The Great Era of Innovation: China Invests in New Infrastructure

In order to boost the economy after Covid-19 and be able to grow again in the short term, China is relying on massive investments in innovative infrastructure projects. In the great era of innovation, the focus is on 7 areas: the construction of 5G base stations, ultra-high voltage, high-speed trains and light rail, charging stations for electric vehicles, a national data center, artificial intelligence and the industrial Internet.

China’s industry continues to be heavily dependent on foreign technology. The leading industrial Internet platform is still based on foreign systems. Around 94% of high-end CNC machine tools, 95% of high-end programmable logic controllers (PLC) and industrial network protocols, and 90% of high-end industrial software come from European, American and Japanese companies. This is set to change with the development of the new infrastructure.

The projects will be financed largely by new trillion-dollar government loans, which will increase the deficit ratio of public finances. The investment in the construction of 5G networks alone will exceed 1 trillion RMB, and the investment in the upstream and downstream industrial chains triggered by the 5G network and its deployment will exceed several tens of trillion RMB. Chinese private companies are also investing in innovative infrastructure and financing new cloud operating systems, servers and chips. Alibaba, Tencent and the three largest telecommunications operators will build a cloud that will be publicly owned.

China’s great era of innovation has far-reaching consequences for foreign companies operating in the country. On the one hand, the program can open up interesting opportunities for private foreign investment in innovative infrastructure that do not yet exist in the home country. On the other hand, greater state support for the innovative capacity of Chinese companies is now rapidly leading to greater pressure for foreign suppliers to innovate and compete. Technical standards play just as important a role in this new innovation competition as patents and cyber security.

Data source: Hengda

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