Working Paper
New Economy and ICT Development in China

The rapid development and diffusion of the information and communications technology (ICT) is the major driving force of the New Economy. While there is ample evidence to suggest that the ICT industry has contributed a great deal to the overall economic growth of the developed countries, its role in the developing countries is far from clear. The pressure of unemployment that may result from ICT’s displacement effect is a major concern faced by the developing countries in their adoption of ICT.
This study provides empirical evidence on China’s ICT industry development and diffusion in recent years. Although there is still a huge gap between China and the developed countries in the development of the ICT industry, the astonishing pace of its progress shows promise for the country’s New Economy. The ICT industry is becoming the most dynamic sector in China’s economy. There is, however, a clear digital divide among the nation’s three economic regions.
To promote China’s New Economy, the following issues have to be addressed: (i) its financial market has to be reformed to conform to international standards, and an over-the-counter market (namely, second board market) to be established; (ii) talent has to be attracted to China; (iii) the ICT industry has to be further deregulated, particularly the telecoms sector; and (iv) strategies to cope with the opportunities and challenges of China’s accession to the WTO have to be formulated.