Pacific Money

China’s Digital Silk Road: A Game Changer for Asian Economies

Chinese tech investments will jumpstart digital development in emerging economies. Are today’s digital giants ready for the competition?

By Chan Jia Hao for
China’s Digital Silk Road: A Game Changer for Asian Economies
Credit: Pixabay

The Second Belt and Road Forum for International Cooperation that took place April 25 to 27 saw 37 world leaders gather in Beijing to discuss more bilateral project opportunities with China. On the sidelines, however, the emerging Digital Silk Road was featured during the “Belt and Road CEO Conference” — a first, which brought representation by global Fortune 500 companies and other Chinese firms as a sign of their interest.

Since 2013, Beijing has inked 173 deals with 125 countries and 29 international organizations under the massive Belt and Road Initiative (BRI). Boosting connectivity has been the overarching concept of the BRI. So far, the bulk of Chinese investments have been crowded around physical infrastructure projects in BRI host countries.

The Digital Silk Road, on the other hand, falls under the subgoal of facilities connectivity of the BRI. It was first introduced as the “Information Silk Road” in a March 2015 white paper jointly issued by the National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People’s Republic of China. Its agenda included strengthening internet infrastructure, deepening space cooperation, developing common technology standards, and improving the efficiency of policing systems among the Belt and Road countries.

Since its launch, the Digital Silk Road has been bringing new waves of technological opportunities for emerging economies in Asia. In 2016, the Chinese Academy of Sciences established two regional research centers in Hainan and Xinjiang as part of a “Digital Earth Under the Information Silk Road” initiative to gather space-based remote sensing data for multiple projects under the BRI, particularly in South and Southeast Asia.

At the same time, Chinese industries have also been actively promoting the development of BeiDou-2, a Chinese-constructed and operated global satellite navigation system set to consist of 35 satellites by 2020. The China Satellite Navigation Office intends for the BeiDou navigation satellite system to be commercially used worldwide as an alternative to the Global Positioning System (GPS) owned by the U.S government. Already a number of Asian countries — including Pakistan, Laos, Brunei, and Thailand — have adopted BeiDou.

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But these developments are not only confined to space. In late 2017, Chinese company Huawei Marine partnered with the Pakistani authorities to start constructing the Pakistan East Africa Cable Express, which will connect Pakistan to Kenya and Djibouti. Huawei Marine also oversaw the completion of submarine cable projects in Indonesia and the Philippines, and previously planned to build a submarine cable route from the Solomon Islands to Sydney, Australia before its bid was dropped in favour of Australian government funding.

On the softer side of the Digital Silk Road, the increasing use of e-commerce and mobile payments have allowed greater collaboration between e-commerce and traditional players. In 2014-15, China’s Alibaba invested $400 million in Singapore Post, a traditional postal service company. On the other hand, Tencent, China Investment Corporation, and Didichuxing have invested in Grab, a leading ride-hailing service in Southeast Asia. In South Asia, Alibaba Group invested at least $620 million in India’s e-commerce players — Snapdeal, Big Basket, Ticket New, and One 97 — collectively between 2015 to 2017. Transfer of know-how, awareness of consumer behavior trends, and operationalization in the digital economy have all seen substantial enhancement and growth for both traditional and digital-based companies.

Yet these opportunities will also mean greater competition for more developed Asian economies as emerging economies gain a more level playing field through Chinese technological transfers in the coming years. Take Myanmar as an example. In 2012, less than 1 percent of its population had broadband access. But the country’s Ministry of Transport and Communications is currently working with Huawei to launch 5G broadband services by 2025, leapfrogging a number of generations of mobile network in stark contrast to countries like Singapore, Malaysia, and India.

As Chinese tech companies continue to expand into BRI host countries, South and Southeast Asia will no doubt develop at a collectively rapid pace. But this Digital Silk Road is essentially a game changer — it challenges the competitive advantages of economies that are already experiencing low growth, while bringing a much larger magnitude of economic opportunities for less developed economies. Transregional companies will need to devise new tech value chains for Asian economies in the face of this tech boom, which is here to stay.

Chan Jia Hao is a Research Analyst at the Institute of South Asian Studies (ISAS), an autonomous research institute at the National University of Singapore (NUS).