Internet report

The Chinese Internet Report by SFF and SCMP

Estimated reading time: 6 minutes

The Green Shoots Series, a collection of online discussions by leading speakers, recently presented the South China Morning Post’s (SCMP) China Internet report. The report aimed to look at factors that are influencing Chinese tech companies to look outside their usual markets, to adapt to shifting dynamics.

Despite viewers needing to buy the report to read full insights, there was a good overall summary and SCMP’s business editor, Eugene Tang also fielded questions that the audience and moderator posed to him.

 In his presentation of the Chinese Internet Report, SCMP CEO Gary Lee described, “A lot has happened in the China tech space since last year,” adding that on the one hand the country added 85 million Internet users in 2020, while on the other hand, listec Chinese tech companies have experienced massive stock sell off, losing over USD1 trillion market cap in the process, since February 2021.

Why did this happen?

Gary talked about three key trends that will be reshaping China’s Internet over the next year.

Regulatory crackdowns

Yes, we have heard about the country’s sweeping regulatory crackdowns since the second half of 2020. And they did play a major role.

“There was no shortage of headlines over the past 12 months, including the abrupt suspension of Ant Group’s IPO, the record USD2.8 billion antitrust fine on Alibaba, China’s ban on bitcoin mining, and the cybersecurity probe into Didi Chuxing shortly after its US IPO.”

This regulatory tightening which caused share prices of China’s largest Internet companies to drop 30-50 percent from peaks, is due to Beijing wanting to better align the country’s tech development with national strategic goals and public interests, according to Gary.

This increased regulation covers four main areas of focus – antitrust, fintech, data protection, and cryptocurrencies.


Antitrust is of bigger concern because Internet service industries are  not only dominated by several tech giants in some sectors, but market concentration is even higher than that in the US.

– The top 3 e-commerce players command 84% while in US it is 51%

– 98% of market belongs to two largest players

This leads to highly monopolistic behaviours, for example heavily walled gardens, or online properties that are not very interoperable. Taobao is an e- commerce platform owned by Alibaba, while WeChat is a messaging app, owned by Alibaba’a competitor, Tencent. Users are not allowed to share links from Taobao on WeChat. (at time of writing, both parties are taking small steps to be more interoperable).

Alibaba also often forces merchants to list exclusively on their platforms, threatening complete removal if merchants sell across multiple channels.


Fintech companies like Ant Group have been using big data and algorithms to facilitate borrowing by consumers and small businesses. Gary pointed out that as a result of this, lending facilitated by fintech companies like Ant Group ballooned to over USD500 billion in just 5 years.

“The government considers fintech to be feeding excessive borrowing and overspending while bearing little of the liabilities (funding comes majority from banks).

Therefore it is now working to bring fintech under same regulations as banks.

Data Protection

Public concern on rising privacy violations, and the authorities’ growing unease about the data practices of tech firms have accelerated legislation, Gary said.

China passed the data security law in June of 2021. The Personal Information Protection Law is also expected to be finalised in this same year.  China’s legal regime on data protection is closely modeled after the GDPR, although it provides stronger protection of individual rights


Bitcoin mining consumes a significant amount of electricity, and China used to be the largest country in terms of bitcoins mined and hash rate. At its peak in 2019, it was responsible for 76% of all the mining activities in the world. This is not aligned with China’s goal of achieving carbon neutrality by 2060.

Not forgetting, cryptocurrencies have the potential of circumnavigating the country’s strict capital controls.

Forced delisting

The threat of forced delisting from the US is growing for Chinese companies, due to the strained relationship between the two countries. As a result, we’re seeing more secondary listings in Hong Kong, as businesses seek to hedge against the risk of delisting.


Another factor is China’s evolving demographic  of Internet users. In China, even niches are enormous.

For example, China has 264 million citizens aged above 60, with 32% only using the Internet. The untapped population of 153 million is already half of the entire US Internet population.  Chinese Internet companies recognise the huge potential of the silver economy and have developed senior-friendly mobile apps featuring larger font sizes and simpler interfaces.

Gary explained, “Some even come with voice commands and screen reader functions for the visually impaired.”

Not to mention, there are new apps that specifically target seniors with content and online communities, for example for elderly square dance lovers.

Besides the silver economy, the She economy is comprised of female consumers who are well-educated, financially independent and confident.

“They are spearheading changes and consumption preferences, for example healthier eating habits like low carbs, low fat, and high protein.

Besides the silver economy, there is the She economy which is comprised of female consumers who are well-educated, financially independent and confident.

There is also the under-served Sinking market, or small Chinee cities (3rd tier and/or in rural areas) that comprise of 78% of the Chinese population. That’s a staggering 1.4 billion. The pandemic shutdown saw community group buying of groceries and daily essentials at discount by this Sinking market, boosted in 2020.

“Transactional value of community group buying in China, more than doubled from a year ago,” Gary said.

Zooming in

Eugene Tang, who is the business editor of South China Morning Post, gave a little bit more detail to why regulatory crackdowns are happening now for China’s Internet companies. He tied in the fintech functions that most of these Internet companies also actually have.

Over the years, and perhaps boosted by lockdowns and shifting consumer behaviours from physical to online, Chinese fintech companies like Ant Group, Tencent,, Baidu have, committed every single aspect of financial services from banking to provision of consumer loans, credit payments, crowdfunding, asset management, insurance, and more.

A number of foreign companies entered China over the past few years, but a number of Chinese fintech companies have also gone overseas, and especially to Southeast Asia, and to invest in startups.

“And it all happened in a very short period of time, so it took time for Chinese regulators to appreciate and understand the potential impact upon the financial system,” Eugene said.

A number of foreign companies entered China over the past few years, but a number of Chinese fintech companies have also gone overseas, and especially to Southeast Asia, and to invest in startups.

“One of the main reasons is because the domestic market in China is extremely competitive, especially when you’ve got the likes of Alibaba and Tencent behind a lot of these ventures,” Eugene pointed out.

Southeast Asia has become a very lucrative alternative to many Chinese fintech companies.


Gary had earlier concluded his presentation of the Chinese Internet report by saying, “Given the sheer size of China’s internet sector, and its intertwined relationship with the global financial system, how these companies navigate evolving regulations and market fundamentals, will have significant implications to the entire world.”