5 reasons China is now ready for proptech

Ultimately, the rise of digital transformation has unlocked the country’s potential for growth in yet another sector: property technology.

“Chinese development is still slightly behind that of the US and Canada, but China’s cutting-edge approach to retail, e-commerce and mobile payment has unlocked its potential for proptech growth,” the report said. 

And with China’s urbanisation rate expected to increase from 60 to 70 per cent over the next decade, the demand for emerging technologies to make cities and their physical assets more efficient and sustainable is set to become more pronounced, it added.

It’s led the report to consider that “understanding China’s proptech landscape can provide global real estate players and the proptech community with a new perspective on the adoption of technology in the real estate industry”.

As it stands, there are five major drivers for China’s emergence in the real estate innovation space, according to the report. These are:

1. Evolving consumer preferences

As the biggest mobile market in the world, with close to 1.2 billion subscribers and 82 per cent mobile internet penetration level, China has a significant impact on the world’s mobile ecosystem, from consumers and businesses to wider communities, according to the report.

In 2019, the country was deemed the largest e-commerce market in the world, with the industry size valued at $1.94 trillion — surpassing the United States’ $62 billion valuation.

The preference for digital processes has penetrated various other industries in China, the report highlighted, which gives way to the rise of a $1.1 billion sharing economy and has birthed some of the biggest start-ups in the world, including ByteDance and DiDi, which are currently valued at $140 billion and $62 billion, respectively.

By 2025, the sharing economy is expected to account for 20 per cent of China’s GDP.

2. Real estate firms innovating to compete

Chinese real estate players have been observed of late undergoing digital transformation, in a bid to remain competitive amid an evolving sharing economy.

To do this, they’re building out their tech capabilities through the adoption of various innovation models.

For one, real estate developers are hiring dedicated engineering and data teams to support internal operations. This is then supplemented by partnering with internet and tech giants, working with accelerators or investing directly in start-ups in order to ultimately boost R&D capabilities.

3. Internet giants building real estate playbooks

While real estate firms are seeking out digital space leaders, Chinese internet giants are also starting to shift their focus, acknowledging the potential for growth in physical spaces, both to boost new businesses and accelerate growth.

“Internet giants have strong incentives to create more use cases from their core technologies (e.g. cloud computing, big data) for which they invested heavily in the R&D process. These technologies can be applied to physical spaces, such as smart city, smart building, and smart home,” the report explained.

And with limited significant proptech players operating in the Chinese market, internet giants are eager to claim their stake in the real estate industry, championing the online/offline integration in the process.

4. Proptech unicorns rising

According to the report, there are a number of Chinese proptech unicorns, or private companies with a valuation of $1 billion or more, that are catching up with the more established ventures of the west.

The average valuation of China’s proptech unicorns is already $3 billion, with most unicorns operating within the areas of listing and brokers and apartment rental services.

In comparison, the average valuation of proptech unicorns in the US is slightly higher — at $5 billion — and mostly covers short-term rental and construction tech.

5. Government support

With private stakeholders embracing digital transformation, the Chinese government has committed its own support for the development of technology through investments and policies.

President Xi Jinping has recently announced the government’s intention to build “Smart Society, Digital China, and Internet Power Strategy” through wide-reaching action plans that include approximately 500 smart city pilot projects and $1.4 trillion worth of new “digital, smart and innovative” infrastructure. The new infrastructure will focus mainly on 5G networks, industrial internet, inter-city transportation and rail system, data centres, artificial intelligence, ultra-high voltage power transmission and new-energy vehicle charging stations.

The report also highlighted that the government intends to promote innovation and entrepreneurship by integrating the internet with traditional industries.

This looks set to boost China’s manufacturing power as well as set industry standards around a whole new generation of technologies.