2020 was a tumultuous year to say the least, but as the adage goes, in crisis there is opportunity. This idea is literally embedded in the Chinese word for “crisis” (危机): Its second character means opportunity.
China’s populace appeared to have embodied that spirit. In a challenging year, entrepreneurs and regulators alike worked together to steady the ship and found ways to restore some normalcy through resilience, digital innovations, and timely policies. At the start of 2021, China looks well positioned to carry on with the rapid digital transformation it has undergone for the past two decades, on the back of the innovative forces that sprung up in a difficult year.
Here’s what to look forward to in China in 2021.
The government will unleash regulations on tech giants
A source of national pride in China has been the digital giants that emerged over the past couple of decades, due to the incredible growth of the country’s digital economy. But regulators are ready to turn the page from quantity to quality of growth.
Digital companies have always had to adhere to government policies, particularly those pertaining to self-censorship and, more recently, those concerning youth internet addiction, consumer rights, and consumer data collection.
By the end of 2020, however, things felt a little different. For one, regulators made an amendment to give the antitrust law more teeth against big tech companies. Anticompetitive behaviors, such as blocking links to competitors’ sites and forcing brands to sell exclusively on one platform, are also getting renewed scrutiny. In November, regulators suspended financial technology giant Ant Group’s IPO (which would have been the world’s largest) at the last minute, citing concerns about its impact on the stability of the country’s financial system.
In 2021, look for more stringent regulations and stiffer penalties against big tech companies, particularly around antitrust and financial technology. There aren’t talks of breaking up big tech in China, as there are in the US. Rather, regulators will look for ways to ensure the long-term health and innovativeness of China’s digital ecosystem, while injecting greater openness into its walled gardens.
The shift to digital consumption will accelerate in 2021
The coronavirus pandemic has fueled online shopping in China, helped create many first-time ecommerce buyers, and fostered new shopping behaviors. Shoppable livestream, online grocery, and local group buying are well positioned to gain further traction, even as travel restrictions have eased. We forecast that retail ecommerce sales in China will grow by 21.0% in 2021, versus the 4.0% growth in total retail sales. As a proportion of total retail, retail ecommerce will jump more than 7 percentage points year over year to 52.1%.