Illustration: Peter C. Espina/GT
Recently, Vice Finance Minister Zhu Guangyao stated that the G20 finance ministers and central bankers had reached a consensus that they would make the G20 High-level Principles on Digital Financial Inclusion a priority at the Hangzhou summit and seek ratification of the principles by G20 leaders.
A bourgeoning new economy and new finance, while enabling enormous convenience, has caught various countries unaware in terms of regulations. Many of the ideas related to the new wave of economic and financial scenarios have not even been conclusively defined. As such, there is still a great deal that needs to be fleshed out, both in the connotation and extension of the idea of digital economy.
Narrowly defined “digital economy” is the transaction activities enabled through the Internet between enterprises, consumers and the government. The digital economy is mainly about products and services. The production, distribution and sales of both are all reliant on digital technologies. A deeper analysis of the digital economy reveals that it comprises the entire IT industry and various sectors such as big data, Internet finance, cloud computing, the Internet of things, sensory technologies, online commerce, virtual reality, augmented reality and artificial intelligence. All these areas have been profoundly influential on the development of the global economy. The digital economy is, at its very core, a fourth industrial revolution that is upon us.
Spontaneous innovation, market orientation and non-equity financing for entrepreneurial ventures are typical of the digital economy at the current stage, which also accounts for the boom of digital economy in countries including China. The fact that governments worldwide have yet to intervene on a large scale is because the digital economy is too new and tech-heavy. As various countries are still trying to adapt to the technological improvement, it has been inevitable that they would fail to respond in terms of regulatory updates.
From the global economic development point of view, the digital economy is considered an outcome of innovation which has a strong capacity to resist financial crisis and can emerge as a new growth engine for the global economy. All countries across the globe have high hopes that the digital economy will pull the global economy out of the muck.
Traditional finance and various other industries of all countries have taken a hit from the fallout of the 2008 global financial crisis, however, the likes of Apple, Google, Facebook, Microsoft and Amazon, typical of the emerging new industries, have basically remained unscathed. In China, companies such as Alibaba, Baidu and Tencent also appear to have been hardly impacted.
The rapid development of the digital economy following the financial crisis has turned out to be a powerful engine for the global economy. It would seem that whatever country can develop its new economy at a faster pace and in a more effective way is able to recover from its predicament faster. The rise of world-class digital firms such as Apple has enabled the US to stay ahead of other countries in this fast recovery phase.
The digital economy is also a great contributor to the Chinese economy, which continues to grow amid sluggish domestic and external demand. In 2015, China’s electronic information manufacturing sector hit 11.1 trillion yuan ($1.66 trillion). Also, in the first half of the year, online sales of various tangible goods rose by 26.6 percent from the year before, official data showed.
It should be noted that the digital economy has had a mix of positive and negative impacts on the economy. If there is no quick fix to address the negative effects, the healthy development of the digital economy will also be at risk.
Therefore, the G20 High-level Principles on Digital Financial Inclusion that is set to be submitted at the upcoming Hangzhou summit is worth anticipating. These principles are envisioned to help foster the development of the digital economy, as well as promote the implementation of specific digital economy projects.
Certainly, the principles must be inclusive in order to address the present situation and current developmental stage of the digital economy in various countries and regions. The digital economy should not be harassed by control, but rather escorted in a protective, encouraging and regulated manner. In addition, the principles should not be coercive, but capable of drawing the road map for the future development of the digital economy.