The turbulence seen on its stock market this August has focused minds on whether the precarious state of China’s economy will impact Asia’s fast growing technology and IT sector.
Asia, in particular India and China, has become a new playground for investors looking to find the next big start-up. In the past year, more than $30 billion (£19 billion) has been pumped into this sector, a jump of 45 per cent on the previous year, according to a report by the auditing group KPMG.
There are many regional success stories to whet investors’ appetite. Headquartered in Hangzhou, China, Jack Ma’s Alibaba Group is now one of the biggest internet companies in the world. Generating annual profits of around $3 billion, the group’s businesses include the business to business trading platform Alibaba, the shopping site Taobao and online payments channel Alipay. In India, online retailer Flipkart has seen off the global giant Amazon to secure a large slice of the market. Flipkart has become so successful that Amazon is having to invest $1 billion just to maintain a foothold in India.
The driver behind the boom in IT and internet shopping is the emergence of an Asian middle class – 340 million in China out of a total population of 1.3 billion and in India 250 million are middle class out of a population of 1.2 billion. The growth in consumerism has led to an explosion in IT startups. Responding to a strong demand for online shopping and services, we see the internet applied to online restaurant and hotel bookings, taxi hire, as well as match-making and matrimonial websites. There is a lot of money out there and consumer spending is increasing, underpinned by the emergence of credit cards.
Internet entrepreneurship is taking off across the region because of the explosive growth of smartphones, fuelled in part by frugal innovation and low-cost manufacturing. For example one can get smartphones for as little as £60 as opposed to around £400 to 500 for an Apple iPhone or similar competing product.