Three Decades, Three Paradigm Shifts: How The Internet Transformed China

BEIJING, China: On April 20, 1994, China established its first full internet access, marking a profound transformative phase in various aspects of the country's economic and social spheres over the next three decades. I will not dwell on the significance of the internet to the Chinese economy. Instead, I aim to explore how the internet has influenced Chinese social paradigms.

 

The year 1994 was critical not only for internet connectivity but also for China's broader shift towards marketization. This year saw the implementation of tax-sharing reforms, the replacement of fixed exchange rates with a managed floating rate system, and the enactment of critical laws such as the Company Law and the Labor Law. In a sense, 1994 represents the beginning of China's move from theoretical discussions about a market economy to its practical application. The simultaneous adoption of the market economy and the internet has indeed been a remarkable historical opportunity for China.

 

But the transition to a market economy required not only changes in institutional frameworks but also shifts in social paradigms.

 

Historically, Chinese society has been shaped by values that have favored agriculture over commerce, a preference ingrained over thousands of years. This, combined with decades of a planned economy, has established a strong conceptual inertia that persists today. Dominant viewpoints include a rigid obsession with state jobs, an overemphasis on educational credentials, a risk-averse mentality, and skepticism towards globalization. Shifting these deeply rooted paradigms is a lengthy and complex process, often fraught with setbacks and regressive trends.

 

The introduction of the internet has had transformative effects that extend far beyond its technical implications. It has been instrumental in introducing three pivotal new paradigms that resonate deeply with the ethos of the market economy, significantly liberalizing Chinese societal mindsets:

 

Firstly, the internet has fostered a grassroots spirit.

 

Prior to the introduction of the internet, career aspirations in China fell into two mere categories: either climbing the academic ladder, securing credentials from prestigious universities to obtain high-profile jobs in the government, foreign enterprises, or financial organizations; or venturing into business. For the past three decades, however, the internet has notably shifted career dynamics in China.

 

Today, success is no longer solely contingent upon academic credentials. The internet industry embodies the Chinese idiom that "heroes are judged by their achievements, not their origins," emphasizing results over pedigree. This dynamic sector demands physical stamina and the ability to adapt quickly to rapid changes.

 

Many founders of China's top tech companies do not hail from elite institutions like Tsinghua or Peking University. Instead, a significant number of leaders of medium to large internet companies hold only undergraduate degrees. The internet sector has been non-elitist for an extended period. Furthermore, many individuals in middle or senior management roles in leading internet firms are often graduates from second-tier universities [which enroll students after the first round of student applications and are perceived to offer a lesser quality of education] or professional universities, a trend that continues today.

 

While some argue that the era where non-elite individuals could significantly advance in the internet industry is over, due to top companies now emphasizing educational credentials in hiring, this observation only captures part of the broader reality. Outside the major corporations, numerous opportunities exist in roles like operators at platform service providers, live-streamers and influencers at MCN companies, and young entrepreneurs on international e-commerce platforms. For those without elite backgrounds or advanced degrees, the internet continues to offer unparalleled opportunities for transformative success.

 

The internet has dramatically lowered the barriers to entry. Today, I will not explore whether online businesses are supplanting offline ones, nor will I compare the costs of online versus offline traffic. It is undeniable that two or three decades ago, launching an online store allowed for a "cold start" with significantly lower costs compared to traditional brick-and-mortar establishments. Moreover, these online ventures were not confined to customers within a one-, three-, or five-kilometer radius but had the potential to reach billions across China.

 

Today, while some may argue that the domestic e-commerce market is saturated, international markets present fresh opportunities. Without the internet, factories will have to rely on large intermediaries for cross-border trade, which constrains profit margins and eliminates branding opportunities. Now, over 60% of Amazon sellers come from China and thousands of Chinese merchants have established e-commerce websites on American platforms.

 

For grassroots entrepreneurs, the internet provides a low-cost platform for launching businesses and a unique avenue into the high-end job market.

 

Ten years ago, Alibaba's IPO slogan, "Gotta have dreams, they might come true," inspired countless individuals. A decade later, despite a seemingly narrower gateway to wealth, many continue to explore internet-based opportunities. From PC-based to mobile internet, from web portals to the era of short videos, the waves of internet innovation persist and there are always those who stand at the forefront. The internet has empowered more people to dream and to access new opportunities—what matters most is how to seize these opportunities.

 

Secondly, the internet has fostered an adventurous spirit.

 

The 1990s which saw the introduction of the internet in China was also a pivotal decade that saw the introduction of venture capital and equity investments in the country. Today, nearly every major and medium-sized internet company in China has benefited from such funding.

 

Prior to this era, no other industry in China was as deeply linked with venture capital, which has enabled young entrepreneurs to start businesses with little initial capital, supported by investors who shared in their risks and rewards. The success of the business will be shared; should the business fail, one simply moves on.

 

The essence of entrepreneurship is an adventurous spirit. This marks a departure from traditional Chinese cultural norms, which have generally been risk-averse and discouraged trial-and-error methods. The advent of the internet and venture capital has prompted a reassessment of the costs and benefits of risk-taking, fueled by the tantalizing potential for success.

 

Over the last three decades, the evolution of the Chinese internet sector has been profound. Innovations range from Taobao's e-commerce breakthroughs to Alipay's escrow service; from QQ's desktop presence to WeChat's mobile ubiquity; and from Douyin and Kuaishou's short videos to Xiaohongshu (a popular Instagram-like social media platform)'s trendsetting capabilities. While China may not have been the birthplace of internet technology, it has certainly mastered the art of its application, achieving a pace of innovation and renewal unrivaled by any other industry.

 

When objectively considering the Chinese internet landscape, it clearly stands out as a sector that exemplifies entrepreneurship and the adventurous spirit. Notably, in this industry, unlike in real estate or finance, the most valuable asset is human capital—not physical or financial resources. In China, starting an internet company tends to be a more straightforward, transparent, and clean process.

 

Thirdly, the internet industry is the most "open-spirited" sector in China.

 

Since its inception three decades ago, the Chinese internet has maintained strong global connections.

 

The early founders of China's internet companies were often returnees from abroad. In Zhongguancun, often dubbed China's Silicon Valley, the influence of its American counterpart was unmistakable. For various reasons, most Chinese internet companies have received investments from U.S. dollar funds and chosen to list on U.S. stock exchanges, highlighting the sector's inherent globalization compared to other sectors in China.

 

In previous industrial revolutions, China struggled to keep pace. However, with the rise of the Internet era, cities like Beijing, Shanghai, Guangzhou, Shenzhen, and Hangzhou have now reached a level that rivals that of the U.S. West Coast. Despite the separation of the Chinese and international internet for well-known reasons, Chinese internet professionals continue to closely follow developments in Silicon Valley and other global innovation hubs. Claiming that the Chinese internet is on par with the U.S. in terms of leadership might be ambitious, but it does remain the only global contender for the U.S. after years of adjustment.

 

In the context of China’s transforming domestic economy, Chinese internet companies are at the forefront of international expansion. They are actively exporting content, e-commerce goods, games, and payment services, thus leading China's "going out" strategy.

 

Entrepreneurs in China's mobile internet era are largely cosmopolitan by nature, embodying a spirit of exploration akin to that of the Age of Exploration. This trait, rare among the previous generation of entrepreneurs, especially those from traditional industries, is precisely what contemporary China needs to foster.

 

Thirty years have flown by, marking a period that not only witnessed the golden age of the Internet but also the golden age of the Chinese economy. This period has bequeathed several invaluable legacies, including a grassroots spirit, an adventurous spirit, and cosmopolitanism.

 

The Chinese society must evolve beyond an exclusive emphasis on academic credentials, fostering an environment where more people are empowered to unleash their creativity. The energy and creativity of today's youth on the internet represent a critical driving force for China's future.

 

It is also essential to sustain the adventurous spirit by fostering innovation and cultivating a tolerance for failure. Although the dynamics of China's venture capital industry have U-turned, with a current preference for investing in hard technology over the internet sector, these funds must still respect the fundamental market principles. The lessons learned from the development of China's internet industry over the past three decades are invaluable for other industries, especially in hard technology and critical sectors.

 

Today, more than ever, a global mindset and cosmopolitanism are essential. As Chinese enterprises, both within the internet sector and beyond, expand globally with unprecedented strength, they also encounter significant challenges and opposition. Their efforts to navigate and conquer global markets deserve the utmost support and recognition.

 

Over the past thirty years, the spiritual wealth that the internet has contributed to Chinese society is as invaluable as its material wealth. At the 30th anniversary of the Chinese Internet industry, the hard-won modern paradigms serve as guiding lights for the future. As long as these ideas are cherished and upheld, the path ahead remains clear and full of promise.