Factors affecting Internet diffusion in China: A multivariate time series analysis

• China’s Internet industry has boomed in the past two decades.
• A theoretical framework called EPIC was proposed.
• Relationships between Internet diffusion and determining factors were examined.
• The growth of Internet was mainly driven by Internet access cost and content.

China’s Internet industry has boomed over the last two decades. Given that China is home to the world’s largest Internet population, we may wonder what factors have caused this medium, which is strictly controlled in China, to grow and flourish. Based on previous studies and theories, a framework called EPIC (Economy-Policy-Infrastructure-Content) is proposed, and a multivariate time series analysis is performed to examine the relationships between Internet diffusion and these factors. The growth of Internet penetration was found to be mainly driven by Internet content and access cost; however, GDP per capita and telecommunications infrastructure were inconsequential. The implications of these findings are discussed.