Economy

Technology protects the Chinese economy

Technology protects the Chinese economy

Despite being seriously affected by the lockdowns as a result of Covid-19, China's economy has shown resistance tests. However, it has not fully recovered: some activities, especially in the services sector, have not yet recovered. Still, unlike much of the world, China seems unlikely to end up mired in a prolonged recession, thanks to its rapid digital transformation.

China's digital economy was growing strongly before the pandemic. In 2018, it was already equivalent to 34.8% of GDP. While this is barely a third of the size of the digital economy in the United States, it presupposes years of continued growth in which the growth of nominal GDP was exceeded. The Covid-19 crisis will reinforce this trend.

While the pandemic has destroyed thousands of businesses and industries, it has also markedly accelerated the penetration of digital technologies. Unable to leave their homes, the families downloaded applications such as JD.com, Meituan, Eleme and Pinduoduo, which allowed them to buy groceries and meet their daily needs online.

Likewise, in the month after the school and institute classrooms closed and the university campuses were evacuated, students and teachers continued to work digitally, a shift that encouraged the rapid development of online learning and conference platforms. In the same way, companies took advantage of digital tools from communication platforms such as Enterprise WeChat and DingTalk to signing electronic contracts to keep their businesses running. In DingTalk, more than 20 million online meetings were started in a single day, with more than 100 million participants in total.

Just as technology helped life continue during lockdowns, it has allowed China to ease some restrictions without putting public health at risk. A growing number of local governments are implementing the Alipay Health Code - a cell phone application that assigns users a color code indicating their health status. That way they know when they should quarantine, when they can safely visit public spaces, and when they can travel. This also allows authorities to track and mitigate risks. If a person, for example, visits an airport or a hotel, they must show their personal QR code. A quick scan will show if you have visited a high risk area in the last 14 days. This tracking - not just while traveling, but also in schools, offices, and other contexts - is essential to avoid another Covid-19 outbreak and further lockdowns damaging to the economy.

But the healthcare applications of new digital technologies extend far beyond that and are transforming the entire Chinese healthcare industry. Beyond the rise in online drug purchases, 5G-based remote medical consultation platforms such as Ping A Good Doctor have been flourishing and laying the foundations for a new industrial model.

During the initial outbreak in Wuhan, when local hospitals were overflowing with Covid-19 patients, those platforms allowed people to consult with medical experts from Beijing via video. As 5G network coverage improves in China, those remote consultations - including hospital diagnostics, referrals and consultations, and health management services - will become more and more accessible. This will be particularly valuable for families who currently lack easy access to better medical resources, for example because they live in isolated areas.

Technology also enables health research and development. For example, Huawei's EIHealth medical intelligence app is being used for viral genome research, antiviral drug development, and medical testing. It has also accelerated research into treatments and vaccines for Covid-19 and improved detection of the virus. And, thanks in part to algorithm-assisted testing, benchmark hospitals in China have already performed more CT scans in 2020 than in all of last year.

A similar digital transformation is revolutionizing China's financial industry. With 562 million users, China's mobile banking apps are the third-largest category of apps by consumer base after short video and shopping apps - at the end of March. Chinese mobile banking applications today average 50 million monthly active users.

Beyond making banking services more accessible, digital technologies have provided the opportunity for financial institutions to expand and improve their services. For example, by using large databases, cloud computing or artificial intelligence, commercial banks have substantially improved their ability to serve small and micro businesses and households in general.

Fintech companies have taken similar steps. Credit-based financing for small and micro businesses has long posed a challenge for institutions. However, with the help of Alipay and online banking services, Ant Financial served more than 16 million customers and provided 2 trillion Chinese yuan in credit last year. And it's not the only one.

The growth of China's digital economy has also been a boost for jobs. The China Academy of Information and Communications Technology reports that in 2018 the digital economy created 191 million jobs and accounted for a quarter of overall employment volume, with a year-on-year increase of 11.5%.

Among the main beneficiaries of these new jobs are young and academically educated citizens who today have more opportunities to work as independent professionals in a new type of sharing economy. The greater flexibility of the labor market brought about by digitization is likely the reason why urban unemployment has not increased significantly in recent years, despite the slowdown in GDP growth. While China is still lagging behind in some key technologies, there is no denying the tremendous progress in its digital transformation. This process will continue and even accelerate in the coming years, especially given the government's planned investments in new infrastructure, including 5G networks and data centers.

China may well be the only major economy to achieve positive growth this year. It owes it, in large part, to a decade of commitment to investing heavily in technology-driven structural transformation.

eleconomista.es

Offices

Barcelona

Plaça Francesc Macià 7, Plt. 17 - 08029 Barcelona (Spain)

+34 936 111 288 | +34 673 448 248

WECHAT: sfabogados2016

© Copyright 2020 EurochinaBridge. All rights reserved.