HOW BIG IS CHINArsquo;S DIGITAL ECONOMY?
Authors: Alicia Garciacute;a-Herrero AND Jianwei Xu
May 2018 SSRN Electronic Journal
DOI: 10.2139/ssrn.3237275
2 What do international measures of the digital economy tell us about China?
International efforts to measure and compare the size and growth of the digital economy have only started recently. In the 2017 G20 Digital Economy Ministerial Declaration1, the IMF and OECD were tasked with working on a programme to analyse the impact of digitalisation on measures of GDP (G20, 2017). An earlier attempt was made by the OECD in a series of publications on the digital economy outlook (OECD, 2012, 2015, 2017b).
Notwithstanding these analyses, the size of the digital economy has so far only been officially
reported in some developed countries, such as Japan and Korea. In both cases, the reported share of
value added in information and communication technology (ICT), a core activity of the digital economy,
as a percentage of total value added, is among the highest in OECD countries. Unfortunately, no
comparable information exists for China (Figure 1 and 2).
Notwithstanding these analyses, the size of the digital economy has so far only been officially
reported in some developed countries, such as Japan and Korea. In both cases, the reported share of
value added in information and communication technology (ICT), a core activity of the digital economy,
as a percentage of total value added, is among the highest in OECD countries. Unfortunately, no
comparable information exists for China (Figure 1 and 2).
Not withstanding these analyses, the size of the digital economy has so far only been officially reported in some developed countries, such as Japan and Korea. In both cases, the reported share of value added in information and communication technology (ICT), a core activity of the digital economy, as a percentage of total value added, is among the highest in OECD countries. Unfortunately, no comparable information exists for China (Figure 1 and 2).
The only internationally comparable data available for China in the OECD Digital Economy Outlook relates to ICT exports (OECD, 2015). It shows that China is a leading power in the gross exports of ICT goods (Figure 3). Our calculation using the latest trade data from the World Bank World Development Indicators database confirmed this by showing that the value of ICT goods exported by China reached approximately $600 in 2015, equivalent to 26 percent of total exports from China (Figure 4).
ICT also plays an important role in Chinarsquo;s exports of services, accounting for 40 percent of Chinarsquo;s services exports. The ICT export services include the wholesaling, renting of machinery, equipment and supplies, and the telecommunication and computer related services. This is a higher share than those of Japan or the US (Figure 5) although lower than those of the Philippines, Israel, Brazil, Sweden, Germany and France. This translates into China having a quite small share of global ICT service exports, at 6 percent (Figure 6).
While Chinarsquo;s ICT exports look quite massive, based on comparable data, this does not give a full picture of the size of Chinarsquo;s digital economy. This is particularly the case when focusing on the value added from the digital economy, because ICT products, such as computers and smartphones, are assembled in – and exported from – China, but with a good part of their value added generated elsewhere. Chinarsquo;s value added embedded in its ICT exports is only half of total value of the ICT exports, which brings Chinarsquo;s share of global ICT exports down to 11 percent (Figure 7), below the US share.
The marked difference between Chinarsquo;s share of ICT gross exports and value added in ICT exports points to the importance of using value added data to estimate the size of the digital economy in China.
3 Official and private measurements of Chinarsquo;s digital economy
During its G20 presidency in 2016, China supported global efforts to agree on a definition of the digital economy within the G20 Digital Economy Development and Cooperation Initiative. That initiative defined the digital economy as: “a broad range of activities that include using digitalised information and knowledge as the key factor of production, modern information networks as an important activity space, and the effective use of ICT as an important driver of productivity growth and economic structure optimisation”.
However, when it comes to the actual measurement of the digital economy, it is much less clear that there is consensus, including in China. The mainstream view in China, voiced by the Chinese National Bureau of Statistics (NBS) is that the sectoral-based analysis adopted in many OECD countries might overlook that only some products in some sectors are linked to the digital economy while others are not. This is why the NBS has started to move to product-level data within some relevant sectors. In other words, the NBS believes a better strategy is to also measure the digital economy at the product level (NBS, 2017b). While relevant, there is no doubt that measuring the digital economy at the product level is very challenging, as product-level information is not widely available for all sectors. Some internal trials in China on product-level measurement of the digital ec
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