New blueprint calls for upgrades to infrastructure and expansion of service sector

China's latest plan to grow its digital economy will empower national digital transformation, shore up innovation and enable the government to offer more equitable public services, analysts said.

The State Council, China's Cabinet, unveiled the first five-year plan on the digital economy on Jan 12, highlighting the sector's role in reshaping the global economic structure and international competition, and rolling out targets for its development through 2025.

The plan laid out measures for upgrading national infrastructure, bolstering the role of data as a production element and promoting the digital transformation of industries. By 2025, the added value of core digital economy industries is expected to account for 10 percent of GDP, up from 7.8 percent in 2020.

The plan also pledged to further open up China's service sector, explore measures to widen market access for new business models in the digital economy and promote globalized development for emerging services such as data storage and cloud computing.

Ouyang Rihui, a professor of digital economics at the Chinese Internet Economy Research Institute at Central University of Finance and Economics, said the plan is of monumental significance to the growth of the national digital economy, and will entail more detailed policy initiatives from local authorities.

He noted that the plan has given priority to the development of digital infrastructure, a pillar of achieving digital economic prosperity that will also spur investment and drive overall economic growth.

The plan has set a target of increasing China's gigabit broadband users from 6.4 million in 2020 to 60 million in 2025 and promoting more commercial and large-scale use of 5G.

According to the National Development and Reform Commission, China has developed the world's largest optical fiber network and has the largest number of internet users, a total of 1.01 billion as of last June.

It also leads the world in the development of 5G, with a total of 1.39 million base stations and 497 million 5G device users as of last November, and it has been the world's largest online retail market for eight consecutive years, with online sales volume hitting 6.1 trillion yuan ($961 billion) in the first half of last year, up 23.2 percent year-on-year.

A key focus of the initiative is to shore up innovation capacity in key technologies, as the country seeks to boost the research and development of sensors, quantum information, telecommunications, integrated circuits, key software, big data and artificial intelligence.

The plan highlighted the need to enhance self-reliance in the development of key products and improve competitiveness in key industrial chain procedures.

China will continue to promote the healthy growth of the platform economy, encouraging companies to step up the integration and sharing of data, products and content and expand services such as online healthcare. New growth areas in the sector, such as smart sales, unmanned deliveries and smart manufacturing, will also be promoted.

Yang Fang, a senior researcher at the Institute of Digital Economy at Zhongnan University of Economics and Law in Wuhan, Hubei province, said the five-year plan ushered in strong measures to shore up China's semiconductor, software and cloud computing sectors, the bottlenecks of its digital economy.

"Only by harnessing key domestic technological capacity can China truly bolster its international competitiveness in the sector and ensure that its industrial chains are safe and manageable," she said.

According to the General Administration of Customs, chip imports were up 15.4 percent year-on-year in 2021, a figure China hopes to see decline as domestic technological capacity increases.

Another focus of the plan is to drive the digital transformation of industries, setting the goal of enabling 45 percent of industrial enterprises to be connected to industrial internet platforms by 2025, up from 14.7 percent in 2020.

China will launch a special initiative to empower small and medium-sized enterprises, encouraging them to scale up efforts to increase online promotion, remote cooperation and the development of digital offices and smart production lines.

Internet platforms and leading enterprises will be encouraged to help traditional businesses and SMEs achieve digital transformation, the plan stated.

Zhang Tao, CEO of Beijing-based business-to-business platform Yeebee, said that the plan will inspire businesses to invest more in the use and application of data resources and the research and development of digital platforms.

"Its release paves the way for businesses to harness information technology and cement the fundamentals of future growth," he said.

To elevate digitalization in the agricultural sector, the blueprint pledged to bolster the growth of smart agriculture and increase digitalization in production, processing, sales and logistics.

China will accelerate the growth of the industrial internet and encourage businesses to upgrade their facilities to 5G and time-sensitive networks, the plan said.

It highlighted the significance of amplifying the role of data as a production element, saying that China will support market players in collecting data in line with the law, improve their capacity to process data and expand the data services sector.

It also pledged to develop a standard system for data resources, including measures to improve the level of data management and data quality.

Yang said the country should continue to clarify protocols and pursue efforts related to the protection of personal privacy and data and manage the orderly flow of data resources.

She noted that another key aspect of the plan is to promote the development of a digitalized government, a critical move that will help build an institutional environment that is more stable, standardized, fair and transparent.

"This will help the government offer more equitable public services, reduce the cost of transactions and improve the vitality of market players," she said. "It will also enable the government to innovate and adjust its policies to amplify its role in guiding and driving market growth."

With the plan now in place, it is expected that 800 million residents will be registered for online government services by 2025, compared with 400 million in 2020.

To make social services more digitalized and wider-ranging, the plan pledged greater effort to encourage public services, including cultural and educational activities, healthcare, exhibitions, tourism and sports events, to go digital.