China's Digital Economy and Moore's Law

 Greetings from the Australian National University's China Update. The first session is on China's digital economy, innovation, finance and growth. Harry X Wu started with industry policy implications and the difficult issue of productivity. He argues ICT drives China's productivity, despite the "productivity paradox". This is due to government policy promotion of ICT in State Owned Enterprises (SOE). He suggested this benefited from Moore's Law, but unevenly distributed across the economy. 

I suggest that this analysis could be applied to other fields, such as defence. There is concern in Western countries over the growth of China's military capabilities. This comes party from government increasing investment but also from applying manufacturing capabilities. Western countries will tend to produce a few of each aircraft, tank or ship, thus making them expensive. China can afford to make more by making more. The other factor yest to be appreciated is AI. 

Recently I was discussing the role of drone submarines with a defence specialist. They argued these had limited use as it is very difficult to communicate with a submarine, so they could not be remotely controlled. This missed the point that these will be tasked like a crewed submarine: given patrol orders then left to execute them, reporting occasionally from periscope depth by radio or laser. The use of a lethal AI system might seem problematic but sea mines use much less intelligence.

Sherry Tao Kong argued that China has a widely adopted digital payment system, but it lacks depth in digital finance. That is you can make payment for goods with Alipay or WeChat pay, but not conduct other financial transactions, such as taking out a loan, or buying insurance. There is also a gap between rural and urban users. I had experience of lack of digital transactions this week when I tried to take out car insurance with NRMA Insurance. I could get a quote online, gut had to call to get the policy issued, despite being an existing customer. It took three attempts to make the payment, due to the poorly designed process, while the people at the car dealership waited to give me the car.

Yanrui Wu cited China's digital economy action plan. The most interesting part for me is digital talent development. Interestingly Dr Wu pointed to the high density of fibre optic cables in China as a measure of digital economy. This also would make the country more resilient to natural disasters and military attacks. 

This was an interesting session but not long enough for questions.