Digital sector development will shape global trade in the future

Digital trade, once a technical term largely confined to industry insiders, has now emerged as a cornerstone of global economic activity. With the world facing slowing growth and increasingly complex trade relations, China's digital trade has managed to rise above the tide, showcasing its remarkable level of resilience.

But China's success in the digital economy is not limited to these figures. Digitally deliverable services and cross-border e-commerce increased rapidly, too. Most remarkably, the release of Black Myth: Wukong, a Chinese-made game, catapulted to the top of Steam's global charts, reflecting how digital entertainment and culture are becoming integral to China's digital export success.

Black Myth: Wukong is perhaps the most striking example of China's rise in digital trade. For many, this game is more than just a success story in entertainment, because it represents a moment when China's digital exports — traditionally dominated by tech giants such as the United States and European Union — commanded serious attention of the world. This shift is emblematic of a broader change: China is not only consuming digital technologies but also shaping them, setting the stage for a new era of global digital leadership.

A key factor behind China's rise in the digital area is its forward-thinking policies. From the Three-Year Action Plan for Digital Commerce (2024-26) to the promotion of reform and innovative development of digital trade in 2024, the policies have been designed to expedite innovation, attract more global investment, and ensure China remains competitive in the digital economy. This shows China is setting the future agenda for global digital trade.

However, as with any success story, there are complexities that lie beneath the surface. One of them is the structural imbalance in China's digital trade. While China has made remarkable strides in digital services and products, its reliance on outsourcing in information and communications technology services puts it at a disadvantage in the global value chain. Despite being a leader in the production of digital goods, China still faces significant barriers to moving up the value chain, especially when it comes to high-tech services. This means that while China's digital economy is growing, there is still room for improvement in its structure.

The complexities of digital services are rapidly increasing. With more countries developing their digital economies, digital trade governance is becoming increasingly difficult. As such, China's challenge is to not just expand its digital economy but also create a governance framework that can keep pace with the global changes in the field. This calls for enacting regulations that foster innovation and meet global standards. To maintain its role as a global digital leader, China must do more than simply follow the rules; it must help shape them.

Another challenge is the restrictions on cross-border data flow. Many countries have implemented data localization laws on the pretext of safeguarding their national security, when the reality is that such measures are barriers to digital trade. As China's digital trade continues to expand, it must find a way to balance its own and other countries' national security concerns with the need for open data flow — since the digital economy thrives on data, restricting its development will stifle innovation and global collaboration.

There has been a rise in the number of "unicorns" and high-growth companies, but more is needed to ensure China remains a leader in the digital sector. By providing subsidies, tax breaks and funding for high-tech startups, China can create a thriving ecosystem of innovation that will drive the digital economy forward.

The existing global digital trade regime is dominated by a handful of developed countries, but their dominance is increasingly being challenged. China has the opportunity to break that monopoly and play a pivotal role in establishing fairer, more inclusive rules for digital trade. The digital economy is global in nature, and to remain a dominant player in it, China must ensure that its voice is heard at the global table.

Looking ahead, China's digital trade future will depend on how well it meets these complex challenges. The opportunities are immense but so too are the risks. The world is entering an era where digital trade will define the global economy, and China has an opportunity to play a pivotal role in this transformation.

The author is a professor of the School of Economics at Xiamen University and a deputy to the 14th National People's Congress. The views don't necessarily reflect those of China Daily.

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