A McKinsey report of July 2014 shows that China's internet economy at 4.4% % of 2013 GDP ranks fifth in the world, ahead of the United States (4.3%), France (4.2%) and Germany (4.2%) but behind the United Kingdom (6.7%), Korea (5.9%), Japan (5.6%), and Sweden (5.0%).
China has 632 million internet users, compared with 277 million in the United States. However, China's smart phone penetration is 54% (US 69%), social netwodrking penetration 60% (US 73%), enterprise cloud adotpion 21% (US up to 63%), and SME adoption only at 20-25% (US up to 85%).
So far, China's internet has been largely consumer rather than enterprise driven. The Report shows that internet adoption will have huge potential in six sectors -
Consumer electronics - connected devices, digital media
Chemicals - demand forecasting and production planning, customized systems, Internet of Things, precision farming
Financial Services- non-performing loans, marketing and customer services
Real Estate- material sourcing and sales marketing
Healthcare- remote diagnosis and e-commerce of across-the-counter treatment and pharmaceuticals
In particular, there is much room for adoption by SMEs.
When fully utilized, enterprise-driven internet adoption is forecast to contribute up to 22% of GDP and productivity growth by 2025, according to the McKinsey Report. It is expected to generate 46 million new jobs, more than enough to offset any job losses due to enhanced efficiency, and will be a key driver for the country's trajectory towards greater innovation, productivity and consumption.
My TV interview on Talk Show with TDM (Teledifusão de Macau), a Macao goverment-sponsored TV station. Broadcast on 26 June, 2014, this half-hour one-on-one show explored the foreign relations implications of a Rising China and the potential conflicts over the East and South China Seas.
The huge energy deal enables Russia to supply 38 billion cubic metres (bcm) of gas to China each year for 30 years under a contract valued in excess of US$400 billion overall. See a report of the South China Morning Post here
Before the deal was signed at the eleventh hour on 21 May, my live TV interview with RT on 20 May tried to pinpoint some of the geopolitical considerations involved on both sides and their impact on the world order.
Further to my research paper "The Ascent of the RMB, the Chinese currency" dated Decemebr, 2013, a latest update is provided in a report by ASIFMA (Asia Securities Industry & Financial Markets Association) dated May, 2014.
This report outlines various routes whereby the RMB is rapidly attaining the position as a global currency for trade settlements. As the world's premier commodities consumer, China is well poised to have more energy contracts denominated in RMB. More and more of China's large number of trading partners are beginning to hold some RMB as a "de facto" reserve currency, even as the Chinese currency is not fully convertible.
Following reforms introduced at the 18th Party Congress Third Plenum, more liberalization of China's financial system is on track. This is now being accelerated by such schemes as the Shanghai Experimental Free Trade Zone, the China-Hong Kong Mutual Fund Recognition scheme and Shanghai-Hong Kong Stock Connect pilot program.
By 2020, it is expected that the RMB capital account will have become basically fully open. While the greenback will still be the dominant international reserve currency, the RMB will have come close to being another international currency like the euro, the British Pound or the Japanese yen.
After unprecedented wide-ranging public consultations, massive revisions and even change of re-drafting authorities, the much revised law, several years in the making, was finally adopted by the Standing Committee of the National People’s Congress on April 24, to enter into force in 2015.
See a review of the new legislation and an interview with Cao Mingde, law professor at the China University of Political Science and Law, who participated in the drafting of the revised amendment of the Environmental Protection Law, on ChinaDialogue, an environmental organization based in London and Beijing,
The new law features a number of breakthroughs -
(a) For the first time ever, evironmental protection is accorded First Priority above economic development. Previously, the two were merely required to be co-ordinated,
(b) Major polluting companies must make the following information publicly available: main pollutants, methods of discharge, concentration and amount of emissions, excess emissions, as well as construction and operation of pollution prevention facilities. Those breaking the law will bear responsibility, along with the monitoring authorities concerned.
(c) The government is required to establish key areas cutting across administrative regions to integrate prevention and coordination systems for watershed pollution and ecological damage, as well to carry out unified planning, standards, monitoring and prevention measures.
(d) Environmental noncompliance will be subject to heavy fines on a daily basis, starting from the day after the correction is ordered,
(e) Environmental authorites are given unprecedented powers of closing down, seizure and detention of offenders.
(f) Enviromental Impact Assessments (EIAs) are extended to apply to regional targets with powers to refuse approval of any project which may result in such targets being exceeded.
(g) Public Interest litigation is allowed against offending projects, though not against monitoring authorities, enabling social organisations registered with the civil departments of governments above city level in selected areas to initiate public interest lawsuits.
One apparent Achilles heel of the new law is that local governments are in control of staff and resources of local environmental authorities. It is, however, much rumored that the Ministry of Environmental Protection will be greatly empowered, taking over environmental responsibilities from other ministries to integrate environmental management within one organisation. If this becomes a reality, the table will be truly turned on China's so-far unsuccessful battle against the nation's continuing ecological degration.
According to Daron Acemoglu and James Robinson's seminal book, "Why Nations Fail" (Profile Books Ltd, 2012), nations plagued by "extractive institutions" manipulated by vested interests historically proved to face decline or even collapse. Its conclusion points to the inevitability that Western democracies would win out in the end over autocractic regimes.
My earlier blog here posted a question comparing China and America - "Which superpower is more threatened by its “extractive elites”?
A recent book review by Michele Boldrin, David K. Levine and Salvatore Modica offers more insight into and in-depth analysis of the universality of Acemoglu's conclusions.
For example, both Napoleonic France and Germany before the Second World War registered long periods of success as nations, while some "inclusive" democracies headed towards relative decline. It begs the question whether the answer lies more in institutions favouring innovation and competitiveness, both domestic and international, rather than purely being "inclusive". It also points out that inclusive institutions could equally be plagued by "vested interests" while "extractive" institutions could evolve over time to becoming more "inclusive".
As in a debate between "democracy" and "autocracy", sometimes the truth is muddled by labels. While there is much merit in highlighting the importance of institutions, the jury is still out whether inclusive institutions are the be-all-and-end-all pre-condition to nation's success or survival, as sometimes it is made out to be. More importantly, it begs the question whether more benevolent kinds of "extractive institutions" are indeed the key to driving a nation's resources to build infrastructural capacity at least during certain stages of development of some countries, as in the case of China.
An analysis of the pros and cons of China's One-Party rule can be found here
TV interview panel discussion on Inside Story with Aljazeera English Channel based in Doha on 15 April, 2014. Other panelists were Peter Roberts - senior research fellow at the Royal United Services Institute (RUSI) in London and Tim Brown - senior fellow at GlobalSecurity.org in Washington D.C. RUSI is an independent world-renowned think tank in cutting-edge defence and security research, founded in 1831 by the Duke of Wellington.