The economic impacts of social media in China

In the lesson IEMS 5720—Social Networking, I have learnt how the social networking has changed the world. As a student from Mainland China, I will discuss the economic impacts that social media brings to China.

 The social media in China is on the rise. Although some world leading social networking websites such as Facebook and Twitter could not be accessed in the mainland due to the government’s Great Fire Wall . This could not stop the trend that social media become something we could live without in China .The great economic impact it brings to China is immeasurable.

1. The great economic potential and jobs created

As the country owns the largest population in the world, China also has the most Internet users on-line. The latest number is about 550 million, which has published in the December 2011 (see the figure below ).

That contributes to nearly a quarter of the total net users worldwide, while the Internet penetration is not as high as some developed countries. And this number is still going up rapidly. According to a survey with a sample of 5700 Chinese conducted by McKinsey, it is found that 95% of these people have registered on a social media site. And China will be the biggest e-commerce market by 2015. New social media websites and applications can turn out and become popular in a short period of time , that means more and more technical workers is needed . The emerging social media and social networking has helped provide thousands of jobs throughout the nation. A new industry has been created online.

2. The great power of social media

The rapid developing social media has really contributed a lot to the e-commerce business. With the new technology of social media, it will be easier for the company to publicize their products. They can just put some advertisements on some major social media sites like Renren or Weibo, and the huge number of this network users will see.

Social media also has greater influence on purchasing decisions for consumers in China than for those anywhere else in the world. Chinese consumers say they are more likely to consider buying a product if they see it mentioned on a social media site. Also they are more likely to purchase a product or service if a friend or acquaintance recommends it on a social media site. This can be explained in part by a cultural difference: Chinese consumers prize peer-to-peer recommendations because they lack trust in information from news sources and advertising; people rely more on word-of-mouth from friends, family, many of whom share information on social media.
 
3. The E-commerce in China
 
China will be the world's biggest e-commerce market by 2015. Social media will play an important factor in their purchase decisions. The Chinese user has spent the maximum time in the world on shopping on the Internet , and that is more than 5 hours a week .Chinese people ,especially young people ,like the way shopping on line .They prefer to buy things from such e-commerce site like Taobao ,not only because the price is relatively lower ,but also this has save them much trouble in choosing things from the mall .So there are indeed some reasons that e-commerce in China is popular and will be more popular .
 
4. A win-win method
  
In my opinion, the social media marketing is a win-win method for both of the consumers and business men .For the business men, they will indeed sell more and earn more with the advantage of the social media. For the buyers, that means they can buy the stuff they need in high quality with a reasonable price. Just like the example presented in the famous economics book《Principles of Economics》written by N.Gregory Mankiw. When firms sell differentiated products and charge prices above marginal cost, each firm has an incentive to advertise in order to attract more buyers to its particular product. The advertisement posed on the Internet or some social websites dose not only tell you the customers some information ,such as functions and prices .They are also serve as the signal of quality of the goods. What the advertisements say is not as important as the fact that consumers know ads are expensive. The company makes an increasing number of advertisements with the advantage of new technology such as social media and social websites.  
 
The online qualitative review system is another good example. It enable social environments to collect users’ opinions .That will also help the consumers know more about the goods from other user’s experience . Usually these things will not be told by the sellers. At the same time it helps the company know what the buyers want their product be. So they will modify their products to match the public taste.  

 

References:

1. http://www.wikipedia.org/

2. McKinsey Company (2012).China’s Social Media Boom.

3. N.Gregory Mankiw. 《Principles of Economics》.

4. http://socialmediatoday.com/ .May 9,2012,《How People Spend Their Time Online》.