ADB Study Reveals How ICT Reforms Can Unlock China's Digital Trade and Regional Economic Growth

ADB researchers find that modernizing China's ICT regulations and fully implementing RCEP could significantly boost digital services exports, attract foreign investment, and strengthen regional economic integration across Asia. The study urges policymakers, development partners, and businesses to prioritize regulatory reforms, digital governance, and competitive telecommunications markets to unlock long-term productivity, innovation, and sustainable economic growth.

China's next phase of economic growth may depend less on manufacturing and more on digital services, according to a new Asian Development Bank (ADB) working paper by Rolando Avendano of ADB's Economic Research and Development Impact Department and Hildegunn Kyvik Nordås of Örebro University and the Council on Economic Policies. The research argues that regulatory reforms and deeper regional integration could significantly strengthen the country's digital services trade while creating economic opportunities across Asia. Using bilateral trade data, foreign affiliate statistics, structural gravity modelling, and economic simulations, the study concludes that modernising information and communication technology (ICT) regulations and fully implementing the Regional Comprehensive Economic Partnership (RCEP) would boost exports, attract investment, improve productivity, and enhance long-term economic resilience.

Digital Services Become China's New Growth Engine

China's economy is steadily shifting from manufacturing-led growth toward a stronger services sector. As manufacturing contributes a smaller share of GDP, digitally deliverable services, including telecommunications, computer services, financial services, consulting, and other business services, are emerging as key drivers of economic expansion. The report notes that China's digital services sector grew by more than 9% annually between 2010 and 2023, supported by expanding digital infrastructure and rising international demand.

Business services now dominate China's digital services exports, while payments for intellectual property rights remain the country's largest import category, highlighting continued reliance on overseas technology, patents, and software. The study also shows that services supplied through multinational affiliates exceed traditional cross-border digital trade. Chinese multinational companies have become increasingly focused on the domestic market, with home-market sales rising from just over 60% of total affiliate sales in 2010 to around 80% by 2020, while information services have become the fastest-growing area for international investment.

Regulatory Reform Could Unlock Billions in Digital Trade

The research identifies regulation, not infrastructure, as the next major challenge for China's digital economy. Although the country has made substantial investments in broadband networks and digital connectivity, restrictions on cross-border data flows, data localisation requirements, and limited competition in telecommunications continue to reduce international competitiveness.

Using structural gravity modelling, the researchers found that every additional improvement in ICT regulation increases digitally deliverable services exports by roughly 6%, raises foreign affiliate sales by about 3.5%, and expands the establishment of new foreign affiliates by around 1.5%. Reforms that strengthen regulatory accountability, expand the authority of ICT regulators, improve spectrum management, simplify licensing procedures, and promote competition generate the strongest economic gains.

For policymakers, the findings suggest that regulatory modernisation has become as important as physical infrastructure investment. A transparent and competitive digital regulatory framework can reduce business costs, encourage innovation, improve investor confidence, and make domestic firms more globally competitive.

RCEP Can Strengthen Regional Growth and Investment

The study highlights the Regional Comprehensive Economic Partnership as one of Asia's most important platforms for expanding digital trade. RCEP covers services, investment, telecommunications, electronic commerce, cybersecurity, digital transactions, and cross-border data flows, creating a common framework for regional integration.

Economic simulations show that upgrading China's ICT regulatory framework to the International Telecommunication Union's advanced Generation 4 regulatory model could increase the country's digital services exports by around 50%, while generating positive spillover effects throughout Asia. A second simulation estimates that full implementation of RCEP commitments could raise China's total services exports by approximately 46.7%, with economies such as Vietnam recording even larger export gains in several scenarios.

The report also finds that stronger telecommunications and banking reforms under RCEP would lower trade costs, increase regional investment, improve productivity, and strengthen economic cooperation among China, Japan, South Korea, ASEAN members, Australia, and New Zealand.

A Roadmap for Governments, Development Partners and Business

The findings carry important lessons for governments, international development institutions, and private-sector stakeholders. For policymakers, regulatory reform should become a central component of national digital economy strategies alongside investments in infrastructure. Independent regulators, stronger competition policies, streamlined licensing, and balanced cross-border data governance will be essential for sustaining long-term growth.

For multilateral development banks and development partners, the report suggests that technical assistance should increasingly focus on digital governance, telecommunications regulation, cybersecurity, competition policy, and institutional capacity rather than infrastructure alone. Supporting regulatory convergence across Asia could generate lasting regional economic benefits.

Private-sector stakeholders, including telecommunications companies, cloud service providers, fintech firms, software developers, consulting businesses, logistics companies, and digital startups, stand to benefit from greater regulatory certainty, reduced compliance costs, easier market access, and stronger regional integration. However, the report cautions that governments must balance market liberalisation with effective cybersecurity, consumer protection, privacy safeguards, and competition enforcement to ensure that digital growth remains secure, inclusive, and sustainable.

Overall, the study concludes that China's future competitiveness will increasingly depend on regulatory quality rather than manufacturing strength alone. By modernising ICT governance and fully implementing regional digital trade commitments, China can strengthen its position as a global digital services hub while creating wider economic opportunities for governments, businesses, investors, and development partners across the Asia-Pacific region.