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Sunday Papers

The Sunday Paper – China’s Digital Economy: Opportunities and Risks

In the IMF Working Paper highlighted today and published last month Longmei Zhang and Sally Chen survey the scene but in so doing make it clear this is a ‘scene’ that almost defies survey.

The big problem is there isn’t a robust definition for ‘digital economy’. The OECD have had a go and on the basis of their guide 6% of China’s GDP is digitally driven; but, according to the Chinese Academy of Information and Communication Technology, the proportion of the economy driven by digital technology is 30%. You see the problem?

However you define it though China is somewhere in the middle rank of developed economies in terms of overall digitalization. According to the OECD China ranks #50 out of 131 OECD economies; but for investors this is a meaningless number. China is the world #1 in e-commerce accounting for 40% of global transactions. It’s fintech companies account for 70% of the global sector valuation and, according to McKinsey, it attracted 19% of the global venture capital investment in the period 2014~2016 (which would most likely be higher now).

The authors struggle for conclusions and their advice to the government sounds much like that you might offer to occupants of a raft heading over rapids i.e. ‘hang on and steer as best you can!’

The paper is an easy read though and despite a lack of ‘crunchiness’ is worth the effort. It can be accessed via the following link China’s Digital Economy. We’re all on this raft now and, despite a lack of direction, any guide is better than no guide at all.

Happy Sunday.

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