China’s Digital Dividend

February 6, 2019/IMFBlog

By Longmei Zhang and Sally Chen

Digitalization has created millions of new jobs in China, accounting for between one-third and one-half of employment growth in the world’s second-largest economy.

Our Chart of the Week shows employment in two sectors: information and communications technology (ICT) and retailing. ICT added 14 million new jobs for high-skilled workers in the five years through 2016, and the average wage doubled.

But ICT is just one part of a much larger picture. E-commerce and the sharing economy are even bigger drivers of job creation, according to our recent IMF staff working paper. Alibaba Group’s e-commerce platform, for example, has almost 11 million small and medium enterprises, which have created 30 million jobs in a decade. Didi Chuxing Technology Co.’s ride-hailing service is connected to 13 million drivers.

Chinese authorities can aid the transition by helping to retrain displaced industrial workers.

Given the growth of e-commerce, you would expect jobs in retail sales to be vulnerable to automation. Surprisingly, though, the chart shows that employment in that sector has been largely stable. On the other hand, industrial employment has fallen by 9 million since 2012, largely because of automation. One company, Coxcomb, has replaced 60,000 workers with 40,000 robots.

Putting it all together, the impact of digitalization on employment has been positive as China’s economy shifts toward more labor-intensive services and away from manufacturing. Chinese authorities can aid the transition by helping to retrain displaced industrial workers for service occupations.

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