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.