East Meets West|Dian Liu: How does China stand out in the global digital economy game?

About the author:

Dian Liu, Distinguished Associate Researcher of China Research Institute of Fudan University. He once worked in Chongyang Institute of Financial Studies, Renmin University of China. His main research areas include digital economic governance, digital currency, network and data governance, and international political economy. He has published more than ten research papers in core journals such as China Finance, Beijing Cultural Review and Academic Forum, and published nearly 100 editorial articles in dozens of newspapers such as Guangming Daily, and Economic Daily.

The digital economy has become the strategical high ground of global competition. All countries are accelerating the pace of developing the digital economy, while China's digital economy is currently facing pressure from both international and domestic aspects.

From an international perspective, the global power competition in the digital economy is entering a perfervid stage. Countries around the world, especially major economies, have introduced medium and long-term digital development strategies to accelerate the development, build a digital-driven economic system, and strive to win the initiative in future development and international competition. At the same time, the strategic role of technology giants has gradually emerged, and even has the geopolitical influence to shift the development of political and economic trends. Therefore, all countries are currently competing for the future voice of the global digital economic market and global governance.

From a domestic perspective, the development of China's digital economy is also facing multiple challenges. On the one hand, China's digital industry is going through a period of technological evolution and transition from Web 2.0 to Web 3.0, and many key technological bottlenecks need to be accumulated and broken through. On the other hand, China's digital economy is facing a special period of high-quality transition and macroeconomic downward pressure. Nowadays, with the raising problems such as demand contraction, undersupply, and weakening expectations, the situation seems more serious than ever.

In October 2020, the 3rd Digital China Summit opened in Fuzhou. Pictured is the interior of the main venue. Credit: China News Agency, Bin Zhang

How to deal with multiple challenges from home and abroad and find a path for the development of the digital economy that is most suitable for China now is becoming an urgent practical problem.

The Game is Getting More and More Intense

Because the three major digital economies in China, the United States and Europe are at different stages of development and their regulatory goals are varied, the application of state-market synergy is also different. This also has a significant impact on the current three-party game situation. The three-party game between China, the United States and Europe is mainly centered on the United States, forming two battlefields, namely the US-Europe and China-US. Due to the different foundations of the digital economy, the United States and Europe have formed different governance systems and developing directions, resulting in fierce disputes. The digital economic dispute between China and the United States is an extension of the competition between China and the United States.

Between the United States and Europe, the United States vigorously promotes the global expansion of technology giants, which has collided violently with the awakening of Europe's awareness of digital sovereignty. The United States hopes to promote the free flow of cross-border data and deregulate network border to endow a full play to its advantages in the digital economy, and help American technology giants expand rapidly in the global market. The US technology giants, which have achieved a data monopoly in the global market, are reaping the global data dividend while winning the initiative for the US government in digital geo-competition.

The EU not only does not have the first-mover advantage of the United States in the field of digital economy, but also does not have technology giants like Facebook and Alibaba to help the EU better participate in the global data market competition. Therefore, the EU has adopted anti-monopoly laws and taxation to prevent US technology giants from being “dominant”, protect the rights of small and medium-sized enterprises and users, and adhere to a fair data governance system based on regulations, emphasizing data sovereignty and independence.

The facebook booth at the 2018 China Big Data Expo in May 2018. Credit: China News Agency, Junyi He

Between China and the U.S., the U.S. suppresses China’s digital industry and technology giants through various means such as domestic laws, and executive orders. In the past few years, U.S. has placed many Chinese companies on the entity list to crack them down, such as ZTE and Huawei, in the name of protecting the "information and communication technology supply chain", restricting the development of Chinese digital economy companies through sanctions such as long-arm jurisdiction. In 2020, the Trump administration issued an executive order on Douyin and WeChat, barring U.S. companies from doing business with their parent companies, and planning to remove their apps from the U.S. app store. In terms of technology exports, the United States has also been continuously strengthening its own export controls and restricting Chinese investment in the United States.

In September 2020, at an exhibition held in Fuzhou, the Douyin live broadcast room set up by the organizer. Credit: China News Agency, Bin Zhang

Between China and the EU, disputes and willingness to cooperate in the digital economy coexist. Although Europe has taken precautions against China's growing digital power, there is disagreement within the EU on facing China. China and the EU are highly complementary in many aspects such as scientific and technological talent reserves, innovation capabilities, and digital industries, which is conducive to the development of digital cooperation between the two sides.

How does China Respond

The digital game between China, the U.S. and Europe has an increasing influence, especially the U.S. means of suppressing China are emerging one after another. China should find its own way through the competition and cooperation between the United States and Europe as soon as possible, break through the technological bottleneck, give full play to its institutional advantages, and develop a broader international market.

Therefore, in the face of domestic and foreign pressures on the development of the digital economy, promoting development has become the main theme of China's digital economy policy system, making the digital economy a "good cure" for China to stabilize growth and enhance its international competitiveness. On May 17, the National Committee of the Chinese People's Political Consultative Conference held a special consultation meeting on "Promoting the Sustainable and Healthy Development of the Digital Economy" in Beijing, releasing many important signals of favourable policies.

In September 2021, the 2021 China International Digital Economy Expo with the theme of "Innovative Development and Digital Economy" opened in Shijiazhuang, Hebei Province. Credit: China News Agency, Yujia Zhai

To cope with global challenges and strategic competition risks, first of all, China should conduct in-depth discussions with other countries on the setting of relevant issues in the context of global development initiatives and global security initiatives, and expand international cooperation in the digital field. Second, manage differences with the EU and continue to deepen cooperation on digital governance. Third, expand cooperation with developing countries, and rely on platforms such as the “Belt and Road Initative” and RCEP (Regional Comprehensive Economic Partnership) to build and promote the development level of digital markets in relevant countries.