Chinese and foreign firms are showing increasing enthusiasm toward China’s new infrastructure plan as it accelerates the move toward new emphases and is expected to bring new drivers for the economy and help hedge against the fallout of the coronavirus outbreak.
Chinese tech giant Tencent recently announced it will invest 500 billion yuan ($70 billion) in the next five years to advance new infrastructure across the country.
The funds will be used in sectors such as cloud computing, artificial intelligence (AI), blockchain, a supercomputing center and operating system for the Internet of Things, said Tang Daosheng, senior executive vice president of Tencent.
“We believe that accelerating the new infrastructure will help achieve a closer connection between the supply side and the demand side of the digital economy, guarantee the development of the industrial internet and achieve economic growth,” Tang said.
New infrastructure has been a key topic at the just-concluded two sessions. The concept of new infrastructure has for the first time been written in China’s Government Work Report.
“China’s new infrastructure plan is like timely rain. It can not only effectively promote the high-quality transformation of China’s economy, but can also lay a solid foundation for China to lead the smart economy era in the future,” Baidu CEO Robin Li Yanhong told media on the sidelines of this year’s two sessions.
High-tech sectors like AI chips, efficient cloud services and general AI algorithms are considered new infrastructure in this era, and they help advance the smart transformations of various industries, Li said.
Yang Yuanqing, chairman and CEO of Lenovo and a deputy to the National People’s Congress, said that Lenovo will actively participate in new infrastructure construction by adopting digital technology to accelerate the transformation of industrial chains and further drive the domestic manufacturing sector.
Strong support
It was the Central Economic Work Conference in December 2018 that first proposed the concept of new infrastructure.
Unlike traditionally defined infrastructure like airports and railways, new infrastructure mainly refers to three areas: information-based infrastructure such as 5G, the Internet of Things and satellite internet; converged infrastructure supported by the application of the internet, big data and AI, such as smart transportation and smart energy infrastructure; and innovative infrastructure that supports scientific research, technology development and product development, said the National Development and Reform Commission, China’s top economic planner, on April 20.
Local governments across the country have been releasing their investment plans for new infrastructure projects since the start of the year.
By mid-April, 31 provinces, municipalities and autonomous regions in the country had planned a total investment of 6.7 trillion yuan for 2020, of which new infrastructure investment is expected to reach 1.56 trillion yuan, accounting for about 23 percent of all investment in 2020, news site sohu.com reported.
China has formed core support for accelerating the building of new infrastructure as it has nurtured innovative information technology, various application scenarios and its comprehensive manufacturing system, Li Meng, a research fellow with the Shanghai-based Academy of Culture and Tourism, told the Global Times.
Li noted that the new infrastructure investment could buffer the coronavirus’ domestic economic impact and become an internal driving force to boost and support the steady growth of the Chinese economy.
Thanks to great market potential and strong supporting polities, China will lead the world in new infrastructure development in the future, Yang Yiqing, executive director of the Zhejiang Business Research Institute, told the Global Times.
Foreign participation
Foreign companies have also expressed eagerness to provide services to drive high-tech development in China.
New infrastructure initiatives will become an important driving force for China’s high-quality economic development and open doors to new chances and broader development room for foreign-funded companies in China, Zhang Ying, managing director of software company Dassault Systemes China, told the Global Times.
“Since the COVID-19 outbreak we have seen significant acceleration in China of the new infrastructure program. This will open up many new opportunities for business and innovation, and demonstrates the strong direction and commitment to this important capability in China,” Julian MacCormac, country director of Rolls-Royce China, told the Global Times.
“The establishment of new infrastructure presents tremendous exciting opportunities for world-leading industrial technology companies like Rolls-Royce,” MacCormac said.
“Rolls-Royce has an important role to play in powering China’s new infrastructure especially in the areas of industrial internet, big data centers, 5G and AI, through the safety-critical power solutions we provide to protect and power the network, servers and data centers,” MacCormac noted.
COVID-19 has been a catalyst for increasing digital capacities, as more people than ever turn to the internet and digital tools for remote working, shopping, online education and communication. The emphasis on speeding up the development of new infrastructure will play a leading role in stimulating further innovation and supporting the digital transformations of key industries in China, MacCormac noted.
But China still has to learn from other countries, and in that foreign-funded companies in China can play key role – they not only introduce advanced foreign technologies to China, but they can also duplicate China’s best experiences and practices in other countries, according to Zhang.
Some challenges may also emerge, Zhang said. “Though companies are determined to conduct digital transformations and move fast, they need more innovative thoughts and platforms.”
“And how we understand policies and how we better deliver our solutions are further challenges. China is moving fast and to secure chances, we need to keep adapting our capabilities to this pace,” Zhang noted.
As China will become a major battlefield for new infrastructure competition, foreign companies will attach great importance to their investments in Chinese industries, Yang said. “Foreign firms will not want to miss strategic opportunities as they don’t want to lose their global competitiveness and be left behind by their Chinese counterparts.”
Foreign and domestic companies are expected to explore profound integration not only in capital but also in technology, to participate in China’s new infrastructure construction, according to Yang.
China’s new infrastructure investment is also very likely to expand abroad.
For instance, Chinese telecoms operators are strengthening efforts to build 5G base stations and after a certain scale is reached, that would help lower the cost of each base station, Ma Jihua, a Beijing-based industry analyst, told the Global Times.
Foreign countries that are also trying to deploy 5G networks can then enjoy the dividends at a reduced cost, Ma noted.
There is also large growth potential for cooperation on new infrastructure in the global markets, especially those along the Belt and Road Initiative (BRI).
Apart from infrastructure like roads, bridges and railways, markets along the BRI are also seeing rising demand for new infrastructure, but that would come at “a slower pace because building new infrastructure involves more complications such as how to ensure the safety of information and economies, and the security of a country,” Yang said.
A China Mobile employee adjusts and tests 5G base station equipment at Tongling Railway Station in East China’s Anhui Province on April 27. Photo: cnsphoto
