China’s Digital Economy

Abstract

China has one of the most advanced digital economies in the world. This chapter analyses the rise of China’s digital economy and the transformational effect of digital innovation on consumers and throughout China’s economy and society. The ‘platform of platforms’ created by leading firms is critical in China’s digital infrastructure, and the user data generated on these platforms is a new factor in Chinese productivity. The ability of the digital economy to build and address demand in China’s highly differentiated markets is shown in cases such as Xiaomi. The chapter reveals the zigzag pattern of iterative interactions between technology entrepreneurs and policymakers. It presents a detailed case study of mobile payments, explaining the dynamic interactions between firm strategies, user endorsements, and government policies. The rise of the ‘platform of platforms’ has raised concerns about user data safety and fair market competition. The chapter discusses the social and political implications arising from powerful platform firms in the digital economy. It concludes with discussion of the importance of future technologies, including artificial intelligence and the internet of things, especially their applications in the industry internet.