In an essay in the ruling Communist Party's publication Qiushi on Saturday, Xi called for focusing on key areas including integrated circuits, displays, communications equipment and intelligent hardware.
China should "cultivate a number of enterprises with international competitiveness, and leading ecological firms with control over industrial chains, to create world-class digital industry clusters," he said.
"We must see that compared with large and powerful countries in the global digital economy, China's digital economy is big but not strong, and fast but not superior."
Xi also called for regulation and standardisation to plug regulatory loopholes and prevent "monopolies and disorderly expansion of capital" in the world's second largest economy.
"In the course of rapid development, China's digital economy has also displayed some unhealthy and irregular seeds and trends that not only affect the healthy development of the digital economy, but violate laws and regulations and pose a threat to national economic and financial security," he said.
China should also improve its national security system, with a focus on strengthening digital economy early warning, prevention and control systems to ensure the security of key technologies, important industries and facilities, strategic resources, and leading enterprises.
Xi's essay follows a plan issued by China's cabinet on Wednesday for the development of the digital economy, which aims to increase the sector's share of national GDP by pushing technologies like 6G and big data centres.
That plan also highlighted challenges including a lack of innovation capacity in key areas and weak governance.
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