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Leading the post COVID-19 digital economy

Daryl Guppy / CGTN Share:
Illustration by Hadkhanong. Dreamstime.com

Where are the growth markets? Concurrent with the answer is a question about the nature of the growth opportunities. COVID-19 has underlined the irresistible and accelerated growth in digital industries. This goes beyond settlement platforms. It includes logistics delivery services, customer service and a new awareness of access to global consumer choice. Economies will be restored, but the new digital shape will not disappear. Dispersed offices and working from home are set to become a permanent feature of the economic landscape.

The potential for digital growth is the key investment question. The Datareportal Global Digital Overview estimates the U.S., with a current online population of 263 million, has the potential to add another 39 million. That’s a 14 percent growth. China has a population of 838 million internet users with the potential to add another 583 million. That’s a growth potential of 69 percent, offering more opportunity both in raw numbers and in percentage growth terms.

It is clear which market offers more opportunities. However, the thought of two very different digital standards makes the idea of one digital product for multiple markets difficult to implement. And the discussion of essential policy standards has been side-tracked by a national security debate. President Trump and his acolytes have promoted the idea that Chinese tech companies cannot be trusted to provide critical infrastructure or social media platforms because, they claim, civil liberties, human rights and personal freedoms will run second to China’s strategic interests.

These issues play well to an un-informed domestic audience, but they obscure the broader picture of digital transformation and the increasingly urgent policy issues that surround these developments. These policy issues shape the way investors can access the growth potential of the China digital environment.

Who sets the protocol standards for digital connectivity? These standards include blockchain, artificial intelligence, digital currency, distributed ledgers and other arcane but critical parts of the digital economy. Without collectively developed and agreed policies, the digital economy would fracture into incompatible fortresses. Currently, governments are using crude tools to deal with the global digital revolution. The headlines include security, legislative control and intervention in the ability to complete financial transactions.

For decades, standards were primarily led and set by the U.S. in a broadly collegiate environment. Under President Donald Trump, the U.S. pursues an America First agenda at the expense of its position as arbiter of the world’s information ecosystem. They seem oblivious to the cost to economic growth, to the strangling of global innovation or the security impacts on anyone else – including its allies.

The U.S. refuses to allow China to play a role in setting these standards, going as far as to withdraw from some global forums if China is also represented. We need to put aside the hypocrisy of demanding that China observe the international rules-based order while denying China the opportunity to participate in formatting those rules. The result of China’s exclusion is that China is compelled to develop its own protocols and standards as they surge ahead in the implementation of the digital economy.

China’s domestic market is large enough to provide a sustainable base for these Chinese standards. The recently announced “dual circulation” economy strategy recognizes the reduced reliance on export markets. For European, Australian and other western investors, the increasing China-U.S. divide in tech infrastructure is a fundamental threat to the expansion of digital economy investment opportunities in China. Looking beyond China through the lens of the Belt and Road Initiatives, the spread of Chinese protocols extends to Asia and Eurasia is becoming the future source of economic growth.

Investors, software developers, businesses and companies are all moving rapidly towards an inflection point. The potential 69 percent growth in the Chinese digital economy is a more powerful driver than the 14 percent growth in the U.S. Rather than leave agreement on global standards to chance and Twitter tantrum, it is essential that business demands a global agreement on ground rules for digital transformation. It’s a process that calls for leadership from technology companies and the investors who support them because otherwise, access to growth opportunities will remain elusive.

 

Daryl Guppy is an international financial technical analysis expert. He has provided weekly Shanghai Index analysis for Chinese mainland media for more than a decade. Guppy appears regularly on CNBC Asia and is known as “The Chart Man.” He is a national board member of the Australia China Business Council. CGTN

 

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