Digital economy fuels 'dual circulation' strategy
Tourists shop at a duty-free shopping mall in Sanya, Hainan Province, on Oct. 5, 2020. Photo: XINHUA
The "dual circulation" pattern, which smooths the domestic market and lets domestic and foreign markets boost each other, can be viewed as China’s strategic solution to cope with the unstable and uncertain international environment.
The digital economy is a pillar bolstering dual circulation. It can help effectively smooth the process of production, consumption, distribution and circulation, and realize efficiency, driving force, and quality reform through digital industrial upgrading, thus contributing to the formation and development of the new dual circulation pattern.
'Dual circulation'
The principal focus of dual circulation is internal circulation. In this regard, it is necessary to strike a dynamic balance between supply and demand, expand domestic demand, and give full play to the advantages of the super-large scale Chinese consumer market. Effort must be made to best match the information between supply and demand, so that high-quality domestic supply could spur the expansion of domestic demand. In turn, the expansion of domestic demand and the increase of consumption stimuli could optimize the supply structure and further improve the quality of products, so as to build an effective internal circulation system.
The development of a digital economy facilitates the information exchange between supply and demand, realizing timely and efficient feedback, reducing information asymmetry and incomplete information, accelerating the diversified and high-quality development of the supply side, and smoothing the internal circulation system.
Moreover, digital economy can also drive the development of artificial intelligence, internet of things, big data, cloud computing and other technologies, which will usher in great economic and social transformations, generate more new demand and new supply, and achieve a higher level of dynamic supply-demand balance.
Meanwhile, the new development pattern is not a closed domestic loop. Rather, it highlights the mutual reinforcement of domestic and international markets, forms new advantages for China to engage in international competition and cooperation, and enhances its initiative in opening up. With the aid of a new generation of information technology, the digital economy will comprehensively advance the level of China's opening-up.
In the field of manufacturing, the development of digital supply chains will expand the boundary of economic operation indefinitely. Artificial intelligence and other technologies enable the supply chain to be more automatic, intelligent, visible, and easier to manage and adjust. The global allocation of resources is also more convenient and secure, making it possible to achieve the win-win cooperation through the whole supply chain.
In the service sector, digital trade has been on the rise, and more and more services can be provided in digital forms, such as online education, remote diagnosis and treatment and working at home. Thus, the development of the service industry transcends the limitations of space and brings domestic and international markets closer together.
In order to build internal circulation, it is necessary to accelerate the construction of a unified and open market system with orderly competition and improve the efficiency of factor flow and allocation. The key is to coordinate the upstream and downstream factors of the supply chain, and improve the overall coordination of supply, production and consumption.
The digital economy enhances connections between the supply chain, industrial chain and service chain, promotes the openness and transparency of information, and improves the rapid and effective flow of resources. At the same time, it largely reduces information asymmetry, evens out the flow of funds, resources and products, and gives rise to the economic system's coordination and ability to rapidly respond in the face of external shocks, thus enhancing the resilience of the entire economy.
Digital economy shortcomings
In recent years, China's digital economy has grown rapidly. According to the China Internet Development Report 2020, the value-added of China's digital economy hit 35.8 trillion yuan in 2019, accounting for 36.2% of the GDP and ranking second on the global industrial scale. However, the digital economy faces several constraints including system design, product application and sharing, talent and infrastructure, which hinders its role in increasing economic efficiency and prompting science and technology innovation, also making it hard to meet the new demand of dual circulation.
First, the constraints of institution and technology impede the application and sharing of digital information, forming a "digital barrier" and constraining internal circulation. The technological imbalance between domestic and international digital economy is also a factor that poses challenges to the mutual reinforcement of internal and external circulation.
Second, the talent shortage restricts the development and utilization of digital resources, resulting in the universal "digital divide" and reducing the synergy of economic development.
Third, the lack of digital infrastructure takes a toll on the breadth and depth of the digital economy. Moreover, security loopholes in the digital economy could potentially harm economic and social development and personal privacy, ultimately threatening the healthy development of our national economy and society as a whole.
Improving institutional design
Going forward, it is vital to strengthen top-level design, formulate and implement relevant policies on digital applications and information sharing, and reduce existing barriers. At the same time, effort should be made to promote digital trade and an international circulation based on the digital economy.
We need to upgrade research and implement regulations which determine rights, usage, circulation, trade and security of digital resources, explore a mechanism for information sharing among regions and departments, and establish a unified standard for digital information application, to avoid the pitfall of creating "information silos." At the same time, it is necessary to clarify the digital economy's standards at home and abroad, creating conditions for Chinese enterprises to integrate into the global supply chain.
Finally, we need to improve the mechanisms for digital transactions, cultivate the digital factor market, and establish a system for digital transaction guarantees. In this regard, the government should take the lead in purchasing digital services, build an administrative management and public service environment focused on "arguing with numbers, measuring with numbers and managing with numbers," while encouraging traditional enterprises and other market actors to actively purchase digital services, and offering appropriate subsidies and support to service providers.
Digital transformation
In the end, to build a new development pattern of dual circulation, the digital transformation of industries is significant.
First, the development of digital industrial chains and supply chains should be strengthened. We need to take full advantage of digital technology to integrate upstream and downstream enterprises at home and abroad, achieve a high level of integration of production factors and resources, and promote the effective alignment and mutual reinforcement of domestic and international circulation. We need to build a digital industrial ecosystem and cloud platforms such as market, finance and exhibition for enterprises, to make the cooperation and exchange between upstream and downstream enterprises at home and abroad more flexible and convenient, while systematically supporting the new development pattern.
Second, the development of digital trade should be boosted. In addition to vigorously developing e-commerce, enterprises are encouraged to provide remote services, and increase support for key service and trade industries such as culture, tourism, and traditional Chinese medicine. The integration of digital trade with domestic industries is expected to provide strong domestic market support for enterprises to "go global," and facilitate the high-quality development of dual circulation. Through digital contracts and other means, Chinese enterprises should strive to provide tailored digital application design schemes and related services for customers at home and abroad. Meanwhile, new businesses and new drivers generated by the digital economy could also contribute to dual circulation in important ways.
In summary, we need to constantly improve the digital economy, and continue to leverage its role in accurately matching supply and demand, optimizing opening up, and making economic development more coordinated. Domestically, we need to build a smoother, more efficient, safer and more standardized domestic circulation based on the digital economy. Then, in the face of the external market's increasing uncertainty, the digital economy should make use of its natural advantages to break geographical boundaries, introducing high-quality resources and providing more powerful domestic market support for the development of international markets.
Huang Nan is a research fellow from the Institute of economic development at Nanjing Academy of Social Sciences.
Edited by YANG XUE