China bets on 5G technology to boost consumption

January 30, 2019 13:08
A ‘5G is Now’ sign sits on a bouquet of flowers at a Huawei Technologies event in Beijing on Jan 24. China aims to speed up issuance of licenses for commercial use of 5G technologies. Photo: Bloomberg

Facing severe economic challenges amid the US trade war, China is launching a fresh effort to boost domestic consumption and reduce the nation's reliance on the external sector. A key aspect of the path to more domestic consumption, authorities believe, is 5G technology.

Next-generation wireless networks can play a critical role in supporting the nation’s growth as they could spur more spending by individuals as well as businesses, the government feels.

In keeping with this, nearly a dozen central government departments on Tuesday jointly released an action plan to promote commercial use of 5G technologies in order to stimulate domestic spending.

The National Development and Reform Commission (NDRC), the top policy planning body, meanwhile said China will speed up the process of issuing licenses for commercial use of 5G technologies that feature low latency, massive bandwidth and wide coverage.

The high-speed networks, authorities hope, will help new projects get off the ground as businesses upgrade their infrastructure and consumers demand more information products and services.

With 5G technologies, information consumption could be driven to an altogether new level. 

Signaling the ambitions, the NDRC said video productions with ultra-high definition will be promoted across the country, with TV stations to receive support in offering 4K channels. Where conditions permit, regional government will consider offering subsidies to promote the use of ultra-high-definition TVs and TV boxes and virtual and augmented reality devices.

In addition to technology related spending, the government also plans to renovate shopping streets in key cities, establish international consumer centers and provide support to well-known Chinese brands, mainland media have reported.

In other initiatives, China will look at departure tax refund plans, open more stores and improve services.

Going by the announcement, it is fair to say that Beijing is betting on 5G mobile technology to stimulate the economy. The focus is on enhancing domestic consumption, given the external uncertainties.

As Western nations led by the US are shunning Chinese telecoms equipment due to suspicions that they could be used by Beijing for snooping, companies such as Huawei and ZTE have suffered a setback in their overseas 5G plans. 

As the firms’ manufacturing bases are mostly in China, fewer orders and weaker sales raise the risk of production rollbacks that could lead to loss of jobs for thousands of Chinese workers. That could be a reason why the Chinese government wants to speed up the issuance of commercial 5G licenses.

By accelerating the process, authorities hope to lift the market demand for telecoms equipment, mobile phones as well as overall telecom services.

China big three state-owned mobile operators are planning to spend hundreds of billions of dollars for 5G network rollout. The next-gen networks, which will feature faster data transmission speed and capacity, and enable Internet of Things connectivity, are expected to unleash a huge potential for both individual and commercial customers to upgrade to the new technology.

That will no doubt stimulate the demand for a series of hardware and services related to 5G. Apart from Chinese equipment makers like ZTE and Huawei, European players like Nokia and Ericsson have also been working with the state-owned network operators for the 5G deployment.

Chinese government officials have said the third stage test of technical experiments for 5G research and development has been completed, and that the 5G system devices have the ability for pre-commercial use.

The government estimated that 5G would generate 10 trillion yuan economic output and create 3 million new jobs in China for the first five years. The launch of 5G will also boost China’s exposure in the technology with the launch of 5G terminal chip. The commercialization of 5G will give the entire industrial chain of the chip, terminal, system and the application a strong boost.

One of the key elements in China’s 5G plan is to enhance internet connectivity in the rural villages. The government has been spending a lot to bring fiber network to rural areas, but mobile networks could prove a more cost-effective method in ensuring the connectivity.

China aims to have 98 percent of the nation's registered poor villages under Internet coverage by the end of 2020. The renewed focus on 5G mobile networks should help achieve the goal.

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EJ Insight writer