East Tech West

The tech gap between East and West: How firms are adjusting for the Chinese market

Sam Shead
Key Points
  • People in China use their phones differently to people in countries like the U.S. and the U.K.
  • As a result, western companies are being forced to tailor their apps and services to the Chinese market. Airbnb, for example, built a new app and called it Aibiying.
  • International brands are also using new forms of technology like AR and VR to reach a tech-savvy audience in China.
  • But what are the ramifications when hundreds of millions of people start living their lives through their smartphones?
Hon ning tse | Moment | Getty Images

Spend 24 hours in any of China's tier 1 megacities and you'll quickly start to realize that the Chinese interact with technology in fundamentally different ways to people in the West.

Whereas westerners still prefer to do many things in person, people in Asia — and in China in particular — use their smartphones at almost every opportunity. In some car parks in Shanghai, you have no choice but to pay with WeChat Pay or Alipay. As a result, many of China's 1.4 billion citizens are streets ahead of their counterparts in western superpowers like the U.S. and the U.K. when it comes to technology adoption.

The scale of the tech gap between the two hemispheres has been referred to on multiple occasions at CNBC's East Tech West conference in Nansha, Guangzhou, this week, with executives from companies like IBM, Airbnb, Universal, Mercedes all speaking of the differences between consumers in the East and the West. And, while it's not easy, these companies are trying to adjust their offerings accordingly.

Apps built by western companies often look fundamentally different in China, largely because the Chinese use them in different ways, accessing them through promotions and search on services like WeChat. Chinese consumers also pay for practically everything via their phones —­ cash is certainly not "king" in this country, and credit cards are also a dying payment method.

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On one panel this week, Tao Peng, Airbnb's China president, explained how Airbnb China is different to Airbnb in the U.S.

"We devote a lot of resources to localize," said Tao, adding that Airbnb China is built by "Chinese engineers for Chinese people." Airbnb's team in Beijing now stands at 500 people.

Not only does Airbnb have a different front page in China, it also has a completely different name (Aibiying, in case you were wondering).

To make it easier for hosts and guests to make bookings, Airbnb China also integrates with Tencent's WeChat Pay and Alibaba's Alipay, the two most widely used payment systems in China.

Travel isn't the only booming sector in China; sport has also taken off in the last few years, and international companies are keen for a slice of the pie.

Brands like Mercedes, WWE and ONE Championship are all looking at how new technologies like augmented reality and virtual reality can be used to attract bigger audiences in the country. These technologies are designed to make viewers feel like they're in the car with an F1 driver, or in the cage with a fighter.

"The Chinese audience is tech-savvy," said Rick Garson, CEO and founder of content development studio VX entertainment. "What they're looking for is this really immersive, interactive experience."

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One technology that's poised to have a major impact on humanity is artificial intelligence, or AI, and China is widely regarded as being a world leader in this field, along with the U.S.

While consumers are crying out for new technologies all the time, Chinese businesses are failing to adopt artificial intelligence (AI) as quickly as expected. Alain Bénichou, CEO of IBM's Greater China business, said only 14% of Chinese companies are embracing AI. That's higher than the global average of 10%, but still underwhelming. IBM is just one company that generates revenue by helping companies adopt this new technology.

Bénichou didn't specify which Chinese companies are embracing AI, but it's safe to say Baidu, JD.com, Alibaba, Tencent and the other Chinese tech giants are all using forms of AI to enhance their smartphone apps and services.

Naturally, there are going to be some ramifications when hundreds of millions of people from the most populous nation on the planet start living their lives through their smartphones. One is that the government and companies know more about societies than they have at any point in time thanks to the vast amounts of data that smartphones collect.

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Yang Zhou, a researcher at London School of Economics (LSE), said "awareness is growing" among Chinese citizens when it comes to privacy matters. "I think there is a question of the different extents to which Chinese society and the Western societies are digitalized," said Zhou.

"As far as my personal experience is concerned, there is no radical difference between the market-driven aspect of the story. But there is a difference in terms of regulation. For example, in the U.K. you have many adult hook-up apps, which is not allowed in China. In China, you have AI-powered classroom surveillance applications, which may not be possible in London. But again, the general public in China tend to be critical about this, especially the young generation."

People's mental health could also be impacted if they're glued to their devices, and so too could their physical health if they shun exercise in favor of spending time on their smartphone.

There aren't many studies into smartphone addiction in general. Pete Etchells, a lecturer in biological psychology at Bath Spa University, told CNBC: "There's very little good research regarding screen time/smartphone use." He added that screens shouldn't be given a "free pass."

Niamh McDade, senior campaigns executive at Royal Society for Public Health, told CNBC that some of the most widely used smartphone apps can have a detrimental impact.

"Our research revealed young people in particular felt pressure to conform to beauty standards perpetuated and praised online, including the ideal for females to be thin and non-muscular, and for males to be broad and muscular," she said.

So those are a couple of the negatives. But what about the positives? History tells us nations that embrace technology typically go on to grow their economies and become more powerful on the global stage.

The tech gap between East and West is obvious. What's less obvious is how that gap is going to change in the future. Tune in to CNBC's East Tech West next year if you're keen for an update.