More than 4,000 illegally parked bicycles were impounded by authorities in Shanghai on March 1, 2017.

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In an era of information technology, big data economy and online culture, work and daily life are being transformed, enterprises are discovering new sources of vitality, and governments are gaining new tools.

In this sense, the digital transformation of the government aims to seize the opportunity of the times, coordinate socioeconomic development, and accelerate the globalization of goods and the internet to create space for growth in China.

 

New deciding moment
More than two centuries ago, China missed the critical opportunity to transition from an agricultural to an industrial economy. As the Industrial Revolution swept across Europe, the Chinese economy continued to rely on the prosperity of its handicraft and agricultural sectors. Dubbed “the golden age of three emperors,” this era of the Qing Dynasty spanned the reigns of emperors Kangxi, Yongzheng and Qianlong from 1662 to 1796.

As history tells us, past glories could turn into obstacles that block a nation’s transformation, and once a nation falls behind, it becomes harder to achieve a revolutionary breakthrough.
Today, humanity stands once again at the threshold of a major transformation: digitization. Major powers in the world need to buckle up and get ready for a new round of fierce competition.

This time, China must ride with the trends and proactively carry out digitization by integrating it into its national strategy. With a comprehensive layout in mind, the government should strive to be innovative and thorough.

In a digital age, nations everywhere have made strategic plans focused on technology, infrastructure and economy. Though some of these blueprints touch upon social issues, such as security, privacy, public services, employment and the digital gap, these concerns are generally not at the forefront.

Domestically, a number of strategies have been implemented on the national level. Once again, the focus is on economy while coordinated economic and social development—in particular the deep-rooted problems caused by digitization in social transformation—has only been given superficial treatment.

For example, we must insist upon farsighted and strategic planning to oversee the platform economy and manage the potential ethical dilemmas of artificial intelligence to synchronize the twin engines of development: economy and society.

 

Digital economy
Digital transformation will affect every facet of society, leading to structural imbalances in industry, trade, investment, society, employment, culture, governance and policies, which pose a severe challenge to the government.

During the Industrial Revolution, China missed a great opportunity, but after more than a century of struggle, it has managed to become the only country in the world with all the industries listed in the United Nations Industrial Classification. Among the world 500 major categories of industrial products, China’s production ranks first in 220.

In the new era, however, the focus of industrial development has shifted, as scale and cost are no longer the keys to success, and China faces the pressing issue of overcapacity. The advantages and competitiveness that China accumulated and boasted over the years have been halved, and traditional industries urgently need to be digitized.

In this light, the “Internet Plus” strategy, a formula for the digital economy, aims to break the traditional industry-oriented pattern by integrating industrialization and informatization as well as speeding up the pace of intelligent manufacturing.

However, the adjustment of industrial structure is not happening overnight, so the government is tasked with striking a balance between the traditional and emerging industries, steadily promoting supply-side structural reform, and encouraging the consumption upgrading.

 

Internet giants
In recent years, global digital trade, especially cross-border e-commerce has been developing rapidly. Approximately 12 percent of the global goods trade is conducted via international e-commerce and 50 percent of cross-border trade of services is in the form of virtual transaction, according to McKinsey’s report on digital globalization in 2016.

The global B2C cross-border e-commerce market will balloon in size to $1 trillion by 2020, with more than 900 million people around the world becoming international online shoppers, while China will become the largest cross-border B2C market, according to a report from global consulting firm Accenture and AliResearch, Alibaba Group’s research arm.

Digital transactions will become an important form of international trade in the near future. To meet the new requirements of a digital age, the government should actively adjust its trade structure and construct a set of new trade rules, such as regulations on cross-border data flow, while advocating a consensus among countries that will create a favorable environment for global trade.

The flow of investment is a barometer that reflects the health of the digital economy, which has great impact on digital transformation. By the end of 2016, China’s money supply in the broad sense (M2) totaled $22.34 trillion, surpassing that of the United States, $13.28 trillion, and Japan, $8.19 trillion in stock combined. This has laid a foundation for China’s investment.

In previous years, the internet sector was popular, but dividends are waning, raising the question of creating a reasonable investment structure in the face of digital transformation. Hence, the government needs to figure out the future investment direction, avoid an internet bubble like the one seen back in 2000 and encourage the integration of the digital and the real economy.

With the rise of Alibaba, Tencent and Baidu, internet firms are taking advantage of their resources in data search, e-commerce and social networking to enter various industries through acquisition, investment, strategic cooperation and other means, and their scale and impact have continued to expand.

However, they are also closely associated with counterfeit products and the spread of false information. In today’s world, the government cannot afford to resort to laissez-faire nor to operate without their support, so a benign interaction between the public and private sector coupled with a fair and reasonable governance structure is essential to balancing supervision and governance.

 

Challenges in daily lives
According to the 39th China Statistics Report on Internet Development released by the China Internet Network Information Center, China has 731 million internet users as of December 2016, which is larger than Europe’s population, and the number of web users accounted for 53.2 percent of China’s total population, the majority of which are aged 10 to 39.

That is to say, China has more than half of its population online, and the 80s, 90s and 00s generation are the most active users, creating a new type of social structure. As a community builds their study, life, and work on the internet, the government needs to understand their profile, spread positive energy and care for their psychological health in the vast ocean of good and bad information on the internet. It is also crucial to not overlook the problem an aging society faces and create more online convenience for the elderly.

The advancement of automation technologies and AI has altered the job market. As smart tools increase labor efficiency, some predict that in the next 10 to 20 years or so, 70 percent of human jobs will be automated. As alarmist as it might sound, the government should pay attention to the predicted structural change in the workforce caused by the automation and plan accordingly.

In the meantime, the popularity of the internet culture has enticed some practitioners to exploit human weakness and adopt reckless, brazen, and unconventional means by posting aggressive, violent, pornographic and superstitious content to achieve rapid dissemination and hyped-up traffic. The unprecedented growth of the Chinese internet sector has made it vulnerable to extreme culture. In this sense, the government needs to step up to its efforts to purify the cyberspace environment, promote cultural pluralism and avoid the spread of vulgar culture.

On the whole, current laws and regulations are designed for an industrial society and somewhat out of touch with the modern era. For example, ride-hailing apps pose an existential threat to taxis. Car-service apps Didi Chuxing and Uber contributed to the grievances that motivated taxi drivers to go on strike. And bike-sharing, as convenient as it is, arouses wide concern due to safety hazards and aesthetic degradation of the urban landscape due to disorderly parking and vandalism.

With digital transformation, we are entering into uncharted territory. There are no precedents that we can look to for guidance. In light of this, China needs to take advantage of its status as a nation with a large pool of internet users and explore a path with Chinese characteristics to take a lead on the world arena.

 

Zhang Xiao is deputy director of the China Internet Network Information Center.