Chinese digital economy VCG/Getty Images

China’s New Digital Dividend

Despite current concerns about China's corporate-debt crisis, rapid digitization is transforming the Chinese economy, and elevating its place in the global value chain. But China's ongoing transition is as risky as it is exciting, because no economy so large has undergone such rapid, far-reaching change.

HONG KONG – Over the past four decades, China has gone from being a low-wage supplier to one of the three most important links in the global value chain, alongside the United States and Germany. Despite growing concerns about China’s corporate debt – which is now close to 170% of GDP – and its ability to escape the middle-income trap, rapid digitization will allow the Chinese economy to continue moving up the value chain.

Following its strategic “opening up” almost 40 years ago, China provided an abundant source of cheap land and labor, which enabled it to achieve economies of scale in consumer manufacturing. Then, as China moved toward middle-income status, it became a major consumer market in itself.

In 2012, China’s current leaders recognized that the country’s “demographic dividend” had run its course: the Chinese economy was reaching its “Lewis turning point,” the stage at which its surplus labor supply would be exhausted, and wages would start to rise. And, at the same time, the “opening-up dividend” was also reaching maturity, and encountering protectionist barriers around the world.

To continue reading, please log in or enter your email address.

To access our archive, please log in or register now and read two articles from our archive every month for free. For unlimited access to our archive, as well as to the unrivaled analysis of PS On Point, subscribe now.

required

By proceeding, you agree to our Terms of Service and Privacy Policy, which describes the personal data we collect and how we use it.

Log in

http://prosyn.org/hL6D8PY;

Handpicked to read next

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.