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5G to revitalize China’s economy as part of new infrastructure plan
of China leaders on March 4 emphasized that the country is to accelerate the construction of new infrastructure such as 5G networks and data centers. New infrastructure was divided into seven categories, namely 5G networks, extra-high voltage power grids, inter-city rail transit, newenergy vehicle charging stations, big data centers, artificial intelligence (AI) and the industrial Internet.
Since its commercial deployment in 2019, 5G has been the centerpiece of China’s new infrastructure. It now has a higher purpose: to offset the economic impact of the novel coronavirus (COVID-19) outbreak and cultivate new growth drivers.
“With the impact of the pandemic, the growth rate of China’s troika—investment, consumption and exports—slowed in the first quarter. Despite some recovery in the domestic supply chain, there is still a long way to go to shore up consumption. With these external uncertainties, it is essential to give play to investment to stabilize growth and achieve the yearly target of social and economic development,” Xu Hongcai, Deputy Director of the Economic Policy Commission, China Association of Policy Science, told Beijing Review.
Xu said the utility and returns on traditional infrastructure have diminished. New infrastructure, based on technological innovation, can not only create employment and stimulate growth in the short term, but promote structural transformation and upgrading, and advance healthy economic development in the medium and long term.
Boom period
are expected to build more than 550,000 5G base stations in 2020.
5G investment has entered a boom period. While investment in 5G construction occupied about 14 percent of these companies’ total investment in 2019, it will account for more than 50 percent in 2020.
“The year 2020 is a cruc i a l year for 5G network construction,” Guan He, an engineer with the China
Academy of Information and Communications Technology (CAICT), wrote in an article published on March 26.
Guan said while the outbreak of COVID-19 has affected this construction, it has also accelerated the implementation of 5G applications, including in medical care. The country attaches greater importance to new infrastructure including 5G this year, which will improve quality and efficiency and promote industrial transformation.
However, new infrastructure investment accounts for only
16 percent of total fixed assets investment, compared to more than 70 percent for investment in traditional infrastructure, according to Zhongtai Securities, a security brokerage.
Despite its current small scale, analysts are convinced of its future value in the new economy.
“This ( new infrastructure) doesn’t only include infrastructure, but also new emerging industries that connect massive investments and demand in a constantly improving consumer market. It is the new engine for growth in the Chinese economy,” Ren Zeping, chief economist for the Guangzhou-based Evergrande Group, wrote in a report on March 6, adding that 5G could potentially lead to a multitrillion dollar new economy.
An eye on the future
According to Zhongtai Securities, 5G is at the core of new infrastructure and will become the direct and indirect impetus for GDP growth in the following decade. Not only will 5G drive the transformation of the industrial chain, it will also power the prosperity of the digital economy.
“5G features a long industrial chain as a representative of hi-tech. Its high capacity and high requirements will lead to a revolution of the industrial chain, such as the emergence of new 5G mobile phones and network construction. Besides, new application scenarios in the mobile Internet and radio communication industry will be generated. Fundamental parts and materials will see new growth. The economy will usher in a new phase of development,” Wang Zhiqin, deputy head of the CAICT, said on March 23.
According to the CAICT, China’s total investment in 5G network construction will hit 1.2 trillion yuan ($169.3 billion) by 2025, which will trigger more than 3.5 trillion yuan ($493.8 billion) of investment across the industrial chain and in relevant industrial applications.
“Currently, the output of the digital economy accounts for 30 percent of GDP,” Xu said, stating that the digital economy has become a new growth driver for economic development and employment.
According to Xu, digital infrastructure, infrastructure based on 5G base stations, big data, AI and the industrial Internet, helps to tap the potential of the digital economy and contributes to the transformation and upgrading of traditional industries.
In recent years, the integration of traditional industries and digital technologies has accelerated. In 2019, industrial digitalization accounted for 80 percent of the digital economy and data-driven technologies became a new feature of and advantage for traditional industry upgrades.
“5G will play a decisive role as the fundamental layer of new infrastructure ,” Xu said.
According to the CAICT, the commercial use of 5G will generate 10.6 trillion yuan ($1.5 trillion) in economic output, create 3 million jobs and produce 24.8 trillion yuan ($3.5 trillion) of indirect output. By 2023, 6 percent of China’s GDP will be attributable to 5G-related industries, Li Jing, Vice President for the Asia-pacific region of Jpmorgan, told Economic Information Daily.
Multiple market players
Traditional infrastructure, due to large-scale investment and a large circle of capital return, is primarily supported by the national budget and state-owned sectors.
“New infrastructure differs greatly from traditional infrastructure in that it depends mainly on local government investment,” said Li Jianjun, chief researcher with Ckkcn.com, a Shenzhen-based business think tank. “It lays particular stress on informatization and innovation, and its projects are hi-tech, indicating that market entities, especially technology companies, will take an active role.”
Li Jianjun said it is not realistic to rely solely on financial support from local
2020-2025
China’s 5G business will directly drive total
economic output of
directly create more than
indirectly drive total economic output of