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The Challenges Confronting China’s Digital Economy

If China is to ensure the continued development of its digital economy, while containing the risks associated with disruption, its leaders will need to implement smart regulations. And that will require careful consideration of the factors that have contributed to – and impeded – its progress so far.

HONG KONG – China’s digital economy is a force to be reckoned with. The country now accounts for 42% of global e-commerce, boasts one-third of the world’s most successful tech startups, and conducts 11 times more mobile payments than the United States per year. But there are major challenges ahead.

To be sure, China is on track for continued progress, thanks to its rich ecosystem of innovators, a tech-friendly attitude among regulators and government, and its massive consumer market. China’s 731 million Internet users outnumber those in the European Union and the US combined.

These factors underpin projections of rapid growth in China’s FinTech market. From 2016 to 2020, Goldman Sachs expects consumption-related third-party payment value to grow from $1.9 trillion to $4.6 trillion, with lending by non-traditional players soaring from $156 billion to $764 billion and new online-oriented asset management increasing from $8.3 trillion to $11.9 trillion.

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