China's economy can no longer rely on real estate! Digital economy relying on a huge market of tens of trillions Big DATA

Data is the new oil & gas, it will be the mother of commodity

Digital Economy is one of the core issues of this trade fair China last month.

Prior to this, digital economy has long become a new driving force for economic growth. During the pandemic, digital trading is an important way to maintain economic development. In the post-pandemic era, the development of digital trade still played an important role in promoting global economic recovery.

The Covid-19 pandemic has plunged the world into an unprecedented crisis. With no cure available, it poses a great threat to human lives. The need for social distancing means shops, offices, and factories have to be closed, dealing a big blow to economic activities. Countries all over the world have introduced huge relief or support packages to prevent mass bankruptcies, surging unemployment rate, and an erosion in social order. Indeed, the world economy is facing the biggest crisis since the Great Depression. Due to the prohibition of physical face-to-face human contact, economic activities have to rely heavily on the internet. Countries with good internet infrastructure and an established digital economy are likely to cope better during this disruptive period.

According to the G20, digital economy refers to a broad range of economic activities that include using digitised information and knowledge as the key factor of production. There are various measures to assess the size of a country’s digital economy. The narrow definition refers to the ICT sector only, which includes telecommunications, internet, IT services, hardware and software etc. On the other hand, the broad definition includes both the information and communication technology (ICT) sector and the traditional sectors that have been integrated with digital technology. The G20 and the China Academy of Information and Communications Technology use the broad definition to measure the size of a country’s digital economy.

Based on the narrow definition, the size of China’s digital economy is the second largest in the world after the US, at US$968.9 bln in 2018. As a percentage of GDP, it was 7%, while it is not as high as 14% for South Korea and 13% for Ireland, it is on par with that of US, Japan, and UK and higher than that of France and Germany. On the other hand, based on the broad definition, China’s digital economy is also the second largest, at US$4.7 trillion in 2018, which is equivalent to 34.8% of her GDP.

In this context, how to understand the value and significance of digital trade, how to grasp the development trend of digital trade, etc., still need more discussion and answers.

Why develop digital trade?

"We are more inclined to think that digital trade is different from e-commerce, but uses digital technology for R&D, design, production and delivery of products and services to users through the Internet and modern information technology. It is based on digital services as the core and digital delivery. It is a new form of trade that is characterized by the characteristics of the new trade.” At the 2020 China International Trade in Services Fair “Digital Trade Development Trends and Frontier Summit Forum” held on September 5, China’s Vice Minister of Commerce Wang Bingnan defined digital trade as such.

In terms of specific fields, Wang Bingnan introduced that digital trade includes information technology services such as software, social media, search engines, communications, cloud computing, satellite positioning, and digital content services such as digital media, digital entertainment, digital learning, and digital publishing, as well as through digital There are three major categories of delivered service outsourcing.

Digital trade has shown great influence. Xiao Yaqing, Minister of Industry and Information Technology, pointed out that now that China has entered the era of big data, data has become an important factor of production and a new engine that promotes economic development, quality change, efficiency change, and power change. Data flow drives the flow of technology, capital, and talent, and promotes the optimization of resource allocation and the improvement of total factor productivity. It will have a more profound impact on economic development, social progress, improvement of people's livelihood, and national governance.

Regarding the value of digital trade, Wang Bingnan said: "On the one hand, digital trade can enhance the sharing of knowledge and technological elements between industries through data flow, leading various industries. Synergistic integration, driving the digital transformation of traditional industries, and extending to the high-end global value chain. On the one hand, digital technology has brought disruptive innovations, spawned a large number of new trade formats and models, and greatly improved the status of the global value chain as a whole."

Especially in the context of the impact of the new covid-19 pandemic on the global economy, the importance of digital trade has become more prominent. Huai Jinpeng, secretary of the party group and executive vice chairman of the China Association for Science and Technology, believes that more than half of the global service trade has been digitized. The spread of the pandemic has brought severe challenges to international trade. Digitization has become the key to reducing the impact of the pandemic and hedging the economic downturn.

Wang Bingnan also agrees with this view: "In this response to the covid-19 pandemic, digital office, digital medical, digital government, digital education, digital entertainment and other fields have played a role in protecting people's production and living, preventing the spread of the pandemic, and strengthening global economic and trade cooperation. An important role. Shows great vitality and strength."

What is the "achievement" of China's digital trade

"Since the 18th National Congress of the Communist Party of China, China's digital economy has grown from 11 trillion yuan to 35.8 trillion yuan, accounting for 36.2% of GDP. It has become an important support for high-quality economic development." Xiao Yaqing highlighted China's "Transcript".

Wang Bingnan also said that according to Chinese forecasts, China's digital trade import and export scale will reach US$203.6 billion in 2019, accounting for 26% of the country's total service trade, a year-on-year increase of 6.7%. In addition, in 2019, the amount of service outsourcing undertaken by Chinese enterprises reached 96.8 billion U.S. dollars, a year-on-year increase of 9.3%, making it the world's second largest offshore service outsourcing country.

Global digital trade is also developing rapidly. "Digital technology is playing an increasingly prominent role in service trade. According to statistics from the United Nations Conference on Trade and Development, the export value of services that can be provided online has increased by 7% to 8% each year in the past 10 years. The global public cloud service market has reached a year-on-year growth in 2019. 26%." Huai Jinpeng said, "Today data has become the most important trade resource after cargo capital. Digital trade is a symbol of the digital age, a sign of technological empowerment, and the direction of future trade development."

"In the future, digital trade will definitely become an important starting point for my country to open up to the outside world and develop in a better pattern, deeper and higher level." Wang Bingnan said.

How to overcome the "barriers" of digital trade

In recent years, trade protectionism led by the United States has repeatedly "hit a wall" in digital trade. How can we overcome the barriers of digital trade and achieve mutual benefit and win-win results?

“The real obstacles to digital trade come from man-made barriers, such as taxation system defects, digital giant monopoly, information abuse, etc. In the future, people will face the challenge of how to profit from each other’s trade. All parties need to avoid zero-sum games and nationalist mentality, and strengthen Global cooperation and multilateralism, while at the same time increasing transparency in the process of platform, algorithm and rulemaking." Nobel Prize winner Joseph Stiglitz said.

He made four suggestions: One is to improve the tax policy. At present, many countries are seeking communication on relevant taxation policies and systems. The Organization for Economic Cooperation and Development and the International Monetary Fund are also encouraging such cooperation. However, an international agreement is still to be reached on the issue of how to tax digital trade.

The second is to encourage fair competition. Currently, a global competition regulatory agency has yet to be established, and a corresponding global regulatory system needs to be established and improved urgently. It must be admitted that a well-functioning economic market and competition mechanism are of great significance to the promotion of sustainable and healthy social and economic development. Disorderly and unhealthy competition will lead to vicious competition among a few large companies in the world, which will affect the order of the consumer market.

The third is to avoid competition and abuse. Various competition abuses will have an adverse impact on the development of global digital trade. In this regard, we must use the correct way to regulate and restrict. However, the relevant policies and regulations of various countries are very different, and it is urgent for all countries to work together to establish common international standards, draw a consistent red line of behavior, and avoid vicious competition regardless of the bottom line.

The fourth is to protect data security. Digital trade involves many security issues, and data security is an important one. Take the field of artificial intelligence as an example. Companies in countries and regions with fewer data access regulations are less transparent in data use than companies with higher and more data access standards. This opacity will cause anxiety about the security of digital trade, and even induce extreme preventive behaviors, adding obstacles to the development of digital trade.

Li Daokui, dean of the Chinese Institute of Economic Thought and Practice at Tsinghua University, believes that it is necessary to further share experience and wisdom in the field of digital economy with countries around the world.

"At present, China's economy is gradually forming a new development pattern with the domestic big cycle as the main body and the domestic and international double cycles mutually promoting each other. On the one hand, it needs to focus on the increase and release of domestic demand based on the domestic market; on the other hand, it also needs to continue to promote Higher-quality opening to the outside world is used to improve the quality and level of economic development. In this process, improving service trade is of great significance to promoting high-quality opening up. At present, we still have broad room for development in the field of service trade. At the same time, relying on the experience and self-confidence that China has accumulated in the process of opening up for many years, the majority of Chinese enterprises in the field of service trade have the ability and confidence to raise their quality and level to new heights in the future, and be more calm and active Participate in international competition and cooperation in related fields." Li Daokui said.

Where is the development direction of China's digital trade

Although China's digital trade accounts for 36.2% of GDP, Li Daokui, Dean of the Chinese Academy of Economic Thought and Practice at Tsinghua University, said: "There is still room for the development of China's digital trade!"

Li Daokui explained that on a wide-caliber calculation, China's digital trade still accounts for a relatively low proportion of global digital trade, which is not symmetrical to the current development of China's digital economy, which still has great potential. Digital trade will become the highlight of the high-quality opening up of service trade in the "double cycle" era of China's economy.

Regarding this issue, China is already planning and solving it.

Xiao Yaqing said: "We will deepen open cooperation, strengthen international exchanges and cooperation, and contribute ‘Chinese wisdom’ and ‘Chinese solutions’ to the development of the digital economy."

He introduced that the Ministry of Industry and Information Technology will prepare high-quality "14th Five-Year Plan" big data, software, information and communication industry plans, cultivate the software industry ecology, promote industrial aggregation; accelerate the construction of digital infrastructure, promote the large-scale commercial deployment of 5G; promote the industrial Internet Big data center construction.

Wang Bingnan revealed that the Chinese government attaches great importance to the development of digital trade. In November 2019, the "Guiding Opinions of the Central Committee of the Communist Party of China and the State Council on Promoting High-quality Trade Development" formally proposed to accelerate the development of digital trade. Currently, the scale of China's digital trade is growing rapidly. The digital industry, which is highly related to information and communication technology, has become the most dynamic sector driving China's economic growth. In 2016, China promulgated the Cyber ​​Security Law, which explored pilot projects to conduct cross-border data security assessments in pilot free trade zones such as Hainan and Shanghai. Shanghai, Beijing and other places actively researched and formulated action plans to promote the development of digital trade, and digital governance has accumulated effective experience.

"In the next step, the Ministry of Commerce will follow the basic principles of safety and order, open innovation, classified management, and rule guidance, further clarify the development positioning of China's digital trade, study and propose a digital trade strategic layout and work measures that suit my country's national conditions, and actively create A governance environment that is conducive to the development of digital trade, and promptly form a digital trade China plan." Wang Bingnan said.

China has one of the world’s most advanced online payment systems due to her huge online consumption activity. China’s mobile payments topped US$41.51 trillion in 2018. More than 90% of China’s mobile payments were made through Alipay and WeChat Pay, which boasts about one bln users each. What is even more significant is that from the digital payment system, Alipay in particular, has developed a robust eco-system of financial services applications, including money market funds, stock brokerage accounts for consumers, and lending operations for small businesses.

The Covid-19 crisis is hurting small businesses the most. Due to their lack of resources, disruptions to production activity will push small enterprises into deep financial difficulty. Even during normal times, small businesses have been having difficulty in obtaining financing. The micro, small and medium enterprises (MSME) are critical economic agents of the Chinese economy. As at end 2017, they accounted for over 90% of all registered enterprises, over 60% of China’s GDP, and over 50% of China’s tax receipts. More than 80% of Chinese workers worked for the MSME. However, about two-thirds of the country’s MSME lacked access to loans as of 2018. Moreover, big banks in China typically charge 25%~30% above the base rate on loans given to the micro and small enterprises.

To help ease the credit bottleneck of small enterprises, Alibaba set up MYbank in 2015. Taking advantage of China’s more relaxed personal data privacy environment, MYbank is able to use the massive volume of data from its payment systems to analyse real-time transactions and assess creditworthiness. This allows MYbank to process loan applications at fast speed and at low cost. Based on its “3-1-0” model, MYbank’s microloans take 3 minutes to apply, 1 second to approve and zero humans involved, as opposed to loan applications in traditional banks, where at least 30 days are needed to process loan applications. MYbank’s operating cost per loan is about RMB3 as opposed to RMB2,000 at traditional banks. As at mid-2019, MYbank has lent RMB2 trillion to nearly 16 mln small enterprises. MYbank is not the only institution that uses technology to lend to small businesses. Tencent, Ping An Insurance, and China Construction Bank are doing the same thing and these are extremely important for the MSME during this trying times.