China saw a deceleration in the growth of total mobile internet users in the first half of 2018, as the market is becoming saturated and is in urgent need of industry upgrades, according to a report.

The country was home to 890 million mobile internet users in the first half of this year, 3 percent higher than the previous period, said the report jointly released by Beijing-based market research consultancy Analysys and Hangzhou, Zhejiang province-based user operation service platform Duiba.com.

The slowdown contrasts with the growth rate of 3.5 percent and 5.0 percent reported in 2017 and 2016, respectively. In fact, the growth rate has been decelerating for five consecutive years.

User activity on popular domestic mobile apps saw declines.

Last April, user activity on Tencent Holdings Ltd's WeChat instant messaging app in first-tier cities declined 2.47 percent compared to the end of 2016. The user activity decline for Alibaba Group Holding Ltd's Alipay and Tencent's instant messaging app QQ during the same period were 0.55 percent and 5.52 percent, respectively.

Ding Chen, co-president of Duiba and a senior expert in the industry, said both e-commerce giants and rising startups, such as short video apps Douyin and Kuaishou, are seizing market share and competing for consumers' attention.

"As a result, user activity in mobile apps is declining gradually," Ding said.

"After several years of evolution, the demographic dividend in the Chinese mobile internet market has disappeared, and internet enterprises have entered the stage of stock competition," said Zhu Jiang, an analyst with Analysys.

Ding said it is "not only the user activity, the general user growth in mobile internet apps is almost stagnant".

"The situation is especially hard for startup companies, which have spared no efforts to raise money, but have no idea how to make use of the funding to tap into their users and harness that advantage. If they don't take opportunities at the right time, their money will be wasted, leaving the company in difficulty."

According to Ding, brick-and-mortar stores also face bottlenecks in the industry. Traditional enterprises have adopted online marketing strategies to broaden their markets and retain users, such as international supermarket chain Watsons and Chinese consumer electronics retailer GOME.

Zhao Yue, an e-commerce analyst at Analysys, said: "The past few years have witnessed the slowdown of sales revenue growth rates at e-commerce platforms. The traffic bonus has peaked. The same situation is unfolding at physical stores."

A report issued by the China General Chamber of Commerce and China National Commercial Information Center showed that in 2016, retail sales of the country's major large-scale retail enterprises dropped by roughly 0.5 percent year-on-year. But, the number rose in 2017.

"The figure demonstrated that the integration of online and offline operations benefits both," Zhao said.

"The integration of online and offline business will be the future trend. Physical stores encompass huge passenger flow, while online enterprises possess valuable user data to serve as guidance for the companies' marketing plans.

"The potential for industrial upgrades is huge. This is why we are devoted to offering operation plans to both online and offline enterprises, to promote the integration of the industry," said Ding from Duiba.