Peking University, February 5, 2021: Although many uncertainties and complexities remain in the way of China's economic growth in 2021, there are multiple areas where relatively steady and high growth can be achieved through efforts. The existing digital economy is one that shows strategic stability, and with appropriate facilitating policies and regulations it will boost the upgrading of China's economic structure with breakthroughs in key technologies and achieving a stable high growth.
As for the two aspects of the digital economy, one is digital substitution economy emerged within traditional manufacturing economy, and borne out of the dramatic cost reduction due to technical upgrades; the other is digital creation economy which represents new physical facilities and related new entities created by new production steps brought about by the development of digital technology.
The general digital economy represents the digital revolution, which is the third economic campaign after the agricultural economic revolution and the industrial economic revolution.
The growth scale of China's digital economy reached 35.8 trillion yuan ($5.5 trillion) in 2019, accounting for 36.2 percent of the GDP, with a growth rate three times higher than that of the traditional manufacturing economy, according to data from the China Academy of Information and Communications Technology.
By 2027, it is expected that the digital economy will account for about half of China's GDP and become the main driver of the country's economic growth.
Meanwhile, establishing regulations is important alongside the development of the digital economy. People have been conflating the increasingly popular concept of digital economy with internet economy, which mainly represents Business to Customer consumption and cannot cover topics such as the digital economy relying on digital infrastructure and the digital transformation of traditional manufacturing.
Different from the digital substitution economy which has a growth ceiling, the digital creation economy has nearly infinitive potential. For instance, building millions of 5G stations would dramatically boost information exchange, facilitate technological advances and lead to explosive growth of whole industries, rather than supporting growth of a handful firms.
The gathered data of the platforms appears becoming more like a common resource or basic public goods. Local public goods management mechanism will be needed to distinguish competitive resource and public resource of those platforms. With regulations lagging behind digital technology development, the innovative component of the digital economy may be outlawed by traditional antitrust rules.
The digital economy is now in the early stages of growth, but is still a small entity compared to its future ecology.
The history of China's agriculture sector in the past decades may offer a reference for the upcoming development of digital economy. China's farmers accounted for nearly 90 percent of its population in the 1950s, yet the sector still couldn't feed its people. Now only 8 percent of the Chinese population still tills the land, and they produce a surplus of food. If major breakthroughs emerge in the digital economy, it would be followed with rapid economic growths.
The Organization for Economic Co-operation and Development estimates the digital economy in advanced countries will exceed 62 percent of GDP by 2030, which is similar to the expected growth of China's digital economy. The digital economy, with its technology advances, has brought China into competition with other major economies, under a mixed competitive scenario. High value growth potential of the digital economy and fairly managing positive and negative element amid the development will win the Chinese economy a better position in the arena.
The article was compiled based on a commentary written by Cao Heping, professor at the School of Economics of Peking University.
Source: Global Times
