THE BLOG

Digital China And Its Implications For Europe

By Romano Prodi and David Gosset

The strategists were traditionally preoccupied by the possession of territories or the domination of sea routes. More recently, the capacity to control airspace and outer space modified the equation of national strength, in the Information Age, a country's comprehensive power has become inseparable from her presence in the cyberspace.

Chinese policy makers have not only integrated the various dimensions of geopolitics but they have rightly paid great attention to the rapidly evolving domain of cyberpolitics.

By almost exclusively focusing on what it perceives as the limitations and the imperfections of the Chinese internet, the West has not yet fully realized the significance of the Chinese digital transformation. At the intersection of China's global projection and of her quest for innovation, digital China is one of the most significant stories of our time.

Not a source of the 18th century Industrial Revolution which, after its birth in Europe, opened a new era in the history of mankind, marginalized for 150 years as a consequence of her incapacity to rapidly connect with the changes associated with the reign of the machines, China is now marked by her openness to the world's scientific advancement but also by her ambition to be at the avant-garde of technological progress.

Following a painful decay whose causes were as much internal than external, China is currently, from biotech to the internet, from nanotech to aeronautics or space exploration, in a quest for relevance. More generally, the ambition not to be a passive spectator in a western led globalization but to stand as a source of modernity is one of the defining elements of the Chinese renaissance.

If the Qing dynasty (1644-1912) was neither able to generate the Industrial Revolution nor to rapidly adjust to the changes it implied, the PRC is already a catalyst of the digital transformation. China missed the Industrial Revolution but it is a co-architect of the Information Age.

Global cyberspace, like the post WWII system of international relations, is bipolar, not structured around Washington D.C. and Moscow, but articulated around the U.S. and China. The current digital bipolarity is reflected in the competition between internet companies : Google, Twitter, YouTube, Amazon, eBay, Uber, Expedia and Apple Pay are the icons of digital America while Baidu, Tencent's Wechat, Youku, JD.com, Alibaba, DidiKuaidi, Ctrip and Alipay symbolize China's cyberspace. In a sense, global cyberspace is a tale of two internets.

Today, the two top languages of the World Wide Web are English (851 million users) and Chinese (704 million users) but with the rise of the internet penetration in the Middle Country (around 50% internet penetration in China against 87% for the U.S.), Mandarin might be soon the internet number one language.

South Korea whose digital economy represents 10% of her GDP is in many ways a reference in the Information Age but with 50 million inhabitants the country's impact is intrinsically limited and it can not affect the dynamics of a bipolar cyberspace.

Some would argue that despite the quantitative dimension of the Chinese internet, China has been qualitatively a mere follower of the Silicon Valley. However, by choosing to protect the development of her own giants she has not only be able to narrow the gap very aptly, but the country's existing digital ecosystem put her in a position to genuinely innovate in the infrastructure and the systems of the cyberspace.

The data that the Chinese internet companies have been accumulating give them an absolute advantage in what will be soon the world's largest economy, and in the field of e-payment where more than 200 firms serve the Chinese consumers, the Middle Country's initiatives have become driving forces.

The significance of digital China is even more striking when it is compared with the internet situation in Africa, Latin America, the Arab world or even India whose engineers continue to contribute to the success of the Silicon Valley. The European Union finds it satisfying to be the user of tools developed by American companies even if such a dependence is both from a commercial and a security perspective an incredible long term weakness.

"Google Italy", "Google France" or "Google Germany" have certainly enriched the life of Europeans but they are variations in a universe centered around Googleplex in Mountain View, California.

Alibaba, the e-commerce giant created 16 years ago by Jack Ma and whose IPO raised a record $25 billion on the New York Stock Exchange, is increasing its presence in the European Union in a move which will immediately benefit the Sino-European trade relations. However, when European companies export to China through trading platforms conceived by Alibaba they become dependent on a new kind of vehicle upon which they have no direct control.

A long term view of the European interests in the Information Age commands to put the development of an ambitious European digital strategy at the top of Brussels'priorities. In the 21st century a power which ignores the centrality of cyberpolitics condemns itself to irrelevance.

Europe would deserve better than linguistic variations on the Google main theme and should be able also to grow e-commerce platforms capable to compete with Amazon or Alibaba. In that context, the European Commission's team in charge of the Digital Agenda of the European Union should certainly work at the regulatory level for the Digital Single Market but it should help to shape the conditions for the emergence, beyond startup companies, of European digital global businesses.

Any long term European digital strategy has to take into account the creativity of the Silicon Valley but the vision of a New Digital Silk Road would allow Europe to keep pace with the evolving Chinese cyberspace. While cyber mistrust is not an issue in the relations between Brussels and Beijing, a converging Sino-European internet has to complement the "One Belt, one Road" connectivity.

The discoveries of new continents, starting from the discovery of America, marked the beginning of "Globalization 1.0" and, equipped with the instruments of the Industrial Revolution, Europe has been in a position to play a preeminent role in the world's affairs. At the dawn of "Globalization 2.0"an expansion into unlimited e-territories is combined with the injection of new digital technology into the production processes.

Would it be possible that the civilization which was at the center of "Globalization 1.0" ends at the periphery of "Globalization 2.0" ? If it is certainly too early to tell, Europeans should nonetheless meditate upon two historical turning points.

During the Renaissance, Italian cities were leading in the fields of trade, banking, science and art. Following the discovery of the New World the European center of gravity gradually shifted from the Mediterranean Sea to the Atlantic Ocean. Incapable of coordinating their efforts to reach the necessary dimension to maintain their rank in a new geopolitical configuration, the Italian states declined and one had to wait the unification of Italy in the second half of the 19th century for the Italian peninsula to be back on the map of world politics.

When the Emperor Qianlong (1711-1799) made it impossible for his Empire to have normal interactions with the 18th century Europe, the economy of the Qing dynasty was still more than 20% of the world economy. But, convinced by the idea of the superiority of the Middle Country, the Son of Heaven was unable to anticipate that the age of the machines would change the distribution of power and his complacency caused a humiliating decline.

If Europe does not find the political wisdom to deepen her integration and the strength to fully enter the Information Age as one of its co-creators, it simply takes the risk, after a gradual marginalization, to end at the periphery of a new global order which would have been shaped without her effective participation.

Romano Prodi is former Prime Minister of Italy (1996-1998, 2006-2008) and former President of the European Union Commission (1999-2004). David Gosset is director of the Academia Sinica Europaea at China Europe International Business School (CEIBS), founder of the Euro-China Forum and of the New Silk Road Initiative.