China’s digital transformation is emerging as a future growth engine for the Chinese economy in the post-corona era, and the US-China trade dispute is gradually expanding into the digital realm. In light of these developments, we need to analyze the digital governance and data-related norms promoted by the Chinese government and recognize the differences between Korea and China. In particular, cooperation in the digital field based on 5G technology and data differs from existing cooperation in that outcomes remain uncertain in the field, while these can be expected to have a large ripple effect, indicating the need for in-depth analysis. This report analyzes China’s digital transformation promotion policy and competitiveness, based on which we seek policy implications and ways to cooperate with China to enhance Korea’s digital competitiveness. In particular, we intend to present relevant policy implications by focusing our analysis on the field of 5G technology and data, which is the most core and fundamental field in digital transformation and a key driving force in the Korean government’s Digital New Deal strategy.
Chapter 2 examines the current status and characteristics of China’s digital transformation strategy. China has proposed the framework of “four orientations” (digital industrialization, industry digitalization, digital governance, and data valuelization development). First, China’s digital industrialization represents the increase and development of added value in the ICT industry. China is undergoing both expansion of the service and software industries in the ICT (digital) industry, and the promotion of Internet industrialization based on the growth of Internet companies. Second, industry digitalization represents integration of digital technology with other industries and triggers a digital transformation of the real economy. The size of the economy in this field accounts for more than 80% of China’s digital economy, and it is a rapidly growing field that is driving digitalization of the secondary industry. Third, digital governance means improving administrative systems and institutions through the use of digital technology. Fourth, data valuelization development means building a system to utilize data as a production factor of the digital economy. Although the economic size of the third and fourth sectors has not been estimated yet, the Chinese government is paying attention to these sectors as the digital transformation is accelerating.
However, despite the rapid growth of China’s digital economy, the low localization rate of industrial software and weak global competitiveness are judged to be the limitations of China’s digital transformation. In addition, China’s digital market has not been opened to foreign companies and there is a possibility that conflicts with advanced countries such as the United States and the EU may escalate in the future due to the government’s measures to strengthen its influence. It is judged that these factors will act as an obstacle to China’s efforts to promote external cooperation in the digital field.
Chapter 3 examines the Chinese government’s 5G technology development, 5G network construction strategy and strategies by major 5G industry companies to promote technology standardization. China has been promoting the development of 5G technology since 2013, after which it began commercialization of 5G communication services in 2019, and since then has been increasing the number of low-cost base stations (3.5GHz band) and expanding coverage areas. Through this, the Chinese government intends to expand various digital service markets and implement technology development and application business models suitable for various frequency bands in the long term. In addition, the Chinese government is rapidly building a 5G network by expanding new infrastructure investment and network coordination to avoid duplicate investments among telecommunication companies. Therefore, we can expect a 5G technology ecosystem to be rapidly established in China based on this 5G network.
Since 2018 China has introduced “group standards,” in which several entities such as companies and research institutes jointly participate in the establishment of standards, and is promoting the standardization of 5G-related technologies. This study analyzes the group standards cooperative network between members of the China Communication Standardization Association (CCSA), which occupies an important position in ICT technology and policies in China, to identify key institutions and companies in the creation of a 5G technology ecosystem. According to our analysis, the China Academy of Information and Communications Technology (CAICT), the ICT policy research institute of the Chinese government, was analyzed as the most important institution constituting the cooperative network of 5G technology group standards in China. This shows that government think tanks are playing a significant role in China's 5G technology cooperation network in terms of coordinating efforts and establishing guidelines. In addition, as the influence of the CCSA is gradually increasing in the process of international standardization in communication technology, it is expected that mutual checks and competition between American and Chinese companies will continue to intensify during the process of establishing 5G technology standards.
The greatest competitive advantage enjoyed by China for its digital transformation is the existence of various digital companies based on its huge domestic market. This report analyzes the case of the China Mobile 5G Innovation Center, promoted by Chinese telecommunication companies and companies with major 5G technologies to create an industrial ecosystem, as a new example of open innovation. The results of this analysis show that China's 5G ecosystem has a demand for cooperation with many alternate companies, indicating the possibility of various types of cooperation models being created, and applied innovations in the 5G sector led by telecommunication equipment companies and platform companies will become more important than telecommunication companies. In addition, based on the success in major first-tier cities, various forms of applied innovation are expected to emerge in second- and third-tier cities as well.
Chapter 4 analyzes the current status of China’s data economy, its policies, and smart manufacturing, which is expected to generate the greatest added value through the convergence of data and real economy in China. Hardware accounts for the highest proportion of China’s big data market, whereas the sales structure of the global big data market is more than half concentrated in the service sector. One of the confirmed reasons for this is that China is deploying data locally for data security and personal information protection when using big data.
In addition, China was analyzed as holding advantages over the data economies in other countries in terms of data production, government’s initiative (policy), and data management (big data management department/data bank and exchange). China will continue developing servers and storage source technologies and promoting cloud applications, Internet security, and IDC operation capabilities, while aiming to become a early mover in technology for finance, telemedicine (online treatment), artificial intelligence, and autonomous driving. Efforts to revitalize data banks and data exchanges to build a larger data ecosystem are expected to continue as well.
China’s fostering policy for the data sector is gradually moving from the stage of big data collection to forming an industrial chain through big data integration and sharing. In addition, China has announced the Data Security Act and Personal Information Protection Act to reorganize and revitalize the domestic data market. These data norms are: ① strengthening data control by government agencies for the purpose of national security, and ② could possibly act as a non-tariff barrier to the domestic market, while ③ related laws are already in effect but detailed rules have not been established. This means Korean companies will have to be cautious, as digital cooperation between Korea and China is likely to incur significant transaction costs due to the differences in systems between the two countries. Therefore, we can consider policy communication between the two countries as the most important task in digital cooperation.
China’s recent promotion of “data assetization” is a process of forming the exchange value of data, characterized by the realization of economic profits through market distribution transactions. China’s first data ownership platform, the People’s Data Asset Service Platform, has been used to examine the legality of data, and in some regions related policies have been announced and platforms have been established and put into operation. In addition, starting with the establishment of the Guiyang Big Data Exchange in 2014, evaluated as the world’s first data exchange, data assetization began on an experimental basis. Since then, 16 data trading platforms in the form of open markets have been established and operated by 8 public-private joint ventures (Guiyang, etc.) or private initiatives (Chongqing, etc.).
According to China’s “Smart Manufacturing Development Index Report 2020 (2020年智能制造发展指数报告)”, the areas of automobile manufacturing, electronic equipment manufacturing, and chemical manufacturing outpaced other industries in the development of smart manufacturing. In addition, as a result of analyzing the global value chain (GVC) participation of the top 10 industries with advanced smart manufacturing in China, exports through GVC increased in all of the top 10 industries, and in particular, forward GVC participation (i.e. producing and shipping inputs that are further re-exported) has increased compared to backward GVC participation (i.e. using imported inputs to produce goods that are shipped abroad). Therefore, if the competitiveness of China’s smart manufacturing grows rapidly in the future, there is a possibility that China’s share of added value in the GVC of automobile manufacturing, chemical industry, and electrical and optical equipment manufacturing will increase and the supply chain in China will be further consolidated. In addition, when comparing the results of smart manufacturing evaluations conducted by Korea and China up to 2019, the level of the two countries is judged to be similar. Therefore, in order to gain an edge in the smart manufacturing competition with China, it will be important for Korea to establish a smart manufacturing model based on data sharing.
Based on the previous analyses, Chapter 5 sets out five policy implications. Korea should: ① review the direction of its digital transformation policy, ② formulate plans to strengthen the competitiveness of Korea’s 5G industry, ③ establish strategy for information and communication technology standards, ④ design plans to expand Korea’s data market, ⑤ build communication channels with China on digital trade rules, and ⑥ utilize special economic zones in China and pursue the opening of digital services through the Korea-China FTA negotiations.