Dragon Net China’s Next Economic Miracle – By Jonathan Woetzel and Jeongmin Seong – NOVEMBER 17, 2014


An Apple store in Pudong, the financial district of Shanghai, February 29, 2012. (Carlos Barria / Courtesy Reuters)

With 632 million Internet users, China has already become the world’s largest e-tailing market, with almost $300 billion in sales posted in 2013. Although digital marketplaces have changed the face of Chinese retail, however, other major sectors such as manufacturing and healthcare have been much slower to embrace the Internet. China’s digital transformation is just beginning, which means that over the next few years, the world’s second-largest economy will radically transform the way it does business. And as new research from the McKinsey Global Institute projects, that change (from the adoption of online marketing and supply-chain management to cutting-edge innovations such as big data analytics and the Internet of Things) could fuel as much as 22 percent of China’s total GDP growth through 2025. How much of this potential China will actually see depends on the government’s ability to create a supportive policy environment, the willingness of companies to go digital, and the adaptability of workers.

As of 2012, only about a quarter of China’s small and medium-sized enterprises had begun to use the Internet for functions such as procurement, sales, and marketing. When they do go online, they and larger companies alike will be able to streamline their operations, find new ways to collaborate, and expand their reach via e-commerce. These types of changes are beginning to ripple through traditional industries outside the tech sector, translating into faster productivity growth.

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