SHANGHAI — The financial hub of Shanghai plans to foray into the digital economy without risking disruption of or obstruction to traditional businesses, delegates of the city’s local legislature said during the annual political gathering that concluded Saturday.

“Cloud computing, big data, artificial intelligence, and other digital technologies are increasingly integrated into the entire process of economic and social development,” Ji Xinhua, a Shanghai Municipal People’s Congress delegate and president of the Shanghai Information Security Industry Association, said during the “local two sessions” meeting. “How to balance the development of the digital economy and avoid the risk of ‘departing from the real to the virtual’ is an issue that Shanghai needs to consider.”

Chinese cities are increasing their adoption of digital transformation strategies in various sectors, while the country published its five-year plan to boost the digital economy earlier this month. The plan envisions China’s digital economy will account for 10% of the country’s GDP by 2025, proposing a two-fold approach: industrialization of the digital economy and the digitization of the traditional industries.

However, experts said that industrialization of the digital economy is faster than the process of digitizing traditional industries due to the hefty costs associated with the latter. For example, while platform-based companies only need to converge and distribute information flow to produce services, the latter requires advanced internet and artificial intelligence technology to transform the traditional manufacturing and agricultural sectors.

“The risk of digital transformation for enterprises is high,” Ding Botao, deputy director at the Shanghai Academy of Social Sciences, said during an academic forum hosted by the Information Office of Shanghai Municipality on the sidelines of the political meetings Friday. “Many worry whether the technology they invest in would generate returns.”

In Shanghai, where the digital economy has accounted for over 50% of the city’s GDP since 2020, convincing the majority of the city’s small and medium-sized companies has been a challenge — most are either unwilling to jump on the digital transformation bandwagon or lack the financial and human resources to do so, according to Zhang Ruibin, another Shanghai Municipal People’s Congress delegate and the president of Shanghai Zhisheng Group, which manages industrial parks. He cited high costs and the inability to access enough data as major barriers for such companies to switch to digitalization entirely.

“Only by ensuring that small and medium-sized enterprises are not left behind can we truly achieve comprehensive digital transformation,” Zhang said.

Editor: Bibek Bhandari.

(Header image: People Visual)