Remarks by ChinaEU President Luigi Gambardella at the DigiWorld Summit 2015
Remarks by ChinaEU President Luigi Gambardella at the DigiWorld Summit 2015
Montpellier, 19 November 2015
Distinguished guests,
Ladies and gentlemen,
I would like to thank IDATE for the organization of the DigiWorld Summit. I hope that this is only the beginning of a long-term cooperation between ChinaEU and IDATE. Montpellier could become the annual European showroom of China’s top players in the digital industry.
Today, I will focus on two points:
1) the Chinese Internet and telecom market
2) the evolving EU-China relations on Digital
1) On the Chinese Internet and telecom market
China is the biggest and fastest growing market for ICT in the world. With an approximately annual growth rate of 7 percent, the 10-year aggregate of China’s ICT market will reach $6 trillion by 2025.
As of the end of 2014, China had 649 million Internet users, with a penetration rate of 47.9%. Mobile Internet users accounted for 85.8% of the total netizen population, that is 557 million (more than the whole population in the EU!). Four of the world’s top ten Internet companies are Chinese: Alibaba, Baidu, Tencent and JD.com. It is estimated that by 2016 China’s cross border e commerce trade volume will reach 6.5 trillion yuan (950 billion euro).
China is home to the world’s biggest telecom operators. China Mobile alone has 800 million users. The objectives of the government are clear and ambitious:
- favor investments in the next generation telecom networks;
- improve the Internet quality and speed;
- reduce Internet connection costs.
The Chinese government has recently established a New Tower company (called China Tower Group), aimed at improving efficiency and cut costs for the telecom operators. China Mobile, China Telecom and China Unicom have transferred a total of 231bn RMB (34bn EURO) of assets to the new company, which will invest in upgrading and expanding mobile networks, including the ongoing rollout of 4G wireless Internet service. China Reform Holdings, a state-owned company created in 2010 to promote restructuring of state groups, has made a 6% equity investment in China Tower. Such investments will be used to help fund the construction of a network of electric car charging stations, considered as a key step to turn the country a leader in new electric-car technology.
The new Five Year Plan aggressively puts innovation, green development and open-up as core goals for the next five years of development (2016-2020). Despite the deceleration of China’s economic development, China will remain a fast growing market for Internet and Digital. With the new “Internet Plus” strategy, China aims at realizing the “network economy”, develop new technologies and applications of “Internet of Things”, promote the “sharing economy”. For the first time, the government talks about a national strategy for big data. All this opens up incredible opportunities for foreign tech startups who want to scale up in China. Think about the apartment booking platform Airbnb or the famous French ridesharing app BlaBlaCar.
The 13th Five Year Plan calls for concrete steps for the creation of a new digital industrial system. With the famous “Made in China 2025” policy, China intends to accelerate the penetration of technologies in all aspects of the manufacturing value chain, from design, to production, to marketing. And here, again, I see incredible opportunities for Europe, and especially for Germany, France and Italy the three biggest manufacturing countries in the continent.
The trend is clear. According to IDC, a market intelligence company, by 2025, over 80 percent of organizations in China will have become technological organizations, and each Chinese consumer will have five digital smart devices on average. This is a huge market for Internet of Things applications, for big data solutions, and for all smart solutions that can promote the creation and the development of smart cities. I am looking forward to the forum on smart cities of this afternoon. In the 12th Five Year Plan, China talked about total investments for smart cities of up to 1.6 trillion RMB (230bn EURO). Imagine if European companies could take benefit from even only one tenth of the total amount.
There is yet another reason to be optimistic about China’s ICT market development, and that is the statement announced in the new Five Year Plan: “Openness is the only way towards development”. The Chinese government wants to strike a balance between the “going global” of its national champions and the “coming in” of foreign technologies, talents, and capital. In June this year, the Ministry of Industry and Information Technology (MIIT) lifted restrictions on foreign ownership of e-commerce, allowing for full foreign ownership for e-commerce businesses operating in “online data processing and transaction processing services nationwide. Previous administrative measures restricted ownership in VATS companies to 50% foreign equity. Foreign investment in the telecom sector continues to be allowed only through joint ventures, where the foreign share is set at 49% for basic telecom businesses, and 50% for value added businesses. A promising development is the openness of mobile virtual network operators (MVNOs), even though in this area, heavy restrictions are in place. An eligible company must have domestic owners with more than 50% investment. For companies listed overseas, the foreign company shares held should be less than 10%.
2) On EU-China relations on digital
ChinaEU has been the most active promoter of EU-China cooperation on all aspect of the digital value chain. In particular, we see five concrete areas where Chinese companies can work together with their European counterparts to make progress in the digital economy and society:
- 5G: since February 3rd we pushed for a bilateral agreement on 5G. This objective was included in the priorities of the EU-China Summit on June 29th and eventually reached on September 28th at the High Level Economic Dialogue in Beijing. This is an excellent result. It means that European vendors and telecom operators will join ZTE, Huawei, and the Chinese telcos in the global race for 5G, the technology of the future and the enabler of the digital revolution of Internet Plus and Industry 4.0. China has committed to opening up its IMT 2020 research programs to European actors. We in Europe should keep our research programs equally transparent and non-discriminatory and we should not exclude any Chinese player.
- Juncker plan: once again we launched the proposal that China should get involved in the European Investment Plan of 315bn EURO. This idea was advanced at the Summit, where China announced its intention to invest up to 10bn EURO. In September, China and Europe agreed to set up a working group to find concrete ways through which China can participate in the plan. In parallel, ChinaEU is working on creating a project pipeline of projects at EU level (prepared by cities, regions as well as companies) and create a match making between Chinese commercial banks and projects in need of extra financing.
- Startups: We have envisioned a SilkCamp, an ambitious program to support European high tech startups to scale up in China and Chinese high tech startups to operate in Europe.
- Smart Cities: it is urgent that we move from the conceptual phase (benchmarking and best practice sharing) to the actual implementation of concrete smart cities projects in China and in Europe, where smart solutions from both Chinese and European suppliers are shared for the support of sustainable urbanization. France could be leader in this field and French companies could support China’s smart city development. More and more, we should get used to the idea that Chinese companies are leading in certain sectors, and can thus provide innovative solutions to European cities. ZTE for instance is actively developing smart energy applications, and is currently providing wireless charging technology for electric vehicles producers.
- Internet: We propose a high level dialogue to tackle issues related to Cyber-security and cyberspace. By the end of the year, we will launch together with the China Internet Development Foundation the first China-EU Digital Research Center. It is important that Europe and China start to work more closely together. We need a better understanding of the current legislations both in China and EU, and at the same time we need to focus on future policies and regulations in such an important sector like the digital one.
