The Self-Reliance Maneuver – China to Boost its Digital Economy in a Bid to Offset Trade War Imbalances

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Digital Economy

As the world’s second largest economy looks forward to drift away from relying on heavy industries, China pledged to provide an impetus to its digital economy on 26th September 2018. China’s digital landscape being a US$ 3.8 trillion economy, the move in further enhancing it was mainly to create job opportunities across new sectors including AI (Artificial Intelligence) and big data.

In the middle of a long-term restructuring, a decline of low-end sectors and rise of high value offering factories that develop products from robotics to drones has been witnessed in China. However, intense trade war between China and its largest trading companion – the United States – has stoked major concerns inducing a sense of jeopardy to its “Made in China” plan – a Beijing initiative to carry out the shift toward high-end manufacturing.

Recently, the Government of China and agencies including NDRS (National Development and Reform Commission) have been upholding their commitment toward long-term restructuring, which has been considered as a means by Beijing to rely less on trade or external drivers of growth. Against this backdrop, China has been paving inroads for Artificial Intelligence, Internet of Things (IoT), cloud computing and big data in its already-huge digital economy, according to NDRC. The agency also revealed that these sectors could be the new drivers for job creation by end of 2025. Embarking a path on self-reliance with rise of trade protectionism and unilateralism, China is focused on conducting inspection tour of high-end factories in the Heilongjiang province.

China accused Washington of using trade as a measure to suppress development of the country. With ongoing trade ward between China and the US, the move of self-reliance resembles a subtle measure to regroup all development plans in the Chinese territory in a step-by-step manner. NRDC also revealed that steps for drawing financial support from capital markets in a bid to assist expansion of new industries are underway. Recently, NRDC and China Development Bank signed an agreement to offer around 100 billion yuan (US$ 14.55 billion) to achieve the much “banked-upon” digital push.

With this strategic maneuver, China’s economy is expected to flourish in the years to follow, creating potential growth pathways offsetting the trade imbalances and tensions created on account of the US – China trade war. According to the China Academy of Information and Communications Technology report, digital economy of China rose by about 18 percent to touch 26 trillion yuan (US$ 3.8 trillion) in 2017, which equals to about a third of the country’s GDP. This move will digitalize all traditional sectors driving more number of workers to switch jobs and also attract foreign talent in the country. Beijing would be banning new capacity addition across sectors such as textiles, food, chemicals and furniture, however keeping large focus on manufacturing and development of industrial robots and new energy vehicles.

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