Despite taking a serious hit from COVID-19 lockdowns, China’s economy has proved resilient. It has not, however, fully bounced back: some activities, especially in the service sector, simply cannot be revived. Yet, unlike most of the world, China seems unlikely to become mired in a long recession, not least because of its rapid digital transformation.
China’s digital economy was growing strongly before the pandemic. In 2018, it already accounted for CN¥31.3 trillion ($4.7 trillion), or 34.8% of GDP. While this is only about one-third the size of America’s digital economy, it represents years of growth that outpaced that of nominal GDP. The COVID-19 crisis is set to reinforce this trend.
As the pandemic has destroyed some businesses and industries, it has also greatly accelerated the uptake of digital technologies. Unable to leave their homes, households embraced applications like JD.com, Meituan, Eleme, and Pinduoduo, which enabled them to purchase food, oil, vegetables, and daily necessities online.
Moreover, within a month of closing their classrooms and evacuating their campuses, schools and universities moved online – a shift that spurred the rapid development of online conferencing and learning platforms. Likewise, companies took advantage of digital tools – from communication platforms like Enterprise WeChat and DingTalk to e-contracts – to keep their businesses running. More than 20 million online meetings, with more than 100 million total participants, have been initiated on DingTalk in a single day.
Just as technology helped life go on during lockdowns, it has enabled China to roll back restrictions without risking public health. A growing number of local governments are implementing Alipay Health Code – a mobile-phone application that assigns users a color code indicating their health status. That way, they know when they should be quarantined, when they can safely visit public spaces, and when they can travel.
This also lets authorities track – and mitigate – risks. If a person visits, say, an airport or hotel, they must show their personal QR code. A quick scan will show whether they have visited a high-risk area within the last 14 days. Such tracing – not only during travel, but also in schools, offices, and other contexts – is essential to avoid another COVID-19 outbreak and further economically damaging lockdowns.
But the health applications of new digital technologies extend much further, and are transforming China’s entire health-care industry. Beyond the rise of online medication purchases, 5G-based remote medical-consultation platforms, such as Ping An Good Doctor, have been flourishing, laying the groundwork for a new industrial model.
During the initial outbreak in Wuhan, when local hospitals were overwhelmed with COVID-19 patients, such platforms enabled people to consult with medical experts from Beijing via video. As China’s 5G network coverage improves, such remote consultations – including diagnoses, hospital referrals and appointments, and health-management services – will become even more widely accessible. This will be particularly valuable for households that currently lack easy access to better medical resources, say, because they live in remote areas.
Technology is also propelling research and development in health. For example, Huawei’s medical-intelligence app EIhealth is being used for viral genome research, anti-viral drug development, and medical imaging and analysis. It has accelerated the search for COVID-19 treatments and vaccines, and improved virus detection. And, thanks partly to algorithm-assisted screening, frontline hospitals in China have already conducted more CT scans in 2020 than in all of last year.
A similar digital transformation is sweeping China’s financial industry. With 562 million users, China’s mobile-banking apps were the third-largest category of apps by customer base – after short-video and shopping apps – at the end of March. Chinese mobile-banking apps now average 50 million monthly active users.
Beyond making banking more convenient, digital technologies have enabled financial institutions to expand and improve their services. For example, using big data, cloud computing, artificial intelligence, and distributed-computing architecture, commercial banks have vastly improved their ability to serve small and micro businesses and ordinary households.
Financial technology firms have made similar strides. Credit-based financing for small and micro enterprises has long posed a challenge to institutions. Yet, with the help of Alipay and online-banking services, Ant Financial served more than 16 million clients and extended CN¥2 trillion in credit last year. And it is not alone.
The growth of China’s digital economy has been a boon for employment as well. The China Information and Communications Technology Academy reports that in 2018, the digital economy created 191 million jobs and accounted for one-quarter of overall employment – an 11.5% increase year on year.
Among the main beneficiaries of these new jobs are young, educated Chinese, who now have more opportunities to work as independent professionals in a new kind of gig economy. The increased labor-market flexibility brought about by digitalization is likely why urban unemployment hasn’t increased significantly in recent years, despite the decline in GDP growth.
Though China still lags in some key technologies, there is no denying the tremendous progress in its digital transformation. This process is set to continue and even accelerate in the coming years, not least because of the government’s planned investments in new infrastructure, including 5G networks and data centers.
China may well be the only major economy to achieve positive growth this year. It owes this, in no small measure, to a decade of commitment to heavy investment in technology-driven structural transformation.
Zhang Jun is Dean of the School of Economics at Fudan University and Director of the China Center for Economic Studies, a Shanghai-based think-tank. Copyright 2020 Project Syndicate, here with permission.
17 Comments
The portion of the article talking about contact tracing via digital is very salient to NZ, especially currently. China traces digitally, we still pfaff around using individual calls and declarations. The Govt needs to get with the programme and and make digital methods mandatory, even to the extent of automatic downloads to people's devices if necessary. They've had 8 months to get something up and running that is foolproof and seamless and they're still dithering. What's the hold up??
The sentiment towards personal privacy is quite different. To begin with, Chinese consumers tend to trade off their privacy for convenience. Re contact tracing, the Chinese authority does not need to worry about legislations around privacy (or human rights to an extend).
Yeah, I get what you're saying about Privacy Laws but surely in situation where continued regional lockdowns are a definite possibility going forward and the economic damage caused by them is potentially crippling, those Laws should be temporarily parked. Let's face it - if you're not up to something nefarious or untoward then having instant digital traceability is of far greater benefit to the country as a whole than some people's misgivings about "big brother is watching"? I know people will say it's precedence setting (and it is) but this is an unprecedented event we're in.
I understand what you mean. In a longer-term, NZ (and the West) needs to rethink its position on privacy and freedom of speech in the digital era, and we might even adopt some elements China has got for years. However, it needs to be a careful exercise and can't be rushed. The entire COVID pandemic could have been avoided if the Chinese state was transparent. A lot of stuff the Chinese State has put in place is not for countering a crisis but for business as usual. I think we need to be careful about what we wish for
Well I can't and don't intend to examine China's other potential reasons for data mining but NZ needs a reliable, swift contact tracing system that isn't predicated on people's voluntary uptake.. IMV. If something like bluetooth or location sensing had been in place after the first incursion and apparent success (pre July) we wouldn't have been saddled with the second lockdown in as far reaching a scale as happened. NZ cannot lurch in and out of lvl 3 regional controls for the next 2 yrs
Data privacy need not be an issue if notification sent to close contacts is automated and based strictly on device ID not ownership details
There is no doubt that digital contact tracing technology has its value. However, if we use China as the benchmark to justify its creation and define the expected value, we need to be more careful (I might have misunderstood you here). China's achievement on the containment of COVID is mainly due to successful border control. Besides a rigorous border testing regime, China has refused the residency permit holders to return and (imo) added a lot of impediments for its citizens to return (such as a compulsory COVID certificate and quarantine fees). Digital tracing, on the other hand, did not prevent the small outbreaks from happening in Beijing and Dalian. Xinjiang's Urumqi has been in full lockdown over a month because of the people flow between China and those ex-Soviet countries in Central Asia. I always believe the border control is the most crucial part for us. The 2nd lockdown could have been avoided if our government had a better grip at the border.
I hear what you're saying but what I'm suggesting is comprehensive mandatory digital tracing to enable any lockdowns to be more targeted. Instead of restricting an entire region it could be narrowed to individuals/ households/community areas. It's the speed and coverage advantage I'm thinking of, and the removal of "selective or impaired memory". I agree it won't stop the virus but it should enable faster, more targeted reaction to any infection clusters that do jump the border, control of which is, as you say, imperative.
I guess I'm just looking at a system for prevention of widespread restrictions, C19 will jump our borders again - it's how NZ deals with it
Yeah, I think our challenge is always on people/mentality rather than the tech itself. It will be quite hard to make a piece of software mandatory when our government cannot make the use of face mask compulsory whereby people fail to comply will face a consequence. I believe it will be a long journey and won't be rushed. Meanwhile, we are not in a bad situation at all considering our population density, primary residence and commuting style. Taiwan is a smaller island with much more people. If they can do it, we should be able to do it too.
I fully agree, however Taiwan had the SARS outbreak to give them a reality check first. Plus the people of Taiwan are probably more compliant and much less individualistic than the average Kiwi. A digital download could be easily achieved mandatorily - ever tried switching off the annoying Windows updates? - can't be done. A quiet word to Apple and Co would see it done, especially if there was a deferment of the DST.
Failing that I'm sure the GCSB could whistle something up.
Time for some NZrs precious attitude to their privacy is put to one side temporarily.
This too?
Trans-Pacific earnings ‘remarkable’
According to Alphaliner, “The recent surge in spot rates from Shanghai to California … has made this route the most lucrative for carriers for exports out of China.”
Alphaliner combined the SCFI numbers with a distance calculator to determine earnings per nautical mile for each route out of China. Shanghai-California came in at 65 cents per nautical mile, Shanghai-New York 43 cents and Shanghai-Antwerp just 20 cents.
“The fact that earnings per nautical mile are more than three times as high on the Asia-USWC [U.S. West Coast] route [versus Asia-North Europe] is remarkable, as carriers need less resources on a shorter trade,” said Alphaliner. Link
So from that it could be assumed there is a higher demand for carriers on the Asia-USWC route, which is supported by reports of a higher trade imbalance between US and China. Seems the figures coming out of China are at least showing a growing trend and are credible.
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