China Center for International Economic Exchanges

Chen Wenling: It is crucial to accelerate the development of the digital economy
Date:Jul 20,2018    Source:CCIEE

The digital economy proposed by the United States is actually the trade of digital products, but the E-international trade: the next-generation trade mode proposed by China is a data-based trade approach that integrates online and offline trade. In other words, the E-international trade is a data-based formation of the trade flow, trade direction and trade mode, which can break through the constraints and containment of the traditional trade.

In the future, the economic competition will focus on the digital economy

At present, the United States remains to be the world’s number one power, especially in the high-tech field, and the gap between China and the United States is still large. Although China’s current GDP accounts for two third of the US, its GDP per capita only accounts for one fifth of the US. In the aspect of digital economic development, China and the US have their respective strength and weakness. For example, the United States has an advantage in hardware such as internet processors. However, China is doing a better job than the US in terms of digital economy applications and business model innovation. In the future, whoever can win in the digital economy will win the future.

The United States uses its outdated domestic rules to impose sanctions against China, nonetheless, this cannot stop China’s progress, especially the development of its digital economy. With a penetration rate of 77.2% in mobile payment, China has now become a highly digitalized country and thus, the development of hardware and hard power must keep up with the rapid development of the digital economy.

How can we better understand the digital economy? Why does it represent the future? These questions will be answered as follows.

First of all, the digital economy is a new type of strategic production factor and it should be added to the three elements of social productivity. It is a strategic resource and includes the data assets, which can be defined as the data flow, stock and increment generated in transactions. As the digital economy continues to develop, data will become even more tradable and create more wealth. As a new production factor, the digital economy is different from the three conventional elements of productivity. It is a strategic element, a leading factor, and a decisive factor in the new era of big data.

Secondly, the digital economy will create a new and disruptive change. In the report of the 19th National Congress of the Communist Party of China, General Secretary Xi Jinping pointed out that subversive, common and core technology is the symbol and foundation of the technological revolution in the future.

The new and subversive changes produced by the digital revolution are mainly reflected in the following five aspects.

First of all, the digital economy will change the manufacturing industry completely. The manufacturing industry will shift from the traditional manufacturing linkage to the information-driven linkage, including the industrial chain, supply chain, service chain, credit chain, capital chain, and value chain. Due to the changes in the data-based industry, the manufacturing industry has become a smart, information-based and internationalized industry, connecting the manufacturing industry and other industries, links and processes. Therefore, the fourth industrial revolution will be different from the previous ones. The first industrial revolution can be seen as the steam engine revolution, which solved the power problem; the second industrial revolution is the revolution of power and production lines, which solved the problem of large-scale production; the third industrial and internet revolution is about human intellectual extension, which replaced part of the human intellectual work; and the fourth industrial revolution will change both our production and lifestyle. The manufacturing industry is the first one to experience this kind of disruptive changes, which is why many countries have launched different programs to adapt themselves to the new era of big data, information, and digital economy, such as the US Industrial Internet, Germany’s Industry 4.0, and China’s manufacturing development plan.

Secondly, the digital economy will trigger a fundamental change in the shape of the world economy. Twenty or thirty years ago, the whole world was dominated by the real economy, but today’s contemporary world economy has combined the real and virtual economy. These two economic forms constitute the two wheels of the modern economy, and they are indispensable and mutually supportive. Some people misunderstood the virtual economy completely, saying that overcapacity and modern finance are virtual economy. Both the real and virtual economy need a healthy development. The virtual economy is the virtual part of the real economy generated by the development of big data and information infiltration, or the service capability of some service industries has become a virtual space, where the service capability and added value are produced. This can be a crucial test for our ability to occupy the commanding height under modern economic conditions.

Thirdly, the digital economy will lead to a revolution in the flow of business, logistics, information and capital. As the basic element of circulation, information will become the largest variable and form a new model which combines the online and offline sales, and led by information technology. The flow of business, logistics, information and capital will experience huge changes and process re-engineering.

Fourthly, the digital economy will revolutionize our social forms and governance, including the smart city, the data society, people’s community, the way information is transmitted, and the way people interact with each other. In the data-based society, people feel that losing a mobile phone is more uncomfortable than losing a wallet because they feel that their communication with the society is interrupted and they lost the sense of social existence.

Last but not least, the digital economy will lead to a fundamental change in the urban and rural areas. In the past thousands of years, cities have been the focus of our development. In the future, however, all the cities and villages will be closely connected by the digital economy, the Internet of Things, the Internet, big data, cloud computing, cloud services, artificial intelligence, high-speed rail, highway networks and aviation networks. These networks are actually supported by data and they will eventually lead to the integration of urban and rural areas. The third Plenary Session of the 18th CPC Central Committee proposed the urban-rural integration, and the 19th National Congress of the party proposed to accelerate urban-rural integration. The digital economy has brought fundamental changes in the urban and rural areas: the future urban-rural integration will change the rural areas to the back gardens of cities, and cities will become the “living room” of the rural areas. In the future, the countryside between different cities will be an endless green field, and the combination of fields and green trees will become the largest green belt.

The urban community will include the national central cities, large cities, medium cities, small and micro-cities. Actually, the micro-cities will be formed by several featured towns in the future. This new form of urban community will change the urban management from the previous administrative system (prefecture-level city, county-level city, township, village) to miniature, small, medium and big cities and villages will connect different cities together and become highly compatible with them. Furthermore, the production factors will move to the countryside because the development of digital economy and big data will create a two-way flow of people, information and capital between urban and rural areas. Consequently, many advantageous resources will flow to the countryside in the digital economy.

The new strategic resources, disruptive changes and strategic choices must aim at the fundamental role of hard technology. In order to support the disruptive changes in the future, we need to develop the hard technology, soft infrastructure construction of data, core hardware and the Internet of Things.

For a long period of time in the future, we must work on the following four major areas:

Firstly, the construction of data infrastructure in the physical area, including self-driving cars, unmanned stores, 3D printing, new materials and robots, especially the manipulating robots.

Secondly, the construction of digital infrastructure, including the Internet of Things, blockchain, cloud computing and big data.

The third category is the data infrastructure of the service industry, the transmission method of the digital economy based on cloud services, artificial intelligence and digital traffic.

The fourth area is the data infrastructure of biological genes, including gene mapping, gene sequencing and so on.

In the future, we must truly realize the interconnection, perception, visibility and intelligence of all things so as to form a solid structure of the digital economy. While the digital economy enables people to enjoy enormous convenience in their daily life, it will also bring them some challenges, such as the protection of people’s privacy.

China has taken the lead in many aspects of the development of the digital economy, such as the digital applications and business model creation. However, the escalation of the China-US trade frictions has brought severe challenges to China and we need to find solutions for questions like how can China enter the era of big data? How can China enter the stage of high-quality development and form China’s core technology and supporting technology? How to create advantages in terms of cross-domain and cross-industry cooperation? In my opinion, we need great concentration and perseverance to improve our originality.

Among the three paths of innovation, we need to make more efforts in bringing more original innovation. Integrated innovation is our advantage but original innovation is fundamental. Therefore, we need to better understand the strategic significance of the digital economy, change the traditional mindset and management in a timely manner. Furthermore, more emphasis should be given to accelerate the development of the next generation of trade: the E-international trade. We should achieve RMB internationalization and allow it to flow globally. To achieve these goals, our globalization strategy must accelerate the development of the digital economy and promote digital mobility. The digital flow and the trade of the digital economy proposed by the United States is only the trade of digital products, but the E-international trade: the next-generation trade model proposed by China is a data-based trade approach that integrates online and offline trade, that is, the trade flow, trade direction and trade model are formed by a data-based approach. On the other hand, we also need cross-border digital flow and find out the law of data circulation. Only if we can identify the trend of development and re-think certain major issues such as the digital economy, can we truly occupy the commanding heights and play a positive role in the international community.

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