The increasing adoption of digitalization in China could lead to a dramatic transformation of the Chinese economy, according to a latest report by McKinsey Global Institute.
Creative destruction would sweep across almost all economic sectors and enhance efficiency as well as boosting productivity, which would eventually boost the global competitiveness of Chinese companies, it said in the "Digital China" report released yesterday.
"The creative destruction brought by digital technologies is likely to be more rapid and on a relatively larger scale in China because of inefficiencies in traditional sectors and massive potential for commercialization. Digitization can make China's economy more dynamic, and enable more Chinese businesses to compete globally and even export "Made In China" digital business models," said McKinsey Global Institute senior fellow Jeongmin Seong.
The report identifies three factors that are ripe for China's digitalization process: a large and young Chinese market suitable for rapid commercialization of digital business models; a rich digital ecosystem; and the government allowing space for digital companies to experiment.
China's digitalization pattern follows that in other countries. In China, the United States, and the European Union, the information and communications technology, media, and finance sectors are the most digitized. Agriculture, local services, and construction tend to be the least digitized in all three regions.
But China's digital journey also differentiates the country from its western counterparts, the report said. In China the digitalization process of consumer-focused industries such as retail and entertainment is ahead of other sectors than they are in either the EU or the US.