Peng Juan I. Status quo of Shanghai’s digital economy development Shanghai’s digital economy has taken a dominant position in regional economy, and accounted for more than 50% of its GDP. A large number of high-tech enterprises and new infrastructure enterprises have provided support and guarantee for the development of Shanghai’s digital economy. Industry digitization has become the main driver for the development of Shanghai’s digital economy, creating an added value of RMB 1+ trillion in 2020, and accounting for more than 40% of the city’s GDP. Enterprises involved in new infrastructure have served as new drivers for the development of Shanghai’s digital economy by virtue of the city’s complete industrial system. Among all the fields of new infrastructure construction, the number of enterprises in Industrial IoT accounts for 69.15%, higher than the national average of 55.34%, making Industrial IoT a preponderant field in the development of new infrastructure in Shanghai, and providing a strong guarantee for the implementation of the Three-year Action Plan on Promoting the Innovation and Upgrading of Industrial Internet to Empower the Development of Shanghai (hereafter referred to as Three-year Action Plan). Shanghai plans to build 8,000 5G outdoor base stations by 2035 and accelerate efforts to build Shanghai into an international data port. II. Status quo of Shanghai’s digital industrialization and innovation enterprises Digital industrialization mainly includes electronic information manufacturing, telecommunications, software and IT service, the Internet and relevant service industries. Given the leading position of the electronic information manufacturing industry among the five high-tech industries, Shanghai’s 14th Five-Year Plan clearly points out that efforts will be made to double the scale of the integrated circuit industry by 2025. In additions, its policies have repeatedly encouraged the development of relevant industries. Typical enterprises in Shanghai’s electronic information manufacturing industry include Semiconductor Manufacturing International Corporation, Shanghai Micro Electronics Equipment (Group) Co., Ltd., Montage Technology Co., Ltd. and UNISOC (Shanghai) Technologies Co., Ltd. Shanghai has always been at the forefront nationwide in the construction of fixed and mobile networks. As its excellent enterprises take the majority, the city has taken the lead in achieving the goal of building it into a “dual gigabit city”. Its software and IT service industry has realized continuous development and gained patent advantages with low-risk enterprises. Representative enterprises in the industry in Shanghai include Alipay (China) Network Technology Co., Ltd., Hanhai Information Technology (Shanghai) Co., Ltd. (DianPing) and China UnionPay Co., Ltd. Shanghai ranks among the top in terms of the income and growth rate of the Internet and relevant service industry, and far exceeds the national figure in terms of patent holdings of enterprises in the industry. According to data from the Ministry of Industry and Information Technology, Shanghai’s cumulative online business revenue in the first three quarters of 2020 ranked third nationwide, with an increase of 22.7%. The number of enterprises with patents in the Internet and relevant service industry accounts for 3.36% of Shanghai’s total, more than 4 times that of the national level. The proportion for enterprises with software copyrights is 15.29%, more than 5 times that of the national level, and the figure for risk-free enterprises is 85.76%, higher than the national average of 75.73%. Those representative enterprises in Shanghai’s Internet and relevant service industry include Ctrip Computer Technology (Shanghai) Co., Ltd., Shanghai Lazhasi Information Science Technology Co., Ltd. (also known as Ele.me), Shanghai Huandian Information Technology Co., Ltd. (also known as bilibili), and Shanghai Junzheng Network Technology Co., Ltd. (also known as Hellobike). III. Status quo of Shanghai’s industry digitization and innovation enterprises  The number of Shanghai-based enterprises involved in the industrial Internet, which represents the digitization of the secondary industry, ranks third nationwide. The industrial Internet shows a new economic ecology resulting from the deep integration of the new generation of information technology and industrial economy. It is a key infrastructure and a new application model, as well as a typical concept and a part of the digitization of the secondary industry. In recent years, Shanghai has focused on promoting high-quality economic development through the innovative development of the industrial Internet, and made a number of deployments in strategic layout and industrial innovation. The Three-year Action Plan aims to promote the innovation and upgrading of Shanghai’s industrial Internet. By 2022, the industrial Internet will play a significant role in improving and facilitating the development of Shanghai’s real economy. Shanghai will continue to stay in the first echelon nationwide in the integration of industrialization and informatization, and serve as an engine for development with international influence, domestically advanced industrial Internet resources, original innovation, leading industries and open cooperation. The industrial Internet has produced a significant industrial cluster effect, and enabled the transformation and upgrading of traditional industries. The Yangtze River Delta region is an important industrial cluster of new energy vehicles, with industrial bases of important parts, power batteries, electric motors, and automotive equipment, a relatively high level of digitization covering its upstream and downstream industries, and a good foundation for the development of the industrial Internet. It is estimated that the size of core industries regarding the industrial Internet in Shanghai will reach RMB 150 billion in 2022. Currently, Shanghai has promoted 300+ enterprises in such key areas as integrated circuits and biomedicine to implement innovative industrial Internet applications. By advancing the construction of Yangtze River Delta Industrial Internet Integration Demonstration Zone, Shanghai will create a new height for the industrial Internet industry that plays a prominent leading role, build a model for the development of the industrial Internet nationwide, and lay a solid foundation for building a world-class smart manufacturing demonstration zone in the future. Shanghai has created an excellent investment and financing environment for the development of e-commerce that represents digitization of the tertiary industry, and taken a leading position in terms of corporate health. As for industry digitization, the service industry has been at the forefront of development. In particular, the rapid development of e-commerce and sharing economy has made great contributions to the growth of the digital economy. Meanwhile, the platform economy has liberated new supply and demand. The e-commerce platform is a typical digital platform with the Internet as the carrier and a representative for the digitization of the service industry. The e-commerce industry has received continuous attention, and livestreaming e-commerce has become the focus. The Shanghai’s Action Plan to Promote Online New Economy (2020-2022) mentioned the tasks of expanding e-commerce retail of fresh food and promoting new forms of intelligent marketing including livestreaming e-commerce, social e-commerce, community e-commerce and “mini-program” e-commerce. One of the important guidelines is to attach importance to the development of livestreaming e-commerce. The livestreaming e-commerce market is at the stage of explosive development, with a large size and a promising future. Thanks to its inherent advantage of many Chinese and foreign brands highly clustered, Shanghai has seen rapid growth in the number of MCN institutions since the outbreak of the pandemic. As the first city in China to have established professional committee for MCN, it has been committed to building a gathering area for the Internet celebrity economy and promoting exchanges and cooperation between upstream and downstream players on the entire industry chain. Representative enterprises of Shanghai’s e-commerce industry include Shanghai Xunmeng Information Technology Co., Ltd. (also known as Pinduoduo), Xingyin Information Technology (Shanghai) Co., Ltd. (also known as Xiaohongshu), Zhenkunhang Industrial Supermarket (Shanghai) Co., Ltd., Meione (Shanghai) Network Technology Co., Ltd. and Shanghai Baozun E-Commerce Co. Ltd. IV. Status quo of digital governance in Shanghai Smart city that represents digital governance has received increasing policy support year by year. The new-type smart city is the core carrier of building a digital China and a smart society. Shanghai has followed national policies and vigorously promoted the construction of smart city. In 2020, Shanghai Municipal People’s Government issued Several Opinions on Further Accelerating the Construction of Smart City, focusing on improving “online and offline platform” for government services and “unified management in one network” for city operation. It aims to comprehensively empower the implementation of the three major tasks in digital economy, enhance the three basic guarantees, namely the “City Brain”, information facilities, and cybersecurity, accelerate the new round of smart city construction, and continuously increase the attractiveness, creativity and competitiveness of the city. Shanghai ranks first nationwide in the Smart City Development Index due to good performances in policy support, infrastructure, high-quality services and applications. It has become a benchmark for the building of smart city in China. Finally, I’d like to talk about the prospects and challenges for Shanghai’s digital economy: Through studying the current development of Shanghai’s digital economy and the interpretation of planning and goals, it’s expected that Shanghai’s digital economy will continue to maintain high-quality development in the future, achieve regional collaborative innovation, and keep a favorable position in digitization. The STAR Market will provide strong impetus for the high-quality development of Shanghai’s digital economy. As an important platform that focuses on supporting the new generation of high-tech industries and emerging strategic industries, it has attracted a large number of excellent new economy and high-tech enterprises to Shanghai. Shanghai will promote collaborative innovation relying on the integrated development of the Yangtze River Delta. In November 2018, General Secretary Xi Jinping announced that the country would support the integrated development of the Yangtze River Delta region and turn it into a national strategy. According to the plan, the Yangtze River Delta will form the spatial pattern of “one center and nine belts” with Shanghai at the core. Shanghai will focus on promoting the cross-regional division of labor and collaboration in the Yangtze River Delta, exert and integrate industrial advantages of the region, and achieve collaborative innovation in the digital economy. Shanghai will consolidate its digital advantages through urban digital transformation. With its advantages in digital development across the country, it has clearly pointed out in the 14th Five-Year Plan that it will promote urban digital transformation across the board, encourage enterprises to make independent innovations in relevant technologies such as AI, 5G and IOT, vigorously promote scientific and technological development, and consolidate such advantages. Meanwhile, Shanghai will inevitably face many challenges in developing digital economy. The increasingly complex international environment and more external challenges have brought tremendous changes to global digital trade. Countries across the world have successively announced development strategies for digital economy to seize the technological commanding point. Despite being home to leading enterprises in various fields, Shanghai still lags behind Beijing and Shenzhen in terms of the numbers of leading enterprises, large platform enterprises and unicorn enterprises on the whole. As for R&D and innovation in the digital economy, Shanghai, currently outperformed by its sister cities, needs to continue to work hard in featured science and technology fields. In short, Shanghai both has advantages and faces challenges in developing the digital economy. We believe that in the near future, “digital Shanghai” with its own characteristics of the digital economy will surely become the international digital capital. (Author: Peng Juan, Associate Professor of Antai College of Economics and Management, Shanghai Jiao Tong University)