Friday, July 9, 2010

1 point 3 BILLION internet users...

International companies have this going through their heads whenever they think of China: 1.3 BILLION customers, probably in a Dr. Evil voice.

From the outside, it looks fairly straightforward. But let's not make the mistake of thinking China is going to become a country of 1.3 billion Americans overnight. The average Chinese person in the city is making less than the South African minimum wage - about US$300 compared to US$400, and that's for a 40 hour week. Oh, there are plenty of white collar staff earning pretty well, but still below what South African equivalents are earning. They make up for this low wage situation with dirrrrt cheap products. Now, how is your average factory worker going to afford a PC which will cost one or two month's wages, even in dirt cheap China (even if you can buy a pirated copy of Windows 7 for 5 yuan)? Sure, you can use an internet cafe if you want.

Yet China has some 384 million internet users. This doesn't mean that 384 million people have computers and an ISP. In fact, in 2008, "only" 32 million PCs were sold. 102 million computers were in use, compared to 274 million in the US. That's 1 computer for every 13 people, compared to roughly 1:1 in the US. Then, you have to actually wonder - just how much money are these users generating? A fairly large chunk of these PCs were bought with totally pirated OS and software. Baidu, China's "answer" to Google is in fact more like China's Pirate Bay - its success is through hosting pirated media! And, even with the lion's share of 384 million users, its turnover was less than $3 billion in 2009, an eighth of Google which has over a billion users.

Sure, the penetration is going to increase, and maybe someday we can expect 1.3 billion computers (or their future equivalents) in use. But for that to happen, we will also have to see dirt poor rural farmers lifted to the equivalent salary of the average American "poor." To match the US now, China "merely" has to maintain wages grow at 10% for the next 25 years or so. To overtake the US, it has to maintain this growth rate for about 50 years. Can it? It's doubtful, heck, downright impossible. If you really want an idea of the growth of the Chinese internet, follow Baidu.

No comments:

Post a Comment