively economy.

  5. williammooremba · ·

    Great blog post. One thing that stuck out to me was the e-commerce live streaming. It reminded me of a big YouTube documentary series/makeup product launch in 2019. Called “The Beautiful World of Jeffree Star” it was a documentary web series by YouTuber Shane Dawson. According to Wikipedia is has over 130 million views. While I normally don’t particularly follow makeup, from a business perspective I thought this was fascinating. The series ultimately ended as a vehicle for launching The Conspiracy Collection a collaboration between Dawson and Jeffree Star. The collection’s initial amount of product sold out around three hours after launch likely worth millions. It really blurred the line between advertising and filmmaking and showcased some of the evolution of e-commerce. I will be interested to see how the impact of product launches could be combined with some of the trends you mentioned with e-commerce live streaming in China.

    Wikipedia article: https://en.wikipedia.org/wiki/The_Beautiful_World_of_Jeffree_Star

  6. courtneymba · ·

    Awesome article! That is so interesting to hear how pervasive QR codes are in China, down to SMB and homeless populations. I wonder if/when that would take off in the US. Most of the credit card machines that are in “mom and pop shops” do actually have ability to accept mobile payments through Apple Pay and Google Wallets, but they’re not still not utilized as often as physical cards.

  7. Jie Zhao · ·

    Great post! I remember going to China (back in 2017) and literally not having to bring my wallet anywhere I go because literally every single store and street vendor accepted WeChat (and that was >4 years ago!). I am also surprised that we don’t have it here in the U.S. yet as we have the technology and apps (i.e. Venmo) for it but somehow it’s just not as commonly used here. I also have heard of people getting their paychecks via WeChat, I am wondering how the government regulates that and if there’s anything in place to prevent fraud or money laundering.

%d bloggers like this: