How China’s rapid shift to a digital economy can help it escape a long recession
- In China, the coronavirus pandemic has accelerated the uptake of digital technologies in households, schools and companies. Technology has also enabled the country to emerge from Covid-19 lockdowns without risking public health
China’s digital economy was growing strongly before the pandemic. In 2018, it already accounted for 31.3 trillion yuan (US$4.7 trillion), or 34.8 per cent of GDP. While this is only about one-third the size of America’s digital economy, it represents years of growth that outpaced that of nominal GDP. The Covid-19 crisis is set to reinforce this trend.
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This also lets the authorities track – and mitigate – risks. If a person visits, say, an airport or hotel, they must show their personal QR code. A quick scan will show whether they have visited a high-risk area within the past 14 days. Such tracing – not only during travel, but also in schools, offices and other contexts – is essential to avoiding another Covid-19 outbreak and further economically damaging lockdowns.
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Technology is also propelling research and development in health. For example, Huawei’s medical-intelligence app EIhealth is being used for viral genome research, antiviral drug development, and medical imaging and analysis. It has accelerated the search for Covid-19 treatments and vaccines, and improved virus detection. And, thanks partly to algorithm-assisted screening, frontline hospitals in China have already conducted more CT scans in 2020 than in all of last year.
A similar digital transformation is sweeping China’s financial industry. With 562 million users, China’s mobile-banking apps were the third-largest category of apps by customer base – after short-video and shopping apps – at the end of March. Chinese mobile-banking apps now average 50 million monthly active users.
Beyond making banking more convenient, digital technologies have enabled financial institutions to expand and improve their services. For example, using big data, cloud computing, artificial intelligence and distributed-computing architecture, commercial banks have vastly improved their ability to serve small and micro businesses, and ordinary households.
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The growth of China’s digital economy has been a boon for employment as well. The China Academy of Information and Communications Technology reports that, in 2018, the digital economy created 191 million jobs and accounted for one-quarter of overall employment – an 11.5 per cent increase year on year.
Among the main beneficiaries of these new jobs are young, educated Chinese, who now have more opportunities to work as independent professionals in a new kind of gig economy. The increased labour-market flexibility brought about by digitalisation is likely to be why urban unemployment hasn’t increased significantly in recent years, despite the decline in GDP growth.
Though China still lags in some key technologies, there is no denying the tremendous progress in its digital transformation. This process is set to continue and even accelerate in the coming years, not least because of the government’s planned investments in new infrastructure, including 5G networks and data centres.
Zhang Jun is dean of the School of Economics at Fudan University and director of the China Centre for Economic Studies, a Shanghai-based think tank. Copyright: Project Syndicate