The Digital Economy has Become the Main Battleground of Competition for Global Powers

With the rapid development of artificial intelligence and formation communication, the digital economy which is driven by digital technology innovation is profoundly changing the traditional economic development model and becoming a new and important growth engine for global economic development. First, the digital economy is playing an increasingly important role in global economic growth. According to the report of The White Paper on Global Digital Economy (2022) issued by the China Information and Communication Institute, the digital economy of 47 countries around the world reached us $38.1 trillion in 2021, accounting for 45.0% of GDP, up $5.5 trillion  and 1.3 percentage points higher than the same period last year. The digital economy plays an increasingly prominent role in leading the global economic recovery and reshaping the global economic pattern. Second, the digital economy plays a key force in reshaping the international competition landscape. As a new social and economic form, digital economy poses a subversive challenge to the global industrial division of labor pattern and competition order constructed in the era of industrial economy, and has become a key factor in determining the reshaping of the new pattern of global competition in the coming decades. Third, the digital economy is the only way to  to promote the Chinese-style modernization. The development of digital economy is a strategic choice for China to grasp the new opportunities of the new round of scientific and technological revolution and industrial transformation. It is also an important opportunity for China to catch up with developed economies. Digital economy will build an important new growth engine of China’s modern economic system.

China’s digital economy is developing vigorously, and the process of digital industrialization and industrial digitalization is accelerating. New technologies, new business forms and new models spawned by digital technologies have widely penetrated into all fields of the economy and society, playing an increasingly prominent role in leading and supporting China’s economic and social development. However, there are still three difficulties in the development of China’s digital economy in the technology, application and system layer, which is urgently needed to breakthrough.

The leading technology route and key technology of digital economy are directly related to the competitiveness of national digital economy, but there is a risk of being suppressed in the selection of key core technologies and technology routes. First, China’s key and core technologies of the digital economy are highly dependent on foreign technology. Digital core key technology is highly depended on foreign technology. And the high-end chip, industrial control software, core components, basic algorithm and so on more than 300 key technologies related to digital industry is still subjected to others. the industrialization of digital technology application, engineering promotion, commercialization are facing the challenges to the stabilization of digital economy development. Secondly, there is high risk that the underlying technical logic is replaced. Over the past decade, the rise of China’s digital economy is mainly based on the choice of digital economy technology route of “hardware and software integration” represented by 5G, and the huge digital economy infrastructure has established an important foundation for the development of digital economy. However, the developed countries with its basic software and chip technology advantage to reconstruct the global digital economy technology route, advocate to “open source” replacing “integration of software and hardware”, which attack the low-layer technology logic through the interface standard, the core software and the underlying chip to redefine the digital economy.

Although the scale of China’s digital economy ranks the second in the world, the overall degree of digital and real integration is still relatively low. The development is not balanced, and the cost of digital transformation of enterprises is relatively high. First, China’s three industries of digital real integration degree is unbalanced. According to the White Paper on China’s digital Economy Development, in 2021 the primary, secondary and tertiary industry digitized economy penetration reached 9.7%, 22.4% and 43.3% respectively, from 2020 increased 0.8,1.4 and 2.6% respectively, but integration degree of the primary and secondary industry is lower and slower than the tertiary industry, which greatly affects the improvement of labor productivity. Second, the degree of integration of digital and real economy obviously lags behind the level of developed countries. According to the White Paper on Global Digital Economy (2022), the highest industrial digitalization level of the world’s primary, secondary and tertiary industries is more than 30%, 40% and 60% respectively. The penetration rate of digital economy in China’s tertiary industries lags far behind that of developed countries, and even the tertiary industry with the highest degree of digitalization is 7-8 percentage points lower than the average level of developed countries. Third, a large number of small and medium-sized enterprises hesitated in the digital transformation. In the transformation, small, medium and micro enterprises have the the difficulties of unwilling to transform, doing not transform or daring not transform, etc,. According to the report of China Institute of Electronic Technology Standardization, in 2021, the proportion of enterprises in the initial exploration, industry practice and deep application in the stage of digital transformation is 79%, 12% and 9% respectively, indicating that the vast majority of small and medium-sized enterprises are still in the initial stage of digital transformation.

Digital rules are an important tool for global data competition and an important institutional basis for mastering the right to speak in the digital economy era. However, China’s digital rules do not match and adapt to the development status and speed of digital economy. First, the control of digital rules by developed countries in the world has seriously impacted China’s data managing system. The United States relies on its digital technology and digital economy pioneer advantages to establish the global governance system of digital regulation, and the European Union also relies on its unified large market advantage to establish the data regulatory system earlier. The global digital rules have formed the situation of “dividing the world” between the EU model and the US model. China’s rights of speech in the digital economy is very softly. Europe and the United States use the effect outside the domain of digital rules to dominate the direction of global digital economy competition, which directly affects China’s data sovereignty security. Second, the construction of China’s digital system lags behind the development of digital economy. The construction of China’s digital economy system does not match the reality of the rapid development of digital economy, which has become a constraint for the development of digital economy. Currently, it’s unhealthy in data ownership confirmation, data trading rules, data circulation system, data security supervision system, laws and regulations, standards and specification. the different business framework and system among the digital economy lead to data unicom, un-efficient integration and sharing, the phenomenon of “data island” is still serious which restricts the release of “digital dividend”.