This research commentary responds to Jiang and Murmann (2022), by offering further explanations for the miraculous growth of the digital economy in China from both the demand and supply perspectives. To complement their views, we identify several additional important factors, and classify them in three categories in an explanatory model. We believe that factors on the demand side played a primary role, along with innovative and entrepreneurial e-commerce service providers on the supply side. Infrastructures and government policies provided the foundation and a facilitating environment. We conclude that digital transformation of traditional industries will become the next wave of digital economy, stronger than the previous wave of e-commerce. Implications for research and practices are also discussed. In addition, we highlight emerging trends and turbulences. In conclusion, despite short-term turbulences, we expect that the digital economy in China will make big-stride progress in the long term, with strong potential to continue its growth.

To stimulate a debate about the rise of China's digital economy, this essay compares China and the US in one key area of the digital economy – e-commerce and internet-based services. China still lags behind the US in internet penetration, but it distinguishes itself by building a mobile-first, fiber-intensive, and inclusive digital infrastructure. A favorable infrastructure, innovations tailored to the large Chinese market, and local firms’ rapid commercialization of products and services turned the world's largest domestic population into active online consumers, helping China overtake the US by a large margin in retail e-commerce and digital payment. While China translated digital technologies into leading business-to-customer and customer-to-customer businesses, it has not been so successful in business-to-business services. The US is still ahead in the general-purpose technologies underlying the digital economy.