Unpacking the Impact of China's Internet Plus Strategy on Digital Transformation

China's "Internet Plus" strategy utilises the scale of its digital economy to promote innovation and efficiency in manufacturing and traditional industries. By integrating mobile Internet, cloud computing, big data, and the Internet of Things (IoT) into various sectors, the strategy aims to modernize industries and develop new economic forms, fostering a networked, intelligent, and service-oriented industrial ecosystem.  

The country has invested heavily in solar PV manufacturing, attracting a large share of global investment and expanding production capacity significantly. 

China's Internet Plus strategy is all about achieving scale; the sheer size of the Chinese internet user base encourages continuous experimentation and enables digital players to achieve economies of scale

While many countries around the world have undertaken comprehensive policy design and implementation for digital transformation; China truly exemplifies that the success of digital transformation efforts owing to the effectiveness of the long-term policies and strategies put in place. China has made the digital economy a critical part of its national development strategy and has developed detailed roadmaps and incentives to shore up the sector (Wu 2022). The country saw over 40 years of uninterrupted growth, often with unorthodox policies the textbooks said would fail (Pan 2018). 

China’s embrace of the internet, within limits, helped make it a leader in technology. “China’s policies were tremendous, they were like a sponge absorbing water, money, technology, everything” (Pan 2018). China now leads the world in the number of homeowners, internet users, college graduates and, by some counts, billionaires. Extreme poverty has fallen to less than 1 percent. The sheer size of the Chinese internet user base encourages continuous experimentation and enables digital players to achieve economies of scale quickly (Wu 2022).

Fintech[1] development in China can be traced back to 1993 when the People’s Bank of China and other banking financial institutions began to digitalize their back offices and services; whole more recently emerging technologies like, big data, cloud computing, artificial intelligence, and block chain, are now being merged into the field of financial business to change or create new financial products or services, lower transaction costs, and improve operational efficiency (Zhou 2022). Additionally, and quite significantly, since mid-1990s, China has adopted a national policy of indigenous innovation, which aims to support Chinese firms to have a stand in key technologies (Gao 2015).

Given where China began the decade, today is stunning. The rise of two major digital payment platforms, Alipay and WeChat Pay, has transformed China’s payment system, reaching near ubiquity in under a decade. Starting from zero at the beginning of the decade, these two payment platforms are now the largest system in China and among the largest in the world (Klien 2020). Fintech Development Plan for 2022-2025, seeks to further develop China’s fintech sector and drive the digital transformation of finance in the country over the next four years (Zhou 2022).

Towards evolution of regulation to keep pace with the dynamic sector, China’s public sector has been supporting innovation. The Hong Kong China Monetary Authority (HKMA) launched FinTech Supervisor Sandbox (FSS) in 2016, to provide a testing environment for banks and tech firms to innovate and create new FinTech products with relaxed supervisory requirements; its regulatory technology (or “RegTech”) is considered to hold great potential for improving the interrelation between banks and regulators in Hong Kong China due to its capability of enhancing regulatory processes in the financial sector. From 2016 until June 2019, 62 new products and services have been tested as part of the pilot trials, of which 34 have been successfully introduced to the market (Angela Attrey 2020).

Along with "Made in China 2025," China's Internet Plus strategy is an important strategy to realize innovation as a new growth engine for China. The strategy will be responsible for promoting industrial advancement and formulating an effective response to the 4th Industrial Revolution (Lee, et al. 2019).

The Digital Silk Road (DSR) initiative, launched in 2017, is part of the Belt and Road Initiative and aims to promote digital connectivity and cooperation among Association of Southeast Asian Nations (ASEAN) (Gordon and Nouwens 2022). The policy approaches and sustained implementation reflect China’s commitment to the development of a robust futuristic digital economy, the contours of which are already visible.

China’ holds global leadership in solar PV (photovoltaic) technology and manufacturing and holding the majority of global solar PV manufacturing capacity. That dominance stems from significant investments, economies of scale, long term prioritization of the investments and technological leadership developed over time.

[1] Fintech, or financial technology, is a combination of the terms, “finance” and “technology,” which is a catch all term to describe any business that uses technology to enhance or automate financial services and processes.