China’s Trillions Toward Tech Won’t Buy Dominance
The reflex to build infrastructure will pay off even less in the post-coronavirus era.
Building Tencent’s biggest data center still came down to shifting dirt.
Photographer: VCG/Getty Images
Big spending numbers are being thrown around in China, once again. This time, it’s trillions of yuan of fiscal stimulus on all things tech. The plans are bold and vague: China wants to bring technology into its mainstream infrastructure buildout and, in the process, heave the economy out of a gloom due only partly to the coronavirus.
But will this move the needle for China to achieve some kind of technological dominance? Or increase jobs, or boost favored companies? Not as much as the numbers would suggest, and possibly very little. A country covered in 5G networks makes for a tech-savvy society; it's less clear that this money will boost industrial innovation or even productivity.
Over the next few years, national-level plans include injecting more than 2.5 trillion yuan ($352 billion) into over 550,000 base stations, a key building block of 5G infrastructure, and 500 billion yuan into ultra-high-voltage power. Local governments have ideas, too. They want data centers and cloud computing projects, among other things. Jiangsu is looking for faster connectivity for smart medical care, smart transportation and, well, all things smart. Shanghai’s City Action Plan alone is supposed to total 270 billon yuan.
By 2025, China will have invested an estimated $1.4 trillion. According to a work report released Friday in conjunction with the start of the National People’s Congress, the government plans to prioritize “new infrastructure and new urbanization initiatives” to boost consumption and growth. Goldman Sachs Group Inc. analysts have said that new infrastructure sectors could total 2 trillion yuan ($281 billion) this year, and twice that in 2021.
Funding is being secured through special bonds and big banks. The Shanghai provincial administration, for instance, plans to get more than 40% of its needs from capital markets, and the rest from central government funds and special loans. Thousands of funds have been set up in various industries since 2018, and some goals were set forth in previous plans.