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Economy and Technology

Economy and Technology

Digitisation & Industrial Innovation

The Chinese economy is at a turning point. The old growth model – ‘the factory of the world’ – does not work anymore. Wages are on the rise, exports and investments cannot ensure high economic growth rates. If structural reforms prove to be successful, China has the potential of becoming the world’s leading economic and technological power in the twenty-first century. Inadequate reforms or a severe economic crisis, however, would drag it into mediocrity – or even propel it to the brink of collapse.

MERICS’ Economy and Technology programme observes and analyses this critical transition of China’s economy. It focuses on three main trends in particular:

Signs of crisis and economic reforms

The real economy shows signs of slowdown and financial markets are tumbling. Facing these challenges, the Chinese leadership needs to prove that its comprehensive reform agenda from 2013 is capable of shaping the country’s economy to prepare for today’s new challenges properly. However, if the Chinese economy heads into a crisis, short-term matters will take precedence and hinder reforms. This would stop structural change towards a service and innovation-driven economy. High, long-term economic growth would be at stake and China would have to give up its efforts to catch up with cutting-edge technology in advanced economies before it had really got started.

Digitisation of the economy

Whatever signs of crisis are already apparent, China’s digital change is progressing at great speed. Dynamic business start-ups are sprouting up like mushrooms. The success of Chinese internet companies like Xiaomi and Alibaba questions the validity of conventional market structures and business set-ups. Linking up every area of the economy and of people’s lives in the Internet of Things will influence and determine the future of China’s economy. The country’s leaders recognised the potential economic benefits of e-commerce and modern IT technologies early on and more so than many other national governments. Internet plus is the catchphrase of the Chinese government to promote the interlinkage and computerisation of traditional industries. New technical possibilities presented by web-based services and Big Data also provide new means to regulate and control the economy more stringently, though.

Industrial innovation

The widespread modernisation of industry is at the heart of China’s strategy of innovation and industrialisation. The country is aiming to become the global leader in terms of innovation and advanced technologies. Beijing intends to make industrial companies boost their productivity and achieve a higher level of quality through its modernisation programme Made in China 2025. Automation technology and intelligent production networks, which are embodied in the concept of Industry 4.0, are growing increasingly important. Simultaneously, Chinese politics is pouring enormous amounts of money and resources into promoting strategically important technologies such as IT, e-mobility and renewable energy. In many industries leading multinational firms are still way ahead, but their Chinese contenders are rapidly catching up.

Research Team

  • Stiftung Mercator