Digital economy

Digital economy of growing importance to China

China’s digital economy is expected to be worth more than 60 trillion yuan ($8.84 trillion) by 2025, according to a forecast by the China Academy of Information and Communications Technology, a government think tank.

Shanghai and provinces such as Zhejiang, Fujian and Hebei have all set out their economic development plans for this year, prioritizing the development of their digital economies.

Zhang Yunming, vice-minister of industry and information technology, recently called on telecommunications companies including China Mobile, China Unicom and China Telecom to speed up the development and application of new infrastructure, promote an innovation-driven development strategy, and speed up the integration of the digital and real economies.

By the end of 2022, more than 2.3 million 5G base stations had been built in China, and the country boasts a capability to connect over 500 million households to a gigabit optical network, according to Ministry of Industry and Information Technology data.

Moreover, the digital connections for the mobile Internet of Things (IoT) in China reached 1.84 billion in 2022, making China the world’s first major economy to have more mobile IoT connections than the number of its mobile users, according to the ministry.

China’s mobile IoT connections account for 70% of the world’s total, said Zhao Zhiguo, spokesman for the ministry.

Wang Zhiqin, vice president of the China Academy of Information and Communications Technology, said: “China has built a good telecom infrastructure, which will lay a sound foundation for the high-quality development of China’s digital economy.

“Previously, China’s digital economy was chiefly driven by consumer-oriented internet applications like e-commerce, but now business-oriented applications like industrial internet are playing a significantly bigger role. This shows that improvements have been made in the digital economic structure,” Wang said.

China’s digital economy was worth 45.5 trillion yuan in 2021, second only to the United States, according to Cyberspace Administration of China report.

Speaking at the recent World Economic Forum in Davos, China’s Vice-Premier Liu He said: “We must let the market play a decisive role in resources allocation, let the government play a better role. Some people say China will go for the planned economy. That’s by no means possible.”

His words echoed those of the Central Economic Work Conference in December, which emphasised the importance of encouraging and supporting the development of the private sector.

Xu Yan, vice-president of Tencent Holdings, one of the world’s biggest multinational firms, said: “In recent years, we have deeply felt that the government has stepped up efforts to create a first-class business environment for private companies. Tencent will ratchet up efforts to drive the integration of the real and digital economies via innovation.”

Xu said the company has invested 150 billion yuan in research and development over the past three years.

 

Economists predict a strong rebound for digital economy 

China is likely to see the bounce back in the economy accelerating from the second quarter of this year, a leading economist has said.

HSBC’s Liu Jing, said that “China will emerge from Covid-19 and rebound strongly from the second quarter”.

Economic rebound will be a goal for China throughout 2023 and 2024, she explained. “China’s GDP will grow 5% this year and 5.8% next year, if current forecasts pan out as expected,” she said.

“Consumption has been a laggard so far but a recovery to the pre-pandemic growth level of 8% is expected in 2023. We expect to see strong pent-up demand for activities and consumption, which previously faced restrictions.

“The economic recovery should boost incomes and improve the consumption outlook, while households can also draw on the 6.6 trillion yuan ($974.7 billion) in excess savings accrued over the past three years,” Liu said.