Economic structure, cultural dynamics, and governance paradigms have all been impacted by the rapidly expanding digital economy in China. This article examines how China's digital environment is changing and what it means for security flaws. The research emphasises the necessity for a methodical structure to recognise risks, manage them, and support sustainable growth. There is a more serious risk of cyberattacks, data breaches, and disruptions because of China's digital ecosystem's interconnection, which includes e-commerce, finance, AI, and big data. To analyse the data, unit root test, cointegration analysis, causality analysis and VAR (Vector autoregressive) Models have been applied to check the stationary of data, and long-run relationships among the variables. To inform policymakers, business stakeholders, and academics, the project examines comprehensive techniques for risk assessment and regulation. The paper emphasises how crucial it is to create flexible policy frameworks, public-private partnerships, regulatory compliance, openness, and global collaboration when creating successful governance strategies for the digital economy. The research hopes to add to worldwide conversations about the safe and sustainable future of China's digital economy.