Imaginechina via AP Images

The Digital Silk Road for the Next Billion Users

by winston ma
 

winston ma, formerly a managing director of the China Investment Corporation (China’s sovereign wealth fund), is the president of China Silkroad Investment Capital.

Published June 30, 2018

 

The Internet and social media now seem to connect everyone to everyone else and to make information available to all. But alas, “everyone” is a bit of an exaggeration. Some 3.2 billion people, or roughly half the world’s population, have no access.

Which brings me to my question: how long will it take to bring the next billion users into the digital fold? Call me a pessimist. But without very determined effort, I suspect the process of networking the globe may take much longer than people expect — a delay the world can ill afford. Why? All you need to look at is the Chinese experience to appreciate the challenges to come. For anyone who knows my work, this may sound counterintuitive. My book, China’s Mobile Economy, celebrates the world’s largest Internet user population: some 750 million Chinese are now online, almost as many as the combined population of the United States and the European Union. The 300-million-strong digitally connected Chinese middle class has redefined the consumer industry in China — and, for that matter, in the world. However, this consumption boom in China built on digital technology also illustrates the challenges involved in the sharing of cyberspace-driven prosperity.

No More Low-Hanging Fruit

Thanks to China’s encouragement of urbanization and massive infrastructure investments, most of the 750 million users (95 percent of whom connect by means of mobile devices) have been acquired at a remarkable pace over the past decade. However, the country still has hundreds of millions of non-users to convert out of a population of 1.2 billion over the age of 14.

Indeed, China’s Internet penetration rate just reached 55 percent last year, which puts the country only modestly ahead of the world average. What’s more, the growth in connections has tapered off in recent years, in large part because penetration in rural areas is still less than half that of the cities. Hundreds of millions of Chinese thus lack the benefits of applications ranging from social networking to online shopping to access to a cornucopia of entertainment.

The costliest consequence, though, is that Chinese without internet connections have missed out on the opportunity to become entrepreneurs and innovators in what the World Economic Forum has dubbed the Fourth Industrial Revolution. A rural entrepreneur only needs to have a 20-m2 space, a secondhand computer and a basic Internet connection to become a global retailer. There are even villages in which a majority of farmers are working on Alibaba’s shopping site, Taobao, earning them the name of “Taobao villages.” According to Alibaba, there are more than a 1,000 such villages with e-commerce revenues exceeding 10 million RMB (about $1.6 million).

In the information age, an Internet connection may well prove to be the difference between poverty and a middle-class life. But future Internet penetration in rural China will require substantial investments in the network infrastructure in remote areas — investments that may be delayed without financial and organizational support from the central government. That aid meshes well with government programs such as “Development of China's Western Region,” which focuses on infrastructure investments in remote areas. Note, too, that the private Internet giants have launched education campaigns to build trust in purchasing goods from virtual shops, to develop brand awareness, and to teach newly connected rural residents the ins and outs of ordering online.

All this focus, of course, is on building out the infrastructure in China. With the global digital economy developing at a breathtaking pace, I would argue that multinational cooperation to accelerate coverage in places that have yet to be swept up in the digital information revolution should be an equal priority. Which is where the “Digital Silk Road,” the latest elaboration of China’s One Belt, One Road development initiative that extends from western China to Africa, fits in.

At the December 2017 World Internet Conference at Wuzhen, China, Saudi Arabia, Egypt, Turkey, Thailand, Laos, Serbia and the United Arab Emirates agreed to cooperate with China on the mega-project. The eight countries are planning to expand broadband access, encourage e-commerce cooperation, encourage policymaking to create a transparent digital economy and promote cooperation in international standardization. The most important aspect of the Digital Silk Road cooperation, I think, is to bring a larger cybermarket to entrepreneurs in emerging markets — an integrated digital ecosystem that is both larger and more robust than existing systems, allowing innovators to test and commercialize their ideas.

•••

Thanks in large part to the rise of digital technologies — in particular, those based on mobile networking — there is real hope that lagging economies can leapfrog many of the barriers that have held them back. But it is also a perilous time in which the failure to narrow the digital divide could slow socioeconomic mobility and harden differences between the world’s haves and have-nots. That’s why the Digital Silk Road is an idea whose time truly has come.

main topic: China
related topics: Economic Development, Technology