China’s resurgent internet sector posts strong profit growth in first 7 months of 2023, led by e-commerce and local services: MIIT report

The Chinese internet industry’s aggregate profits rose 29.1 per cent year on year to US$11 billion in the January-to-July period
Overall revenue for the sector grew 2.8 per cent in the same period to US$105.2 billion

China technology

Ben Jiangin Beijing

Published: 9:00pm, 6 Sep 2023

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China’s internet sector saw total profits rise significantly in the first seven months of the year, driven by the e-commerce and on-demand local services market segments, as major industry players went back into expansion mode after the government lifted rigid Covid-19 control measures and ended a 32-month regulatory crackdown.

The latest survey by the Ministry of Industry and Information Technology (MIIT) of so-called Chinese scaled internet services firms – those with an annual turnover of more than 20 million yuan (US$2.7 million), which include the sector’s largest players and various small providers – showed aggregate profits of 79.93 billion yuan in the January-to-July period, a 29.1 per cent increase from a year earlier.

Overall revenue for the sector grew 2.8 per cent year on year to 766.6 billion yuan in the same period, according to the MIIT report published late last month.

Those figures reflect the reinvigorated state of the country’s tech sector on the back of Beijing’s pro-growth policy for Chinese Big Tech companies.

The facade of the Ministry of Industry and Information Technology’s headquarters at Chang’an Avenue, near Tiananmen Square, in Beijing. Photo: Shutterstock

That strong endorsement underscores Beijing’s push for the digital economy to help boost the country’s post-pandemic economic recovery, which has so far been uneven.

E-commerce firms saw their total revenue jump 42.4 per cent year on year in the January-to-July period, according to the MIIT report.

Alibaba Group Holding, the country’s largest e-commerce services provider, last month reported its biggest percentage growth in revenue in over a year amid China’s economic recovery efforts. Alibaba, which owns the South China Morning Post, posted a 14 per cent year-on-year increase in revenue during the June quarter to 234.16 billion yuan.

Providers in the local services market segment, including on-demand food delivery platforms and online travel agencies, saw their aggregate revenue grow 11.6 per cent for the first seven months of the year.

Chinese food delivery giant Meituan, for example, last month reported a 30.2 per cent year-on-year jump in first-half revenue to 126.5 billion yuan.

Providers of information services, one of the three main internet market segments tracked by the MIIT, saw total revenue decline 2.6 per cent in the January-to-July period.

There were 2.61 million apps operating on the mainland at the end of July, according to data from the MIIT. Its survey also found some 830,000 app developers nationwide during the same period.

In a separate announcement, the MIIT on Tuesday unveiled a working plan from 2023 t0 end-2024 to help boost the country’s electronic information industry, which it described as the “strategic, foundational and frontier industry of the national economy”.

Under that plan, China will not only focus on the development requirements of the digital economy, but also on the expansion of related areas such as semiconductors and new display technologies. The country is also expected to enhance the supply chain for relevant materials, equipment and components.

The MIIT also aims to expand sales of 5G smartphones, which will account for more than 85 per cent of China’s handset shipments by 2024. The agency is also targeting an average growth of 5 per cent in the computing, telecommunications and electronics equipment manufacturing sectors from 2023 to 2024.

The plethora of government support under the MIIT plan would involve various tax relief and funding measures, talent acquisition and implementation of favourable industry policies.