12-Lecture Series on Platform Economy Begins
Dec 01-2021
On November 18th, Prof. Huang Yiping gave an online lecture on the opportunities and challenges of the platform economy, presenting some findings of an ad hoc research team set up by the NSD in June 2021. More findings are to be shared in this 12-lecture series by renowned professors of the NSD. Prof. Huang is Associate Dean of the NSD.
The platform economy, a special type of the digital economy, relies on network infrastructure and digital technology to match transactions, transmit contents, and manage processes, says Prof. Huang. With the application of new technologies, digital platforms have transcended many constraints – such as locality, time, transactional scale, and communication - faced by traditional platforms and have acquired brand-new scale, meaning, efficiency and influence.
According to the Ministry of Industry and Information Technology, China’s digital economy reached a scale of 35.8 trillion yuan in 2019, or 36.2% of its GDP. Of the 74 digital platforms each with a valuation of over 10 billion yuan, 35 are American and 30 Chinese. That begs the question why the platform economy has prospered in China? Prof. Huang boils it down to three major reasons: China’s large market size which plays to the innovative advantage of platforms, low protection for individual rights and data privacy (which has become a target for improvement), and market separation in the sense that there’s a wedge between the Chinese market and other markets. But he also draws the attention to the fact that despite their remarkable sizes, Chinese platforms do not possess salient advantages in technology.
After introducing the basic features of the platform economy, Prof. Huang delves into its benefits, such as increasing the inclusiveness of digital finance, improving big tech and big data-based credit risk control, and strengthening China’s macro-economic stability.
However, there’s not without problems, says Prof. Huang. To begin with, platforms tend to straddle the boundaries among supervision, market, and enterprise, thereby giving rise to the question how they can manage to pursue efficiency and ensure fairness at the same time. Another question to be asked is about their impact on innovative activities, given their penchant to nip competition in the bud by buying out startups. In addition, a worthy question concerns the platform economy’s impact on income distribution as they create some jobs while displacing others. The other questions enumerated by Prof. Huang include fair competition, digital algorithm, and involvement in the making of international rules.
On the anti-monopoly front, Prof. Huang argues that market share might not be an appropriate criterion; instead, he points to the contestability theory by American economist William Baumol. Entry barriers and sunk costs much be sufficiently low to foster competition. Statistics suggest that contestability has been on the rise in China’s platform economy, but Prof. Huang highlights the fact that many competitive platforms are invested by one single super-platform. The exact significance of such a development deserves more analyses, he cautions.
