Is the gap between US, Chinese internet service companies narrowing?

By Gao Rui Source: Global Times Published: 2020/12/8 15:07:56

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A major transition the coronavirus pandemic has brought to the world in 2020 is "to go online." While transforming people's lifestyle, the shift also affects the growth curves of economies and businesses, particularly internet companies. 

As many small and medium-sized technology services companies are flourishing in their business as people work and entertain from home amid the pandemic, has the gap between Chinese and US internet companies narrowed?

Tech giants from China and the US have both witnessed strong growth this year. Third-quarter financial reports show Amazon's earnings grew 37 percent year-on-year, Google's parent company Alphabet's earning grew 14 percent, Tencent's revenue grew 29 percent and Alibaba's business volume grew 30 percent.

US internet giants such as Google and Amazon have exceeded $1 trillion market cap. Chinese companies such as Alibaba and Tencent have surpassed $700 billion and are growing fast. 

The earnings of Alibaba's cloud computing services grew 60 percent year-on-year in the third quarter, narrowing the gap with Amazon's cloud-computing services. The speedy development was boosted in part by research and development and China's vast consumer market.

In global unicorn rankings released recently, companies from China and the US account for about 80 percent of the total. China is stronger in e-commerce and logistics industries, while the US leads in the fields of artificial intelligence (AI) and cloud computing. The two countries have little difference in online financial technology and cultural entertainment development.

During the "go online" transition, Chinese and US tech companies have honed their strengths and realized fast business growth. Meanwhile, the gap between Chinese tech companies and US tech companies is narrowing.

Due to the pandemic, technology services companies further expanded their business scale in online consumption, while embracing more opportunities brought by digitalization and industry integration, in which some Chinese companies enjoy advantages.

A study by the Digital Economy Board of Advisors under the US Department of Commerce pointed out that the US' digital economy is conducive to easing the impact of the pandemic on tertiary industry, but offered limited support for the first and secondary industries. This is because the global supply chain system has suffered disruption from the pandemic, which largely affected the digital economy's complementary role in traditional industries.

And, the US economy has suffered from a manufacturing hollowing out. 

Although US internet companies enjoy great advantages, they still face challenges in realizing deep connection with traditional industries. In comparison, Chinese manufacturing industry has realized fast development over decades of participation in global trade. Of 500 major manufactured products in the world, China ranks first in manufacturing ability, leading 220 products.

The major challenge facing Chinese manufacturing industry is not low-value-added but rising costs, which has a strong motivation to seek digitalization. The fast growing technology services industry has provided important support for Chinese manufacturing sector digitalization.

With online consumption keeps rising, China's manufacturing industry has also become a test field to keep pace with the giant market's demand. Now, the new infrastructure construction is gaining impetus in the country this year, with ultrafast 5G rollout leading the world, which is expected to bring about new challenges and new opportunities too. 

The author is vice director of economy study department of China Enterprise Confederation.


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