[Opinion] Expanding New Infrastructure Helps Stabilize China's Economic Growth
Yicai Global
DATE:  Feb 09 2022
/ SOURCE:  Yicai
[Opinion] Expanding New Infrastructure Helps Stabilize China's Economic Growth [Opinion] Expanding New Infrastructure Helps Stabilize China's Economic Growth

(Yicai Global) Feb. 9 -- Since Lunar New Year, Chinese regional governments have broken ground on major projects to stabilize economic growth while their main focus is on new infrastructure.

The Ministry of Industry and Information Technology, the National Development and Reform Commission and other government agencies have specified construction plans regarding emerging infrastructure such as fifth-generation wireless networks and data centers. Shanghai, as well as Fujian, Shaanxi, Hunan provinces have kicked off major projects worth hundreds of billions of Chinese yuan, mostly related to 5G, smart manufacturing, clean energy, and new materials.

To realize stable economic growth, policies and measures from all parties need to be in place as the economy is facing greater downward pressures. Given that there already are policies aimed at supporting foreign trade and consumption, introducing policies to support investing should be forthcoming.

Increasing infrastructure investment can help stabilize growth but the base of conventional infrastructure is already at a high level after years of huge investments. Poor-efficiency investment has not been uncommon in past years, wasting resources to some extent. Thus, local governments should not blindly boost their investments, expecting better outcomes.

Emerging infrastructure, such as digital structures, is still in the initial stages with wide room for development. Moreover, the direction of future development is definitely toward the digital economy and high-tech as those meet the requirements of high-quality development.

More than 20 provincial governments have specified their 2022 plans to build 5G base stations, industrial internet, and data centers. They seek to stabilize their investments and promote the digital economy by prioritizing new infrastructure, according to incomplete statistics.

Compared to conventional infrastructure, new infrastructure features stronger technical innovation and faster development prospects. However, it also poses bigger uncertainties, with a more acute need to adapt to the changing market needs. Local governments should carefully study and plan the demand and market conditions to avoid excess capacity and hidden risks.

A systematic approach is needed to do a good job in infrastructure. It requires pooling the wisdom and strength of all parties. To succeed, the guidance of local governments and social capital is needed. Firms, especially those involved in the field of information technology, should participate and take a central role while special bonds should be used to improve investment efficiency.

Stabilizing economic growth requires smart investing. New infrastructure, represented by the digital economy, is definitely the future direction considering the high conventional infrastructure base and the background of low-efficiency investments. However, pioneers in advanced infrastructure also need to follow market rules and guide related firms to participate.

Editors: Xu Wei, Emmi Laine, Xiao Yi

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Keywords:   5G,New Infrastructure