China’s digital transformation: The Internet’s impact on productivity and growth

An insightful report from McKinsey on the digital transformation occurring in China.

China is in the midst of a digital revolution. During the course of 2013, the number of active smart devices grew from 380 million to 700 million.1 On Singles Day, the e-commerce marketplaces Taobao and Tmall posted more than RMB 36 billion (almost $6 billion) in sales in just 24 hours. Some five billion daily searches

are made through Baidu, and hundreds of millions communicate via WeChat, Tencent’s mobile messaging app. Now with 632 million users—and counting—the Internet is fundamentally altering the fabric of daily life in China.2

Until now, China’s Internet has been largely consumer-focused (Exhibit E1).
But that is about to change as the Internet penetrates more deeply across
major sectors of the economy. As companies embrace Web technologies, their operations become more efficient, translating into productivity gains. While this process is likely to displace some workers from existing roles, the Internet also creates new markets for innovative products and services, increasing demand for workers with digital skills.