China is the world’s second-largest economy. The digital economy of China is increased rapidly in recent years. Due to the increase in population china is facing many problems. But china’s technology sector is coping up with all these problems. While in comparison to the other more digitally advanced states china’s digital economy is lower. The digital economy naturally favors markets and productivity. But without effective management, it can create an economic imbalance that leads to political and social instability.
What is the Digital Economy?
The digital economy refers to the internet economy and e-commerce. In the broad term, the Digital economy is associated with the information and communication sector.
It is also defined as an economic activity that results from the everyday connection between people, data, processes, and businesses. The digital economy of a country is important because it increases job opportunities and the growth of the economy.
The Digital Economy of China
According to a report released by the cyberspace administration of china the digital economy reached 31.3 trillion Yuan in 2018. This also increases the drivers of development and the manufacturing industry by 11.7% in 2018. This also created new job opportunities. Due to government involvement, the digital infrastructure has improved over the years. Investment in digital infrastructure has played a significant role.
These efforts also fueled the digital economy. Due to this the digital infrastructure of china has increased over the past few years and is now competing with the world’s largest economies.
The digital economic development varies across the different provinces. For example, the digital economy in Being and Shanghai is 45 percent as compared to the digital economy of central Henan province which is 15 percent of provincial GDP (gross domestic product).
Booming e-commerce in China
China has become an important global power in terms of the digital economy. China is the world’s largest e-commerce industry. The country has 42% of e-commerce’s far the digital economy of china is driven by e-commerce but we are expecting even more changes in the coming years. Ali Baba has created a global platform to engage sellers and buyers from all over the world with a total revenue increase of 200%.
China’s three internet companies are known as BAT(Baidu, Alibaba, and Tencent). These are setting new world-class standards for computing performances. Due to which china is creating a dominant position in the digital world.
According to a report, almost 81 percent of new internet users surf the web on their smartphones. Out of these smartphone users, 54 percent are male users and 44 percent are female users. From which 69 percent made online purchases through their smartphones. Due to the increased number of smartphone users. China has emerged as a country with the largest number of e-commerce transactions.
1. A direct link between suppliers and buyers
Online shopping has now become a major trend in China. Alibaba and other companies are linking the suppliers and consumers directly. Which is making the availability of goods faster than ever? These digital forces are changing products and processes from physical to virtual.
People can buy what they want and whenever they want from the comforts of their homes. This also helped people from wasting time
2. Increase in a number of small businesses
Because of the digital economy, anyone can start their business online. Digitalization is providing a platform for this kind of business so they can connect with customers all over the world. This is creating a business market shift from big companies to the entrepreneur.
3. Increase in transparency
Because of the direct link between sellers and buyers, businesses are now more transparent. Now the buyers can compare different products online and choose accordingly. Because of this, they have access to a wide range of products.
4. Increased efficiency of production
Because of automation now the efficiency of production is increased. This leads to a short time span of the delivery of goods and services. Due to which quality and reliability are increased. People don’t have to wait for many days for their things to deliver.
5. Online payment system
Ali pay and WeChat pay are the most popular third party payment systems in China. These technology giants are rapidly increasing China’s market all over the world.
Challenges and risks associated with China’s expanding digital economy
The online market makes shopping and business easy but there are some risks associated with this. The booming e-commerce industry of china is creating more job opportunities. This is also affecting employment at the industrial level. This is also creating a gap between the lower and higher labor workforce.
Because of the transparency, it now becomes easy for hackers to get access to data. Government and companies need to increase their cybersecurity. Because of the influence of technology giants in digital sectors are raising concerns about holding power on market stability and innovation, which is creating challenges for policymakers. So the government must leave space for innovation and create an environment for fair competition. Due to which the digital and industrial sectors can work side by side.
The digital economy of china has strengthened the new drivers of growth. China is working on different innovative technologies that are affecting its digital economy. Because of which the e-commerce industry of China is booming. As China is benefiting from its digital economy but some risks are associated with this. Because of the online shopping trends, small business is increasing. This is also affecting china’s economy in a positive manner.
As the Chinese government is playing its role in developing the e-commerce sector. The government can also play their part in maximizing the benefits of digitalization while helping to minimize costs and risks. The government can promote active training of the workforce and strengthen the social security networks.
China could also play a most important role to set standards on cybersecurity and digital transactions.