Promoting the Healthy Development of the Digital Economy in China

At the 34th group study session of the Political Bureau of the Central Committee of the Communist Party of China (CPC) on October 18, 2021, President Xi Jinping stressed that we should give full rein to China's vast data troves and rich range of fields of application in order to firmly embed digital technology in the real economy, enable the upgrading and transformation of traditional industry, foster new industries, new business forms and models, and build up the strength, quality and size of China's digital economy. He explained that this should be done while keeping in mind the larger strategic picture of national rejuvenation and the once-in-a-century changes occurring in the world and giving full consideration to our domestic and international imperatives and our development and security needs. 

I. Profound significance of developing the digital economy 

Promoting the healthy development of the digital economy is a major strategy of the CPC Central Committee with Xi Jinping at its core that focuses on the change to the principal contradiction in Chinese society and promotes high-quality development and the construction of a strong and modern socialist country. Thus, it is of profound and far-reaching significance. 

Developing the digital economy will provide essential support for China's new development dynamic. 

Building a new development dynamic is a strategic move that conforms with the principles governing the growth of major countries and seizes the initiative in future development. The digital economy plays a vital role in enabling economic flows, generating development momentum, and boosting economic resilience. Data has become a major productive force and a key factor of production that has infiltrated deeply the links of production, distribution, exchange of commodities, and consumption. It is leading to network-based sharing, intensive integration, collaborative development, and efficient utilization of factors of production, such as labor, capital, land, technology, and management. It is facilitating flows of resources and production factors and greatly enhancing the efficiency of allocating resources in various areas of the economy and society. The rapid development of digital productivity has transformed producers and the targets, tools, and methods of production. It has reconstructed and shifted the paradigm of the real economy, improved the quality and efficiency of supply, helped to balance supply and demand, and enhanced the overall efficiency of economic development. The digital economy bolsters economic resilience and encourages social organization to become more platform-based and eco-friendly. It transcends industrial and organizational boundaries, improves collaboration between enterprises, and makes supply and industrial chains more adaptable to external forces. Despite the dual impacts of the anti-globalization movement and Covid-19, the digital economy has continuously grown, ensuring healthy and stable development of the economy and society. 

A liquid-cooled compute node pictured in November 2021. These nodes can bring data center power usage effectiveness to 1.1 or lower, a 20% improvement over traditional air-cooled nodes. The role of the digital economy in driving economic and social development is becoming increasingly apparent. PHOTO PROVIDED BY THE CHINESE ACADEMY OF SCIENCES 

Developing the digital economy is a vital means of constructing a modern economic system. 

Developing and applying big data is a vital part of the modern economic system. The digital economy is highly innovative, penetrative, and expansive. It is capable of driving the construction of a modern economic system and promoting high-quality economic development. Innovation in the new generation of information technology is thriving, and core industries of the digital economy, such as big data, Internet of Things, and artificial intelligence (AI), have great capacity for innovation, growth potential, and profitability. Indeed, the main driving force of economic development has changed from factors of production, such as resources and low-cost labor, to innovation. Digital technology is subverting the traditional economic model. New technologies, such as 5G, AI, and blockchain, have vitalized countless industries, promoting the digitalization of traditional sectors, including agriculture, energy, construction, and services, and creating high-end and smart businesses. The application of digital governments, smart cities, and digital villages has pushed forward the reform of public services and governance. Thanks to the ongoing construction of one-stop online services and unified management on a single network, public services are becoming more convenient, the business environment is improving, and a more unified and open market environment featuring orderly competition is being created. 

Developing the digital economy is essential for building a new national competitive advantage. 

The world is undergoing an expansive and profound technological revolution and industrial transformation. Continuous breakthroughs are being made in modern information technology, including the Internet, big data, and AI, the digital economy is booming, and the interests of all countries are becoming more closely connected. The digital economy is leading a new round of technological revolution and industrial transformation, becoming a key force in reorganizing global factors of production and resources, reshaping the global economic structure, and changing the pattern of global competition, thereby lending new impetus to global economic growth. Countries around the world recognize the importance of the digital economy, which has led them to strengthen strategies, increase R&D investment, and promote the digitalization of industries, in order to boost innovative growth and develop their digital economies. China possesses solid fundamentals for developing a digital economy. We benefit from a vast market and a complete industrial system, the largest number of Internet users in the world, immense data resources, and a wealth of applications of digital technologies in various industries. Moreover, the Chinese people's growing demands for a better life are creating a larger and more diverse domestic market.

II. Rapid and effective development of China's digital economy 

Since the 18th CPC National Congress in 2012, China has implemented its national cyber development strategy and national big data strategy, advanced the development of a digital China and a smart society, and accelerated digital industrialization and industrial digitalization, achieving remarkable results in its digital economy. In 2020, the value added of core industries in China's digital economy accounted for 7.8% of GDP, with this sector playing an increasingly prominent role in the wider economy and society. 

China's digital economy is at the global forefront. 

China's digital economy has been the second largest in the world for many years thanks to the rapid progress in information and communication infrastructure, digital consumption, and digital industries. In terms of information and communication infrastructure, on the back of major policies such as the National Broadband Agenda, China has rapidly developed its high-speed broadband network and built the world's largest optical network. As of November 2021, China had 497 million 5G end users as well as about 1.4 million 5G base stations, accounting for more than 70% of all 5G base stations in the world. Having played catch-up for some time, China is becoming a contender and even moving toward to be a leader in information and communication technology. In terms of digital consumption, China has the largest market in the world, with the highest number of Internet users for 13 consecutive years, which exceeded 1 billion in June 2021. China's immense number of Internet users has created an enormous market. E-commerce transactions in China grew at an average annual rate of 11.6% during the 13th Five-Year Plan period (2016-2020), and China has had the world's largest online retail market for eight consecutive years. Between January and June 2021, the total value of online retail sales in China was over 6.1 trillion yuan, with physical goods accounting for over 5 trillion yuan. China's digital industries have grown rapidly. Guided by the strategy of innovation-driven development, China has made continuous achievements in digital technology innovations, driving the continuous evolution and rapid growth of digital industries. In the past six years, China has jumped from 29th to 12th in the Global Innovation Index. During the 13th Five-Year Plan period, the operating income of Chinese software and IT service industries increased from 4.28 trillion yuan to 8.16 trillion yuan, at an average annual rate of 13.8%, far exceeding average annual GDP growth.

A smart factory of Hunan Sany Heavy Industry in production, December 2021. Chinese manufacturing enterprises are accelerating digital transformation. Through its own transformation, this Sany factory has seen a 50% increase in production efficiency and can produce a pump truck every 45 minutes. PHOTO PROVIDED BY THE DEVELOPMENT AND REFORM COMMISSION OF HUNAN PROVINCE 

Digital technology has improved the quality and efficiency of the real economy. 

The deep integration of digital technology in the real economy has improved total factor productivity and promoted transformation and upgrading of all aspects and each link in the industrial chains of manufacturing, services, and agriculture. The digital transformation of manufacturing is continuing, with companies increasingly migrating to the cloud, using digital tools, and enabling AI. By October 2021, the rate of digital control of key processes of large-scale industrial enterprises was 54.6%, the digital penetration rate in management and administration reached 69.8%, and the penetration rate of digital R&D tools was 74.2%, and more than 100 industrial Internet platforms with industrial and regional influence connecting 76 million items of industrial equipment had been established, promoting cost savings and greater efficiency within manufacturing. Digitalization of the service industry has increased markedly, leading to the vigorous development of new forms and models of business. The scale of e-commerce and mobile payments in China is world-leading, and the online car-hailing, food delivery, and medical treatment service markets are expanding, reaching 397 million, 469 million, and 239 million users by June 2021, respectively, which have contributed to expanding domestic demand. The digital transformation of agriculture is also progressing steadily. The penetration rate of digital technology in agricultural production and operations is increasing, with applications of the Internet of Things, big data, and AI in agricultural production exceeding 8%. New methods of smart agriculture, such as product tracing, smart irrigation, smart greenhouses, and precision fertilization have been widely introduced, which have greatly increased agricultural automation and productivity. 

The digital economy is creating new areas of economic growth. 

The digital economy has played an important role in stabilizing investment and foreign trade as well as promoting consumption, and it has become a strong driver of economic growth. It has led to investment growth, with nearly 100 billion yuan invested in digital industries, including the rapid construction of 5G and other IT infrastructure. Fixed-asset investment in the electronics and IT manufacturing industries increased 28.3% year-on-year to June 2021, 18.9 percentage points higher than the previous year and 12.1 percentage points higher than industrial investment during the same period. New types of consumption have expanded, with rural e-commerce reviving the ailing market. During the 13th Five-Year Plan period, rural online retail sales grew at an average annual rate of 38.75%, from 350 billion yuan to 1.8 trillion yuan. E-commerce can satisfy the individual demands of consumers, leading to a long-tail market. Smart products are driving upgraded consumption in China, with sales of robot vacuum cleaners, smartphones, smart watches, and smart speakers higher than anywhere else in the world. Digital trade has given China a new export advantage, expanding the depth and breadth of international trade. Between January and June 2021, China's cross-border e-commerce trade was worth 886.7 billion yuan, a year-on-year increase of 28.6%. According to the United Nations Conference on Trade and Development, 44.5% of China's total service trade was delivered digitally in 2020, which was instrumental in stabilizing our foreign trade. 

Digital technology has played a pivotal role in containing Covid-19. 

Since the outbreak of Covid-19, digital technology and the digital economy have played vital roles in containing the Covid-19 virus, getting people back to work and resuming production, and stabilizing employment. The digital war against the pandemic has achieved remarkable results, with governments at all levels and enterprises employing digital technology to contain Covid-19. As of late 2021, a national "health code" has been in widespread use that grants access to all manner of venues and services, and a national government service platform has facilitated more than 65 billion inter-regional health code status inquiries, allowing personnel to move around the country in an orderly manner. The digital transformation of the economy is promoting a comprehensive recovery. Services such as contactless deliveries and smart food pickup lockers are helping to ensure that the needs of the public are met, and moving medical consultations, educational classes, and entertainment online have reduced flows of people and thus lowered the risk of the virus spreading. Remote working, online contract signing, online contract tendering, and online interviews have ensured that work and production can continue away from workplaces, thereby enhancing the resilience of industrial and supply chains. In addition, new forms and models of business have stabilized and expanded employment, online recruitment has ensured employment of college graduates, and new jobs have been created by adopting employee sharing and flexible working. More than 60 million people now work in e-commerce, and new formats and models of e-commerce are creating an "employment reservoir" with a vast number of available positions. 

The use of digital technology in public services is continuously increasing. 

Remarkable achievements have been made in digital government, digital public-interest services, and digital village construction. These advancements have made public services more inclusive and equitable, allowed the public to derive greater and fairer benefits from the digital economy, and reinforced people's sense of fulfillment, happiness, and security. The effectiveness of digital government has improved as the "Internet plus government services" have moved forward and a national online platform for government services has largely been established that connects 31 provinces, autonomous regions, and municipalities directly under the central government as well as the Xinjiang Production and Construction Corps and 46 State Council departments. One-stop platforms providing a range of trans-regional services are increasingly becoming the norm. By the end of 2020, 82.13% of provincial-level administrative licensing items could be handled online and in one visit, and the time required to complete more than half of national administrative licensing items have been reduced by more than 40%, making it more convenient and efficient for the public to have things done. Digital public-interest services can meet people's desire for a better life, and applications of digital technology to services related to public wellbeing have achieved remarkable results. By the end of 2020, Internet access in primary and secondary schools (including learning centers) nationwide was 100%, a national platform for medical insurance information had been put into operation, and the number of users of medical insurance e-vouchers was 376 million, with a total of 72.18 million payments made. As of September 2021, 104 websites and apps in China had taken initial steps to become more user-friendly for the elderly, thereby improving the accessibility and inclusiveness of the digital economy and helping to eliminate the digital divide. Digital villages are helping to vitalize rural areas, with all administrative villages in China having been connected to broadband Internet and 99% of them having both optical fiber and 4G connections. New forms of business in the countryside are booming, and efforts to integrate Internet technology with agricultural products to increase exports to cities are increasing rural incomes. The use of smart digital technologies in rural tourism has also increased considerably, and digitalization of rural governance is helping to strengthen villages and good governance. These advancements are promoting quality and efficiency in agriculture, making villages more desirable places to live and work, and increasing the wealth and prosperity of rural residents. 

International cooperation on the digital economy is deepening. 

China is deepening digital economic cooperation with countries and regions located along the Belt and Road and participating in the formulation of international regulations governing digital technologies, and it has achieved positive results in international cooperation regarding the digital economy. China is proactively contributing its wisdom, such as President Xi's far-sighted approach at the 2nd World Internet Conference in 2015 of focusing on issues of common concern regarding the future of the world and adhering to the universal morality of the development and well-being of all humankind, as well as his proposal to "build a community of shared future in cyberspace," which garnered a positive response and widespread approval from the international community. China has been active in proposing initiatives, such as the jointly launched Global Initiative on Data Security and the Belt and Road Digital Economy International Cooperation Initiative. China has also applied to join the Comprehensive and Progressive Agreement for TransPacific Partnership (CPTPP) and the Digital Economy Partnership Agreement (DEPA), in order to work with all countries in the world to make cyberspace a peaceful, secure, open, and cooperative place. China is attempting to share its development opportunities by promoting the construction of a Digital Silk Road, hosting international conferences such as the Belt and Road Forum for International Cooperation, and building platforms for the world to exchange and cooperate in the global digital economy. Chinese cities including Hangzhou and Shenzhen have established cooperation mechanisms with cities in other countries, and Chinese e-commerce platforms are helping small and medium-sized enterprises (SMEs) around the world to expand into our domestic market, so that benefits from the digital economy can benefit people all over the world. 

III. Building up the strength, quality, and size of China's digital economy 

Changes that take place once-in-a-century are accelerating, and a profound shift in the international balance of power is taking place. China's economic development faces the three-fold pressure of contracting demand, supply difficulties, and weakening expectations. Thus, new and greater requirements are being set for the rapid development of the digital economy. China must strive to achieve high levels of self-reliance and self-improvement, make thorough integration of digital technology and the real economy a prevailing theme, and make it our fundamental objective to share the benefits of the digital economy with even more of our people. We also need to improve governance of the digital economy, build a strong cybersecurity barrier, and expand cooperation on digital technology, in order to build up the strength, quality, and size of China's digital economy. 

China must concentrate its resources to make core technological breakthroughs and quickly achieve high levels of self-reliance and self-improvement. 

Rapid breakthroughs in core technologies are key to the healthy development of the digital economy. To achieve them, China must strengthen basic research and development of digital technologies, target strategic fields of the future, increase basic theoretical research and key technological breakthroughs, and enhance key technological innovation capabilities. China requires an open collaborative innovation system that promotes innovation between industries and enterprises, platform enterprises, and digital technology service enterprises. We need to promote the collaborative and mutually beneficial use of innovation resources, support the development of open-source communities, platforms and projects that possess independent core technologies, and encourage the open evolution of the innovation model. We also need to promote the commercialization of advances in digital technology. With an orientation toward integrating and applying digital technology in various fields, we should optimize mechanisms for the rapid commercialization of innovations and applications in engineering and industrial settings. 

China must formulate appropriate plans for new types of infrastructure and consolidate the development foundations of its digital economy. 

New types of infrastructure provide the material basis and essential support needed to develop new technologies, industries, and formats and models of business. China must construct better information infrastructure, expand and upgrade its optical network, and promote commercial deployment and large-scale applications of 5G. We need to construct a system of national integrated big data centers, including 10 data center clusters across the country, and accelerate the establishment of efficient civil space infrastructure systems for communication, navigation, and remote sensing with global coverage. We need to develop integrated infrastructure and accelerate the digital upgrading of traditional infrastructure. We need to gradually create network-based, smart, service-oriented, and collaborative infrastructure that is focused on industry, transportation, energy, public wellbeing, and the environment. We must adopt a progressive approach to innovation-oriented infrastructure by drawing up plans for new scientific research facilities, improving technological development facilities, and building service facilities dedicated to innovation and entrepreneurship. We must also support efforts to achieve high levels of self-reliance and self-improvement in science and technology and build a collaborative, advanced, open, and efficient system of innovation-oriented infrastructure. 

China must increase the digitalization of traditional industries and accelerate the integration of digital technology with the real economy. 

A vital element of building a modern industrial system is upgrading traditional industries. It is also the starting point for improving digital productivity, fostering new drivers of development, and putting in place a modern economic system. Consequently, we need to deepen the digital transformation and upgrading of enterprises of all sizes, encourage businesses to create integrated digital platforms, and improve synergy within enterprises and along industrial chains. We also need to implement the SME digitalization campaign and support SMEs in digitally transforming whole business processes. China needs to promote the digital transformation of all aspects and every link of major industries. We must strive to develop Internet platforms of industries, enhance their clustering and eco-driven development, and encourage new models of integrated development involving primary, secondary, and tertiary industries, such as smart ordering in agriculture, supply chain finance, service-oriented manufacturing, and trade and logistics. We should also use spatiotemporal data to facilitate the digital transformation of industry. We need to cultivate a service ecosystem to support the digital transformation and promote the dual drivers of market-based services and public services. We need to develop digital transformation centers and link and concentrate resources to build regional and industrial digital transformation and innovation hubs.

An orthopedic doctor at Lhasa People's Hospital carries out robot-assisted surgery with specialists at Jishuitan Hospital in Beijing providing guidance via video link, April 19, 2021. Digital technology is making traditional industries increasingly smart and sophisticated. PHOTO BY XINHUA REPORTER SUN RUIBO 

China must vigorously promote the innovative development of digital industries and create an internationally competitive industrial system. 

The quality and scale of digital industries are concentrated expressions of the core competitiveness of a digital economy. China needs to upgrade its digital industrial base, help industries to keep growing, especially key digital industries, and improve supplies and production capacity of essential software and hardware, core electronic components, key basic materials, and production equipment to ensure self-sufficiency in key products. We must quickly modernize the industrial chains of digital industries and strengthen efforts to consolidate industrial chains. We must boost technological integration and product innovation to achieve diverse fields of application, increase the competitiveness of key links in industrial chains, and improve supply chains of major industries. It is important that we cultivate new forms and models of business, promote standardized, healthy and sustainable development of platform enterprises, and deepen applications of the sharing economy in consumer services. We should also optimize smart products and service operations and develop the smart economy, such as smart sales, robotic delivery systems, smart manufacturing, and reverse customization. 

China must improve governance of the digital economy and promote its orderly and regulated development. 

Having a system for governing the digital economy guarantees its sustainable and healthy development. We need to improve further the system of policies and regulations for governing the digital economy in China and enhance rules and institutions for coordinated regulation. We need to crack down on monopolies, prevent the disorderly expansion of capital, and establish sound systems of market supervision, macro-control, and policy and regulation that adapt to the developing digital economy. We need to establish sound mechanisms of coordinated regulation and strengthen regulation across departments, levels, and regions so that we can manage every link in the chain and all fields at every stage. We should explore the establishment of regulatory mechanisms adapted to the platform economy to protect the legitimate rights and interests of participants. China must encourage people from all walks of life to participate in the supervision of the platform economy, including supervision by society, the media and the public, smooth channels for diverse participants to express demands and for the protection of rights and interests, and address conflicts and disputes quickly to safeguard public interests and social stability. 

China must continue to increase the efficiency of digital public services to satisfy the public. 

Developing a digital government and society is an important guarantee for enhancing people's fulfillment, happiness, and security. To promote the joint development and utilization of digital government services, China needs to improve the efficiency of its "Internet plus government services" model, accelerate the standardization and easy access of government services, and achieve a one-stop service for high-frequency services that are important to businesses and the public. We need to accelerate the optimization and upgrading of social services and promote the digital provision of public service resources and online services in areas such as culture, education, and healthcare. We need to strengthen the connection between the supply and demand of social services in key areas of life, such as employment, elderly care, and childcare, in order to make the allocation of services more efficient and beneficial to all. We also need to coordinate and promote the integrated development of smart cities and digital villages. To this end, we should promote the building of the new type of smart cities across different levels and categories, encourage free two-way flows of production factors between urban and rural areas, and create a pattern of integrated development between digital urban and rural areas in which cities drive the development of the countryside and benefits are shared among everyone. 

China must actively participate in international cooperation on the digital economy and build a community of shared future in cyberspace. 

Global digital technology and industrial development are deeply connected, and participating in international cooperation on the digital economy is an important way to promote a high level of openness. China needs to be involved in negotiations on international issues concerning the digital economy. This requires us to engage in bilateral and multilateral cooperation on digital governance and help to maintain and improve multilateral mechanisms for governing the digital economy in order to build a broad development consensus and ensure Chinese solutions are presented and China's voice is heard at the right times. We need to accelerate the use of digital technology to develop trade, promote the transformation of trading entities and the reform of trade methods, and improve policies on digital trade. We must attract quality foreign-invested enterprises and entrepreneur groups, strive to develop cross-border e-commerce, and build cross-border e-commerce industrial chains and ecosystems. We should pragmatically promote exchanges and cooperation in the digital economy and make deeper and more solid progress in developing the Digital Silk Road. We should engage in high-quality cooperation on smart cities, e-commerce and mobile payments and create more areas of converging interests, growth areas for cooperation, and new mutually beneficial highlights to ensure that digital economic cooperation benefits the people of all countries. 

China must build a cybersecurity barrier to better prevent and resist security risks. 

Our national security will be compromised and our economic and social operations will be vulnerable if we fail to defend our cybersecurity, making it difficult to protect the interests of the people. We must, therefore, enhance our capacity to maintain cybersecurity and strengthen the synchronized planning, construction, and implementation of technical measures for cybersecurity. We need to improve early warning and notification mechanisms for cybersecurity emergencies and boost cybersecurity situational awareness as well as threat detection and cooperative handling. We should step up protection of data security, including government data and personal information, establish a sound system of data protection based on categorization and grading, and develop our data security governance system. We need to increase the resilience of our industrial and supply chains, establish sound safety management rules, systems, and working mechanisms in various industries, and bolster security situation monitoring, early warnings, and analysis of security risks. We also need to strengthen risk prevention and joint mitigation in key industrial fields and ensure the security of industrial and supply chains. 

(Originally appeared in Qiushi Journal, Chinese edition, No. 2, 2022)