(Editor’s note: With this article, CCR is initiating a series on China’s digital revolution. The first article will report on the astounding advances which China is making through the application of digital technology – already surpassing the West in certain areas. Subsequent articles will deal with the Communist Party’s “Made in China” initiative, China’s integrated party-state system and the digital revolution, and where China is headed, including how cultural differences between China and the West influence the direction and course of the digital revolution.)

“Having extended or translated our central nervous system into the electromagnetic technology, it is but a further stage to transfer our consciousness to the computer world as well.” Marshall McLuhan, Understanding Media (1964)

Three distinct “spheres” — East, West, and Digital — are now said to be driving social development worldwide, according to an emerging theoretical framework which distinguishes between the three.[1] The former two overlap upon the latter, but they engage the digital sphere in different ways based on widely disparate cultural profiles. The discrete cultural spheres of East and West are rooted in their respective ideogrammatic and alphabetic writing forms, which, according to Marshall McLuhan, profoundly shape human perception of reality.

As the digital age unfolds, it does not play out the same way in societies of the East and West. While the West approaches digital life in a manner demonstrating our cultural sphere’s orientation towards individualism, fragmentation, and specialization, the East engages the cybersphere upon cultural foundations which emphasize communalism, planning, and an integral notion of social development.

Conventional wisdom tells us that the United States will long remain the world’s epicenter of high-tech development—the sunny climate, relative ethnic diversity, and lax regulatory environment of Silicon Valley providing just the right growing conditions from which innovation may sprout. This essay presents a counter narrative: As the West wanders into the digital age, driven by little beyond the most base profit-making impulses, China is leading the East into the management of the digital sphere with a highly-structured and visionary tech strategy that brings into play the strongest aspects of Chinese culture and governance, as well as the ambitions of the Communist Party of China (CPC) to achieve the nation’s “great rejuvenation” by mid-21st century. The West monetizes digital technology so as to generate profits, while China is monetizing digital modes of production with long-term national interests and goals in mind. Although many American observers remain self-assured of our nation’s economic and military preeminence, the Peoples’ Republic of China (PRC) is not only quickly bridging the digital divide; it is also mastering the complex economic and social possibilities offered by the Digital Age.

China’s Technological Rise

A casual stroll around Beijing will offer the American visitor a glimpse into China’s digital transformation. She will at first complain that she cannot access certain foreign websites on her smartphone, but she may also notice that her 4G data connection is faster and more widespread than back home—she rarely encounters a spot with no signal. In any case, just about everyone she meets during her stay is on WeChat, a popular domestic social networking app similar to Facebook, but with far more practical functions. As she stops by Starbucks, she will find that the line goes by unusually fast, as everyone before her pays by simply scanning their WePay QR code. Funds are instantly deducted from their bank accounts.

When she steps outside, she may notice the proliferation of yellow, blue, and orange bicycles, which locals can rent cheaply using a smartphone app. The bikes are unlocked with a quick scan of the phone, and tracked using GPS. Later in the evening, she’ll encounter trouble finding a cab; without the Didi app, it’s increasingly difficult to hail one. In short, she’ll discover that it’s tough to get around and run daily errands without a smartphone and data connection. If this had been her first visit to Beijing in, say, five years, she would no doubt be impressed by the rapidity with which everything has changed: On her last visit, nobody owned a smart phone.

Increasing numbers of Western observers have noted China’s meteoric technological rise. “Look at the 500-metre-wide radio telescope in Guizhou province that has joined the global search for extraterritorial life. Or the Sunway TaihuLight supercomputer, which is by far the fastest in the world. Or lithium battery development. Or 3D-printed blood vessels made from stem cells… the list goes on,” writes David Dodwell, in reference to China’s array of recent breakthroughs.[2] However, little attention is given to the politico-economic structures underlying China’s digital leap.

Meanwhile, neoliberalism’s disciples in Western media, academia, think tanks and governance adhere to their ideology-driven doctrine, reminding us regularly that China’s state-led innovation push is fated for doom. Western political discourse on China is increasingly incongruous with reality. As neoliberal ideologues await their own prophecies of stagnation, melt-down, or even regime change in the PRC, here is a glance at what China has actually accomplished:

China has laid the infrastructure and regulatory framework for a vibrant, competitive government-led telecom industry. Competition between China’s three state-run telecom conglomerates—China Mobile, China Unicom, and China Telecom—has brought 4G connectivity to vast swaths of territory, providing higher data transfer speeds than the U.S., at a much lower cost to consumers, with monthly comprehensive phone service plans hovering around 50 RMB ($7).[3] The number of 4G mobile communications subscribers in 2016 grew by 340 million, while over 5.5 million kilometers of optical fiber cables were installed nationwide.[4] China’s mobile (64%) and fixed (57%) broadband penetration rates trailed behind the U.S. (77% and 73%, respectively)[5] as of 2016, but are rising fast—during the first six months of 2016, mobile and fixed broadband penetration in the PRC jumped 6.8% and 16.6%, respectively.[6]

This feat is all the more noteworthy in light of the persisting divide in per capita GDP between the PRC ($6,497) and the U.S.A ($51,638 [2015]).[7] Meanwhile, in India, fixed and mobile broadband penetration languish at 7%[8] and 16.6%, respectively, while the Subcontinent registers the third lowest data transfer speed globally.[9]

China has built four of the world’s ten strongest tech companies:

  • Alibaba, the e-commerce giant behind Taobao, has now surpassed Walmart as the world’s largest retail outlet. Alibaba recorded $14 billion in sales on a single day in November 2016, while the Alipay payment platform positions itself as a rival to Paypal.
  • Baidu, China’s search engine behemoth, receives more hits than any other site in the PRC, with 663 million active users in 2016; a beneficiary of government Firewall restrictions on Google, Baidu’s search engine and mapping function are currently without parallel in China.
  • Huawei, meanwhile, produces smart phones which easily rival or surpass Android and Apple variants in both function and design, but at a significantly lower cost to consumer per unit. Huawei filed more patents in 2016 than any other company in the world.
  • Finally, Tencent, the social media corporation behind WeChat, dominates the nation’s messaging service platforms while also engaged in the production of mobile games, search portals, and various other online services. WeChat—an integrated “super-app” from which daily life in the PRC is increasingly inseparable—registered 697 million users in 2016.[10]

China is fast evolving into a cashless society, with digital payments numbering roughly 50 times those of the U.S.[11] Consumers can choose between Alipay, WePay, personal banking apps, and even Apple Pay, though WePay has probably re-invented monetary transaction patterns more than any other service. Friends dining out frequently split the tab by transferring money to each other via WePay. Family members often send “red envelopes” in the form of a WeChat hongbao (“red envelope” money transfers) on special occasions; the digital hongbao are opened with a press and click to reveal how much money has been gifted. Transactions in the taxi-cab, at 7-11, and even the neighborhood hole-in-the-wall noodle shack can all be processed with a quick scan of a QR code. It is now more common to see beggars on the Beijing subway presenting their smart phones, rather than a hat or tin can, so that sympathetic passengers may transfer a small donation electronically. Instances in which cashiers simply do not have the proper change or cash denominations on hand, are becoming more common.

Special government initiatives

China has built numerous tech hubs, including Shenzhen, Shanghai, Beijing’s Zhongguancun, and even far-flung Hefei, as well as technology development zones in nearly all major cities. By 2017, 156 such zones have sprung up across the PRC, with combined operating revenue of $4 trillion—11.6% of national GDP (2016).[12] These “innovation zones” offer low-cost office space for lease to small and medium-sized enterprises (SMEs). The government is also promoting entrepreneurial start-ups through other means, such as by offering tax breaks to small tech companies and enterprises engaged primarily in R&D, and by prodding large state banks to provide more loans to SMEs.

The effectiveness of China’s high-tech innovation zones has been confirmed in Western scholarly reports. Hellmann, Shih, and Hofem, for example, note that China’s experimental Torch Program, which delinks R&D from state central planning bureaucracies by creating autonomous “innovation clusters,” “combines centralized definition of program objectives with extensive local implementation experiments” through dozens of High Technology Zones (HTZs)[13] Far from being ineffectual, China’s HTZs “have made a disproportionately strong contribution to Chinese exports of higher-value, technology-intensive products.”[14] As of 2016, China’s 54 Science and Technology Parks and 32 Torch Program Software Parks constituted 7% of national GDP, and nearly 50% of R&D spending. China’s tech clusters are designed to facilitate deep collaboration between research and business by providing seed funding for projects coordinated by tech-oriented SMEs; 9000 projects have been approved.[15]

China has set up a special fund for artificial intelligence (AI) research with the specific end goal of surpassing the U.S. While the U.S. leaves AI research largely to the “invisible hand” of the market, China’s state-led AI drive is in full swing, with the government investing heavily in the nation’s institutions of higher learning. Beijing is increasing funding for research by double digits annually, hoping to foster the kind of “deep learning” which once put the U.S. at the forefront of the digital revolution.

Almost all major Chinese tech companies—public and private—have established AI research labs, which mine the vast quantity of data sent their way daily by China’s army of netizens. The government helps coordinate R&D between these companies and research institutions. Major tech companies partner with elite universities like Tsinghua and Peking University, for example, providing access to data in exchange for the creative input of top scholars and scientists.

It is worth noting that Chinese scientists, fluent in English, routinely monitor developments in the West. However, Westerners remain largely cut off from the fruits of China’s own organic, home-grown technology revolution, due to the language divide.[16]

China’s space program is soaring to new heights. The recently-launched Long March 3B rocket is “the country’s first high-throughput satellite, a class of telecom relay spacecraft capable of delivering more bandwidth and capacity to end users by reusing frequency allocation and targeting high-demand.”[17] Last year’s launch of a “hack-proof” quantum satellite also put the nation’s space-tech innovation boom in the spotlight. The satellite, described as “simple in design and almost magical in operation,” uses quantum entanglement rather than digital encryption to secure data transmissions, marking a first in history, as well as a breakthrough in quantum computing.[18] The activation of the world’s largest radio telescope in Guizhou province, last year, marks another milestone in China’s space development program.

Meanwhile, China is capitalizing on its burgeoning space-race infrastructure to spur development in the wider economy, spinning off an array of start-up companies, often partnered with universities. Improvements in the design of rockets and other hardware provide one example. Companies applying data from China’s network of BeiDou satellites provide another.[19] Once again, upstream government investment and R&D is providing opportunities for innovation and real-world industrial application in the nascent entrepreneurial IT industry.

Other accomplishments of importance to China’s digital rise were reviewed by Premier Li Keqiang in his Report on the Work of the Government, delivered to the National People’s Congress in March 2016. Achievements highlighted in the report included:

  • in-force patents issued in China surpassing the million mark
  • technology transactions exceeding 1 trillion yuan in value
  • the contribution of scientific and technological progress to economic growth rising to 56.2%
  • the construction of 12 new integrated experimental zones for cross-border e-commerce
  • spending on education surpassing four percent of GDP
  • the number of students from poor rural areas enrolled in key universities growing by 21.3%
  • a 24.5% increase in registration of new businesses, amounting to an average of 15,000 new businesses registered daily
  • trial replacement of business taxation with a value added tax (VAT) across all sectors, reducing the tax burden on businesses by over 570 billion yuan
  • cutting the number of administrative items requiring government review by 1/3
  • cancelling the review requirement on165 items previously reviewed by State Council departments and authorized local governments[20]

 

* * * *

We have reviewed here some of the major elements of China’s rapidly-advancing digital revolution. Yet, this is little understood in the West. The fog of ideology and the gulf of cultural differences, continue to cloud Americans’ view of China’s development. Beijing’s critics—abundant in U.S. media, academia, and governance— predict that China’s modernization will stall. What is the flaw in their reasoning?

In the next article in this series, we will examine how China’s party-state operating system has put technological development at the forefront of its modernization program and its program for national “rejuvenation.” And we will look at the phenomenon which might be described as “digital Marxism.”

  1. Center for the Study of Digital Life, http://www.digitallife.center.
  2. David Dodwell, “Be afraid: why China is on the path to global technology dominance,” South China Morning Post, March 24, 2017, http://www.scmp.com/business/global-economy/article/2081771/be-afraid-china-path-global-technology-dominance.
  3. Robert Triggs, “Which country has the fastest mobile network,” Android Authority, August 17, 2016, http://www.androidauthority.com/worlds-fastest-networks-709140/.
  4. Li Keqiang, “Report on the Work of the Government,” delivered at the Fifth Session of the 12th National People’s Congress of the People’s Republic of China, March 5, 2017, http://online.wsj.com/public/resources/documents/NPC2017_WorkReport_English.pdf.
  5. Andrew Burger, “Pew: U.S. Smartphone Ownership, Broadband Penetration Reached Record Levels in 2016,” Telecompetitor, January 13, 2017, http://www.telecompetitor.com/pew-u-s-smartphone-ownership-broadband-penetration-reached-record-levels-in-2016/.
  6. Joseph Waring, “China’s broadband penetration jumps in H1,” Mobile World Love, August 17, 2016, https://www.mobileworldlive.com/asia/asia-news/chinas-broadband-penetration-jumps-in-h1/.
  7. United States GDP Per Capita, Trading Economics (website), http://www.tradingeconomics.com/united-states/gdp-per-capita.
  8. India’s broadband penetration of only 7% a matter of concern: Trai, Hindustan Times, November 30, 2016, http://www.hindustantimes.com/tech/india-s-broadband-penetration-of-only-7-a-matter-of-concern-trai/story-IKDoiyLmfWDIzFXlBxpqDL.html.
  9. Benson Wu, Digitimes Research: 3G/4G to become mainstream technology in India in 2016-2017, DigiTimes, March 27, 2017, http://www.digitimes.com/news/a20170324PD206.html.
  10. Jethro Mullen, “Meet China’s tech behemoths,” CNN, May 17, 2016, http://money.cnn.com/2016/05/17/technology/china-tech-behemoths/.
  11. John Thornhill, “China’s digital economy is a global trailblazer,” Financial Times, March 20, 2017, https://www.ft.com/content/86cbda82-0d55-11e7-b030-768954394623.
  12. “More high-tech zones in China,” Xinhua, March 27, 2017, http://news.xinhuanet.com/english/2017-03/27/c_136160965.htm.
  13. Sebastian Heilmann, Lea Shih and Andreas Hofem, “National Planning and Local Technology Zones: Experimental Governance in China’s Torch Programme”, The China Quarterly, October 18, 2013, p. 896.
  14. Ibid, p. 897.
  15. Steve Balk, “China’s Torch Program—the glow that can light the world,” April 11, 2013 (Blog), https://steveblank.com/2013/04/11/chinas-torch-program-the-glow-that-can-light-the-world-part-2-of-5/.
  16. Sarah Zhang, “China’s Artificial Intelligence Boom,” The Atlantic, February 16, 2017, https://www.theatlantic.com/technology/archive/2017/02/china-artificial-intelligence/516615/.
  17. Stephen Clark, “China’s highest-capacity communications satellite launched into orbit,” Spaceflight Now, April 12, 2017, https://spaceflightnow.com/2017/04/12/chinas-highest-capacity-communications-satellite-launched-into-orbit/.
  18. Robert Young, “China’s quantum satellite could make data breaches a thing of the past,” The Conversation, October 12, 2016, https://theconversation.com/chinas-quantum-satellite-could-make-data-breaches-a-thing-of-the-past-66863.
  19. Clay Dillow, “China’s secret plan to crush SpaceX and the US space program,” CNBC, March 28, 2017, http://www.cnbc.com/2017/03/28/chinas-secret-plan-to-crush-spacex-and-the-us-space-program.html.
  20. Li Keqiang, “Report on the Work of the Government.”