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Digital economy needs global governance

By Wang Huiyao | China Daily | Updated: 2018-11-03 09:39
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From the G20 and World Economic Forum to national development plans and think tank research reports, in recent years, the "digital economy" has become a buzzword and risen to the top of many countries' and businesses' agenda.

Increasingly, governments and businesses see the digital economy as a key driver of growth and are directing investments accordingly. In September, the National Development and Reform Commission signed an agreement with China Development Bank to offer 100 billion yuan ($14.55 billion) in financing over the next five years to support the digital push.

On Sept 20, China held its first International Digital Economy Expo in Shijiazhuang, capital of Hebei province, attracting high-profile companies and more than 100 business leaders from home and abroad.

At present, more than 22 percent of the global GDP is closely linked to the digital economy. By 2025, the digital economy is expected to drive about half of the global output growth. The digital economy has enabled the birth of new industries and business models, allowing companies and people to connect across borders, linking producers with consumers and workers with job opportunities. Digitization has had a transformative effect on all manner of industries.

Over the past decade, buoyed by its vast market and supportive policies, China has taken a leading position in digital industries. A Cyberspace Administration of China report in 2017 said China's digital economy grew to 27.2 trillion yuan, up 20.3 percent year-on-year, and accounted for 32.9 percent of its GDP.

This makes China's digital economy the second-largest in the world. China has the world's largest e-commerce market, accounting for 40 percent of the global total. It is also among the leading markets for virtual reality, autonomous vehicles, drones and artificial intelligence. Mobile payments, in particular, have caught on like wildfire in China, with the total annual transaction value being more than 10 times that of the US.

Promise and challenges of the digital economy

The digital economy has become an important engine for growth that is both sustainable and inclusive. It has helped to raise productivity in existing industries and given birth to new sectors, and integrated all aspects of business and society, helping to make our world more efficient and convenient while providing impetus and inspiration for socioeconomic development.

However, the rapid development of the digital economy has also presented us with new challenges. For example, a significant "digital divide" still exists within and between countries due to inequalities in access to infrastructure and digital literacy. This divide may prevent societies from harnessing the full benefits that digital technologies can deliver.

The growth of the digital economy has also been accompanied by increasing threats to safety and security. Experts estimate that cybercrime and hacking cause more than $400 billion of losses to the global economy every year. Recent events across the world have also shown how the same digital tools designed to link people from different corners of the globe can also be used to spread misinformation and prejudice.

But the development of governance models for this new digital sphere has lagged behind the rapid advances in technology. We have yet to achieve consensus on what should be regulated, how, and by whom, and there is a lack of common rules and standards on issues such as data ownership and privacy.

Solutions for a safer, more inclusive digital world

To balance the benefits and risks of the digital economy, we need more effective platforms and institutions to overcome the present governance deficit. As a leading digital economy, China has actively worked to promote suitable global governance mechanisms.

During China's presidency of the G20 in 2016, the digital economy was put high on the agenda for the first time. This culminated in members adopting the G20 Digital Economy Development and Cooperation Initiative at the G20 Summit in Hangzhou in 2016, the first policy document on the digital economy to be endorsed by G20 leaders. The G20 is well placed to build on this and help coordinate digital strategies, acting as a hub of global governance in this sphere.

There is also a need for new platforms to facilitate dialogue and coordination in the management of the digital economy, including ones that involve the non-governmental sector. In recognition of this, at the 2018 International Digital Economy Expo, the D50 Enterprise Digital Economy Summit was created, based on a joint proposal from the Center for China and Globalization and China Electronic Chamber of Commerce. The D50 aims to provide an international forum to enhance the role of nongovernmental actors in building a healthy and inclusive global digital economy.

Moving forward, we will need new ideas and ways of thinking to fully realize the great promise of the digital economy and ensure that all share its benefits.

First, we should accelerate building the necessary foundations of the digital ecosystem, expanding network infrastructure and promoting innovation of digital technologies and applications.

This calls for increased R&D in key sectors such as cloud computing, big data, Internet of Things, and smart manufacturing. These efforts will nurture new industries and promote the digital upgrading of existing sectors, helping to integrate the digital and real economies. In turn, this will provide new vitality to the global economy.

Second, we should work to promote meaningful exchange via digital technologies. Interconnectedness is a fundamental characteristic of the digital economy and its proliferation. Therefore, decision-makers, entrepreneurs, and social actors should work to build shared digital spaces that bring people from all nations and walks of life together.

Fruits of new economy should be shared by all

Third, it is important that we ensure that the fruits of the digital economy are shared by all. The growth of the digital economy can produce wealth but also causes some people to lose out as existing industries and ways of life are disrupted.

So governments, businesses, and social organizations should find solutions to help overcome the digital divide, providing not only physical access to key infrastructure but also cultivating the social conditions and skills necessary for people to participate in the digital economy.

It is also crucial that we increase cooperation on governance of the digital economy. Countries should be allowed to follow a path of digital development that is suitable to their own national conditions and be able to participate in internet governance on an equal footing. Only by working together can countries prevent cybercrime and build a safe and healthy environment for the growth of the digital economy.

To establish long-lasting peace and prosperity in this interconnected world, we should continue to strive for win-win partnerships and ever-deeper cooperation to ensure the healthy development of the digital economy.

The author is the president of Center for China and Globalization.

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