Five B2B Digitalization Trends in China

6 min read.

Recent years have seen a digital transformation in just about every aspect of business, including the automation of processes, and the introduction of cashless payments. Given the promise that digitalization brings to many businesses, coupled with the immense value technology adds to customers, B2B companies have also increasingly shifted their reliance on digital channels, and ramped up their reliance on technology. 

According to McKinsey, B2B companies which digitalize achieve up to five times the revenue growth and up to eight times the EBIT (earnings before interest and taxes) growth of their peers. This opportunity for growth has been widely recognized by many B2B companies in China, which have integrated advanced technologies such as 5G and AI into their operations. In this article, we delve into the five prominent B2B digitalization trends in China.

B2B companies who digitalize achieve greater revenue and earnings than their peers.
Source: McKinsey

Additive Manufacturing

Additive manufacturing, commonly known as 3D printing, is the process of making three-dimensional solid objects from a digital profile. Instead of prototyping individual components, companies can now produce small batches of customized products. The process of 3D printing therefore allows companies to significantly speed up the manufacturing of complex and lightweight designs.

As a rising economy currently undergoing rapid digitalization, China’s market for 3D printing is unsurprisingly a promising one. According to a study published by the International Data Corporation, China accounted for approximately 13 percent of global spending on 3D printing in 2019. The firm estimated China to be the fastest growing country in the 3D printing market over the next five years, with an annual projected growth rate of 21.6 percent.

The increasing popularity of additive manufacturing can be attributed broadly to falling production costs, ease of customization of goods, as well as government incentives. To promote digitalization in manufacturing processes, the Ministry of Industry and Information Technology introduced a series of policies to advance 3D printers between 2015 and 2017, heralding massive opportunities in additive manufacturing for many players in the B2B industry. This, coupled with rapid advances in additive manufacturing equipment, will likely incentivize many companies to rely more heavily on 3D printing over the next few years.

A 3D-printed electric vehicle debuts at the 3D Printing Cultural Museum in Baoshan, Shanghai.
Source: China Daily

Robotic Technology

Companies utilizing robotic technology commonly deploy robots to optimize basic commercial processes, often enabled by AI. According to TechinAsia, China accounted for 36 percent for global industrial robot sales in 2017, up from 21 percent in 2013. Given its significant global market share, China has undeniably become a frontrunner in enabling human-robot collaboration, and companies have adopted this strategy across many industries.

Industries such as automotive manufacturing have traditionally been one of the largest deployers of robotic technology, commonly utilizing it to carry out basic tasks such as welding, assembly and painting. Given the advances in robotic technology in the past years, the range of applications made possible by robotics has expanded significantly, and many more industries are starting to take advantage of the cutting edge technology. 

As the COVID-19 pandemic continues to disrupt supply chains and strain revenues, more businesses in the B2B industry have increasingly realized the need to digitalize. Technologies such as AI and IoT are crucial to cutting costs, increasing efficiency and broadly de-risking manufacturing processes, hence, we can expect to see more of such robotic technology in the B2B industry in upcoming years.

A Public Relations Robot developed by Teksbotics to provide customized customer service.
Source: Teksbotics

Augmented Reality (AR)

Unlike Virtual Reality (VR), AR interacts with the real environment. Although AR is more commonly associated with improving customer experience, many opportunities for incorporating AR have surfaced in the B2B sector as well, for AR systems can support a variety of services that enhance and speed up operational procedures. For instance, manufacturers can select parts of a warehouse and send repair instructions for their specific selection via their mobile device. Companies can also provide employees with real-time information to improve decision-making and increase efficiency.

Given how China boasts an increasing mobile and internet penetration rate alongside a rapidly growing middle class, foundations for AR technology are expanding at a remarkable rate. According to Daxue Consulting, the Chinese AR market is likely to catch up with Western AR markets soon, as seen from the success stories of several Chinese AR initiatives, including NEOBEAER, an app aimed at teaching English and Chinese via AR, as well as Fantasy Kaka Bear, a Wechat application featuring an AR dancing bear.

Furthermore, China’s domestic AR hardware and software capabilities continue to grow. Domestic hardware companies Xiaomi, Huawei and Oppo emerged with a combined market share of 44 percent in 2015, beating foreign players Apple and Samsung. Meanwhile, domestic AR software companies Sight Plus and Hisense have also launched viable alternatives to their foreign counterparts, Metaio and Wikitude. Hence, it is expected that the integration of AR technologies in B2B processes will only become more seamless and ubiquitous moving forward.

AR is gradually changing the e-commerce landscape.
Source: Chozan

Big Data

With over 700 million internet users, China boasts immense potential for the utilization of big data. In March 2014 alone, the state-owned Industrial and Commercial Bank of China (ICBC) had impressively amassed 4.9 petabytes (equivalent to 4.9 million gigabytes) of data, according to Daxue Consulting. Meanwhile, South China Morning Post reported a predicted growth of over 30 percent in China’s Big Data in 2019, a number that is projected to increase from 2020 onwards.

Most recently in 2020, the Ministry of Industry and Information Technology in China unveiled a new directive to facilitate the establishment of big data centres in 23 provinces, in order to bolster efforts to upgrade the country’s manufacturing sector. This initiative is seen as a support of the government’s overarching priority to incorporate big data to benefit different industries.

Recognizing the benefits brought about by big data, some large B2B companies in China have already begun their digital transformation. These companies include JD.com, which presently uses big data to manage its inventory and set efficient distribution routes, as well as Alibaba, whose Open Data Processing Service (ODPS) analyzes millions of transactions to devise loan services for small online businesses. For the latter, retailers can pay a small fee to tap into ODPS’s robust database, which would enable them to identify trends and plan future campaigns to meet their customers’ requirements.

The Chinese government and several large domestic companies have increased their big data capacities significantly.
Source: Analytics Insight

5G Connectivity

With the rapid rollout of 5G technology across the country, China is aiming to position itself as a global 5G leader, and it has done so rather successfully. According to GSMA, an industry organization representing the interests of mobile network operators worldwide, approximately 20 percent of global 5G connections in 2020 are attributed to China. By 2025, China is forecasted to become the largest consumer market for 5G in the world with over 800 million 5G connections.

Taking on a leading role in the race of 5G development has become an important strategy for China to increase its global power and speed up its post-COVID-19 economic recovery domestically. Domestic implementations of 5G in the B2B sector have already been ramped up; in July this year, China Mobile announced its commercial offering for 5G private networks to B2B customers. In this newly launched scheme, B2B customers are able to select the types of services they require from a menu of four network services that should align to the business value expected from the network, according to a blog post by Mobile World Live.

However, given how 5G is such a new technology, businesses would likely have to gain more experience with 5G equipment and network first, before 5G private networks can be implemented ubiquitously. Operators will also first need to acquire practical deployment experience in order to accelerate commercial deployments.

China is rapidly rolling out 5G technology across the country.
Source: Bloomberg

Going forward, B2B companies in China are likely to ramp up their scale of digitalization. Given how China is increasingly gaining a comparative advance in the technology sector, one can only expect digital transformations to become increasingly common in the following years. However, an increasing reliance on technology will also bring about a host of problems that can be costly vis a vis the benefits brought about by digitalization, one of which being privacy concerns. Therefore, as Chinese B2B companies continue to surge ahead in digitalizing their processes, they will also have to ensure that adequate safeguards are enacted in order to ensure a high level of security and accountability.