Time to revitalize platform economy domestically and beyond
With China adjusting its policy on COVID-19 since Jan 8, China's economic recovery is widely expected to accelerate. And the platform sector should play a bigger role.
China's annual economic tone-setting Central Economic Work Conference, which concluded on Dec 16, stressed the need to vigorously develop the digital economy, strengthen normalized supervision, and support the platform companies so they can help boost economic growth, create more jobs and compete in the global market.
The platform economy has become a significant driver of economic and social development because it has been playing an important role in optimizing resource allocation, accelerating industrial upgrading and promoting economic growth.
China's platform economy has been developing at a slower rate since 2021 due to the macroeconomic downturn, declining demographic dividends, strengthened supervision and the fast-changing international landscape. Fortunately, the Central Economic Work Conference said the country will support the development of the platform economy despite the various economic challenges.
The conference also said the foundations for China's economic recovery have yet to be strengthened, and the country is still under pressure due to shrinking demand, supply shocks and weakening expectations amid an uncertain global environment.
The platform economy was affected by the macroeconomic downturn last year, and its growth rate dropped by 11.2 percent year-on-year in the first 11 months even though online retail sales increased by 4.2 percent, data from the National Bureau of Statistics show. The depressed consumer confidence is reflected in the declining revenues of big e-commerce players such as Alibaba, JD and Pinduoduo.
However, the Chinese economy is very resilient, and it still has great potential and vitality. Since the fundamentals sustaining its long-term growth have remained strong, the economy is expected to recover this year thanks to the optimized COVID-19 strategy and resumption of full economic activity, including production.
International experiences show a country's consumption market recovers due to shifts in the COVID-19 prevention and control strategy after a wave of rising infections. Accordingly, the Central Economic Work Conference proposed measures to raise public expectations and boost people's confidence in the country's continuous development. This means efforts will be made to stabilize growth, employment and commodity prices so that major economic indicators stay within a given range, creating a healthy environment for the platform economy.
China can provide more resources for the platform economy because it leads the world in terms of information technology infrastructure construction, and has built the world's largest and technologically advanced network facilities, covering 500 million families with gigabit fiber-optic networks, with 2.25 million 5G base stations.
By the end of August last year, the number of mobile internet of things connections in China had reached nearly 1.7 billion. China's scale and ratio of mobile IoT connections have surpassed those of many developed countries such as the United States, Japan, the Republic of Korea and Germany.
Last year, the authorities introduced several policies to promote the healthy development of the platform economy in a bid to support platform enterprises that had been suffering due to declining revenues and shrinking market capitalization since 2021. In fact, an array of positive signals sent by the central government has laid a solid foundation for the growth of the platform economy this year onward.
Well-regulated and healthy development is a prerequisite for platform enterprises to receive government support. So they should not repeat past mistakes such as making efforts for rapid expansion and trying to artificially create low-level, homogenized competition. Instead, platform enterprises should pursue high-quality development, boost innovation in technology and create a better future for Internet Plus.
Moreover, improving the level of supervision is necessary to facilitate the healthy development of the platform economy. For example, many developed countries have strengthened supervision on platform enterprises in recent years, which bolstered the growth of innovation-oriented companies.
China's revised Anti-Monopoly Law, which was implemented last year, conforms to the rule of competition for the platform economy. According to the law, platform enterprises should not use data and algorithms, advanced technology and capital, and not misuse rules to indulge in monopolistic behaviors. Besides, the authorities have been strictly regulating monopolistic behaviors, in order to create a fair and transparent business environment this year.
Moreover, the development model of the platform economy is undergoing structural changes, and platform enterprises are expeditiously transforming their businesses, boosting innovation and raising their competitiveness levels. As such, they are expected to enter a new stage of business expansion and cross-border e-commerce in 2023.
Platform enterprises are adjusting their investment and marketing strategies according to the development of industrial internet systems because of the slow growth of consumer internet services and great potential of the industrial internet, which is reflected in the official recognition for industrial internet platforms developed by internet giants such as Tencent, Alibaba, Baidu and JD last year.
That the industrial internet has a very bright future is beyond doubt. As the world's manufacturing and internet powerhouse, China's complete industrial system, innovative ICT sector and vast domestic market can help realize the huge potential of the industrial internet and help platform enterprises' transformation and upgrading.
That Chinese platform enterprises are extending their footprint to overseas markets is well known. For example, Tencent has been repeatedly emphasizing since 2021 that it aims to earn half of its gaming revenue from outside China. And TikTok actually topped the list in terms of average time spent on a platform by Android users at 23.6 hours a month, followed by YouTube and Facebook, in the first quarter of 2022.
Furthermore, China is expected to deepen reform and further open up its economy so as to boost cooperation among digital economies around the world, facilitate the development of the Digital Silk Road, and promote multilayer digital economy partnerships and high-level trade agreements. This means China's platform enterprises will not only grow domestically but also extend their operations across the world.
The author is deputy director at the Policy and Economic Research Institute, China Academy of Information and Communications Technology.
The views don't necessarily reflect those of China Daily.