Thread by @kendraschaefer

Yesterday, CPPCC bigwig and econ policy advisor Liu Shijin published an essay outlining the next evolution of China's digital economy — it's a pretty enlightening read. Good bits below. 1/12 finance.sina.com.cn/tech/2022-01-1…

Backstory: Lately, Chinese policymakers have been vocally critical of the ways in which the digital economy cannibalizes the real economy. Examples: e-commerce decimates offline retail, or tech startups hog all the capital while traditional SMEs struggle to get funding. 2/12

The loud criticisms, coupled with China's anti-monopoly drive, has led some to assume that the digital economy has fallen out of favor with policymakers and the real economy is the new policy darling. Liu says everyone is missing the point. 3/12

The point, Liu says, is that China's digital economy is growing up. It used to hang out at the mall, disrupting pizza delivery or whatevs. Now, it's time for the digital economy to shoulder adult responsibilities, and help the real economy function better. 4/12

Liu: "In recent years, the development of the digital economy was mainly focused in retail and wholesale, social media and other fields, and was aimed at individuals. In other words, it focused on how to reach the consumers after a product is produced." 5/12

"Next, the focus of digitization will gradually shift to the production process of those products. If the digitization of consumption and circulation was the opening act of digital economic development, then the digitization of production is the headlining act." 6/12

"Emphasizing the development of the real economy is not simply about returning to the traditional real economy, nor is it just focusing on the development of material production." 7/12

"In fact, there is major over-capacity in the traditional real economy, and there may not be market demand for that excess if the supply is increased." 8/12

"Therefore, we are faced with two potential 'real economies,' one is the real economy with declining traditional competitiveness and serious excess; the other is the new real economy enabled by digitalization and greatly improved in productivity." 9/12

"The real challenge we face is to achieve that transformation, to turn the traditional real economy into a new real economy with enhanced productivity after digital empowerment." 10/12

This is why China's new digital policy planning documents — including the 14th Five-year Plan for Informatization, released 2 wks ago — are so heavily focused on the digital transformation of manufacturing — even more than previously. (The plan: cac.gov.cn/2021-12/27/c_1…) 11/12

The push to maneuver China's digital economy and its real economy into a state of symbiosis is shaping up to be one of the biggest tech policy storylines over the next couple of years, and one global governments will read with interest. 12/12