Internet to drive future growth with enhanced productivity: study

Internet could contribute up to 22 percent of China's GDP growth through 2025, via increased productivity and adoption of internet application across a number of sectors, according to the latest research by consultancy McKinsey.

The booming internet sector has provided momentum in China's attempt to wean the economy off investment and export, and rely more on consumption and innovation for growth.

This is happening as the world's second-largest economy sets to embark on a digital transformation to boost productivity and economic growth.

Based on McKinsey's calculation, the internet took up 4.4 percent of China's economy last year, a share placing the country among the world's most advanced economies.

The consultancy predicts the internet could contribute up to 22 percent of GDP growth from 2013 to 2025, provided supportive policies are put in place and businesses are aggressive in adopting the internet in their practices.

McKinsey argues the internet's ability to boost productivity is crucial for sustaining China' s growth as the nation is facing dwindling labor pool and rising labor cost.

The report also shows increased adoption of the internet by the country's financial sector, through big data and online channels for example, will lead to more efficient use of capital.

This, McKinsey says, will grant China's small and medium-sized firms with more access to financing. These firms account for 70 percent of China's GDP, according to China's National Bureau of Statistics.

They also boast higher return on assets, at 8.2 percent, compared with 6.6 percent for larger firms.

Aside from growth, the report finds the internet is changing China's labor market.

Jobs will be lost when they are moved online while demand for workers with digital skills grow over time. Yet the internet' s net impact over jobs, the report says, will be positive as jobs it creates outnumber positions it eliminates.

Whether the economy will benefit thoroughly from the internet depends on government support and adoption by various industries.

The report argues that authorities should articulate boundaries between privacy protection and data sharing. This will help remove constraints that prevent companies from using consumer data to maximize value.

The report indicates the importance of realigning with international standards in the push for the internet' s growing impact.

Adopting international technology standards rather than solely domestic ones can also improve China's competitiveness and ability to export, it says.