Information and communication technologies (ICT) are vital to managing China's unprecedented growth challenges, according to a new World Bank study titled China's Information Revolution: Managing the Economic and Social Transformation. This report, the first to comprehensively map out China's current ICT landscape, provides a forward-looking assessment of the state of the country's ICT preparedness.

China has the world's largest telecommunications market and its IT industry has been an engine of the country's economic growth--growing two to three times faster than GDP over the past 10 years. However, as China's development has entered a new stage, it requires an updated "informatization" strategy to reflect the current economic and social challenges as well as opportunities. If China is to reap the full benefits of ICT, the report says, it needs to deal decisively with several key issues.

"China is serious about putting in place a good foundation for equitable and sustainable economic growth" said Jim Adams, World Bank Vice President for the East Asia and Pacific region. "This report reinforces how important to that effort is a well thought-out ICT strategy that brings the benefits of the online world closer to everyone's daily lives."

The report says that legal and regulatory reforms are urgently needed in areas such as telecommunications, open access to government information, data protection and privacy. A stark urban-rural divide in access to telecommunications infrastructure puts internet penetration 40 times higher in urban areas compared to rural. It also says the domestic ICT industry needs more innovation so that it moves up the value chain and beyond production of low-end products and applications.

Currently, software exports account for just 1-2 percent of China's total IT industry exports -- reflecting China's comparative strength in IT manufacturing and weakness in software development. Furthermore, only 16 percent of teachers in China have ICT training, resulting in a major shortage of skilled ICT workers. 'Brain drain' further exacerbates this situation.

According to the report, China also stands to benefit from expanding into e-government as online applications could make government functions more service-oriented, efficient and transparent. Rural areas in particular can benefit from online information services. Fostering e-business can boost productivity, increase technological innovation and enhance international competitiveness of Chinese enterprises. A 2004 Ministry of Commerce survey of 838 firms found that 58 percent of those that had participated in e-commerce increased their number of supplier contacts, while 70 percent increased their number of client contacts.

"Given the cross-cutting nature of ICT, government decisions about ICT can also be seen as decisions on the course of the economy as a whole" said Mohsen Khalil, Director of the World Bank Group's Global ICT Department.

"The issues affecting China's ICT policies and strategies are similar to those faced in other sectors. The rapid pace of technology development just means that ICT issues are being addressed before other problems, and that the effects of ICT development will be felt throughout the entire economy," he said.

Highlights of the report:

• China has the world's largest telecommunications market, and its IT industry has been an engine of economic growth, growing two to three times faster than GDP over the past 10 years.

• ICT could make government functions more service-oriented, efficient and transparent; to make markets and resource allocations far more efficient to sustain growth; and to enhance productivity, international competitiveness and capacity for technological innovation of Chinese enterprises.

• Four key enablers and building blocks for achieving China's informatization priorities are:
1) Legal and regulatory framework
2) Telecommunications infrastructure
3) ICT industry; and
4) Levels of IT literacy and ICT skills.

These enablers, supported by strong leadership, should aim to transform administrative and business processes into automated, streamlined processes that support the two pillars of ICT applications: e-government and e-business.

• Several challenges, if not addressed properly, would impede China's informatization progress:
1) A coordinated institutional approach is vital to respond to the increasing trend of convergence.
2) Digital divide in China may intensify the rising inequalities in income and opportunities;
3) China relies heavily on foreign technology and expertise;
4) ICT skills are not strong enough to reap the benefits of informatization; and
5) Large-scale ICT applications projects have yielded limited results.

• These key issues need to be addressed decisively in the second half of this decade, through policies entailing institutional reform, to trigger broader changes. Policies should set an overall vision and direction for the sector, while not being overly prescriptive in order to allow for technological innovation. China would benefit from achieving a balance between government regulations and free market dynamics, and matching the supply and demand of commercially successful applications.

• Given the cross-cutting nature of ICT, government decisions about ICT can also be seen as decisions on the course of the economy as a whole.

• The issues affecting China's ICT policies and strategies are similar to those that the country will face in other sectors. The rapid pace of technology development just means that ICT issues are being addressed before other problems, and that the effects of ICT development will be felt throughout the entire economy.

(China.org.cn April 27, 2007)