Global Economic Governance Reform and China’s Strategy in the Digital Age

Amid the Fourth Industrial Revolution led by digital technology,key technologies including big data, cloud computing, the Internet of Things, augmented reality, 5G, blockchain and artificial intelligence have made great strides. Supporting each other, these technologies together constitute a comprehensive system that integrates digital storage, transmission, analysis and computing. Through the intelligent interconnection of people, machines and resources, digital technologies combined with advanced manufacturing have promoted new production methods and business models, and facilitated the efficient allocation of resources and sustainable economic development. The speed of the digital economy’s development, the extent of its reach, and the level of its impact are unprecedented. It is becoming a key force in reorganizing global factor resources, reshaping global economic structure, and changing the landscape of international competition.1Xi Jinping, “Developing a Stronger, Better, and Larger Digital Economy in China,” Qiushi, No.2, 2022,p.4.

The digital economy has broad connotations. Generally speaking, it is an emerging economic form based on big data, intelligent algorithms and computing platforms.2Shi Yong, “Development and Future of the Digital Economy,” Bulletin of Chinese Academy of Sciences,No.1, 2022, p.79.The development of digital technology has promoted the digital economy in at least two ways. First is the expansion of digital data. According to estimates by the United Nations Conference on Trade and Development (UNCTAD), global internet protocol traffic in 2022 will exceed the total internet traffic as of 2016; and global internet bandwidth increased by 35 percent in 2020, the largest increase since 2013.3United Nations Conference on Trade and Development, Digital Economy Report 2021: Cross-Border Data Flows and Development (Overview), p.1.Second is the support of data platforms. The past decade has seen a proliferation of digital platforms that apply digitally-driven business models. They provide mechanisms that bring external producers and consumers together to interact online, while recording and extracting all data related to online behaviors and interactions between platform users.4United Nations Conference on Trade and Development, Digital Economy Report 2019: Value Creation and Capture (Overview), p.2.More than half of the world’s ten largest companies by market capitalization in 2021 used a digital platformbased business model.

The digital economy has now become a major driver of global economy. According to the Brookings Institution, global cross-border data flows contributed 10.1 percent to global economic growth from 2009 to 2018, surpassing traditional factors such as goods, services, capital and trade.5Chen Weiguang and Zhong Lieyang, “Global Digital Governance: Components, Mechanisms and Breakthroughs,” International Economic Review, No.2, 2022, pp.87-88.The COVID-19 pandemic has also objectively contributed to global digitalization. According to a study of 47 countries by the China Academy of Information and Communications Technology, the size of value added in the digital economy rose from US$31.8 trillion in 2019 to $32.6 trillion in 2020; and the share of the digital economy in gross domestic product (GDP)rose from 41.5 percent to 43.7 percent in the same period.6China Academy of Information and Communications Technology, White Paper on Global Digital Economy, 2021, pp.10-12.

While driving global economic growth, digital technology has also brought many new challenges to the global economic governance system. On the one hand, the rapid development and application of digital technology have spawned systemic changes in the economic field. The digital economy offers new paths to address traditional issues of global governance. For instance, blockchain technology can help crack the trust deficit and promote international cooperation.7Gao Qiqi, “The Great Significance of Blockchain for the Reform of Global Governance System,”Exploration and Free Views, No.3, 2020, pp.23-24.On the other hand, the wide application of digital technologies has also created new global problems. Traditional mechanisms of global governance can hardly adapt to new demands of the digital economy, and the governance deficit continues unabated. To address these challenges, the global economic governance system needs reforms and institutional innovations to provide effective systemic solutions and make digital technologies better serve the global economic development.By analyzing how digital technology changes global economic governance,this article clarifies the relationship between digital technology and global economic governance and offers China’s ideas to participate in and lead global economic governance in the digital era.

Expansion of Global Economic Governance in the Digital Era

The progress of digital technology and its wide application in the global economy have expanded global economic governance. The situation is especially complex in the fields of global industries, trade, finance and sustainable development. While the accelerating process of digitalization has created new momentum and enriched global economic governance, the complex situation has also put forward higher requirements for international coordination and cooperation.

Digital industrial governance

The development of digital technology has brought profound changes to global industries, as reflected in both the industrialization of the digital economy and the digitalization of industries. On the one hand, digital industrialization has witnessed remarkable development. Referring to largescale production and use of information, digital industrialization mainly involves hardware and software manufacturing, as well as sales and services in electronic information equipment, data transmission, cloud computing,the Internet of Things and artificial intelligence, etc. It is the basis of the digital economy. On the other hand, the process of industrial digitalization has deepened. By widely applying digital technology and information data to various aspects of production, operation and management in traditional industrial sectors, industrial digitalization increases output and efficiency through the interconnection between technology and data. As digitalization accelerates, digital industrialization has become the main engine of the digital economy, while traditional industries have also stepped into the digital era.In 2020, digital industrialization and industrial digitalization accounted for 15.6 and 84.4 percent of the digital economy, with a share of 6.8 and 36.8 percent in GDP respectively.8China Academy of Information and Communications Technology, White Paper on Global Digital Economy, p.12.

The development of digital technology has affected global industrial governance in two dimensions. First is the change of production factors.Data as an information carrier has been an essential factor of production along with land, labor, capital, and technology in the industrial era and become the core of industrial digitalization. Innovative governance in terms of data right confirmation, data security and protection, digital property transaction, and cross-border data flow will be among the core tasks in global industrial governance.9Zhu Heliang and Wang Chunjuan, “Industry Digitalization Against the Strategic Background of the New Development Paradigm: Theory and Countermeasures,” Finance & Trade Economics, No.3, 2021, pp.17-19.Second is the change of industrial models.New technologies have given birth to new industries, business formats and models. New industries, such as bio-engineering and information technology(IT), are based on scientific and technological innovation as well as market demand; new business formats, such as cross-border e-commerce and internet finance, refer to new links and activities based on new technologies and industries; and new models are market-driven adjustments of production and external factors aimed at reshaping the upstream and downstream of industrial and value chains, which include B2B (business to business)and C2C (consumer to consumer) e-commerce models and new direct sales supported by the internet and massive data.10Li Hongyu, “Status Quo and Prospects of China’s New Technologies, Industries, Business Formats and Models,” in Pan Jiahua, ed., China Urban Development Report, Social Sciences Academic Press, 2019,pp.113-116.These changes have complicated regulation on the flow of production factors.

Digital trade governance

Digital trade has emerged with the development of digital technology.As the extension of traditional trade in the digital era, digital trade is the efficient exchange of material goods, digital products and services, as well as digitized knowledge and information, which promotes the transformation from consumer internet to industrial internet and ultimately realizes manufacturing intelligence.11Ma Shuzhong, Fang Chao, and Liang Yinfeng, “Digital Trade: Definition, Practical Significance and Research Prospects,” Journal of International Trade, No.10, 2018, pp.19-20.The digital transformation has reduced transaction costs and enhanced the interconnectedness of different elements in trade.

The widespread use of digital technology has led to rapid growth of digital trade. Digital trade in both services and goods has grown much faster than traditional trade, especially during the coronavirus pandemic.According to UNCTAD, global exports of services declined by 20 percent in 2020 compared to 2019. Still, global exports of digital delivery services based on information and communications technology (ICT) declined by only 1.8 percent, while digital delivery services accounted for 64 percent of global exports of services.12“Digital Trade: Opportunities and Actions for Developing Countries,” UNCTAD Policy Brief, No.92,January 7, 2022.As for trade in digital goods, the global trade volume of ICT commodities, which are typically digital-intensive, increased from $1.81 trillion in 2011 to $2.35 trillion in 2020, and its share in global goods trade rose from 9.89 percent to 13.37 percent in the same period.13Jiang Xiaojuan and Jin Jing, “Review and Prospects of China’s Digital Economy,” in Xie Fuzhan et al., eds., Analysis and Forecast of China’s Economy in 2022, Social Sciences Academic Press, 2021, p.27.

The development of digital trade has facilitated global trade governance. Relying on digital technology and massive data, the internet platform has contributed to the efficient matching of supply and demand of global goods and services. Digitalization has also improved trade efficiency by simplifying procedures and speeding up customs clearance and quarantine in traditional trade. Meanwhile, the development of digital trade has posed challenges to global economic governance. On the one side, the complex changes in mobile elements, participants of international trade, and trade patterns have complicated regulations, raised security challenges and increased the difficulty of trade governance. On the other side, digital trade rules at both international and domestic levels are currently inadequate, with frequent regulatory loopholes in various countries. Moreover, coordination between countries in policy and action can hardly meet realistic needs.

Digital monetary and financial governance

The development of digital technology has brought about innovations in the monetary field and given birth to digital currency. With cloud computing, the internet and blockchain technologies, economic and financial activities are transferred more to the internet world, giving rise to digital currencies without physical forms. In recent years, cryptocurrencies and government-endorsed central bank digital currencies have both grown and circulated rapidly. According to CoinMarketCap, the world’s leading cryptocurrency market platform, as of January 29, 2022, a total of 17,198 types of cryptocurrencies are traded globally, with a total transaction volume of $1.71 trillion and a daily trading volume of over $70.9 billion,of which Bitcoin accounted for 41.7 percent of market share.14“Global Cryptocurrency Market Charts,” January 28, 2022, https://coinmarketcap.com/charts/.As of January 2022, 95 countries have been promoting central bank digital currencies.15“Central Bank Digital Currency Tracker,” Atlantic Council, January 28, 2022, https://cbdctracker.org/.

Innovations also take place in the traditional financial sector. Traditional international settlement mainly uses the Society for Worldwide Interbank Financial Telecommunication System (SWIFT) and the New York Clearing House Bank Payment System (CHIPS), which operate with long delays and high costs and are dominated by the United States. The 2008 international financial crisis exposed the obvious flaws of the centralized model, under which a centralized financial institution acting as a credit guarantee for both sides of a transaction does not ensure the parties’ contractual capacity. Comparatively, international payment and settlement based on the blockchain technology does not rely on such institution, and is able to provide strong support to payment regulation and privacy protection due to its tamper-evident and traceable qualities, while advancing the decentralization of the global monetary system and the diversification of global financial governance in the long run.16Zhao Zhongxiu and Liu Heng, “Digital Currency, Trade Settlement Innovation and the Improvement of International Monetary System,” Review of Economy and Management, No.3, 2021, pp.49-51.

Having said that, global monetary and financial governance also faces new challenges. In traditional monetary and financial governance, the international financial system, the international monetary system and their corresponding governance institutions are based on sovereign currencies, but digital technologies have brought about transformation that makes regulation more difficult. For example, the emergence of super-sovereign digital currencies, which are issued by commercial institutions without endorsement by sovereign credit but are circulating globally, is bound to largely impact existing sovereign currencies. The potential risks of digital currencies are reflected in three aspects. First is the technical security risk. Technical failures and operational risks can lead to interruption and suspension of economic activities. Second is the risk of illegal use. Digital currencies may be used for illegal trading due to the lack of supervision from national central banks. Third is the risk of threatening financial stability and even eroding a country’s monetary sovereignty.17Li Cangshu and Huang Zhuo, “Development and Potential Risks of Super-Sovereign Digital Currency,”Social Science Journal, No.6, 2021, pp.169-172.Due to the decentralized and highly anonymous nature of super-sovereign currencies and their susceptibility to attacks, effective governance may face greater difficulties at the global level.

Digital sustainability governance

Digital technologies are shaping new dynamics of a sustainable global economy. Technological innovation has been an engine of economic development, and it is especially the case amid the COVID-19 pandemic,where the digital economy has greatly helped address impacts from the coronavirus and facilitate economic recovery. With an average nominal growth rate of 3.0 percent in 2020, 5.8 percentage points higher than that of GDP, the digital economy has become a stabilizer to boost economic growth and cope with the downward pressure of global economy.18China Academy of Information and Communications Technology, White Paper on Global Digital Economy, pp.10-12.The size of China’s digital economy increased from 2.6 trillion yuan in 2005 to 39.2 trillion yuan in 2020, an increase of 3.3 trillion yuan over the previous year and accounting for 38.6 percent of GDP. During the same period, China’s digital economy grew at a rate of 9.7 percent, more than 3.2 times the nominal growth rate of GDP. In a word, the digital economy offers strong support for epidemic prevention and socio-economic development.19Ibid., pp.4-6.

The digital economy serves as a major path towards sustainable development. By significantly reducing the socio-economic costs of economic activities, digital technologies underpin the sustainability of global economy. In climate governance, the application of digital technologies can directly reduce carbon emissions from traditional economic activities and help achieve climate goals such as carbon neutrality through data mapping and scenario prediction.20Ibid., pp.11-13.In industrial development, digital infrastructure reduces economic costs while digital platforms help maximize the use of resources. Moreover, digital transformation has redefined traditional business models, simplified business processes, expanded the boundaries of production, reduced costs for enterprises, improved operational efficiency,and created more flexible jobs for the society, thereby promoting a sustainable economy.21Zhu Heliang and Wang Chunjuan, “Industry Digitalization Against the Strategic Background of the New Development Paradigm: Theory and Countermeasures,” p.19.

However, the digital economy can also exacerbate the digital divide and bring negative impacts to global sustainable development. In terms of internet penetration, 80 percent of people in Europe will have access to the internet by 2022, while the figure is merely 22 percent in Africa.22“Bringing Africa Up to High Speed,” International Finance Corporation, February 16, 2022, https://www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external_corporate_site/news+and+events/news/cmstories/cm-connecting-africa.In terms of the share of digital economy, according to statistics of 47 countries by the China Academy of Information and Communications Technology, the digital economy in developed countries accounted for 54.3 percent of GDP in 2020, far exceeding the 27.6 percent for developing countries.23China Academy of Information and Communications Technology, White Paper on Digital Carbon Neutrality, 2021, p.14.According to data from the International Labor Organization (ILO), the number of digital labor platforms increased from 142 in 2010 to more than 777 in 2020, but there are severe imbalances between the costs and benefits of digital platforms. Nearly 96 percent of the investments in digital platforms have come from Asia, North America and Europe, but 70 percent of the revenues are concentrated in the US and China.24International Labour Organization, World Employment and Social Outlook 2021: The Role of Digital Labour Platforms in Transforming the World of Work, 2021, pp.19- 30.In addition, the digital revolution will bring the hazards of unemployment, inequality, and the continued flow of income from labor to capital, leading to further concentration of resources,wealth and power as well as increasing social instability.25The World in 2050, The Digital Revolution and Sustainable Development: Opportunities and Challenges, International Institute for Applied Systems Analysis, 2019, p.19.

New Approaches for Global Economic Governance in the Digital Age

The development of digital technology has not only resulted in an expansion of areas in global economic governance, but also led to innovation in governance approaches. Rather than a single technological area, digital technology is a system comprising of technological breakthroughs in a series of fields. For example, the utilization of digital resources mainly relies on big data; the operation of digital equipment cannot do without cloud computing; digital transmission is based on the Internet of Things;digital information is supported by the blockchain technology; and digital intelligence is only possible with the advent of artificial intelligence. These digital technologies have not only made previously unattainable governance approaches possible; in the age of information explosion, such innovation in approaches is even more necessary. In global economic governance of the digital era, profound changes can be expected in the exchange of global economic information, prevention of economic risks, response to economic crises, and evaluation of policy effectiveness.

Digitalization of information exchange

The exchange of economic information is the foundation and prerequisite for global economic governance, as well as a major driving force for collaborative governance. In terms of macroeconomic policy coordination, big data, by acquiring and processing massive amounts of data, can help us better understand the overall picture of macroeconomic operation, synergize information and resources from multiple parties,and break the barriers of information asymmetry. By coordinating macroeconomic objectives among different parties and facilitating trade and other economic activities, it has breathed new life into global economic governance.

The development of digital technology has contributed to the exchange of information in niche areas such as global trade, industries and sustainable development. In global trade governance, information exchange between countries leads to faster customs clearance, credible trade data, and targeted law enforcement in response to irregularities such as under-reporting value of goods declared based on data auditing. In industrial governance, digital technologies represented by blockchain and big data can cope with the rapid launch of new products in the era of globalization and the operational pressures caused by fragmented logistics and distribution. Combining the two technologies enables real-time storage, historical tracing, deep mining and multi-dimensional analysis of industrial chain data and market demand information. This will contribute to more accurate allocation of resources, more flexible marketing arrangements, and more timely acquisition of industrial information within the global production system.26Chen Weiguang and Yuan Jing, “Integration of Blockchain Technology into Global Economic Governance: Innovation of Paradigm and Challenges,” Tianjin Social Sciences, No.6, 2020, p.95.As for sustainable development governance, addressing climate change and environmental damage, whose causes and implications are both transnational in nature, requires global cooperation with extensive sharing and analysis of relevant data for effective measures. For example, the European Environment Information and Observation Network plans to share environmental data and knowledge across 38 European countries and regions through a shared platform and common standards. On this basis, environmental data of diverse sources and forms can be used for global sustainable development governance through artificial intelligence, analytics, cloud computing and other digital methods.27IBM Institute for Business Value, Digital Technology and the Environment: Sustainability at the Speed of Open Innovation, 2021, https://www.ibm.com/downloads/cas/BPRYZAOY.

Digitalization of risk prevention

Risk prevention is an essential part of global economic governance.On the one hand, global risks are often related to endogenous institutional arrangements of global governance that lag behind the realistic needs in a specific period; on the other hand, the prevention of risks also contributes to the development of global economic governance.28Guo Wei and Liu Xiaoyang, “Global Economic Governance Reform from the Perspective of Risk Prevention: The History of Reform, Evolution Logic and China’s Positioning,” Economist, No.10, 2021,p.120.Risk prevention has become more challenging in the digital age, but there are also new favorable conditions.

Digital technology enables timely and accurate monitoring and early warning of economic risks. Governance in the financial sector is particularly reliant on digital technology. The financial sector itself is highly digitalized: trading products are inherently virtual, and the penetration of digital technology has a more pronounced impact.Conversely, the financial market is highly volatile with a broad spillover effect of risks. Traditional financial analysis has such defects as incomplete data, weak linkage and failure to clean low-quality information, making it hard to generate intelligence valuable for decision-making and early warning. Digital technology overcomes the limitation of traditional analysis in three ways. First, the data stored through the blockchain technology are tamper-proof and traceable, thereby being authentic and reliable. Second,big data makes information more abundant, complete and time-sensitive.Third, the powerful analytical capabilities of artificial intelligence make it possible to solve problems which traditional financial and intelligence analysis found unsolvable before.29Ding Xiaowei and Su Xinning, “Financial Security Intelligence Analysis Based on Blockchain Driven Trustable Big Data and AI,” Journal of the China Society for Scientific and Technical Information, No.12,2019, p.1299.

The 2008 international financial crisis revealed the problem of inadequate data analysis. According to some scholars, factors unfavorable to risk prevention in this crisis include a lack of complete data, insufficiency of information for effective early warning, fragmentation of data and information systems, and low quality, credibility and reliability of the data available. All these led to severe defects of the models that built on the data and information.30Ibid., p.1300.Therefore, a basic direction of global financial reform after 2008 has been to build a regulatory system based on big data and related technologies. For example, the US Financial Stability Oversight Council promotes data sharing to detect and reduce risks in advance. Major economies, including China, have established comprehensive statistical systems based on big data technology to better share information, grasp and understand the financial situation, and prevent systemic risks.31Li Wei, “Big Data and Financial Regulation,” China Finance, No.22, 2018, pp.93-94.

Digitalization of crisis response

Addressing the negative impacts of economic crises is undoubtedly a major task of global economic governance. Economic crises are sudden and severely destructive with spillover effects. An economic crisis in one country can not only affect other members within a region, but also bring about shockwaves across the world. Therefore, crisis response cannot be left to one or a handful of countries. As Resolution 63/303 of the United Nations General Assembly stated, “An equitable global recovery requires the full participation of all countries in shaping appropriate responses to the crisis.”32“Outcome of the Conference on the World Financial and Economic Crisis and Its Impact on Development,” United Nations, February 16, 2022, https://www.un.org/zh/documents/treaty/files/ARES-63-303.shtml.

Digital technology has offered new instruments for global economic crisis response. The application of blockchain-based trusted big data and trusted artificial intelligence can help settle the problems of “data silos”and “information silos” in a crisis. Traditionally, the incompleteness and fragmentation of data from major international investment banks, and the beggar-thy-neighbor policies of different governance bodies, have exacerbated the negative implications of economic crises.33Ding Xiaowei and Su Xinning, “Financial Security Intelligence Analysis Based on Blockchain Driven Trustable Big Data and AI,” p.1301.With blockchain, big data and artificial intelligence, people can not only have access to more abundant data, but also have a more comprehensive grasp of the crises by analyzing the highly connected data, thus facilitating a scientific and timely response.

Intelligence analysis based on big data and other digital technologies can also help eliminate the adverse effects of financial crises. Quantitative investment relying on big data and artificial intelligence algorithms can accurately identify and analyze disruptive factors in risk management and cover what traditional trading programs cannot do. Based on real-time capture and monitoring, these technologies enable more timely mining of disruptive factors, thus patching the vulnerabilities that induce financial crises.34Ding Xiaowei, “Financial Big Data and Intelligence Analysis: Example of Quantitative Investment,”Jiangsu Social Sciences, No.3, 2020, p.126.

Digitalization of economic policy evaluation

The assessment of economic policy effectiveness constitutes another important part of global economic governance. The Group of Twenty(G20) Pittsburgh summit in 2009 proposed a Mutual Assessment Process(MAP) mechanism for achieving global rebalancing, under which the International Monetary Fund (IMF) issues reports that assess key global imbalances, the consistency of G20 members’ policies with growth objectives, and the possibility of collectively achieving these objectives. As a mechanism for economic policy coordination launched by an international forum at the highest level, the MAP has helped global cooperation achieve strong, sustainable and balanced growth. However, there is still room for improvement in terms of analytical and economic modeling capabilities. A study in the early phase of the MAP’s implementation noted that “without a clear and nuanced understanding of global economic interdependencies,policy coordination will continue to be found wanting.”35Kevin English, Xenia Menzies, Jacob Muirhead et al., “A Map for Strengthening the G20 Mutual Assessment Process,” CIGI Junior Fellows Policy Brief Series, No.2, 2012, pp.6-9.Digital technologies such as big data can lead to more scientific, democratic and objective policy evaluation, which is beneficial for mechanisms such as the MAP to play a better role.

Digital technologies represented by big data bring policy evaluation closer to reality by analyzing massive amounts of data, including unstructured data. A quick judgment of policy effectiveness is possible by accepting the imprecision of big data and applying analytical methods such as classification or clustering.36Wei Hang, Wang Jiandong, and Tong Nannan, “Public Policy Evaluation Based on Big Data,”E-Government, No.1, 2016, pp.11-12.Timely and effective information sharing and policy coordination are critical especially in an urgent crisis. Given the different negative impacts a crisis will have on different members, such collective action is also a demonstration of mutual trust and willingness to cooperate. Digital technology is also important for policy evaluation in niche areas. In the ex-post evaluation of financial policies, big data can be used to assess the reaction of various market players to the policy. Based on dynamic monitoring of regulatory targets, the latest data are available to help understand the policy response of a regulatory target and guide subsequent policy adjustments. For example, an extensive database of mortgages created by the Bank of England has been applied to help implement new real estate policies in the UK.37Li Wei, “Big Data and Financial Regulation,” p.94.

Strategies for China’s Participation in Global Economic Governance

In recent years, China has attached great importance to digital development.In the proposals of the Central Committee of the Communist Party of China for formulating the 14th Five-Year Plan for National Economic and Social Development and the Long-Range Objectives Through the Year 2035,China made a clear decision to develop the digital economy, promote digital industrialization and industrial digitalization, advance deep interaction of the digital economy and the real economy, create digital industrial clusters with international competitiveness, and actively participate in formulating international rules and standards in the digital field. Chinese President Xi Jinping has repeatedly stressed China’s participation in international digital cooperation. He called for active engagement in digital economy negotiations in international organizations, more bilateral and multilateral cooperation on digital governance, and improvement of multilateral governance mechanisms, thus contributing Chinese solutions and making the country’s voice heard.38Xi Jinping, “Developing a Stronger, Better, and Larger Digital Economy in China,” p.8.Amid the new situation of global economic governance, China must consolidate the foundation of its domestic digital economy while actively participating in and leading international cooperation on the digital economy, to continuously enhance its institutional discourse in global digital governance.

Promoting the domestic digital economy

As a new economic form, the digital economy is essential in reorganizing global factor resources, reshaping global economic structure,and changing the landscape of international competition. Promoting the digital economy is both a major strategic choice and a requirement for China to be part of global economic governance in the digital era.

First, China should consolidate the technological foundation of its digital economy and promote independent innovation of core technologies.According to data from its Ministry of Industry and Information Technology,by the end of 2021, China had built and launched a total of 1.425 million 5G base stations, which constitute the world’s largest 5G network and account for more than 60 percent of the world total.39“Analysis of the Statistical Bulletin on the Communications Industry for 2021,” Ministry of Industry and Information Technology of China, January 25, 2022.However, China is still subject to external restraints in core technologies, including high-end chips, operating systems and industrial design software. For example, China has been the largest consumer of integrated circuit (IC) chips since 2005, but China’s IC chip production only accounted for 15.9 percent of the global market in 2020,40“China Forecast to Fall Far Short of Its ‘Made in China 2025’ Goals for ICs,” IC Insights, January 6,2022, https://www.icinsights.com/news/bulletins/China-To-Fall-Far-Short-Of-Its-MadeinChina-2025-Goal-For-IC-Devices/.which means there is still a long way to go before China achieves chip self-sufficiency. Therefore, China must stick to the path of independent innovation in digital technology and make greater efforts to develop its independently controllable products.

Second, China should carry out digital transformation and support digital enterprises with strong innovation capabilities. In recent years,Chinese digital enterprises have developed rapidly and held significant influence in the global market. Four of the seven internet companies in the Fortune 500 in 2021 are from China. As of September 2021, 31 of the 90 “Lighthouse Factories of the Industry 4.0 Era,” selected by the World Economic Forum as representing the world’s leading business innovation,smart technology development and investment, and digital transformation,are from China.41Jiang Xiaojuan and Jin Jing, “Review and Prospects of China’s Digital Economy,” p.33.During the COVID-19 pandemic, it is more necessary to accelerate the digital transformation of enterprises. From the demand side, the pandemic has stimulated the willingness to transform; from the supply side, the improvement of digital infrastructure has paved the way for digital transformation and upgrading. The huge amount of production data, application data and user data in China creates favorable conditions for digital transformation and upgrading.42China Electronics Standardization Institute, White Paper on Enterprise Digital Transformation, 2021,p.5.

Third, China should improve domestic legal governance and provide institutional safeguards to develop its digital economy. In recent years, the country has made significant progress in formulating laws and regulations related to the digital economy. In 2021, the Standing Committee of the National People’s Congress (NPC) adopted the Data Security Law and the Personal Information Protection Law. These laws are not only a safeguard for the development of China’s digital economy domestically but also a foundation for China’s participation in the rules-making of global digital governance. At the same time, local governments have enacted regulations to incentivize the use of data by market players. For example, Shenzhen passed the Shenzhen Special Economic Zone Data Regulations in June 2021, which explicitly proposes the concept of “data rights and interests” to encourage and regulate the legal use of data by enterprises. However, with new problems arising, China needs to further upgrade the legislative and institutional construction of its digital economy. For example, given that the dynamic competition, cross-border operation and oligopolistic contention of digital platforms have brought about complicated and severe problems and inhibited the vitality of the digital economy, it is necessary for China to amend its Anti-Monopoly Law with a chapter on the digital economy to ensure fair market competition and high-quality supervision.43Sun Jin, “Antitrust Regulation of Digital Platforms,” Social Sciences in China, No.5, 2021, pp.101-123.

Participating in and leading digital cooperation

As the world’s second-largest digital economy, China should actively participate in international cooperation in the digital economy and play a leading role in the supply of digital public goods. International cooperation is the requirement and natural extension of a country’s digital economy, and the prerequisite for leading the rules-making of digital economy governance.China must take the initiative to get involved in and lead the negotiations of international organizations on related issues, carry out bilateral and multilateral cooperation on digital governance, and improve multilateral governance mechanisms, thus contributing Chinese solutions and making the country’s voice heard.

China needs bilateral and multilateral cooperation on digital governance to promote an alliance on the digital economy. China has been fostering a new paradigm of open digital economy and expanding its digital economy partnerships with ASEAN and the EU based on multilateral and bilateral trade and economic cooperation agreements. At the same time, China will advance the building of the Digital Silk Road, promote the combination of the digital economy and the Belt and Road Initiative, and deepen digital infrastructure construction and digital cooperation in countries along Belt and Road routes. Given the unbalanced development of digital economy across countries, China should also actively cooperate with developing countries in regions such as Africa to help their digital transformation and narrow the global digital divide.

In addition, China should take the initiative in international negotiations on the digital economy as an important part of international economic cooperation in the digital age. In the current global negotiations on digital economy issues, China needs to make greater efforts on international coordination. For China, there is still a considerable gap with developed countries on key issues such as lowering trade and market access barriers; it has yet to have a clear position on cross-cutting issues such as the intellectual property protection of source codes; and its tariff arrangements are still far from flexible.44Chen Hongna, “Prospects and Challenges of Negotiations on International Digital Trade Rules,” New Economy Weekly, No.1, 2021, pp.16-17.China needs to engage in crucial issues with a more active attitude and a more dynamic strategy to ensure the centrality of multilateral economic and trade mechanisms in formulating, implementing and monitoring international economic rules.

Raising China’s voice in global institutions

Global digital rules are lagging behind the pace of digital globalization. As traditional economic governance mechanisms can hardly adapt to the needs of the digital era, digital economy governance has become a key issue for many international organizations and international platforms. Due to the large gap in the development of digital technology across countries, there is increasingly intense competition for the discourse of global digital governance. In this context, governments and international organizations have introduced digital development strategies, plans or agendas to seize this opportunity. For example, the EU has introduced the General Data Protection Regulation and a regulation on the free flow of non-personal data, which is a model of rules-making in data flow and the protection of personal information and data. The US antitrust investigations of large digital platforms such as Google and Facebook also demonstrate its efforts in the governance of the digital economy. The Digital Economy Report 2021, released by UNCTAD, also focuses on cross-border digital flows.

For a greater influence in digital economy governance, China should play a leading role in the formulation of digital technology standards and industrial standards. Communications technology is one of the core technologies in the digital economy. Countries across the world have been competing to lead the standard-setting of three key technologies in 5G control interface, namely channel coding, multiple access, and multipleinput multiple-output.45Zhang Qianyu, “Power, Life Cycle and Policy of Technology in Major Countries,” Foreign Affairs Review, No.1, 2022, pp.80-81.According to data from the Ministry of Industry and Information Technology in May 2021, China’s 5G-standard essential patent declarations had accounted for over 38 percent of the global total,ranking first in the world.46“MIIT: China Ranks First in the Number of 5G Standard-Essential Patent Declarations,” People.cn,May 14, 2021, http://finance.people.com.cn/n1/2021/0514/c1004-32103532.html.This allows China to have a pivotal voice in the 5G field. Moreover, China should actively participate in and lead the formulation of international digital rules. So far, China has played an active role in the rules-setting of multilateral organizations and mechanisms including the United Nations, G20, BRICS, APEC and WTO, and facilitated the conclusion of the G20 Digital Economy Development and Cooperation Initiative, the Belt and Road Digital Economy International Cooperation Initiative, the Initiative on Jointly Building a Community with a Shared Future in Cyberspace, and the Global Data Security Initiative,thus contributing its solutions to developing the digital economy and cyberspace governance.47“Cyberspace Administration of China Releases Digital China Development Report (2020),” Cyberspace Administration of China, July 2, 2021, http://www.cac.gov.cn/2021-06/28/c_1626464503226700.htm.On this basis, China should be more proactive in the rules-making process. The country’s decision to join the Digital Economy Partnership Agreement has demonstrated its determination to align with global digital economy rules and play a larger role in global digital economy governance.

Conclusion

The Fourth Industrial Revolution led by digital technology has become a key force in reorganizing global factor resources, reshaping global economic structure, and changing the landscape of international competition. In terms of the areas of governance, digital technology has expanded the scope of global economic governance, and enriched global industrial,trade, monetary and financial, and development governance. In terms of governance approaches, digital technology has brought about new approaches in global economic governance, which have been reflected in the fields of information exchange, risk prevention, crisis response and policy evaluation.

The changes brought by digital technology are both opportunities and challenges. In some emerging industries, developing countries have been running alongside developed countries. In those mature industries,developing countries can even overtake developed countries by applying new technologies in traditional industries and utilizing their market and resource advantages. Amid the rapid development of digital technology,however, the update of digital rules still lags behind the practice of digital economy. Global economic governance is therefore in a process of constant renewal, innovation, reconstruction and improvement, and multilateralism based on mutual benefit and consultation is still the basic logic in this process.

As the second-largest power in the digital economy, it is imperative for China to actively participate in and lead global economic governance in the digital era. With the wide application of digital technology in traditional economic fields, China’s booming digital economy, especially digital trade, has created opportunities for the country to join in and even lead the reform and innovation of global economic governance. To this end,while continuously developing its digital economy and strengthening its domestic power base, China must actively participate in international digital cooperation to enhance its institutional discourse on global digital economy governance. On this basis, China should take the initiative to promote the reform and innovation of global economic governance, and offer systemic solutions to address challenges of the digital economy, thus making digital technology better serve the global economy.