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US-China tech war: Beijing unveils grand plan to grow digital economy as US moves forward with competition bill

·4 min read

The Chinese government has published a major plan to boost its global competitiveness in the digital economy before 2025, as the US is reportedly moving forward with a bill to authorise billions of dollars in funding to bolster US capabilities amid the US-China tech war.

The 14th five-year plan on the "digital economy", published by China's State Council, or cabinet, is broad in scope, covering everything from communications to e-commerce.

It will be a "a key force in reorganising global resources, reshaping global economic structure, and altering global competitive landscape", according to the text of the document, which was issued on Wednesday but is dated December 12, 2021.

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China must seize the opportunities offered by the digital economy, according to the plan. The document, which includes 11 chapters focusing on different areas, does not mention any country by name, but notes that "all major countries ... are undertaking strategic planning and taking initiatives to create new competitive advantages [that will] reshape the international landscape in the digital age".

For the five year period from 2021 to 2025, China will improve the digital transformation of its supply chain, close the gaps in data between different industries and social groups, better use data resources, and improve governance of the digital economy, according to the document.

The plan endorsed a target that would see the output of core industries in China's digital economy account for 10 per cent the country's GDP by 2025, up from 7.8 per cent in 2020.

Other targets that were set include a tenfold increase in the number of Chinese households connected to broadband with speeds of at least 1 gigabyte per second, reaching 60 million by 2025, up from 6.4 million in 2020.

The booth of Chinese artificial intelligence company SenseTime at the 2021 World Artificial Intelligence Conference in Shanghai. AI is a key technology in the five-year plan for the digital economy. Photo: CNS/AFP alt=The booth of Chinese artificial intelligence company SenseTime at the 2021 World Artificial Intelligence Conference in Shanghai. AI is a key technology in the five-year plan for the digital economy. Photo: CNS/AFP>

Further, 45 per cent of Chinese industrial enterprises will be connected to "industrial internet platforms" by 2025, up from 14.7 per cent last year, while 800 million residents will be registered for online government services with their real identity, compared with 400 million in 2020, according to the document.

Under the plan, China aims to enhance its basic research capabilities in "strategic areas" such as sensors, quantum information, communications, integrated circuits, key software, big data, artificial intelligence, blockchain and new materials.

The country will also seek to improve self-sufficiency in "basic hardware and software, core electronic components, key basic materials and production equipment" to enhance supply chain security in key industries such as "5G, integrated circuits, new energy vehicles, artificial intelligence and the industrial internet", according to the document.

While many of the specific targets in the 14th five-year plan have been included in earlier Chinese government documents, the digital economy plan showcases Beijing's strategic vision for a bigger and more powerful digital economy sector.

For example, it has a goal to increase the size of the software and information technology service industry from 8.2 trillion yuan (US$1.3 billion) currently, to 14 trillion yuan by 2025, and boost digital trade from 37.2 trillion yuan to 46 trillion yuan over the same period.

Beijing's ambitions for the digital economy and core technologies have stoked fears in the US that the country could lose its technological leadership to China. A report published by the Belfer Centre for Science and International Affairs at the Harvard Kennedy School last month stated that within the next decade, China is likely to catch up to the US - if it has not already overtaken it - in the foundational technologies of artificial intelligence, 5G, quantum information science, semiconductors, biotechnology and green energy.

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The US House of Representatives is preparing to move forward with its sweeping China competitiveness bill, Bloomberg reported on Thursday. The timing of a vote in the House became unclear after the Senate passed the bill in June. The US Innovation and Competition Act has angered Beijing, as it includes many clauses targeting Chinese technologies and businesses.

The US has been the world's most digitally competitive country since 2018, according to the 2021 IMD's Digital Competitiveness Rankings, which measures how 64 economies adopt digital technologies for economic and social transformation. Over the same period, China has risen 15 places to No 15 on the list.

Additional reporting by Coco Feng

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

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