Building an e-Silk Road

China can develop its trade in digital services by focusing on countries participating in the Belt and Road Initiative

The digital service trade experienced a rapid growth trend in China during the 13th Five-Year Plan period (2016-20), with its volume increasing, and innovative business forms and models further promoting its development.

Ministry of Commerce data show that the volume of the digital service trade in China grew from $200 billion in 2015 to $272.2 billion in 2019, rising from 31 percent of the total volume of the service trade to 35 percent. And United Nations Conference on Trade and Development data show the total value of exports of digitally-delivered services grew from $93.3 billion in 2016 to $131.4 billion in 2018.

In the 14th Five-Year Plan period (2021-25), the trade in digital services will open up a world of opportunities for China. Digital technology has not only stimulated the creation of new business models, but also enabled traditional services to go digital.

There are huge differences in the digital industries of countries involved in the Belt and Road Initiative, giving rise to cooperation opportunities in the fields of information and communications infrastructure construction and information technology outsourcing.

By the end of 2019, China had signed 199 cooperation documents under the framework of the Belt and Road Initiative with 137 countries and 30 international organizations. International cooperation on digital trade is also deepening. Under the framework of the World Trade Organization, countries have reached agreements on electronic signatures, paperless trading, transparency, electronic transmission, tax exemptions and other related content.

However, there are some restrictive factors. First, China lags behind the United States and the European Union in terms of technological innovation ability. China's basic software development depends heavily on foreign countries for a host of reasons. Intellectual property protection in China's digital economy still needs to be strengthened. Innovation focuses mainly on the business models, rather than technology, by imitating those of foreign enterprises.

Second, the digital industry in cities is vastly different from that in rural areas. In most rural areas, specifically underdeveloped and remote areas, the broadband network penetration rate is low. By June 2019, the number of internet users in China's rural areas was 225 million, accounting for 26.3 percent of total number of internet users in China; while in the cities and towns, the number of internet users reached 630 million, accounting for 73.7 percent.

Third, although China has introduced rules for digital trade and participated in discussions on the rules for international digital trade, it wields little influence when it comes to international governance of digital trade because of domestic digital trade laws not introduced in a timely manner and difficulties in transforming domestic standards into international rules.

In the 14th Five-Year Plan period, China is expected to seize the advantages of the rapid development of the global digital economy and digital trade by fully leveraging the constant improvement in China's basic digital infrastructure and the huge potential of its own market and the broad market created by the Belt and Road Initiative.

First, China should strive to fully exploit the advantages of its scale of trade, boost digital service exports in the fields of trading-related finance, insurance, settlement, e-commerce, supply chain management and others, and increase its overall value-added level in the international digital services trade.

Relying on its huge domestic consumption market, China can increase the scale of trade of digital education, digital entertainment, digital medicine, digital publishing and other fields. It can construct a Digital Silk Road by improving digital infrastructure and boosting cooperation in the digital economy with the countries involved in the Belt and Road Initiative.

Second, new business forms and models for the digital services trade should be encouraged. China should perfect the digital intellectual property protection system and strengthen protection of patents, digital copyright and personal privacy. It should insist on an open environment of cooperation and innovation.

Third, China should encourage enterprises to put more resources into the development of technology platforms and the implementation of cloud computing, artificial intelligence, blockchain and other new digital technologies. Those enterprises that lack professional digital technology teams will be encouraged to use the services of third-party professional organizations to realize digital transformation.

Fourth, China should improve the level of liberalization and convenience in its digital service trade. With national information security and economic security well protected, China is able to open its door wider to the global players in the service sector. China should enhance the cross-border exchange of data by and continuing to shorten the negative list and promoting innovative service trade pilot projects in the pilot free trade zones and Hainan Free Port.

Fifth, given its advantages in information technology services, digital content services and international services outsourcing, China should have more say in the framing of the rules for the digital service trade, and clarify and promote its stand on the rules for the digital service trade. China could promote rules for the digital service trade in regional and bilateral free trade agreements, and enhance the mutual recognition of standards with its main trading partners.