How China’s rapid shift to a digital economy can help it escape a long recession
In China, the coronavirus pandemic has accelerated the uptake of digital technologies in households, schools and companies. Technology has also enabled the country to emerge from Covid-19 lockdowns without risking public health
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.
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China’s digital economy was growing strongly before the pandemic. In 2018, it already accounted for 31.3 trillion yuan (US$4.7 trillion), or 34.8 per cent 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.
While 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, Ele.me and Pinduoduo, which enabled them to purchase food, oil, vegetables and daily necessities online.
Moreover, within a month of closing their classrooms and evacuating their campuses, schools and universities moved online – a shift that spurred the rapid development of online conferencing and learning platforms. Likewise, companies took advantage of digital tools – from communication platforms like Enterprise WeChat and DingTalk to e-contracts – to keep their businesses running. More than 20 million online meetings, with more than 100 million total participants, have been initiated on DingTalk in a single day.
Just as technology helped life go on during lockdowns, it has enabled China to roll back restrictions without risking public health. A growing number of local governments are implementing Alipay Health Code – a mobile-phone application that assigns users a colour code indicating their health status. That way, they know when they should be quarantined, when they can safely visit public spaces and when they can travel.
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This also lets the authorities track – and mitigate – risks. If a person visits, say, an airport or hotel, they must show their personal QR code. A quick scan will show whether they have visited a high-risk area within the past 14 days. Such tracing – not only during travel, but also in schools, offices and other contexts – is essential to avoiding another Covid-19 outbreak and further economically damaging lockdowns.
