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What should we Watch out for in China's Vast Digital Economy?

2021-02-05

While China's digital economy reached 35.8 trillion yuan (5.45 trillion U.S. dollars) in 2019, taking up 36.2 percent of the country's GDP, Professor Wang Chong notes that digitization in the country's agriculture, manufacturing and service sectors is still lagging behind, suggesting huge potential for development.

China is gradually taking the lead in hi-tech fields such as data collection and analysis, profiting more from the digital economy, says Wang, associate professor of management science and information system with Peking University's Guanghua School of Management. He calls for more efforts in exploring data management, artificial intelligence services and privacy protection.

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VAST POTENTIAL FOR DIGITIZATION

According to a development blueprint released by the State Council, China's cabinet, the value of China's core Artificial Intelligence (AI) industries could exceed 400 billion by 2025 and hit a staggering one trillion yuan by the end of 2030. Meanwhile, more than 700,000 5G base stations had been in service across the country as of October last year, connecting more than 180 million terminals.

However, a project called Big Data Ecosystem Index of 2020 conducted by Peking University's National Engineering Laboratory of Big Data Analysis and Applied Technology reveals unbalanced development in digital economy in different Chinese regions, indicating vast potential for industrial digitization.

LOOKING THROUGH THE MICROSCOPE

Of all the micro-scenarios in digital economy, people may be most familiar with online shopping. For e-commerce platforms, user rating serves as a key reference for customers. Our research on customers' rating-based choices suggests that visual information is unlikely to help them make the best decisions, while digitization and intellectualization can assist people in making evaluations and creating values.

Consumption and gaming are not the only fields where the digital economy and AI can lend us a helping hand. In terms of industrial usage, AI can help us better monitor equipment, control risks, boost productivity and make scientific management decisions. However, recent studies have found that people have trouble trusting AI's evaluations and forecasts completely. One research reveals that inaccuracy in human forecast will not make people trust AI notably more, but people will trust AI much less when it makes a mistake.

The results show that human beings hold different standards when judging ourselves and AI, and explain, to some extent, why there are many difficulties in the digital transformation for businesses. Our standards for AI are too high, and it will take a long time for us to adjust our perceptions. Another feasible path for digital development is to pick up the pace in boosting AI’s capabilities.

A huge data reserve is a key foundation for AI development. Rapid progress in new infrastructure is offering a sound basis for data collection, transfer, storage, and analysis. It also means that more data will be collected. International Data Corporation (IDC) forecasts that by 2025 the global datasphere will grow to 163 zettabytes — ten times the amount of data generated in 2016. It means that we will collect more data in the next five years than we did in the past. Of the collected data, 25 percent will be real-time, most of which will come from the Internet of Things.

HOW DO WE HANDLE DATA?

The accumulation of such a huge amount of data brings both challenges and opportunities.

First, we need to properly store the data for use in economic development and other areas. Construction of data centers have been accelerating as we observe the number of working centers increase from 51,000 in 2012 to 72,000 in 2019. Among them, 12.7 percent were large and super large centers. Documents outlining the 14th five-year plan (2021-2025) also include the construction of big data centers. To build more and better data centers, we first need to face the urgent problem concerning energy consumption efficiency. It should be noted that between 2015 and 2019, China had already built many data centers with improved energy consumption efficiency.

Second, more macro-policies should be in place to define the ownership and circulation of data as production factors. While construction of new infrastructure kept accelerating last year, the collection, usage and circulation of data also became hot public discussion topics. How to build a secure, fair and efficient economic system for data circulation should be a key research goal that concerns a series of issues including data security, management and supervision, data value and ownership definitions, as well as individual data protection.

Third, more attention should be paid to the protection of individual privacy. Our research shows that people's privacy-related demands have experienced profound changes over the past 10 years. They are no longer just about phone numbers and personal ID info. People's privacy demands have expanded to include the protection of their digital assets, the rights to control their own online social networks, as well as the protection of personal rights when obtaining and using data. All these demands require further thought and research.

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As China's economy gains pace, various industries will also speed up their digitization efforts. In the coming year, industrial digitization will accelerate as firms are actively researching bid data plans, building data middle platforms, improving data governance capacities, and achieving data integration.

Fast digital development is bringing China more challenges and dividends alike. Rapid construction of new infrastructure and data integration will help apply digitization and artificial intelligence to more economic activities, improve people’s living standards and boost firms' efficiency.

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