President Xi Jinping stated, “The speed of the digital economy’s development, the extent of its reach, and the level of its impact are unprecedented; and it is fast becoming a critical force that is reordering global production factors, reshaping global economic structures, and transforming global competition.” Realizing synergic development of the digital economy and digital finance is of great strategic significance to promoting high-quality development of China’s economy.

Technical characteristics

Digital finance and the digital economy exhibit synergies in terms of their technological foundations, and software/hardware development conditions.

Positive externalities of digital industries determine that the digital economy and digital finance benefit from industrial linkage synergies. Firstly, the digital economy can provide an important technical basis, customer group basis, and data basis for the development of digital finance. These help the financial industry to reduce transaction costs, promoting the healthy development of digital finance. Secondly, digital finance can provide digital payments and financing services, expand the application scenarios, and increase the consumption forms of the digital economy. Furthermore, digital finance can promote the development of inclusive finance, so that the subdivisions of the digital economy can break through physical space constraints and continue to extend, achieving greater market penetration and broader development prospects.

Development synergies between the digital economy and digital finance also arise due to the compatibility of the consumption environment and consumption habits of digital industries. Owing to the virtual characteristics of digital products (unlimited supply, non-exclusive consumption), the digital economy and digital finance both inhabit a virtual space that is essentially immune to physical constraints. Meanwhile, consumers in different forms of the digital economy are more likely to exhibit virtual consumption behaviors, further expanding synergies. In addition, the rapid development of the digital economy also provides a richer application environment and data access for the popularization of digital finance.

High-quality development

Empirical research shows obvious synergy between the development of the digital economy and digital finance in provinces across China. Therefore, this synergy should be highlighted and leveraged to facilitate the high-quality development of China’s economy.

Firstly, the construction of digital infrastructure should be further accelerated. Infrastructure is an important foundation and prerequisite for this synergic development. First, focus should be placed on complementing existing facilities, promoting the construction of regional data centers, accelerating the establishment of big data transmission channels, and constantly improving data transmission capacities. Next, regional balance and equal opportunities should be emphasized. Finally, the diversified investment and financing models for digital infrastructure construction should be innovated.

Secondly, independent R&D and innovation should be further promoted. First, the sci-tech innovation system should be constantly improved, digital technology standards optimized, and digital technology innovation platforms established. Second, we should further strengthen the cultivation of digital talent and the development of digital education to inject new momentum into the digital economy by supplying high-quality human capital. Meanwhile, high-level opening-up should be promoted and digital talent recruited globally. Third, more financial resources should be directed towards supporting innovation and the development of the digital economy.

Thirdly, major risks to the digital economy and digital finance should be actively anticipated, and mitigated. First, digital finance laws, regulations and regulatory systems must be improved to prevent and resolve possible systemic risks. Second, data security should be prioritized, a holistic approach to national security adhered to. Data security laws, regulations and regulatory systems should be improved and the development of data security industries fostered.

Xiao Wei (associate professor), Peng Yu, and Tong Yuequ are from the School of Economics and Finance at Huaqiao University.