Understanding China’s Digital Economy

China’s digital economy is among the most vibrant in the world growing at an exponential rate that can be outcompeted by few. This sector is also gradually becoming one of the dominant forces in the national economy. At the same time, China is on the move to achieve a balance between scrutinous regulatory measures and innovation stimulation. A core factor in rebooting the sluggish economy, the digital economy presents a range of dynamic growth and investment opportunities.To get more latest news about china economy, you can visit shine news official website.

China’s digital economic activities have grown exponentially in the past decade, becoming one of the country’s dominant economic forces.

The digital economy, sometimes referred to as the new economy or internet economy, is an umbrella term that describes an economy in which information and communication technologies (ICT) are used to transform traditional brick-and-motor economic activities (production, distribution, trade, and so on), products, and services into digital form. As a relatively broad concept, any economic form that directly or indirectly uses data and information technology to guide resource distribution and improve productivity can be categorized as being part of the digital economy. It goes beyond the ICT sector itself. Technologies that back the development of the digital economy mainly include big data, cloud computing, the Internet of Things, blockchain, artificial intelligence, and 5G communications, and so on.
In 2021, the digital economy reached US$7.1 trillion (RMB 47.94 trillion), ranking second after the United States, according to a white paper issued by the China Academy of Information and Communications Technology (CAICT). Statistics also show that the digital economy’s share in the national GDP, measured by the combined value of technology products and integrated digital inputs, reached 39.8 percent in 2021, up from 20.9 percent in 2012.

The rapid growth is accompanied by the expansion of digital infrastructure construction. The number of 5G base stations in China totaled 1.43 million with more than 500 million 5G users as of early March 2022. China possesses among the world’s largest and most advanced network facilities. Additionally, the country has also accelerated the integration of big data, cloud computing, and artificial intelligence (AI). By 2025, China will account for nearly 30 percent of the world’s total data volume with the richest variety of data types in the world.
China has made the digital economy a critical part of its national development strategy. The 14th Five-Year Plan on Digital Economy Development (the “14th FYP”)provides a detailed roadmap and incentives to shore up the sector. Under the plan, China will enhance its capabilities in “strategic areas”, such as sensors, quantum information, communications, integrated circuits, and blockchain, as well as pushing for technologies like 6G. It will also facilitate the digital transformation of the supply chain to better utilize data resources and improve the governance of the digital economy.

The 14th FYP also endorsed a target that will increase the output of core industries in the digital economy to 10 percent of the national GDP by 2025, up from 7.8 percent in 2020. This number specifically refers to the direct value-add of information transfer, software, and information technology services. Other targets include increasing the connection rate of Chinese industrial enterprises to “industrial internet platforms” to 45 percent and increasing the number of Chinese households connected to broadband with speeds of at least 1 gigabyte per second to 60 million by 2025.
The 14th FYP emphasizes the importance of enhancing cybersecurity and data security, in line with China’s data regulatory efforts since 2021. To govern the energetic yet nascent sector, particularly the platform economy, China has rolled out multiple regulatory measures, addressing problems such as data abuse and monopolistic market behavior. These measures guarantee a fair market environment and improve governance while maintaining the sector’s vigor and innovation with high-speed growth.

While the year-long regulatory efforts have shrunk investment and financing in the internet sector to some extent, recent easing of the tech crackdown has given a positive signal to the market. Faced with multiple economic headwinds in 2022, the Chinese government will expect tech giants to play a bigger role in helping the country maintain the growth momentum. On the other hand, the government will continue to strengthen oversight and law enforcement in the coming years in key areas, including the platform economy, sci-tech innovation, and information security.