Study: Internet Penetration In China Remains Below 50%

The latest report from the China Internet Network Information Center (CNNIC) includes some truly staggering statistics involving the growth potential for Internet usage in China. It may come as no surprise that the number of Internet users in China dwarfs the number of users in the U.S. However, there are currently still 700 million Chinese citizens that are not connected to the Internet.

The numbers
China’s population of 1.374 billion is more than four times that of the U.S. (325 million). But according to the CNNIC, less than 50 percent of China’s population currently has internet access. In other words, there are still 700 million people in China who are not connected to the Internet, a potential future user base more than twice the size of the entire U.S. population.


Rural challenge
If China is ever going to reach an Internet penetration rate anywhere close to the U.S.’s reported 86.7 percent rate, Chinese Internet companies must find a way to get the country’s 600 million rural residents connected. According to the CNNIC, only 27.9 percent of China’s rural population is currently online.

Since many rural parts of the country lack Internet infrastructure, mobile connection is the only currently viable means of connectivity growth. The CNNIC says that 88.9 percent of Chinese mobile phone users now use their phones to access the Internet.

Growth opportunity
It has been about 15 years since the U.S. had an overall Internet penetration rate below 50 percent, and the economic growth that has occurred since that time has been staggering.


Alibaba Group Holding Ltd BABA VP of International Media Robert Christie told Benzinga that smartphones will be the key to unlocking Internet growth in China. “We believe Alibaba Group is in the best position to capture the growing Chinese e-commerce marketpace, especially in tier 3 and 4 cities and the rural country side” Christie explained. “This growth is being driven by the rapid adoption of mobile devices, which is becoming the epicenter of life for the Chinese consumer.”

Pacific Crest analyst Cheng Cheng also discussed the growth potential for Chinese Internet stocks in a report released on Monday morning. The firm named 58.com Inc WUBA and Qunar Cayman Islands Ltd QUNR as its top two stock picks in the space.