2017: The rise of the Sinosphere and the Digital Silk Road

The continued rise of the Sinosphere (the East Asian cultural sphere that has been historically influenced by China) in the digital economy is unquestionable and worth watching closely in 2017.

The Silk Road — the famous trading route traveled by Marco Polo — enabled the flow of culture, ideas and goods from the East to the West, and vice versa, in ancient times. Now, we’re seeing the growth of the Digital Silk Road, which may eventually come to rival Silicon Valley as a center of the innovation universe.

Right now all eyes are on the East, where new ideas are formulating and technological innovations are being developed.

Need proof? China’s Huawei is now the world’s largest telecommunications manufacturer and has started to penetrate Europe and Canada with its eyes now on the U.S. Tencent’s WeChat has exploded onto the social network scene and beyond. And Chinese IT and digital innovation labs and offices, along with Chinese venture capitalist firms, are popping up in Silicon Valley and elsewhere in the U.S.

Facebook, Google, Amazon, GE and any company with a digital strategy are likely looking East for their next big idea.

2017 PREDICTION: Chinese ideas and products will enter the European and U.S. marketplaces

The powerful moves being made by Chinese IT and digital business behemoths – hardware players such as Huawei, cloud players Alibaba/Aliyun and Baidu, digital players Didi Chuxing and Meituan – are staggering.

Also impressive is the viral rate of change that has occurred in China, moving the country into the digital era. China’s cellphone and Internet penetration practically exploded overnight, now up to more than 600 million cellphone subscribers, 250 million of which are already on 5G network. Internet users numbers more than 750 million.

China takes advantage of the law of large numbers to build up expertise in research, development and local innovations before moving products and services beyond the “Great Fire Wall” to global markets.

China’s transformation has its roots in the government’s strategic play to use the market as a tool, not a destination. The country has utilized a series of 5-year plans designed to move away from being the global economy’s source of low-cost labor for manufacturing to become a leading source of everything digital.

This could serve as a new model for governments elsewhere. Public sector could play an adapted role in the future as a venture capitalist, incubating and funding companies and universities directly and developing innovation labs. This trend of government playing VC is picking up momentum outside the U.S.

China also benefits from the education systems of the West. The country outsources higher education to the West’s best universities in the high-demand fields of STEM, with graduate students increasing by 3x between 1987 and 2010. With the continued growth and influx of science and engineering degrees, expect to see continued growth in Chinese startups and advancement in hardware.

Also expect to see Chinese companies and the government participating more openly and collaboratively in global cybersecurity discussions. To emerge as a leader in the global market, especially the U.S., the country must significantly reduce the stigma of cyber-espionage.

PREDICTION: “High-Speed Rail Diplomacy” will continue.

The continued rise of technology out of East Asia goes well beyond IT in many ways. For one, China can boast the largest high-speed rail network.

In 2011 China began its “high-speed rail diplomacy,” selling rail technology into other countries (Hungary, Romania, Serbia and Thailand, in addition to other countries around the Sinosphere).

In 2015, a consortium of Chinese Rail Companies and investors signed an agreement with XpressWest to build high-speed rail between Los Angeles and Las Vegas in the U.S. The contract has since fallen apart, however there is renewed hope as California has passed a bill to provide funding for the LA-San Francisco bullet train.

Strategically, China is also working to reopen the Silk Road trade route by connecting to resource-rich central Asian countries, including Kazakhstan and Afghanistan.

PREDICTION: The Sinosphere will become a major player influencing the Fintech space.

 China is fast becoming another spawning pool for Fintech, an opportunity driven primarily by the Sinosphere’s enormous “unbanked” population. The lack of a large, entrenched legacy banking system creates an environment ripe for moving from a “cash past” to a Fintech future.

Singapore is making a dent in the Fintech space. Expect to see regional banks, insurance companies and the government playing a major role in the emerging space of Fintech/Insure-tech in the months and years ahead. The recent “Brexit” vote also seems to be benefiting Singapore, as there has been a wave of London-based Fintech firms applying to operate in the country.

The development of Fintech in East Asia also paves the way for a “unitary-Sinosphere” crypto-currency, similar to Bitcoin, that utilizes blockchain technologies.

With lots of exciting developments in the Sinosphere, it’s sure to be an interesting region to watch – and learn from – in 2017.

Simon Alexander is senior business strategist for DXC with over 10 years’ experience of strategic new business development and program management. He is currently enrolled in Northeastern University’s Masters in Analytics 2017 cohort.



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