Digitalization key to growth amid headwinds
Looking back on the years of the COVID-19 pandemic, despite many serious challenges, globalization remains an important reality. Today, trade and investment remain the strongest drivers of economic vitality, both for China and the world.
Exports played a significant role among China's major means of economic growth in 2021 and 2022. In 2021, when the nation's fixed-asset investment increased 4.9 percent year-on-year and consumption 12.5 percent, foreign trade surged 21.4 percent, with exports rising by 21.2 percent. In 2022, the nation's fixed-asset investment registered a 5.1 percent rise year-on-year, while consumption, due to the COVID-19 impact, dipped 0.2 percent. Foreign trade maintained its momentum and increased 7.7 percent, and exports were up by 10.5 percent. At a time when other drivers faced various pressures, trade managed to maintain its resilience against such headwinds.
The global picture is similar, with trade growing more strongly than GDP. In 2021, global trade growth was twice as high as GDP growth, and trade growth in China and the United States both nearly doubled their respective economic growth rates, indicating the strong driving force of globalization behind the world's economy during the COVID-19 pandemic.
Digitalization spurs trade
Digitalization plays an important role in globalization. One major reason that globalization was not severely disrupted during the COVID-19 pandemic — which had a big impact on trade in goods, global transport and the movement of people — was ongoing digitalization.
During the pandemic, multinational digital companies grew the fastest. The top 100 multinational digital companies witnessed impressive figures in various fields, and the proportion of overseas assets, overseas sales, net assets and profit margins all continued to increase, in sharp contrast to traditional multinational companies. Multinational digital companies have become the most important force supporting the continuation of globalization during the pandemic.
The uptrend in data-driven trade in services is not a result of the pandemic. In fact, such a trend had been growing at a high rate for many years, even before the pandemic broke out. In pre-COVID-19 years, data-driven services trade even accounted for more than 50 percent of the total, and in the past two years, it surged to 65 percent. Although the current proportion has declined, it is expected by many to develop rapidly in the future.
Benefits for BRI
Digitalization is bringing benefits to the development of the Belt and Road Initiative. First, transactions leveraging digital tools can reduce costs and promote trade. E-commerce platforms use data resources and technology to tap consumer demand, reduce cross-border transaction costs and play an important role in trade promotion, such as overseas customer demand mining, overseas marketing promotions, cross-border payments, supply chain management and brand building. Massive suppliers selling their products on e-commerce platforms not only significantly reduce costs, but also unleash trade potential that did not exist previously. This is not just about moving trade from offline to online, but creating more overall trade opportunities online.
Digital logistics platforms are also an important competitive advantage for China. Various sectors have seen wide application of digital solutions — trade-related logistics warehousing, payment and settlement, financing and loans, Customs clearance, foreign exchange collection and settlement, advertising and marketing, as well as other areas. Such applications have greatly enhanced the response speed of each link to customer needs.
Yiwu, Zhejiang province, is a good example of this. With the optimization of the nation's COVID-19 control measures, Yiwu built an online platform dedicated to serving the BRI to provide efficient digital services in manufacturing, trade and logistics. After three COVID-19 years, the group that was once made up of offline purchasers numbering tens of thousands in the region has now become one with hundreds of thousands of online purchasers. Small retail stores can also link directly with suppliers, improving transportation efficiency and reducing logistics costs through consolidation, which creates many new trade opportunities.
Second, the role of the middleman is removed from digital global transactions, bringing benefits for traders and buyers on both sides of transactions. Digitalization plays an important role in removing middlemen. In the process of trade between China and economies involved in the BRI, and those in Africa and Latin America, large enterprises often take more profits, while grassroots farmers and small business owners earn much less. With the help of online platforms, traders are able to interact directly with farmers and cooperatives.
Third, digital investments are advancing rapidly by adhering to a replication model. The asset-light operating model of digital investment expands quickly and efficiently. For example, Nigeria's power grid has been plagued by electricity theft for many years, and even several wires can be inserted into a single line to illegally access energy. But local power companies can do little about it. LongShine Technology Group Co Ltd, a power grid services enterprise in China, can offer a way out for grid operators plagued by such woes. With a simple template cooperation mode, the company uses its technology to help local operators debug systems and train local personnel to use and operate equipment, which also leads to win-win results.
Fourth, remote digital services can reduce costs, increase efficiency, ensure security and promote investment and cooperation. The socioeconomic situation in some BRI economies is relatively unstable, which has led to concerns of some domestic enterprises over operations in these markets. For example, in the past, if a manufacturer came across equipment failures in such a market, it would have to send technicians overseas to fix the problem, even though sometimes the local situation is not stable. But nowadays, with the help of digital technology, employees can remotely carry out on-site in-line inspection, and experts anywhere in the country can remotely guide maintenance as if they were actually on-site. This method greatly reduces risks, and can not only promote the export of production enterprises, but also minimize on-site risks, and ultimately reduce costs, increase efficiency, ensure safety and promote investment and cooperation.
Promoting digital globalization can help further enhance global cooperation and sharing. China should include digital assistance as an important aspect while promoting global cooperation and the BRI, and prioritize talent training, so that this cooperation model can develop efficiently, and be asset-light, green and sustainable. Many complete sets of software technologies in China can be exported to other countries, and together with the training of personnel using these software systems, the digitalization level of their terminals, central control rooms, ports and warehouses will be greatly improved, which in turn can enhance the digital trade capabilities between China and other countries.
The views don't necessarily reflect those of China Daily.
The writer is a professor at the University of the Chinese Academy of Social Sciences. Jiang served the State Council, the country's Cabinet, as a deputy secretary-general between 2011 and 2018.
