looking beyond covid-19: the tmt sector – the technicalities for future industry growth in china
jun 15, 2020
shanghai, june 15, 2020 ——according to cushman & wakefield’s recent report - looking beyond covid-19: the tmt sector – the technicalities for future industry growth in china, over recent years, the technology, media and telecommunications (tmt) sector in china has enjoyed favourable industry growth off the back of a growing economy and policy directives aimed at elevating the industry.
when examining economic growth, according to standard chartered, 10 years ago, china’s nominal gross domestic product (gdp) was worth $ 14.9 trillion in purchasing power parity (ppp) terms using current international dollars. in 10 years’ time, standard chartered estimates that this figure will grow to $ 64.2 trillion. when specifically looking at the tmt sector in china, the number of unicorn companies (companies which are privately held and are valued at us$ 1 billion or more) in china has grown rapidly over the last few years. according to matthews asia, as of february 2018, china ranked second behind the u.s. in terms of its number of unicorns.
in addition, the level of electronic information industry fixed asset investment in china has also seen strong growth of late. according to the ministry of industry in china and its issued document entitled ‘2019 operation of the electronic information industry, bulletin 6’, electronic information industry fixed asset investment in 2019 in china grew 16.8%, far higher than the 3.1% growth rate for fixed asset investment in the manufacturing sector in the country for the same time period. one policy which has been driving tmt sector development in china over recent years is the ‘made in china 2025’ policy. the government is currently working through this 10-year plan to quicken the advancement of high-tech industries in the country, including telecommunications, electrical power equipment, robotics, high-end automation, and new energy vehicles.
moreover, another tech-related policy objective china is pursuing to boost sustainable economic growth is ‘new infrastructure’ development and included in this development are 5g network establishment and data centre construction. in all, a total of 25 provincial-level regions have put ‘new infrastructure’ projects into their government work reports, with 21 proposing to advance 5g network establishment.
shaun brodie, head of occupier research, greater china, cushman & wakefield, said: “given the importance of the tmt sector, the evident expanding market opportunities and the need to secure and service new business, over the years, tmt companies have also steadily grown their organisations in china. most large tmt companies now have a very established business footprint in the country.”
today, however, even though the business presence has been established, many tmt companies (particularly those newly emerging and fast developing companies) are still seeking to expand their commercial activity, and this is evidenced when examining office leasing activity rates in city markets around china. for example, when considering the number of grade a office leasing deals completed in china’s four first-tier cities, according to cushman & wakefield research, between q4 2018 and q3 2019, tmt sector companies were responsible for 36.1% of deals done in beijing, 20.0% of deals done in shanghai, 20.4% of deals done in shenzhen and 31.2% of deals done in guangzhou.
during the covid-19 outbreak in china, technology really came into its own. it was utilised by the authorities, by society and by businesses to mitigate the spread of the virus, to assist with everyday living needs and to ensure business continuity. given the strong economic fundamentals and trends in the application and use of technology, pre-covid-19 outbreak, the tmt sector in china was already set for strong business growth in china. what the covid-19 outbreak has done, in a short period of time, is to bring to our attention how useful and important technology is and can be to our leisure time, to our home life and to our work.
cloud computing – china's cloud computing industry value to exceed rmb 300 billion in 2023 (development research centre (china)).
ecommerce – china’s online retail sales growth rate was 19.5% in 2019 (national bureau of statistics (china)). expect the 2020 growth rate to remain solid.
industry 4.0 – the latest revolution in the manufacturing industry makes use of cyber-physical systems, the internet of things, the industrial internet of things, cloud computing, cognitive computing and artificial intelligence.
remote working and online meetings – according to a recent cushman & wakefield survey, about 21% of interviewed enterprises in china will change their mode of working and adopt a home/remote working business platform for their office employees in the future.
livestreaming and online entertainment – according to the qianzhan industry research institute, the number of users in china's online livestream broadcasting industry is expected to reach 526 million in 2020.
online education – according to the china internet network information centre, as of june 2019, china's online education users reached 230 million. expect this number to increase in 2020.
online healthcare – hi-tech healthcare solutions and the advancement of digital healthcare delivery models are likely to be offered and occur, respectively.
smart building technology – there will be an even greater motivation for landlords in china to develop/own commercial-use buildings that are fully cognitive in the future – with smart commercial building health and safety technology being a greater driving factor for going cognitive.
3d printing – china’s ‘additive manufacturing industry development action plan’, is pushing for the national autonomous manufacturing (am) industry to be worth rmb 20 billion by end of 2020.
robots and drones – registering an average annual growth of 20.9% for the past five years, according to the chinese institute of electronics, china’s robot market was estimated to reach us$ 8.68 billion in 2019, constituting about 30% of the global robot market. again, expect the robot and the drone markets in china to see value growth in 2020.
data centres – according to kezhi consulting, by the end of 2022, the internet data centre (idc) market in china is expected to reach a value in the order of rmb 320 billion plus.
when viewed from a real estate portfolio standpoint, we have seen major overseas and domestic tmt sector companies already establish a comprehensive real estate platform across china, from r&d facilities, to manufacturing plants, to distribution warehouses, to offices, to retail outlets. other newly emerging and fast developing tmt companies are only just getting started and as their businesses expand, they will also look to continually enlarge their real estate portfolio footprint in china.
jonathan wei, managing director, head of occupier services, china at cushman & wakefield, said: “given the impact of covid-19 and also the long-term tmt sector-related macroeconomics and policy in china, many new business opportunities will appear. accordingly, tmt company executives and corporate real estate practitioners (whether they are working for established tmt companies or newly emerging tmt companies) will have to rapidly reassess the situation and formulate new real estate portfolio stratagems to ensure their companies have fully examined all the technicalities for future industry growth in china for the years to come.”
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mandy.qian@cushwake.com
