Photo Credit: pexels
If you buy into the argument that “data is the new oil,” then it’s clear that power in the new global economy will flow to those nations that are producing, selling and transacting in this valuable resource. And, according to the latest figures from Japan-based Nikkei, the new ruler of the global data economy is not the United States – it’s China. In terms of cross-border data flows (i.e. data flowing out of one nation into another), China is now responsible for 111 million Mbps of cross-border data per year, compared to just 60 million Mbps for the U.S. As a rough approximation, then, China’s data economy is twice as large as America’s. Obviously, this has real-world implications for everyone.
The oil analogy
The easiest way to think about the new data economy is in terms of the old “oil economy.” Oil powered the global economy, so it only made sense that oil-rich petro states got to determine the rules of the game. Nations like Saudi Arabia, for example, could essentially set the price of oil. And huge blocs like OPEC (led by Saudi Arabia) could gather together all of the top oil producers in order to control what happened in the oil economy. For that reason, nations like the United States have attempted to become energy independent ever since the disastrous economic period of the 1970’s, when “stagflation” reared its ugly head.
So think about the data economy in these same terms. Instead of Saudi Arabia, think China. And instead of OPEC, think of a new massive Asian data super-bloc that determines how data is used and transacted, and even which data-powered startups gain traction on the world stage.
That, in fact, is one of the underlying themes of the Nikkei report on cross-border data. The report mentions, for example, “data friction” that might occur if the U.S. and China continue to spar over the ways that Google and Facebook can do business in China, and the ways that TikTok and WeChat can do business in the U.S. And the report also mentions the fact that the emerging nations of Southeast Asia are starting to do more and more cross-border data business with China, thereby leading to a new kind of data OPEC.
The future of the data economy
If data is the new oil, then whoever has the most data is going to be in the driver’s seat. And, for right now, China not only produces most of the world’s data – it is also exchanging this data with nations around the world, and especially with all the other large states in Southeast Asia. At the same time, the U.S. and Europe seem to be losing their position in the global data economy. Yes, the U.S. still ranks #2 behind China and the U.K. ranks #3 in terms of cross-border data flows, but the writing is on the wall right now. In many ways, population size is destiny, and the most populous nations are also most likely to be producing the most data. This is just basic math – and one big reason why India now ranks #4 on the list. China and India are the two most populous nations in the world right now, accounting for nearly 40 percent of the world’s population, so doesn’t it make sense that these nations are also cranking out huge amounts of data?
At the end of the day, though, it may not matter that China has overtaken the U.S. in terms of cross-border data flows. If you believe in the power of American ingenuity and innovation, then it might be the case that it’s the “quality” and not the “quantity” of data that matters. Going back to the oil analogy, you have different types of oil powering the global economy – everything from West Texas Intermediate to Brent Blend to Dubai Crude. Market buyers and sellers set a different price for each, based on the underlying quality of that oil. And so the same thing might happen in the new data economy, with buyers and sellers of data much preferring “West California Intermediate” data to some low-end “Beijing Blend” data. America still has a very large role in determining the future of the global data economy.
