A new wave of technological revolution and industrial transformation is gaining momentum, with the digital economy injecting fresh vitality into China's growth. The recent Central Economic Work Conference made it clear: "We must vigorously develop the digital economy."
In this installment of Xinhua's "Plain Talk on Finance" column, Li Lihui—head of the Blockchain Research Working Group at the China Internet Finance Association and former President of the Bank of China—breaks down the key trends and highlights in China's push for digital economy innovation.
Question One: Why is developing the digital economy so crucial?
Li Lihui: The government's focus on digital tech and the digital economy reflects global trends in innovation and economic development. Digital technology is a suite of integrated tools—blockchain, big data, cloud computing, and AI—and its greatest strength is radically improving economic efficiency.
How does it achieve this? By enabling the creation of more direct and efficient networks. We used to describe the world as "flat," where connections between businesses, individuals, and objects were linear and two-dimensional. This flat structure creates too many intermediary points, slowing things down.
Digital technologies—especially blockchain, cloud computing, and AI—could help us build a future with a three-dimensional, interactive architecture. Within it, point-to-point or end-to-end interactions become more direct, cutting out reliance on central hubs and boosting efficiency. Blockchain adds another key advantage: it can establish digital trust through mathematical algorithms.
Imagine an interactive, 3D framework built on digital trust. Overall economic efficiency would see a major lift, paving the way for lower costs, higher productivity, and faster socio-economic progress.
Question Two: What is China's position in global blockchain research and application?
Li Lihui: After a decade of development, blockchain technology is still in its early stages of application. While some commercial uses have scaled, their overall reach remains limited, and many projects are still experimental.
In short: blockchain isn't fully mature yet; bottlenecks for large-scale, reliable applications persist; and we're still in a critical window for innovation in both the technology and the industry.
Blockchain combines several underlying innovations—like peer-to-peer (P2P) networks and cryptographic algorithms—as component technologies. These components are relatively mature on their own, but integrating them creates new demands. Plus, blockchain-specific tech, such as consensus algorithms and smart contracts, needs further evolution to support large-scale, reliable applications and reach greater maturity.
Applying blockchain—or any digital tech—in China comes with a unique challenge: we're an ultra-large market. Any innovation here must handle ultra-high concurrency. That's a key direction for future blockchain improvement and maturation.
Question Three: Do you agree that "the blockchain era has arrived"?
Li Lihui: I agree in part, but not entirely. We shouldn't overstate any single digital technology—whether it's blockchain or big data. I believe the future belongs to the broader digital technology era and the digital economy era.
That era is already here—and accelerating. No single digital tech can thrive in isolation. Blockchain must integrate and synergize with AI, big data, and cloud computing to reach its full potential and meet future socio-economic needs.
Question Four: With blockchain enthusiasm running high, how should we view cryptocurrency speculation?
Li Lihui: Bitcoin is Bitcoin; blockchain is blockchain. Bitcoin emerged in 2009 as a so-called virtual currency built on a blockchain platform. When we talk about Bitcoin, we're really talking about virtual currencies. These have two major flaws: technically, they rely on public blockchain platforms, and within decentralized architectures like Bitcoin's, transaction throughput is extremely low and speeds are slow—they can't scale for large applications.
Moreover, Bitcoin-like virtual currencies are highly speculative, making them unsuitable as mainstream payment tools or viable forms of money. These inherent issues have fueled cryptocurrency and financial speculation worldwide, including in China, making stronger regulation essential. Every new technology brings security concerns that must be addressed. New concepts are also prone to hype, requiring vigilant oversight to ensure healthy, sustainable development.
I believe strict regulatory oversight is necessary for activities posing significant technological, financial, or systemic risks. We absolutely cannot allow a country of China's scale to face nationwide or systemic financial risks. That's a fundamental底线 for financial regulation everywhere.
At the same time, we must特别注意, protect, and encourage experimental innovation in new technologies. We should foster a more supportive environment for technological innovation and broad application, helping these innovations mature and succeed.
Question Five: The Central Economic Work Conference called for "accelerating financial system reform." What role can digital technologies play?
Li Lihui: Deepening financial system reform is critical for China's financial sector. Two points stand out: First, reform must align with trends in digital adoption and fintech innovation. Financial management systems, regulatory frameworks, and even market structures must adapt to the new era of digital tech and the digital economy. This is a vital task.
Second, the number of participants in future financial markets will keep growing—not just large state-owned institutions and banks, but other中小型 financial institutions too. Increasingly, tech companies may engage in financial services or quasi-financial activities, sometimes operating at the edges of regulated finance.
As the market expands, the financial system needs higher operational efficiency and coordination, along with more comprehensive and effective regulation. Future fintech innovations will open new possibilities for supervision—using digital tools to boost regulatory efficiency, cut costs, and reduce compliance burdens. This helps contain financial risks at manageable levels, ensuring smoother, healthier, and more sustainable development for the entire sector.
Only then can finance truly fulfill its core purpose: better serving the real economy and creating greater value for it.