China Makes Digital Inroads into Smart Europe: Traditional Europe Watch Out and Learn

August 4, 2017 Posted by China Briefing Reading Time: 5 minutes

China, often the target of calls for investment into Europe, has been making further inroads into the EU’s digitally advanced economies, giving strong hints in the process as to where Beijing and Chinese businesses see both value and growth being added.

Chinese ride sharing company Didi Chuxing is investing in a smaller European Uber rival, Taxify, which dominates the Baltics. Didi has a strong presence in China, headquartered in Beijing, and providing rides for 400 million users across 400 cities in the country. It provides services such as taxi hailing, private car hailing, Hitch (social ride-sharing), Didi Chauffeur, Didi Bus, Didi Test Drive, Didi Car Rental, Didi Enterprise Solutions, Didi Minibus, Didi Luxe, and bike-sharing to users in China via a smartphone application.

Taxify is an Estonian based business in the same industry, operating in 18 countries and 25 cities in Europe, Western Asia, Africa, and Mexico, also via smartphone application.

The investment is significant in that it points the way ahead for what China wants Europe to provide and which markets it is willing to invest in. The EU is behind China in terms of embracing digital technologies, and has not been especially coordinated in developing this across the EU. This is borne out by the fact that Taxify was started by a 19 year old Estonian high school student in 2013, rather than developed by any particular EU initiative or vision.

This has implications, both for individual EU nations’ government trade and investment departments, as well as for Europe’s visionary young entrepreneurs. “Old” Europe is trying to sell and encourage China to invest in old technologies, but what China wants is new technologies and new markets driven by new digital technologies. As I explained in the recent article “Winners and Losers in the EU’s Digital Connectivity with China and the OBOR Sphere“, China needs and wants Europe to be digitally prepared for OBOR and new 5G technologies.

Interestingly, this isn’t just because China wishes to buy up and develop EU market share, as is the case with Taxify. The larger picture, especially when it comes to developing a high-speed rail network between China and Europe, is the e-commerce opportunity that China is also presenting to the EU: supplies of perishable and fast moving consumer goods. That extends from European aquaculture, dairy, and other agri-businesses to sensitive pharmaceuticals and medicines, as well as to fashion lines with seasonable trends.

China’s investment in Taxify therefore provides a timely indication of where it will place its investment – digital technologies of tomorrow, that can both help China finance, access, and develop EU and Eurasian markets as well as promote the development of digital trade with Chinese consumers themselves.

China’s consumers – fast facts

China has 20 percent of the global population but just five percent of globally available arable land.
China’s energy needs grew 146 percent in the last decade. The EU’s growth during the same period was seven percent.
China’s middle class consumer base will reach 500 million by 2020, and is already larger than that of the EU.
The number of Chinese consumers able to purchase online is currently one billion, 25 percent larger than the total population of the EU.
China needs food, energy, and smart, safe EU products and consumables.

The real opportunity therefore for EU based businesses in particular, when it comes to China, is in the development of 5G platforms and new e-commerce businesses capable of exploiting this. While Brussels dithers, the Internet of Things is moving ahead without listening to political rhetoric. In fact, we already seem to have reached the phase whereby the doubling of technological capacity has occurred so fast that governments, beset by old administration tools and politics, cannot actively keep up.

“What is 5G and Why Do I Need It” is what China is all about. Businesses dealing in goods such as perishables or short term fashionable trends will be able to use these new technologies to engage with and benefit from China’s ability to both invest and to consume. Businesses not familiar or unable to adapt to what 5G means will die off fast. Didi’s investment in Taxify is a pointer as to how to take advantage of what China is really now all about, and what it needs and wants. Old Europe needs to get prepared – fast.

Chris Devonshire-Ellis is the Founding Partner and Chairman of Dezan Shira & Associates. He is based in Europe. The firm provides European businesses and governments with strategic, legal, tax and operational advisory services about SMEs and MNCs investing throughout Asia and has 28 offices across China, India and the ASEAN nations as well as partners in St. Petersburg and Moscow. Please contact the firm at asia@dezshira.com or visit the practice at www.dezshira.com

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