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Digitalization to reshape China’s economy: IMF

Updated: Oct 22,2018 7:37 AM     Xinhua

BEIJING — The increasing adoption of digital technologies in China will boost productivity and reshape the economy, according to research by the International Monetary Fund (IMF).

China’s digitalization has been rapidly developing, ranking upper-middle globally, while the country’s e-commerce and fintech industries have become world-leading, Zhang Longmei, IMF deputy resident representative for China, told a forum in Beijing.

Zhang attributed the success to a confluence of factors, including a large base of 700 million internet users and 282 million digital natives, a rich digital eco-system and government support in digital infrastructure.

According to the research, the degree of China’s digitalization varies across sectors, with the service sector ahead of the industrial and agricultural sectors in the digitalization process. Zhang expects the digitalization of traditional sectors to be more rapid in the coming years.

Zhang said that digitalization will increase China’s total factor productivity and boost employment, adding that digitalization in China will reduce the need for intermediaries by lowering information asymmetry and transaction costs, and lowering entry barriers in many sectors, especially traditional goods and service provision.

Although digitalization will cause an employment decline in the industrial sector due to productivity gains, the impact on overall employment will be manageable, as the loss in jobs in some areas will be offset by job creation in newly emerging sectors, she said.

“A 1-percent increase in digitalization will boost employment by 0.01 percentage points,” Zhang said.