China's Xi requires motion towards 'unhealthy' improvement of digital economic system

©Reuters. FILE PHOTO: A giant screen shows Chinese President Xi Jinping attending the sixth plenary session of the 19th Communist Party of China (CPC) Central Committee in Beijing, China, November 11, 2021. REUTERS/Tingshu Wang

SHANGHAI (Reuters) – President Xi Jinping has called for improved regulation and governance of China's digital economy to guard against its "unhealthy" development as Beijing aims to boost the sector's contribution to the country's growth.

In an essay in the ruling Communist Party's publication Qiushi on Saturday, Xi called for focusing on key areas including integrated circuits, displays, communications equipment and intelligent hardware.

China should "cultivate a number of enterprises with international competitiveness and leading ecological firms with control over industrial chains to create world-class digital industrial clusters," he said.

"We must see that China's digital economy is large but not strong and fast but not superior compared to large and powerful countries in the global digital economy."

Xi also called for regulation and standardization to close regulatory loopholes and prevent "monopoly and disorderly expansion of capital" in the world's second largest economy.

"With rapid development, China's digital economy has also revealed some unhealthy and erratic germs and trends, which not only affect the healthy development of the digital economy, but also violate laws and regulations and pose a threat to national economic and financial security." he said.

China should also improve its national security system, with a focus on strengthening the digital economy's early warning, prevention and control systems to ensure the security of key technologies, key industries and facilities, strategic resources and leading enterprises.

Xi's essay follows a digital economy development plan released by China's cabinet on Wednesday, which aims to increase the sector's share of national GDP by pushing technologies like 6G and large-scale data centers.

This plan also highlighted challenges including a lack of innovation capacity in key areas and weak governance.

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