The Digital Economy in China

by | December 13, 2018

The Digital Economy in China

December 13, 2018

In 2015, the work report of central government of China mentioned the concept Internet + for the first time. Internet + is the concept that digital technology and the internet are more and more integrated with convential industries. In more recent years the report mentioned Digital Economy, and “Digital China”. The digital economy is the concept that an economy is driven by digital technologies and industries are intertwined with the internet. We can see a trend here that digital development and the internet are playing a significant role in China’s developmental route more and more. In our previous article about Singles Day, we introduced that Alibaba is planning to bring this concept to its business model. In this article we are going to elaborate more on the topic of the digital economy in China.


What is the Digital Economy in China?

The digital economy refers to an economic system in which digital technology is widely used. Thus, bringing about fundamental changes in the overall economic environment and economic activities. Moreover, the digital economy is a new social political and economic system that digitizes information and business activities. Above all, the digital economy focuses on the production, distribution and sale of goods and services that rely on digital technology.

With the rapid development of the mobile Internet and the Internet of Things, the connection of all things and people has been realized. Furthermore, the amount of data that is generated has exploded. Undoubtedly, the Internet will become an ecological element like water and electricity that penetrates all aspects of economic and social activities. In the future it is likely that there will be no mention of the digital economy. Similarly, to that no one now mentions things about working in a company which uses of electricity. Like land and labor in the agricultural era, and technology and capital in the industrial age, data has become a production factor in the digital economy era. Unquestionably, it is one of the most critical production factors today.


Development of Digital Economy in China

In the “13th Five-Year National Strategic Emerging Industry Development Plan”, the Chinese government added the digital innovative industry as an important objective. The development of the digital economy in China has seen three major stages, as can be seen in the infographic below. In the early stages, China’s digital economic policy was mainly based on creating an information infrastructure and encouraging the development of e-commerce. However, thanks to the focus on the Internet+ and its related policies, the digital economy in China has seen rapid progress in recent years.

This year a study was published on China’s Top 100 Cities for the Chinese digital economy in 2018. According to this study, Beijing, Shanghai and Shenzhen rank as the top three cities that are important for the digital economy. Moreover, there are 3 provinces with 10 or more cities in the top 100. These provinces are Jiangsu, Shandong and Guangdong. In terms of overall distribution, the top 100 cities of the digital economy in China are densely distributed along Chinese coastal areas. Mainly, the cities are located along the coast of the Yellow sea and the East China sea. The Yangtze River Delta, the Pearl River Delta, or Greater Bay Area, and the Beijing-Tianjin-Hebei region are all located within this region. Undeniably, this is the reason that the coastal areas of China account for more than 70% of the top 100 cities in the list.


Future trends

Nowadays, China has over 800 million active internet users, which means that almost 60% of the Chinese population uses the internet. All of these people are in some way part of the digital economy in China. Furthermore, a majority of these internet users make use of mobile and digital payments through Alipay or WechatPay. Through the efforts of the Chinese government to give more people access to a good internet connection this number will only continue to grow. Simultaneously, Chinese companies continue to integrate their industries through digital technology to create a digital ecosystem. Baidu, Alibaba and Tencent have already showcased how this is done by integrating multiple business facets in their digital offerings. In the future other companies will follow their lead.

Another aspect of the digital economy in China that we must not forget is the development of new digital technologies such as AI, VR and other technologies. China is one of the top countries in terms of AI development and its focus is on implementing this technology in everyday life.  This means that AI is being used more and more in every aspect of Chinese businesses. In the future AI development in China is highly likely to surpass that of the US and Europe.


China still not a ‘digital’ economy

Crucial to remember is that China’s overall economy is still catching up on a digital level when compared to the Western world. China is making great and novel developments in the digital economy. However, China is also still largely dependent on non-digital industries such as agriculture and manufacturing. Furthermore, China’s digital economy developments mainly takes place on the coastal areas of China and, thus the countries digitalization in distributed unevenly across the country. This means that a lot of the Mainland still has to catch up with the digital developments. 

All in all, this shows that there are quite strong in its developments of a digital economy in China, but also that there still are many opportunities in the future to further help built its digital economy. It is only a matter of time until the technological developments in places such as Beijing, Shanghai and Shenzhen start to trickle down further in to the mainland of China.

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