The new year is a time for reflection, but it’s also a time for looking forward. In this regard, we’ve taken a broad look at some of the budding trends we expect to continue in China in 2014. In an ecosystem growing as fast as China’s tech scene, anything is possible within a year, but here’s a few predictions we think will change the country’s landscape.
Weibo will go out of style
Weibo was still growing as of Q3 2013, and revenues were up, but we still predict the service’s popularity will taper off. Many reasons factor into this. WeChat has taken over as the dominant social network of choice for most Chinese users. Sina has reached out to overseas Chinese in international markets, but will fail to get much traction among local populations outside the domestic market, mainly because it has to compete with Twitter, Facebook, and any number of local social networks. Government scrutiny of “Big Vs” and censorship has risen over the past year. Sina Weibo will still be around, held up by China’s growing internet and smartphone penetration, but any growth will be minimal, especially if it keeps punishing and deleting thousands of accounts. It’s biggest hope is its marriage with Alibaba, which could lead to some e-commerce tie-ins. WeChat has already covered ground there, though.
After the central bank’s two tough blows restricting bitcoins in China this month, the world’s most robust Bitcoin market has been severely stunted. Bitcoins cannot be used as currency by payment or financial institutions. All bitcoin-based businesses must register with the government, as well as bitcoin users. Third-party payment companies have been barred from letting users purchase bitcoins at exchanges, which led to BTC China, the world’s largest exchange, no longer accepting deposits in RMB. Bitcoin’s outlook in China, which led the cryptocurrency to it’s peak just one month ago, is now bleak, but some still remain optimistic.
Baidu will continue to decline in search
Baidu (NASDAQ:BIDU) is already starting to lose it’s once-unshakeable hold on the Chinese search market. The biggest threat to the company’s dominance is Qihoo‘s (NYSE:QIHU) 360 Search, followed by Tencent‘s (HKG:0700) Sogou. Despite gradually losing market share, Baidu has managed to hold onto its place at the top, but if trends continue, it won’t be long before it dips below the 50 percent mark. In August 2012, Baidu accounted for 80 percent of all search queries in the city. By September 2013, it held 66 percent.
More decentralized consumer finance
This could be the biggest trend of 2014, and it covers a lot of ground. For the first time in recent history, Chinese people can choose online, non-government options for financial services. These include savings and investment in funds like Alibaba’s Yuebao and Baidu’s Baifa, microfinance and peer-to-peer lending, insurance from companies like Jack Ma and Pony Ma’s Zhong An Insurance, and e-wallets – either standalone apps like the Alipay Wallet or those built into apps like WeChat. More of these services will be rolled out in 2014, along with more supplementary services built around them.
4G-enabled services and devices
China’s nationwide 4G network finally received government approval and started rolling out on December 18. As the three major telcos flip the switches on for other cities over the next year, smartphone users will want to take advantage. China Mobile plans to sell 100 milllion 4G smartphones in 2014. That means more money spent on data plans, which in the past were often limited to just 300MB per month. As HD video, live video chat, online multiplayer gaming, and other services become available, consumers will have to pay for the devices and data plans to use them. For the world’s largest carrier, China Mobile, that means a closing a deal with Apple for a TD-LTE-enabled iPhone.
Of all the trends on the list, this one perhaps deserves the most skepticism. We’ve been let down by rumors of China lifting it’s 13-year-old console ban in the past, but this looks like the real deal. A company CEO close to Microsoft’s partner in China has publicly stated the Xbox One will be released in China in September 2014. But even if that really happens, will Chinese gamers be keen on console gaming? We have a feeling they won’t be.
China’s EV industry has more or less been a failure to date despite heavy government subsidies and market demand. This February, Tesla Motors will start selling imported Model S sedans on the mainland. Perhaps directly faced with a foreign adversary, China’s fragmented auto industry will get its act together. It looks like China might reconsider fully electric vehicles and go down a hybrid path, instead. Besides private vehicles, China has also been updating its taxi and bus fleets with electric and hybrid motors.
More high-quality Chinese-brand smartphones
China is no longer the land of cheap knockoffs (although they are certainly still around). Led by Xiaomi, both old and new companies are entering the low-cost high-performance mobile device space. It’s a chance for them to shake off the made-in-China stigma and start making headway into international markets. Oppo has been making its way to the US, Europe and Southeast Asia with the N1, although it’s not exactly a budget model. To compete with Xiaomi, prices will have to come down. Huawei just started taking preorders for the Honor 3C, a direct competitor to Xiaomi’s cheapest smartphone Hongmi. In November, Baidu invested in mobile supply chain manager Digione, which is likely to make a Xiaomi competitor as well. We expect even more smartphone models fitting this profile in 2014. Even the cheap knockoffs will start seeing upgrades. We predict sub-$100 quad-core smartphones will hit the market before the end of next year.
(Editing by Josh Horwitz)