China seeks full digital benefits
Editor’s Note:
Innovative business models matter considerably for an increasingly platform- based global economy, which seems to be particularly the case in China where indigenous digital platforms have risen to global prominence. Meanwhile, concerns have arisen about the compatibility of the digital platform boom and China’s efforts to beef up the real economy, and also about the country’s true competitiveness and capacity for innovation. In a recent interview with the Global Times, Jimmy Greer ( Greer), senior business insights manager at the Association of Chartered Certified Accountants ( ACCA), addressed these concerns.
GT: How do you understand the relationship between the digital platform economy and the real economy, in China’s case in particular? Greer: The boundaries between the real economy and the digital one are coming down and in most cases disappearing. Where boundaries still exist, they will continue to be eroded.
Why do digital platforms continue to take an oversize role in our economies? The positive externalities related to their efficiencies and network effects cannot be matched. But the two are intrinsically linked – nowhere more so than China. Let’s remember, these are early days. The challenge for the next step lies around deeper integration of digital and “real,” continuing evolution and better accounting for what happens in the digital economy and how that is part of the real world.
GT: Is China’s booming digital platform economy actually hurting its real economy?
Greer: Many economies are, in the near- term, experiencing negative displacement effects because of digital platforms. But let’s avoid mischaracterization: While there is a big shift from offline to online, we shouldn’t remove digital from our understanding of the real economy. In many ways, digital platforms are allowing more people to enter marketplaces than was previously possible – enabling more business to happen. Of course, there are issues that digital platforms can exacerbate, such as lower employment and fraud, that need to be better understood and worked out. Better iterations of the digital platform economy are coming and are reimagining de- materialized, new types of digital value.
GT: Which of the three countries – China, the US, and India – is set to take the lead in the platform- based economy? Why? Greer: China is already far ahead of the others in the way that platforms work and how they are integrated into all areas of people’s lives and work. But when thinking about other countries, it is important to understand contexts and look at specific areas where certain parts of the world are using platforms in specific ways that could provide learning for others.
GT: Are there any business models pertaining to China? Greer: While we know a lot about digital platforms, one area that has the potential for a great impact is mass customization 2.0. As hardware costs fall, in the same way that software costs once did – access to high quality equipment is growing. This means that “in stock” is being replaced by “on demand.” The ability to download bespoke designs of products and “print” them on demand is on the way to becoming a mass market activity.
This may radically alter the way cities are organized. It also touches on another area where people want to build and make more things themselves and not just buy everything. This cultural side is very powerful and often the secret ingredient for widespread adoption of a good commercial proposition.
GT: How can China become a global leader in innovation in terms of identifying and adopting new business models? Greer: Just take a look at bike sharing. This new breed of companies are building on the pioneering work of the original Chinese platforms and are now looking to expand their service internationally, fast. The world continues to become smaller; distant markets are closer together. They will be providing an innovative service that is unavailable elsewhere and taking their brands to new markets. This is just the beginning.
GT: The Belt and Road initiative aims to spur e- commerce and digital economic growth. Will it help in creating a more balanced global economy that is driven by new business models? How much of a role will China play in fostering innovation- driven growth along the route? Greer: The digital aspect of the Belt and Road initiative must not be underestimated. We are already seeing many of the services provided by Chinese Internet companies make their way into other countries. The Belt and Road can facilitate this further. The challenge for platform owners as for all business owners is to create an enabling environment that provides real, tangible, enduring benefits for users of services. Despite global ambitions, this requires strong local knowledge and cultural specificities that define how people do things in different regions of different countries.