Global Economic Governance in Digital Era

Chen Weiguang

The digital economy is a main economic form which comes after the agricultural economy and the industrial economy. It has profoundly changed the means of production， ways of life and modes of governance in the human society and has become a critical force reshaping world economic structure and transforming the paradigm of global competition. With flourishing digital economy at home， China has played an active role in reforming the global economic governance system in the digital age， shouldering its due responsibility as a major country in maintaining and improving the multilateral mechanism of governance on digital economy.

NEW FEATURES OF GLOBAL ECONOMIC GOVERNANCE

Despite a lack of uniform international rules and regulations and a coordinated global governance system of the digital economy， the world has witnessed rapid growth in the development of bilateral， multilateral and regional mechanisms in the sector.

First， the participants of global economic governance have become more diverse. Since the end of World War II， governments have played a crucial role in establishing the post-war political and economic order and providing global public goods. However， the age of digital technologies has seen the creation of many digital technology companies， whose functions may go well beyond that of the government， extending from online governance in a narrow sense to much broader social and even country governance. Moreover， as digital technologies including the block chain have brought about the distributed technology， and digital platforms have allowed for community-level self-governance， new channels are now available for individual participation in global governance.

Second， the objects of global governance have become more complex. The rise of digital technologies has accelerated the popularity of the global mobile internet and information technology upgrades， profoundly changing the model of traditional trade and finance and even currency form. Many problems have emerged， including digital development gap and systemic financial risks caused by cross-border data flow， private digital currency and frictions in digital trade. In addition to these problems generated from the integration of traditional and digital technologies， global governance also focuses on other global challenges created by digital technologies themselves.

Third， there is a growing trend of fragmentation in the mechanism of global economic governance. Since the end of the cold war， the global institutions for economic governance have become more fragmented， due to the signing of many regional trade agreements and bilateral investment agreements. This trend is made more apparent by the impact of digital technologies. Many countries have reached independent bilateral or regional agreements regarding the digital economy. However， there is still no uniform systematic global governance framework on the digital economy. Countries choose different modes of digital economic governance to protect their own interests. This fact has also added to difficulties in the agenda of promoting global governance on digital economy.

DIFFICULTIES IN GLOBAL ECONOMIC GOVERNANCE IN THE DIGITAL AGE

The main challenges in global governance in the digital age include the broad scale of governance objects， malfunction of traditional governance mechanisms and rising conflicts between governance participants. The major difficulties in global economic governance in the digital age are reflected in the following three aspects.

First， there is a rising conflict of power between sovereign governments and the private sector. The digital economy causes conflicts between currency nationalization and liberation. With the rise of the block chain technology， the Bitcoin and other private digital currencies have emerged. As private digital currencies are an integration of traditional finance and emerging technologies， their issuance and circulation are not without risks， which is a huge threat to financial security. Meanwhile， excessive use of private digital currencies also poses severe challenges to sovereign currencies. In international settlements and cross-border payments， private digital currencies may erode the trading system of central bank digital currencies， and even compete with the latter as equals. How the two can coexist remains a daunting task in currency digitization.

The digital economy also causes an invasion of the private sector into the function of sovereign countries. In the digital age， digital technology companies have gone far beyond their role defined in classical economics. They have even taken the place of traditional trading markets and now function as the facilitator of goods， currency and personnel circulation. Besides， the globalization of digital technology companies is severely threatening the political process of governments by means of public opinion manipulation and interference with media freedom.

Second， the differences and conflicts of policy between countries are increasing. The global paradigm of digital economic governance can be described as the U.S. and the EU each dominating one of the worlds two major governance systems of the digital economy. Their policies follow two different principles. Since the 1980s， the U.S. has been advocating for “l(fā)iberalism” in global economic governance. It aims at leveraging U.S. advantage in the digital economic sector and setting “l(fā)iberal” rules and regulations for global digital economic governance， which can in turn help the U.S. secure its leading position and a larger share in the global market. The EU has started to unify digital policies within the region since the 1970s. Its policy emphasizes human rights protection and aims at competing with the U.S. for domination of the global digital market. With the continued spread of COVID-19 and downward pressure of the global economy， the differences and conflicts between the U.S. and the EU will still linger in the near future.

Third， the coordination of global governance mechanisms is increasingly difficult. For many countries including India， the General Agreement on Trade in Service compiled by the World Trade Organization in 1995 still works as the fundamental framework guiding all forms of services （digital services included）. Whereas the highest standards in the digital sector are reflected in the cross-border data flow clauses in the U.S.-Mexico-Canada Agreement， as well as in bilateral and regional agreements such as the U.S.-Japan Digital Trade Agreement. Such high standards form invisible yet unavoidable development barriers for developing countries. The paradigm of global governance on digital economy will remain dominated by the competition of global multilateralism， regionalism and unilateralism for quite a long time to come.

CHINAS PARTICIPATION IN GLOBAL ECONOMIC GOVERNANCE IN THE DIGITAL AGE

In recent years， Chinas vast domestic market has encouraged technological innovation and model shifts. With vigorous development of digital technologies and the digital economy， China has ranked 2nd in the world in terms of digital economic volume for many years. However， Chinas digital economy is still falling far behind that of the U.S.. In addition， due to a lack of influence in setting digital governance rules and regulations， China also faces the potential challenge of digital trade barriers created by Western countries. China should continue to build up the size， strength and quality of its digital economy. While improving the governance of digital economy domestically， China should make its voice heard through deeper and more active participation in the global effort of digital economic governance. It is also imperative for China to work with other countries in addressing the difficulties in developing the digital economy， and striving for secure， regulated and orderly development of global digital economy， so as to make sure that the digital economy contributes to the progress of human civilization.

First， leverage the potential of the G20 mechanism to promote coordination and cooperation on global digital economic policies. At the G20 Hangzhou Summit in 2016， China issued the G20 Digital Economy Development and Cooperation Initiative， the first ever policy document in the field of digital economy co-signed by world leaders. It marks the official inclusion of the development of digital economy into the global governance agenda. Digital economy had become a key item on the agenda of G20 summits in the following three years. India has also pledged to make “Digitalization for Development” a focus under its G20 presidency in 2023. The G20 mechanism has limited experience in digital economic governance. Its lack of a standing body and formal treaties also restricts it from playing a more effective role in the global governance system of the digital economy. Despite these limitations， however， there are indications that G20 has the potential of leading global governance in the digital sector as the worlds premier forum on global economic governance. As an important participant in digital economy and an advocate for global cooperation and governance on the digital economy， China should take part in negotiations on the digital economy at G20 and other international platforms， so as to maintain and enhance the global order of the digital economy.

Second， promote the development of regional and bilateral mechanism of governance on the digital economy. The chapters involving e-commerce in the free trade agreements signed by China so far are focused only on traditional areas such as digital product treatment and digital facilitation. China still has a long way to go compared with the position and high standards of Western countries. China should accelerate the process of institutional opening-up， align with higher standards of the digital economy， pursue multilateral cooperation through regional coordination， and speed up the upgrading of digital trade clauses in existing trade agreements. It should also engage with the U.S. and Europe in the coordination and cooperation on digital rules and regulations. In the digital services sector where China enjoys comparative advantages， China should take the lead in exploring the establishment of international standards. These are all efforts to form and enhance Chinas institutional influence on global governance of the digital economy. In December 2021， China officially applied to join the Digital Economy Partnership Agreement （DEPA）， showcasing its will to work with all sides towards sound and orderly development of the digital economy. China should actively promote the alignment of its domestic laws and regulations with international ones such as DEPA， so as to better facilitate the participation of Chinese digital companies in global and regional governance of the digital economy.

Third， accelerate the building of the Digital Silk Road to promote high quality development of the Belt and Road Initiative （BRI）. The digital transformation in most countries and regions along the Belt and Road is in an initial stage， with huge growth potential to be unleashed. The Digital Silk Road serves as an exemplary practice of promoting high-level development of the digital economy and a new type of globalization in the region. It also provides Chinas solution to the problem of Western digital imperialism. As the RCEP （including chapters on e-commerce） has come into effect， China should seize the opportunity to accelerate the development of the Digital Silk Road as an international cooperation system， while taking into consideration the e-commerce contents in other free trade agreements it has signed. Such an effort will be conducive to improving the institutional environment for BRI countries to participate in the Digital Silk Road. Meanwhile， China boasts a huge domestic market and enjoys advantages in new technologies such as cross-border e-commerce， digital trade， 5G and digital infrastructure. China should live up to its role as a responsible major country in the age of digital economy， fully leverage its advantages， help BRI countries to improve their digital infrastructure and narrow the digital gap between the Global North and South.

Fourth， build a community with a shared future in the cyberspace featuring security， openness and cooperation. In the digital age， the internet has enabled enterprises and individuals to easily evade the laws and regulations of a country， making regulation by a single country increasingly difficult. This trend points to the importance of building a community with a shared future in the cyberspace in the age of digital economy. China has already contributed to this goal through its policies and practices. The Global Data Security Initiative has received great attention and positive response from the international community since its launch on Sep 8th， 2020. Meanwhile， China is closely monitoring the risks of digital economy on national security and human rights. It stays alerted to long arm jurisdiction by other countries under the pretext of digital governance， which is harmful to Chinas national security and the interests of enterprises.

China should take the initiative to participate in negotiations on digital economy at international organizations， engage in bilateral and multilateral cooperation on digital economic governance， and safeguard and improve the mechanism of digital economic governance. China has the will and strength to create momentum for the global shift towards digital economy， to provide Chinas approach to the changes of global economic governance in the digital age， and to make due contributions to building a community with a shared future in the cyberspace.