China’s Rapid Shift to a Digital Economy
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.
SHANGHAI – 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.