China’s Digital Economy Expected to Reach $ 16 Trillion by 2035
Digital economy refers to the economic systemwhere digital technologies represented by like Internet, cloud computing, large data, Internet of Things and artificial intelligence are widely used and thus bring about a fundamental change in the entire economic ecosystem.
According to the report issued by Boston Consulting Group, Year 2035, 400 Million Job Opportunities in the Digital Age, China’s overall digital economy has reached $1.4 trillion in 2015 with a total employment capacity of 113 million.
It is estimated that China’s digital economy would expend to $16 trillion by 2035 and its penetration rate would be 48%, and the total employment capacity would rise to 415 million.
Data source: Boston Consulting Group
Data source: Boston Consulting Group
According to the data from China” Internet + “Digital Economic Index (2017), China’s digital economy is about 22.77 trillion Yuan in 2016, accounting for 30.61% of GDP, estimated to offer 2,801,700 employment oppotunities.
Driving Factors of China‘s Digital Economy Development
Although China’s digital economy is very young, it shows a rapid development and promotes the comprehensive progress of Chinese society. The scale and penetration of China’s digital economy are at a high level due to two main driving factors. On the one hand, China has no science and technology “burden” like developed countries. Each upgrade from 3G to 4G and 4G to 5G in Europe and the United States has to spent a lot of capital investment as it won’t be upgraded till it’s completely outdated. But in China, some regions can upgrade the network directly from 3G to 5G, which contribute to the also achieved jumping development on mobile Internet. On the other hand, China’s large population and high urban density also greatly promote the development of digital economy.
The Impact of China‘s Digital Economy on Employment
Data from industrial source show that currently 55% -77% of the employment in China will be eliminated in the future due to low technical content, while in India, the number is 43% -69%, and 57% in OECD countries.
Therefore, the employees who have the skills and quality that are comprehensive and won’t be easily replaced by the digital technology, will enjoy a wider range of career development space, and compete for such talent is bound to become the most important thing in the next round of “talent battle”.
Machine intelligence and platform employment make the physical quality of the employment and the region no longer a constraint, whether the individuals in remote areas or small organizations, there will be no difference for them to access global job opportunities, making great increase of job opportunities.
The development of digital economy will have some people lose their jobs, but at the same time it will create more employment opportunities. For an long time in the future, the digital economy ecosystem and traditional industry will merge with each other and develop substantially
Alibaba’s Digital Strategy
Alibaba Group is undoubtedly one of China’s pioneers that benefit from the boost of digital economy. Alibaba retail business platform has integrated over 15,000 “Tao Factory” to form numerous processing industry groups, that is, 1311 “Taobao Village”, in which 18 are the state-level poverty-stricken counties.
By 2035, as Alibaba’s future emerging businesses like cloud computing, digital entertainment, etc. are closely involved with digital economy, its sharein China’s digital economy is estimated torise continuously along with international businesses, which would bring employment opportunities over 100 million.
Issues in China ‘s Digital Economy Development
According to China Digital Economic Development White Paper (2017), China’s digital economy is developing at a high speed, but there are inevitably problems in the convergence of digital technology and the real economy.
Digital economic development gap among industries is huge. The development of digital economy presents the trend of reverse infiltration of tertiary, secondary, and primary production, the digital economy of the tertiary industry is more advanced, and the digital economy of the primary and secondary industries is relatively lagging behind.
The development of digital economic regions is uneven. In 2016, Guangdong, Jiangsu and Zhejiang digital economic scales all exceeded 2 trillion Yuan, the total digital economy of these three provinces accounted for one-third of the national total.
The developments of digital economy consumption and production are not fitted. Capital floods in to the field of digital economic life services, in 2016, online education and online medical respectively financed $850 million and $1.22 billion, but the investment on digital technology are not enough, the substantive change of innovation, design, manufacturing and other core aspects still lag far behind developed countries.
There are high barriers in the process of transformation of the traditional industries. For example, traditional industries lack power to use digital technology, and there is high capital investment requirement in information technology, high conversion costs, long additional information investment cycle, etc..
Emerging industries are developing fast but low in market share. Platform economy, sharing economy and other new models and new forms are growing rapidly, but subject to their own scale, its contribution to economic growth is limited. In 2016, Alibaba, Tencent and Baidu revenue growths were as high as 33%, 49%, 6.3%, but the sum of their net profit was only 90 billion Yuan, accounting for less than 0.12% of GDP.
The time-lag of digital technology playing a role is quite long. The lag of the digital technology between the input and the positive economic returns is about 3 to 10 years.
Local overheating phenomenon is serious. In recent years, the digital economy tertiary industry, especially in the field of life services is overheating, leading to many problems.
Currently, the world economy accelerates to transform to economic activities which takes the network information technology industry as an essential part, the digital economy is profoundly changing the human production and lifestyle, becoming the new economic growth momentum. The development of digital economy has become a global consensus and aroused attention from countries, industries and social sectors.
China should forwardly adapt to digital change, cultivate new impetus to economic growth, and actively promote structural reform, promote the integration of digital economy with the real economy, to further advance the world power.