China's digital economy surges 18.9% in 2016, drives growth

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China's booming digital economy is one of the country's major economic contributors. It surged 18.9 percent in 2016 to 22.6 trillion yuan (around 3.35 US trillion dollars), according to a white paper issued by China Academy of Information and Communications Technology (CAICT), Ministry of Industry and Information Technology (MIIT) recently.

The white paper shows that, China’s digital economy accounted for 30.3 percent of China's total gross domestic product (GDP) over the year, and the digital economy contributed 69.9 percent to the GDP in 2016.

What is digital economy?

Digital economy, also known as the internet economy, is based on digital computing technologies, comprising new business models such as e-commerce, cloud computing and payment services.

China's digital economy grew significantly higher than the overall economy, becoming a major engine of growth, said the paper.

Technology drives fast in China’s digital economy

Within a fast growth technology in China, it is functioning as a driver of revenue and enabler of new business models for many Chinese companies, including China e-commerce giants Alibaba and JD.com.

CAICT expects China's digital economy to be valued at 32 trillion yuan and account for 35 percent of the whole GDP by 2020, before taking up over half of the country's GDP by 2030, according to the white paper. 

Policy preference

China has made a point of promoting digital economy as part of its measures to upgrade the economy. In terms of governmental level, the central and local governments had identified digital economy as "major development strategy".

During the 2016 G20 Hangzhou Summit, China put digital economy as one of the main topics on the agenda and made it part of the G20 Blueprint as the Innovative Growth for the first time in the history of Chinese economic development.

The report also said that the Chinese government is making more efforts to deepen the development of "Internet Plus" and accelerate the growth of the digital economy.

Two-way policy support

China's central government will formulate and issue a strategic plan for promoting the digital economy, according to an announcement from the State Council executive meeting on July 12.

National and local leaders in China have geared up for the digital economy. In Guizhou, Jiangsu, Anhui and other provinces, local governments have made plans to make their economy more digitalized to satisfy the market needs and develop a good economy.

For example, southwestern Guizhou wishes to see its digital economy grow 20 percent annually and carve up at least 30 percent of the province's GDP by 2020. 

Digital economy has become an area where China's economic transformation and industrial upgrading can achieve major breakthrough, MIIT Minister Miao Wei pointed out in April.

Miao believes smart manufacturing, industrial Internet, sharing economy, and the digitalization of traditional industries should be boosted through a proper way.

However, the development of the digital economy is imbalanced. Lu Chuncong, president of Communications Policy and Economics Research Institute pointed out, “the service sector adopting the digital economy more extensively than the primary and secondary industries.”

Also, the current regulation of market access does not suit the development of digital economy, Lu said. He is calling for establishing a mechanism where all market players can enter the digital economy on an equal footing so as to have fair chance at success.