According to McKinsey, China has a $10 trillion economy growing at a 7% annual rate, with an expanding digital e-commerce market. In 2020, China’s online e-commerce market encompassed more than 710 million digital consumers and facilitated $2.29 trillion in transactions. In 2021, China became the world’s largest e-commerce market at $1.5 trillion in revenue, with projections indicating a surge to $3.5 trillion in transactions by 2024.
Not only that, China is home to the world’s largest Internet-connected population, with over a billion Chinese citizens connected to the Internet. From the data, it’s evident that it can be financially advantageous to enter the Chinese market.
Yet only about 8,000 U.S. companies are conducting business in China, while foreign-invested corporations make up less than 3% of companies registered in China.
For business leaders looking to enter the Chinese market, being able to efficiently operate their services in that region can lead to a significant financial advantage. And, for global businesses already operating in China, further improving site speed and performance can result in incremental revenue gains.
A recent PWC report found that China is the world’s most advanced e-commerce market. Consumers in China are more likely than global consumers to shop online — from researching product information to completing transactions. And they expect seamless, fast online experiences.
It is well-known that site latency can directly impact customer satisfaction and lead to revenue loss. Research shows that 90% of shoppers will abandon a site if it does not load “in a reasonable time”, and 57% of shoppers will leave and buy from an alternative retailer. Amazon found that an additional second of latency can cost the company more than $1.6 billion in sales annually.
Unfortunately, some businesses struggle to maintain a fast and reliable site experience in China given the complexity in navigating network bottlenecks and congestion — leaving them at a disadvantage to competition based in China.
All Internet traffic traveling in and out of China has to pass through one of the three “national level” Internet Exchange Points (IXPs) based in Beijing, Shanghai, or Guangzhou, or five “core level” IXPs based in Chengdu, Wuhan, Nanjing, Xi’an, and Shenyang.
During high-usage periods or activities like music and video streaming, heavy Internet browsing, or large file uploads and downloads, the IXPs become congested, causing long load times and website performance issues for websites hosted outside of China.
To circumvent this, some companies host their websites in data centers close to the IXPs or on servers within China’s borders. While this solution can fix some of the bottlenecks, it still leaves organizations at a disadvantage, as they are forced to use local, minimally-connected Internet Service Providers (ISPs).
Similar to the IXPs, four state-owned ISPs dominate the current market: China Telecom, China Mobile, China Education & Research Network (CERNET), and China Unicom. The ISPs oversee 95% of the total Internet traffic in the country and engage in minimal peering, which is the practice of connecting networks. A 2017 Mlytics study found that the most peered network in China was connected to only two IXPs, compared to 66 in North America and 71 in Europe. This means that even domestic Internet traffic has to cover a large network distance in order to travel a short geographic distance, resulting in latency for the end user.
Some multinational firms can address this issue by opting for direct peering. However, establishing direct peering connections with the four ISPs from outside of the country requires the organization to pay premium pricing, which can become very expensive.
The network bottlenecks and limited local peering can increase latency and network congestion, make content delivery inefficient, and ultimately lead to loss of revenue in addition to higher operational costs.
For businesses already active in or looking to enter the Chinese market, solving for network bottlenecks and inefficient local peering can be a challenge. To overcome these obstacles and ensure fast, reliable site performance, global businesses can consider the following:
Reduce webpage size. There are multiple approaches to decreasing webpage size to enhance site speed. These methods include optimizing image and video files and minifying or removing unnecessary code.
Decrease load times. HTTP requests, external scripts, and redirect links can contribute to longer load times, slowing down website speed and overall performance. By limiting or restricting the use of these elements, companies can enhance site speed and performance.
The Cloudflare China Network Service is available for all organizations operating in or looking to enter the Chinese market. With approximately 30 locations in mainland China, Cloudflare and its strategic partners have created a global network that offers a fast experience for visitors inside and outside of China, helping enhance performance, reliability, and security for businesses operating in China.
This article is part of a series on the latest trends and topics impacting today’s technology decision-makers.
Get the Optimize website performance and security in China whitepaper for a detailed report on strategies for tapping into China’s massive, complex, and rapidly growing Internet economy.
After reading this article you will be able to understand:
How large the opportunity is in China
How China’s Internet infrastructure can impact global businesses
Why the user experience comes down to site speed and performance
Recommendations for optimizing the web presence of businesses operating in China