China’s Economy In the Wake of COVID-19

For decades “Made in China” has generally meant, to the Western world at least, mass-produced low-cost goods. But the strategic plan “Made in China 2025,” established by Premier Li Qekiang, aims to move the country into making high-value, high-tech products in fields like robotics and automation, computer chips, aerospace and biomedical research. 

In a three-part Tech Barometer series recorded in April 2020, Kitty Fok, Managing Director of IDC, China, explains findings from her annual report, which showed China's economy in the first quarter of 2020 fell 6.8% compared to Q1 2019. She said this is the first time China's economy shrank since the government began sharing that data almost three decades ago.

In this second segment (first released May 15, 2020), Fok shares insights about the Made in China 2025 plan, which invests in technologies like the Internet of Things, artificial intelligence (AI) and cloud computing.

While finishing her report in early 2020, she noticed that during the spread of coronavirus, China turned its high-tech resources, like cloud capabilities, to fight the spread of the disease. In this segment, she talks about changes expected to occur around enterprise IT, including the proliferation of cloud computing and hybrid cloud-powered data centers. 

Transcript (unedited):

Jason Lopez: For decades made in China has generally meant to the Western world, at least mass-produced cheap goods. But the strategic plan made in China 2025 established by premier Leeka Chung aims to move the country into making high value, high tech products in fields like robotics and automation, computer chips, aerospace and biomedical research. And that has meant an investment in things like the internet of things, AI and cloud. It just so happens that when the coronavirus pandemic broke out, China's high-tech resources like its current cloud capabilities were quickly reoriented to fighting the spread of the disease. Well, this is the second part of the conversation with kitty folk managing director of IVC China. She recently authored the report impact of covert 19 on China's economy and ICT market. She spoke to us from Beijing going forward once the pandemic is over with, do you think that the demand for cloud services will remain?

Kitty Fok: Absolutely. So there's definitely need for more cloud capacity. There is more need in terms of analyzing your data. There's more need, um, in terms of changing the mindset from capex to OPEX because of the funding that you have. Type funding right now we definitely see the adoption of cloud computing. Public cloud, in particular, are increasing and we already forecast that the demand of cloud computing increasing but now it's just much faster and it will continue because now you have more data available, you have more information available, you have more applications developed. I think the most important thing now is because covert 19 speed up native development of cloud applications. So all the application now is cloud native. It will be faster utilize the whole facility much faster and because of the demand, we also think that even for the HeartWare point of view to hold data center, there will be new architecture for the data center so can utilize everything much better. Uh, one of the stimulus programs from the Chinese government is seven major projects in China. One is specific for big data center. So there is definitely increased demands for cloud computing facility weaving forward. 

Jason Lopez: Well it sounds like a pretty big project. Maybe Google ask size a project. What? Well 

Kitty Fok: There will be always a few types of public cloud. You always have the Alibaba, the 10 cents, those type of um, hyperscale and dent. You have the government, they will have a major investment for public cloud, for the, from the government so that they can begin to share more information to the public and you have to stay on enterprise. That they will start to build what we call the industry cloud. So that is more to facilitate specific industry that they need. So imagine education, healthcare, manufacturing, finance, those industries will have more development types of industry-specific cloud facility. This is say something quite different in China compared to the state because we always have enterprise that they have, um, a major usage of technology and you have to government and also you have the open market. 

Jason Lopez: That's really fascinating. Um, you know, it sounds like a quite a different approach from a patchwork of public and private and hybrid clouds to think of it, uh, from an industry standpoint that if you're an educator or you're in transportation or agriculture, whatever that vertical is, that you have a system built around that industry. That's really interesting.

Kitty Fok: It is. And, um, and also the whole 5g roll out. It will speed up the whole five GS development in China as well. What the stimulus program is to speed up the fight G Bay station and network in China, you will begin to see a lot of this is really speed up the whole connectivity. It's really, completely different from the consumer point of view as well as the commercial point of view. And we are also seeing, um, another project on industrial IOT. So manufacturing because it hits so hard this time and the Chinese government already have the whole making China 20, 25 strategies in place. So this, we speed up the whole development of smart manufacturing. So everything have data, everything you need, cloud platform. 

Jason Lopez: Well I imagine technologies like virtual desktop infrastructure and desktop as a service are being not only talked about more but being deployed more. 

Kitty Fok: Yes. So because of the whole future work and uh, we mow office, you didn't really share, uh, information online right now. Also, the desk is actually one of the topics that we hear from the CXO survey that we have. In fact for the desk, it has been one of the hot topics since last year in China because what the user need is not just a single solution or single function or like just devices. They want a total solution. Having devices is it services. We help to bring in the total solution to the user and imagine now the user, we need to have this facility at home. You really don't want to buy every single hardware you would want. It just, you know, give me the total solution, bring my home in ministry to become an office so that I can really communicate to all my colleagues, my customer and my business partner around the globe. 

Jason Lopez: So because of the pandemic, do you expect a growth in the use of the technology.

Kitty Fok: There were some discussions about it since last year, but it's really, really slow. The provider, the supplier is also thinking like, well it is really the market. The user is thinking like, Oh uh, especially for the mentality in China is that, well I will still be fair to own my facility then paying a all-purpose type of model. So it was a really long discussion evaluation. The demand is very, very low this time. We think that would definitely speed up. We do expect increased demand.

Jason Lopez: Well one thing I saw in your report is that this will be a you recovery and not a of the correction. Um, but you know, Chinese companies seem to be responding pretty quickly. Leveraging technology. What's driving that action to go faster? 

Kitty Fok: I think first of all you want to survive at this moment. So as a company you really want to stay on top of the curve by leveraging technologies. Whether it is a reshape or your shape, you say how fast you can let fish, what are, you can let fish everything you have available right now. So some companies decide to actually move faster than fishing technology and they can identify very quickly which pack of the company that they H they need to move faster and go ahead and move on. And they are not just looking at a short term investment date, big investment right now. It can be a long-term benefit and it is not just to help them to survive is to help them to bounce back and then to be competitive moving forward. So at this moment for any company's leader, what they would need to think about is how fast they can move on your site, how fast they can evaluate a situation to look at which part of the organization that they need to move and leverage technology. What they can do on disc strategy is not just for a short term survival, but for them to make sure that they can rebound and also stay as more competitive moving forward.

Jason Lopez: Well, you know, the pandemic has really brought on a lot of profound changes in the way that we are conducting ourselves these days and the way we're using technology. How many of these changes do you think are going to remain in place after the virus is contained? And we're sort of back to normal? 

Kitty Fok: Well, I want to go back to what happened to saws 17 years ago. So when SARS happened 70 years ago in Asia, mainly in China, uh, Hong Kong, Singapore and Taiwan. So what I saw is that, um, Singapore for example, did, you know, forget about. So at that moment, they have been like continuously to build special unit hospital so that they can have um, isolation or quarantine facility. So with COBIT 19 happened, the Singapore government is actually more prepared, so they know that they will have the facility for the people for quarantine or isolation, but some of the country actually did not build dosa facility. So when COVID-19 hit, um, it is not as fast in terms of infection compared to the Singapore [inaudible]. So I think some of the people will go back to their comfort zone. Some of the people will move on and think that this is something that can create more opportunity or like can have a change of life. 

Kitty Fok: It really depends on, again, for the industry demands personal preference as well as some of the policy. So I want to go back to education again. I don't think the education will go back to like a hundred percent back to what we used to be because the content is already available and it can definitely support more kids that need education. So that will definitely move on but it will change from a hundred percent on our education back to like a hybrid model. So now the school can we left fish what is available online? They're already set up the communication channel with all the parents so that we'll move on. So I think it really depends on the industry and the need of it. 

Jason Lopez: kitty folk is the managing director of IDC China. In her latest report, she identifies opportunities for tech innovation and investment in China. Of course, it areas like cloud AI and five G are on the list but now because of the pandemic, they're stronger focus on areas like smart cities, digital health, online learning, remote work and food e-commerce. This is the Tech Barometer podcast. I'm Jason Lopez. Tech Barometer comes to you from The Forecast covering technology and the people behind tech.

Jason Lopez is executive producer of Tech Barometer, the podcast outlet for The Forecast. He’s the founder of Connected Social Media. Previously, he was executive producer at PodTech and a reporter at NPR.

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