The Low-Code/No-Code Industry in China: Opportunities for Foreign Investors

The low-code/no-code market in China could reach US$1.4 billion by 2024, and is among the fastest growing worldwide. We discuss key industry trends that will attract growth investors as more and more Chinese businesses are opting to build applications using low-code/no-code development platforms. 

The global low-code development platform market was estimated at US$16 billion in 2021 and is forecasted to reach US$159 billion by 2030, at a compound annual growth rate (CAGR) of 28.8 percent.

Indeed, as digital transformation speeds up, data volumes increase, and industries become smarter, there will be an even greater demand for non-developer personnel to manage business applications without it passing through IT departments. Using a low-code platform empowers citizen developers due to its simplicity and rapidity.

Given the digitalization of most sectors and the need for quick customization and scalability, there is sufficient reason to be optimistic of the business growth potential of the low-code development platform market.

What are low-code and no-code development platforms?

Low-code/no-code development platforms are visual software development settings that enable both businesses and individual developers to drag and drop application components, connect them, and ultimately build mobile or web applications (apps).

In other words, low-code and no-code platforms allow developers to create apps faster by eliminating the need to write code line by line. They also allow non-software professionals, such as business analysts, office managers, small-company owners, and others to construct and test applications. Such platforms can be used to develop apps with little to no understanding of traditional programming languages, machine code, or the development effort that goes into the platform’s customizable components. Customers interact on the platforms through a graphical user interface (GUI) that allows them to combine components and third-party application program interfaces (APIs).

Among the main reasons behind the proliferation of low-code and no-code platforms are the shortage of trained software engineers and the need to reduce turnaround time for development projects, so that businesses can respond to challenges more rapidly.

What are the differences between low-code and no-code?

While providing the same core benefits, there are still fundamental distinctions to how low-code and no-code systems work, namely the level of coding and professional skills required.

Low-code development requires users to do some coding, even if significantly less than typical program development. Professional developers and programmers, for instance, resort to low-code to build apps rapidly and to shift their attention away from commodity programming chores and toward more complicated and specific work which brings greater value to the company. Low-code tools can also be used by non-IT professionals with some programming skills to create simple apps or embed additional features inside an app.

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No-code development is intended for non-expert users in various areas who understand business requirements but lack programming skills. In other words, any business role with no coding experience or programming language abilities is the ideal target audience for no-code development.

There are also differences in the application of no-code and low-coded development. No-code is commonly used to construct tactical apps that do simple operations. While low-code may be used in such scenarios as well, it is more commonly used to create apps that are vital to an enterprise’s operations, such as facilitating types of vertical integration and digital transformation projects.

However, the distinction between no-code and low-code is not always evident, and this extends to the low-code and no-code platforms themselves. Many technology product analysts regard no-code to be a subset of the low-code market because even the most powerful platforms need some amount of coding throughout the application development and deployment process. As they market their solutions for different categories of clients, vendors drive much of the distinction between low-code and no-code platform capabilities. Thus, broadly speaking, no-code platforms can be considered a subset of low-code cloud platforms that provide the visual components to address industry-specific operations, a specific line of business (LOB), or support the corporate branding of a certain corporation.

Growth of low-code/no-code adoption in China

Since 2016, the concept of low-code and no-code development platforms have gradually gained value in China. In 2016, China registered 10 financial investments related to low-code products. By 2020, this number had grown to 59 – 13 of which exceeded the RMB 100 million (US$14.29 million) threshold. To date, the number of low-code investments in China has experienced a steady rise, with a handful of them surpassing the RMB 100 million (US$14.29 million) mark every year. Overall, investments grew by a 28.6 percent margin between 2016 and 2020, indicating that the low-code market is in the early stage of development, characterized by a high number of start-ups and rapid growth.

As a result, low-code platforms have been a big trend in China over the last 18 months, with enterprises using them to improve customer experiences, speed up application development, construct bespoke systems at a reduced cost, boost operational efficiency, and incorporate AI capabilities for digitalization. A report from Mendix found that IT professionals in China are more likely (34 percent compared to 28 percent globally) to look to innovative development approaches, such as low-code and a broader talent pool, to reach their software development goals. Moreover, according to a recent survey, 58 percent of China’s software technology and business decision-makers now adopt low-code platforms in their application development process, and an additional 16 percent is willing to do so, demonstrating the sensible margin of growth in a sector that is still in its initial development stage.

What is the low-code/no-code market size in China?

China’s low-code/no-code market size in 2020 was RMB 1.9 billion (US$272 million) and is predicted to expand rapidly over the next few years, reaching RMB 10 billion (US$1.4 billion) by 2024. In terms of market segmentation, low-code accounts for 86 percent of the overall market share, while no-code accounts for 14 percent. This demonstrates that while low-code is the dominant market segment, the no-code industry likely needs more development.

At the global level, the CAGR of the low-code market has remained at around 30 percent, with the Chinese low-code industry representing one of the fastest growing markets worldwide. China accounts for a significant portion of the global low-code and no-code industry, with 426,000 platforms users and an estimated 1.64 million individuals employing such open-source tools offered by these platforms. There are several examples worth mentioning.

As the first firm to debut low-code technology in China and hence possessing a market edge, Grape City presents the greatest number of users in terms of users scale. The company first established a low-code platform for professional software developers and individual coders in 2016. Over 50,000 developers and hundreds of software firms are currently using Movable Type – a system for weblog publishing – to construct thousands of enterprise-level apps.

Another notable example is Mendix, a low-code platform that launched in China thanks to the support from its parent-firm Siemens (which has a long history in the Chinese market). Siemens first acquired Mendix in 2018 and began incorporating it into the Siemens Digital Industry Software portfolio as the low-code and no-code industry footprint kept expanding. Siemens has plans to integrate Mendix in a variety of ways in its China business, ranging from IoT and edge computing to AI, automation, and more.

Among early investors in the Chinese low-code and no-code markets is Menlo Park-based Sequoia Capital, which raised more than US$3.7 billion across its three funds to invest in China.

The reason for the low-code and no-code market’s rapid expansion in China is primarily due to Chinese enterprises’ increasing demand for digital transformation, combined with the entry of other platform companies, such as Kingdee, Seeyon, Yonyou, Tencent, Baidu, Ali, Inspur, and others. The market scalability of low-code/no-code platforms is also driven by Chinese organizations’ diverse needs for scenario application development. Digital companies that provide scenario application platforms, like Mingdao Cloud, benefit from a quick development cycle that boosts their enterprise growth and market value.

Competition pattern of low-code/no-code industry in China

From the standpoint of industry concentration, China has a small number of companies acting as platform providers as the industry is the midst of a transition between the introductory phase and growth period. As the market for such platforms grows, there is likely to be a consolidation of key players, and the industry will transition to an oligopoly.

Moreover, the supply ratio for application type and product research in the low-code and no-code markets is much lower than the demand ratio, resulting in a situation where the demand for these two types of platforms is high, the intensity of competition is low, and the growth rate is rapid. As big companies enter the market and bring changes to development capacity in the platform ecosystem, supply may well outpace demand and raise the intensity of competition.

What are the application prospects of low-code/no-code in China?

The market for low-code and no-code platforms in China is still in its infancy, but can provide insightful data on its outlook that can be utilized by foreign investors to gauge growth prospects.

Users of low-code/no-code platforms are predominantly male, over the age of 35, highly educated, technical professionals, work in the internet industry, are medium to high-income earners, and live in first tier and second tier cities. Chinese consumers of low-code/no-code platforms have an average usage rate between 20 percent and 50 percent.

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In terms of payment model of choice, the annual/monthly billing is preferred, followed by customized demand billing. In general, product R&D opt for annual/monthly billing, whereas scenario application users who have bespoke needs prefer customized demand billing.

Data security, ease of use, diverse functional scope, simple process management, and a rich data model are factors that drive purchases, with an optimal price point at RMB 1000 (US$142), indicating that customer price acceptability is still low.

In terms of application type, applications produced on low-code/no-code platforms are mostly mobile terminals, which is closely tied to the more popular and developed mobile internet in the Chinese market, whereas applications generated in other countries are more PC terminal. The products built using low-code/no-code platforms are mostly in the data, equipment, co-working, and R&D areas. The data warehousing category, advanced technology categories, such as artificial intelligence and blockchain, and manufacturing categories all present strong demand growth potential in the future.

Internet, professional services, retail, banking, manufacturing, and education business settings are the top sectors for customers of products generated by low-code/no-code platforms.

What are the business models used by the low-code/no-code industry in China?

A recent industry assessment confirmed that China is anticipated to overtake the United States in low-code development as corporations embrace the technology for a speedier transition to digitalization.  According to the industry survey, China’s low-code industry has experienced significant development, with 85 percent of the country’s IT leaders actively adopting low-code technology and believing it is a trend they cannot afford to miss.

Currently, three business models have surfaced:

Vendor to platform to product user model:

Companies build their own commercial products on the low-code platforms and sell them to end consumers. This model primarily services big and medium-sized enterprises.

User to platform vendor to app user model:

In this model, product users develop the functions they need on the platforms for internal (non-commercial) use. It is mostly employed by small-medium sized enterprises.

Individual to platform to product user model:

In this model, individual users rather than companies are the target of low-code platforms. Users develop their digital commercial products on the platform and promote it for final product buyers.

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