By Long Guoqiang

Research Report Vol.17 No.4, 2015

As China’s economy enters the new normal, its transformation and upgrading have become the key to China’s economic development. Human history since the industrial revolution shows that major technological revolutions are the great force to drive economic transformation and upgrading. At present, information technology plays the leading role in the new wave of technological revolution. It is of strategic significance to take these major opportunities and implement the strategy of promoting economic transformation and upgrading through informatization.

I.Informatization to Play a Significant Role in China’s Economic Transformation

The revolution of information technology is still on the rise. Since the later period of the last century, this revolution has accelerated. At present, represented by the Internet of things, cloud computing, mobile internet and big data, this new generation of information technology develops rapidly, featuring some new characteristics totally different from the past. All relevant steps including information collection, transmission, processing and application advance synchronously. This leads to a faster improvement, wider and deeper penetration and more far-reaching impact of information technology.

Informatization has already had and will have a deeper impact on the economic and social development of all countries. It has created a huge sector of the “new economy”. IT industry has become one of the largest industrial sectors, in which many huge enterprises have come into being both at home and abroad, such as Microsoft, Apple, Intel, Alibaba, Tencent, etc. Besides, the transformation and upgrading of traditional industries prompted by IT applications deserve more attention. All industries, the primary, the secondary and the tertiary, are penetrated by IT applications to different degrees, some of which are experiencing fundamental changes. Profound changes are going on in such traditional service industries as commerce and trade, logistics and finance. New characteristics as intelligentization, networking, modularization and flexibility can also be seen in the manufacturing sector. IT applications not only bring technological revolution but also promote plenty of innovative business models. They even have a significant impact on people’s ways of thinking and doing things. The impact of IT applications is so unprecedented and profound that it merits our thorough understanding.

Facing the strategic opportunities brought by IT applications, governments of all countries take the initiative to make strategies to direct industrial transformation and development. The US government, usually opposed to making industrial policies, made the “Reviving American Manufacturing” strategy, in which the integration of the new generation of information technology and manufacturing industry is the main idea. In 2010, the German government issued High-Tech Strategy 2020 for Germany, putting forward the initiative of “Industry 4.0”. In 2013, its working group published Securing the Future of German Manufacturing Industry: Recommendations for Implementing the Strategic Initiative INDUSTRIE 4.0, in which “Industry 4.0” featuring the integration of industries and IT is called the fourth industrial revolution, after mechanization, electrification and informatization. Some other developed countries also made similar strategies.

The Chinese government attaches great importance to IT-driven economic transformation. As early as 2002, at the 16th Party Congress of the Communist Party of China, the Central Committee put forward the guiding principle for the new type of industrialization road. That is,“promoting industrialization by informatization, and in turn, accelerating informatization by industrialization”. The 17th Party Congress put forward the idea of “integrating informatization with industrialization”. The 18th Party Congress required deeper integration of informatization and industrialization. The Report on the Work of the Government in 2015 proposed strategies of the “Internet Plus” and “Made in China 2025”.

For major countries in the world, it has become decisive whether or not they can take IT opportunities to advance economic transformation and development in order to take the lead in global competition. As China’s economy enters thenew normal, China is facing a tough task of stepping across the “middle-income trap”. Therefore, if China can make good use of the opportunities of IT-driven economic transformation, it will be of great strategic significance for China not only to provide a new driving force for the economic development, but also to enable China to surpass the developed countries at this opportune time just like overtaking on a bend.

II. Advantages and Challenges of China’s IT-Driven Economic Transformation and Upgrading

To achieve IT-driven economic transformation by making use of the opportunities, China faces many advantages as well as challenges. It is important to make thorough analysis and sound judgment. It is also important to amplify the strengths and avoid the weaknesses.

1. Advantages

First, China has a solid basis of IT industries. With the IT industry having developed rapidly and vigorously for so many years, China has become the world’s largest exporter of IT products and the second largest producer of IT products, only next to the US. Of all leading enterprises in the IT industry worldwide, no matter they are hardware or software providers, most of them have investment, production and R&D in China. Plenty of important links of the world’s IT industry chain gather in China. Domestic enterprises develop fast, producing many influential IT products makers in the world such as Huawei, ZTE, Lenovo and Inspur. China also has some top IT service providers in the world in terms of their business scale such as Baidu, Alibaba and Tencent. Among them, Huawei, ZTE and Tencent all ranked among the world’s top 25 companies having the most patent applications in 2014, which best demonstrates the ability of R&D and innovation of China’s domestic enterprises. China not only has made Milky Way (Tianhe) computer with the world’s fastest computing, but also has growing influence in setting the international standards for the information communication technology. It has established standards with their own intellectual property rights, represented by TD―SCDMA, AVS, WAPI, etc.

Second, the domestic market is full of huge potential. The global market of information products and services is being formed, whereas the domestic market scale is still important in many ways. China enjoys a great domestic market. As of December 2014, China has 649 million internet users, representing 47.9% of the whole population, much more to be expected. With the popularity of smart phones, 557 million internet users surf the internet via smart phones, by which the cost for popularizing the internet is greatly cut. The volume of e-commerce transactions surpasses that of the US, and ranks No. 1 in the world. This huge domestic market provides advantages for the innovation of both IT and business models, providing conditions for cultivating a large number of internationally competitive enterprises for the “new economy”. In spite of this, what is more worthy of attention is that as the world’s largest developing economy, there is a great gap between many of China’s traditional industries and those of the developed economies, with much potential for IT applications to transform them. In all fields, from agriculture to mining, from manufacturing to service, information technology is being applied, to various degrees, in transformation and upgrading. In some cases, traditional industries take the initiative to apply information technology; while in other cases, “new economy” enterprises take the initiative to penetrate into traditional industries. This historical process has begun. Despite the differences in the progress made in different sectors, they are generally in the primary phase where IT applications promote traditional industries. In the future, this process will accelerate and enjoy a great potential.

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