Measurement of digital economy to be improved
A woman applies make-up in a live studio at a Huawei booth during the Mobile World Congress in Shanghai on Feb. 23, 2021. Photo: CFP
China’s 14th Five-Year Plan outlines a new vision for the construction of a digital China in the next five years. The Plan proposed accelerating digital development, catalyzing new advantages in the digital economy to promote digital industrialization and industrial digital transformation in a coordinated way, speeding up the pace of social construction, improving the level of digital government construction, and creating a functional digital ecology.
Digitalization provides a more efficient operation mechanism for economic development. Today, countries around the world are stepping up efforts to make strategic plans for the development of the digital economy, advancing the global economy’s degree of digitalization. The digital economy has indeed become a new engine of economic growth.
Nowadays, digital technology has penetrated every aspect of the traditional economy. However, most countries’ GDPs or their actual productivity performance are not consistent with expectations of the contributions to the digital economy. As the digital economy rapidly grows, there has been rising debate over whether the “Solow Productivity Paradox” is real. A prerequisite to disperse such concerns is an accurate calculation of digital economy.
In reality, the current accounting statistics lag behind the development of the digital economy, urgently calling for an improvement in this regard. The significance of a statistics accounting system for the digital economy lies not only in accurately measuring its contribution to GDP, but also in quantifying and analyzing the digital economy’s internal and external mechanisms writ-large, so that better reference can be provided to policymakers and entrepreneurs.
Scope of statistics
The concept of the digital economy was first coined by Canadian economist Don Tapscott in 1995. Since then, it has witnessed the evolution of similar concepts such as the information economy and the internet economy, and finally it has been unified into the canopy of the digital economy. Subtle differences prevail among different concepts, but the term “digital economy” has gradually won most recognition, which is inseparable from the wide application of digital technology in production, consumption and other fields, and its high-speed integration with the traditional economy.
Though the early development of the digital economy mainly relied on information processing technology and network construction, the digital economy’s integration with other industries is its unique edge, expanding its impact infinitely.
The digital economy is not a new type of industry, and it is difficult to make a clear-cut separation between the digital economy and other industries. A more appropriate definition is to classify it as a new economic stage, which emerged after agricultural economy and industrial economy, and a new impetus for current economic development.
In the digital economy, data becomes a new factor of production, and technological innovation is the core driving force. Through the integrated development of the digital economy and the traditional economy, the former could help the latter improve production efficiency and optimize economic structure.
Digital technology involves both digital software and hardware. Hardware is key to the breadth of the digital economy, while software technology determines the depth of it. Only when the two factors complement each other can they jointly boost the development of the digital economy. In addition, the upgrade of digital technology also affects the degree of data sharing and the possibility of economic model innovation, which is the innovation-driven source of the digital economy.
Though we do not view the digital economy as an industry, it is still necessary to classify the statistical data of relevant digital economic activities based on the established industry classification. The digital economy as a whole can be divided into two parts: core and extension, which refer to basic industry and industry convergence, respectively. The digital economy’s basic industries provide material support for the integration of digital technology and the real economy, including digital-enabling infrastructure such as computer hardware and software, telecommunications equipment and services, the Internet of Things, and support devices. The measures to accelerate the “new infrastructure” fall under this category.
In a sense, all industries except basic industries represent industry convergence of the digital economy. For example, digital content and media is the application of digital technology in the cultural industry, e-commerce is the application of digital technology in wholesale and retail industries, the sharing economy is the application of digital technology in the rental industry, and 3D printing is the application of digital technology in the manufacturing industry. The list goes on.
That is to say, digital products can find their place in traditional industry classification. To be specific, products in the digital economy can be divided into digital products and digitized products. The former is the carrier of digital technology and the result of basic industry’s production of the digital economy, whereas the latter is the digitization of production and consumption, and the nature of products remains unchanged.
Satellite accounts
The framework of national economic accounting is designed to reflect overall performance of the national economy and has a relatively complete structure and detailed statistical standards and accounting rules. However, this is not completely applicable to the digital economy. At present, traditional statistical accounting based on industrial society is beginning to show its limitations.
To start with, the boundary between production and consumption has blurred. Digital technology facilitates production and consumption activities, but there is no strict division between producers’ and consumers’ identities. From the perspective of the institutional sector, compared with the traditional System of National Accounts (SNA) production boundary, the digital economy has added the household sector to companies, the government, the non-profit sector that serves the households, and the foreign sector.
In particular, the emergence of digital platforms enables traditional consumers to engage in production activities more freely and lowers the threshold for participation in production. The household sector can provide products to the market, so that commodities’ consumption and investment attributes become unclear. For example, Airbnb rents residents’ self-occupied houses to others in their spare time.
At the same time, the definition of employment and unemployment needs to be reconsidered in the context of “flexible employment” in the era of the digital economy. All of the digital economy’s production activities pose challenges to accounting statistics.
Second, data asset accounting is insufficient. The role of data resources in the digital economy is becoming more and more prominent. Many countries consider big data as an important development strategy, and China has made it clear that data has become one of the key production factors.
However, the current national accounting system does not confirm data’s asset attribution, and the value of data is largely overlooked. One thorny issue in data asset accounting is that it lacks unified value measurement norms, clear ownership and use rights for data, as well as effective management for cross-border data flow and data security.
Third, there are many controversies over accounting for free digital products. While technological progress promotes the integration of the digital economy and the real economy, it also increases product choices and reduces prices. Some free digital products have greatly reshaped people’s consumption habits. Therefore, there is a huge debate over whether free digital products should be included in the measurement of GDP production.
At any rate, whether from the perspective of production accounting or welfare, free digital product accounting, one of the important derivatives of the digital economy, is still of great significance.
As an important supplement to the central framework, satellite accounts can be used for accounting in some specific economic activities. With a relatively independent accounting system, satellite accounts can reflect economic performance in a meaningful way. Therefore, the construction of digital economy satellite accounts is not only conducive to measuring its own development, and present characteristic development status, but also does not conflict with the central framework, which is exactly in line with the requirements for digital economy statistics accounting.
Meanwhile, efforts must be made to improve the digital economy’s statistical index system. The impact of the digital economy comes through various fronts, such as economic impact, social impact, employment, and information security, calling for comprehensive consideration in indicator design.
Coordinated effort
The digital economy poses great challenges to the current statistical accounting system, given that the original statistical theory and tools cannot sustain an analysis of the digital economy in most cases. Going forward, the construction and improvement of the statistical accounting system for China’s digital economy is a time-consuming task and needs cooperation from all sectors of society.
On the one hand, statistical departments should be timely in their adjustments of the traditional statistics accounting system, strengthen the availability of data by improving statistical laws and regulations, constantly improve statistical survey schemes with the help of big data, cloud computing and other technologies, and improve the efficiency of data collection and analysis capacities.
That said, digital statistics accounting puts higher requirements on staff’s data collection, collation, and analysis abilities, so talent training is essential to improving the application of information science in relevant departments.
On the other hand, enterprises should enhance their understandings of statistical work. As the digital economy rapidly grows, enterprises stand to gain substantially with sound internal statistical data. Only when micro and macro statistics supplement each other can enterprises fully grasp market information, and the government can formulate proper policies and carry out strategic layout, so as to ensure healthy market operation.
In practice, it is necessary to form a digital economic statistics team that involves statistical departments, relevant enterprises, universities, and research institutes to expand data sources, break down information barriers and “data silos,” and promote data sharing among departments and enterprises.
Theoretical research about the digital economy is also important to make statistical practices reasonable and reliable. At the same time, it is crucial to borrow international experiences in line with China’s reality and strengthen international cooperation, so as to provide Chinese wisdom for the formation of international statistical accounting standards for the digital economy.
Ping Weiying and Zhang Yulu are from the School of Statistics at Jiangxi University of Finance and Economics.
Edited by YANG XUE
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