Why China Could Be ‘Over-Protective’ of Digital Economy
A new report by the McKinsey Global Institute (MGI) seems to lay bare the rationale behind China’s overprotection of its digital economy especially as the Asian giant has demonstrated with cryptocurrencies.
Globally, many cryptocurrency users tend to see some of the several checks and policies being discussed between the Chinese government and digital currency stakeholders as it has happened of late as unnecessary especially when such discussions tend to swing the prices of digital currencies like Bitcoin.
However, going by the MGI report, China’s Digital Economy: A Leading Global Force, in which it suggests that China could set the world’s digital frontier in the coming decades, it brings an understanding that the Chinese government could be taking those protective measures because its “…digital transformation is already having a profound impact on its own economy, and is likely to have an increasing influence on the worldwide digital landscape.”
Setting the standard for a new sector is key to its sustainability particularly if it could have a multiplier effect on other branches/sectors.
With nine of the 23 privately-held unicorns in the world based in China accounting for more than 70% of the total valuation of fintechs worldwide; and one in three of the world’s 262 unicorns being Chinese commanding 43% of the global value of these companies, keeping a strict tab on the structure of the budding decentralized technology brought about by digital currencies makes a lot of sense.
Some other highlights of the report show that the value of China’s e-commerce transactions is today estimated to be larger than the value of those of France, Germany, Japan, the United Kingdom and the United States combined; and that China has the scale to drive rapid commercialization of digital business models using its advantage of a very large home market of consumers who are young and eager to embrace digital in all its forms.
According to MGI, the Chinese government gave digital players space to experiment before enacting official regulation after a delay, an approach that gave innovators plenty of space to experiment.