ISSN 2330-717X

China’s Quest For Digital Dominance – Analysis

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The Chinese Communist Party (CCP) sees the Fourth Industrial Revolution, which blurs the line between the ‘physical, digital, and biological spheres,’ as central to its ambitious domestic and foreign policy agenda. 

By the early-2010s, the CCP saw the digital space as offering several things. First, providing China with new markets that would keep the factories working, possibly because the CCP had always known that eventually other countries would seek to replace China as the world’s factory. Second, it would further the CCP’s ability to connect the economic to the political and advance its revisionist foreign policy

For years, China has been affected by labour disputes because of disparity between wages and the cost of living underlying the growing inequality within China. These disputes are a major concern for Chinese leaders who fear that such unrest would lead to political turmoil that could end the CCP’s dominance.

Central to the CCP’s domestic and foreign agenda is tech-nationalism. This form of industralisation rejects the traditional laissez faire model for a state-led one. To attain tech-nationalism and ensure China’s place under the sun, the CCP will oversee $1.4 trillion investment over the next six years in technology development within China seen especially in China’s commitment to Smart Cities, where technology is used to ease peoples’s lives through automation and the collection of vast amounts of data. Hangzhou, Alibaba’s “City Brain” is such a city as AI manages amongst many other things the city’s traffic, helping to make transport more efficient.

In terms of foreign policy, China’s revisionist foreign policy goals rests on President Xi ambitious One Belt, One Road Initiative (BRI). This 2013 Initiative is a $1.3 trillion infrastructure programme aimed at connecting China to countless states through an overland road and a maritime road. These ‘silk’ roads are composed of a network of railways, energy pipelines, highways, ports, and streamlined border crossings, all of which are meant to simplify lines of communication between China, the producer of goods, and the markets, where the consumers reside.

In 2015, Beijing announced the launch of the Digital Silk Road. One reason for this new initiative was the CCP’s recognition that consumers were enthusiastic on e-commerce, as it made buying things easier. Big Chinese tech companies already rely on e-payment which represents 16% of gross domestic product in China, compared with less than 1% in the US and Britain. It is therefore unsurprising that e-commerce generated $2.3 trillion in sales in 2017; by 2021, e-commerce is expected to generate $4.9 trillion in sales, a 175% growth. 

The Digital Silk Road has four components: first is investment in digital infrastructure which ranges from fibre optic cables and data centres to next-generation cellular networks such as 5G and 6G as we become more wedded to the Internet of Things. The second component calls for massive investment in developing Chinese technological capabilities. An integral feature of this is the the Thousand Talent Plan, launched in 2008, to attract talented scientists to relocate to China to help the country catch up and lead in the tech sector. The CCP has also adopted the Made in China 2025 initiative, an industrial policy through which the state provides large subsidies to support tech-nationalism. Such policies and initiatives are all aimed at advancing China’s dominance of the digital sector. 

Thirdly, the Digital Silk Road underlies an appreciation of a shift in consumerism, primarily the growth in mobile technology and e-commerce, which includes, digital currencies, digital free trade zones, and e-pay. Thus, it is unsurprising that the Chinese have been experimenting with central bank digital currency (CBDC), including launching pilots test in April 2020 (amid the Covid-19 crisis) as to the viability of CBDC in cities in Guangdong Province, Jiangsu Province, Hebei Province, and in Sichuan Province. The CCP is encouraging the digitalisation of the economy by supporting a digital yuan seeing it as more useful than cash because it allows one to better track individual behaviour. The digital yuan system has two elements: a central bank issuing a digital currency for commercial banks and digital currencies issued by commercial banks for the public.

The fourth pillar of the Digital Silk Road is a focus on international institutions and the importance of standards. Under this pillar, Beijing looks to establish such standards for emerging technology by shaping international institutions and bodies involved in constructing the rules and regulations that would determine how emerging technologies are incorporated into mainstream society.

Many countries were slow to see the impact (threat) that the BRI would have on the post-World War II liberal international order, but by 2017-18, opposition to the BRI was gathering. Politicians and people came to see the Initiative as a threat to their national security and as an attempt by Beijing to move from being a regional power to a superpower. This has led to a robust debate on such companies as Huawei, 5G, the ability of Chinese companies to acquire particular business or become involved in certain sectors.

Noting this growing concern with the BRI, China has adapted its signature foreign policy initiative, bring forth the BRI 2.0. The latest iteration of the BRI still seeks to fulfil China’s revisionist goals, but it does it in a different way, magnifying the CCP’s commitment to the Digital Silk Road.

The new strategy has several components. Firstly, Beijing has sought to reduce or limit some of its more outlandish demand when it came to some of the projects that it is investing in, opting instead to appear to form joint partnerships with local actors (often affiliated with the government or entities close to the ruling elite). Algeria provides a good example of how Beijing has adapted to local concerns, with Chinese companies forming partnerships with local companies to ensure continued access to indigenous markets. Beijing has also supported an increase in Algerian exports to China which have grown 60-fold between 2000 and 2017. It was therefore unsurprising that in 2018 building on a 2016 MoU, China and Algeria agreed to build five industrial and port infrastructure projects in Algeria. Through these project Chinese companies not only increase their investments in the country but tighten Sino-Algerian corporation in railway, iron, steel engineering, and petrochemicals, whilst also giving China an important presence in North Africa.

Secondly, to advance its agenda, China has ramped up its charmed diplomacy, as seen most visibly with the Covid-19 health-humanitarian-diplomatic initiatives, sending doctors, protective equipment and general humanitarian aid to countries affected by the virus. This ‘masked diplomacy’ has included an expression of sympathy that has led leaders such as Aleksandar Vučić, Serbia’s President, to describe President Xi as ‘brother and friend’ and declare that the only country helping Serbia is China, an interesting statement as Serbia is being considered for EU membership. President Xi seeing the potential that the coronavirus has opened the door for the prospects of a Health Silk Road, shaping it as China seeking to work with like-minded countries to help deal with the coronavirus pandemic but also improve the general health of people.

A third area where China is making progress is in standardisation, as Beijing knows that technical standards – specifications shaped through the collaboration between professional associations, experts, and businesses – will shape the future. Central to the standardisation campaign is a national strategy led by the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) and carried out by the Chinese Academy of Engineering involving workshops, research trips, and meetings. This strategy, known as China Standards 2035, to be officially released in late 2020, would serve as a blueprint for ‘China’s government and leading technology companies to set global standards for emerging technologies like 5G internet, the Internet of Things (IoT), and artificial intelligence,…’. In other words, Beijing is ensuring that especially when it comes to emerging technologies, China would set the standards that others would have to adopt. This approach is based on the recognition that Beijing’s ability to influence the Internet, fiat currency, and the digital world has been limited as the standards had been set by China’s competitors, which is why it wants to shape the emerging technologies. Conversely this also explains why China consistently chips away at the post-World War II liberal international order.

To succeed in its ambitious domestic, the CCP has shown an unprecedented level of strategic adaptability. Since coming to power in 2013, President Xi has found ways to turn lemons into lemonades because he knows that the world is more than just a few western countries (he is betting on the MENA region, Africa Latin America and the South Pacific). He also appreciates that ordinary people are more interested in consumer goods than geopolitics, which explains the allure of the Internet of Things for consumers who are unperturbed by the need to furnish large amounts of personal data in order to find a restaurant or a product.

By establishing the BRI and later modifying it, and through such programs as Made in a China 2025 and China Standards 2035, President Xi and the CCP are looking for ways to ensure Chinese dominance. 

It is still time for the West to challenge China, but that would require good, smart, and inspiring leadership, something currently lacking in the West.

*Isaac Kfir is an adjunct professor at Charles Sturt University, a member of the advisory board of The International Institute for Justice and the Rule of Law, University of Malta, and independent consultant.