Data is the new “oil” and industrial IoT is the “intelligent vehicle”, driving us on the “highway” of New Infrastructure towards an all-inclusive digital society…
– Pony Ma, President and CEO, Tencent
It is, presumably, far too early and premature, to talk about a “Post-Covid-19 Era”. Nevertheless, as discussed in our first blog on Covid-19 and the digital economy, China has seen both the resilience and creativity embedded in digital technologies as well as their far-reaching transformative impacts on business and society. In the past weeks, China’s new “digital transformation package” was launched, including Cloud- Big Data- AI-driven New Economy Strategy, New infrastructure development, Data as a new production factor and Blockchain for Industrial IoT development. The technical comprehensiveness and the strategic links to China’s future economic development are sending a clear signal: China is seeking its way forward by stepping up its digital transformation in the preparation for a “Post-Covid-19 Era”.
What is a “digital transformation”, exactly?
Before we dig into the details of China’s new digital transformation package, let us first get back to the basics. Literally everybody in policymaking and business communities is talking about “digital transformation”. Do people talk about the same thing? Do we have a common view of what it is and how it can be achieved?
In the framework of the “Going Digital” project, OECD provides a generic, but highly policy relevant definition of digital transformation (See Box below).
Departing from these definitions, the key policy agenda for a digital transformation, need to include, at least 3 key aspects/elements:
- Digital technology ecosystem (See Figure below): opportunities and challenges of each technology and their combinations in the ecosystem.
- Data revolution: as an important source of value, how data and data flows affect individuals, the economy and society.
- Fundamental changes from a digital transformation: new and evolving business models and implications for public policies and society.
Technology is a capacity and Tech-for-Good is a choice
As the digital transformation starts to enter a more mature stage, the focus, from both the business and the policy communities, is shifting from digital technologies alone towards the purposefulness and societal implications of the digital technologies. In other words, digital transformation is both for growth and for good – which needs to be a conscious and proactive choice, supported by the technological capacity. The key questions that we can often hear from both the business communities and the political leaders can be summarised as follows:
- How will digital technologies transform our economy and our life to be more efficient and more sustainable?
- How can digital technologies generate job-enhancement and job-creation, instead of a “job-killing” transformation?
- How can digital technologies help to minimise and even eliminate stereotype, prejudice, bias and discrimination, associated with gender, age and race?
- How will digital transformation change the relationship between policies, regulations, businesses and citizens?
- How will digital transformation make knowledge-sharing and wealth-distribution more inclusive and equal, instead of more restricted and skewed?
- How to secure and safeguard trust, transparency, ethics and integrity in the digital transformation and the data revolution?
Even though we do not have perfect answers to and solutions for these questions and challenges, we do see that important initiatives and debates are under way, not least in Europe, in Sweden and in China:
- In April 2019, the EU Commission’s High-Level Expert Group on Artificial Intelligence launched the Ethics Guidelines for Trustworthy Artificial Intelligence. In the beginning of 2020, the EU Commission published, both “White Paper on Artificial Intelligence: a European approach to excellence and trust” and “The European data strategy”. These are the first pillars of the new digital strategy of the EU Commission, which focus on putting people first in developing technology, as well as on the need to defend and promote European values and rights in how we design, make and deploy technology in the real economy.
- In a Swedish context, the Committee for Technological Innovation and Ethics (Komet) was established by the Swedish Government in 2018. Its mission is to identify policy challenges, contribute to reducing uncertainty surrounding existing regulations and accelerate policy development linked to emerging technologies, such as individualised healthcare, AI, 5G, self-driving vehicles and smart climate solutions.
- When it comes to related policy development in China, in May 2019, a very important joint research paper was published, by the Development Research Center of the State Council (DRC) and Tencent Research Institute on “Following Tech-for-Good, Embracing Digital Transformation – Application of emerging technologies and its impact”. The paper analysed key policy issues, such as employment impact, ethics and privacy protection, industry oversight and taxation on digital products and services in detail.
China’s new “digital transformation package”
Having the above conceptual framework and policy context in mind, let us look at China’s new “digital transformation package” in more detail.
A comprehensive “Cloud- Big Data- AI-driven New Economy Implementation Strategy” was launched in the beginning of April, with the focus on Chinese enterprises’ capacity and readiness for digital economy and transformation. The highlights below are particularly interesting and strategically important:
- The “New oil – Intelligent vehicle – New highway” combination represents a high ambition of systemwide digital transformation, by engaging supply chains and building up digital technologies and innovation ecosystems.
- The level of digitisation and digitalisation of Chinese enterprises is still low. For instance, only 25% of Chinese enterprises have carried out digitization- and digitalisation-related transformation, compared to 46% in Europe and 54% in the US. Particularly, limited by both technical capacity and financial resources, small- and medium enterprises (SMEs) and microenterprises in the manufacturing sector face even higher thresholds on their digital transformation journey, despite their urgent needs in order to survive and thrive. Therefore, an SME-targeted supporting measures package has become the centerpiece of this implementation strategy (See Figure below).
Following the Cloud – Big Data – AI-driven New Economy Implementation Strategy, the launch of China’s “Data Strategy”: Data as a new production factor (together with the “conventional” production factors, such as land, labor, capital and technology) was another key element of the “policy package”. According to estimates by IDC, China will account for 28% of the data generated globally in 2025 and data are already an important source for business- and wealth generation here and now in China. This policy document can be seen as a milestone for formalising, or legitimising, the role of data in value-creation as well as recognising and trying to handle the complexity involved in ownership and utilisation. A “Big-Data Governance Structure” was proposed for data security and privacy protection, which will be applied at national, industrial and entity-level (See Figure below).
While infrastructure development and investments used to be crisis recovery hotspots, China’s initiative on “New Infrastructure Development”, i.e. the digital-technology-based, integrated and innovative infrastructure development, attracted both attention and curiosity (See Figure below). Apparently, a full-fledged new infrastructure development aims to accelerate China’s digital transformation, through both developing new digital infrastructure and integrating with “old” infrastructure for upgrading and leapfrogging. It is premature to say how the new infrastructure development will contribute to China’s “post-Covid 19” recovery. But it implies a clear potential and need that research and innovation will be more closely integrated with the real economic development and unleash the transformative nature of a new digital economy.
Finally, blockchain has been a hot topic in China for years. When the data-driven business and market development as well as efforts by industries for digital transformation have all accelerated, the blockchain applications are also gradually broadened and deepened (see Figure below). Already in 2019 the Chinese government launched a strategy policy paper on “Blockchain for breakthroughs of core technologies and innovations to accelerate industrial digital transformation” . In the post-Covid 19 recovery as well as enhanced by the new policy package, the integration of blockchain and industrial IoT will enter a new phase of acceleration to develop the new security and trust basis.
To conclude, we do see that China and many other countries and regions are making preparations for stepping up the efforts to accelerate the digital transformation as one of the central pieces of a recovery strategy from the Covid19 crisis. To be truly effective, inclusive and transformative, the digital transformation will not only need to change the pace of a path-dependent recovery and growth, but also to drive fundamental changes in a Post-Covid-19 era for good, i.e. well-being, resilience and sustainability.
In our next blog (27 May), we will continue to share our thoughts on China’s digital transformation, with a focus on digital transformation and sustainability, i.e. Tech-for-Good, not only for human’s good, but also for nature’s good. See you soon again!
Linnea Yang and Nannan Lundin
 Going Digital: Shaping Policies, Improving Lives. OECD. (2019).