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China tech

China to pump $1.6tn into tech infrastructure through 2025

5G, EV chargers and AI to be boosted as Beijing eyes prolonged tensions with US

Facial recognition technology employing artificial intelligence is among the areas that China plans to increase investment in.   © Reuters

GUANGZHOU -- China's public and private sectors are set to spend 10.6 trillion yuan ($1.6 trillion) through 2025 to develop next-generation infrastructure, including the 5G network and electric-vehicle charging stations, as frictions with the U.S. look to remain intact despite a new administration in Washington.

The investment will account for roughly 10% of all social infrastructure spending, according to the China Academy of Information and Communications Technology, a government think tank that released the outlook.

Globally, spending on communication services, data centers and other information technology infrastructure is expected to come to $3.75 trillion this year alone, a forecast by U.S. data provider Gartner shows. In that light, China's spending is not particularly extraordinary.

But China's annual tech infrastructure spending through 2025 would nearly double the 1.2 trillion yuan in comparable spending last year, according to an estimate by the Bank of China.

The government has embarked on a "new infrastructure initiative" that focuses on seven main areas, including the 5G communication network, charging equipment for electrified vehicles, data centers and artificial intelligence.

Rounding out the list are ultrahigh voltage transmission lines for ensuring efficient power supplies at high capacity, high-speed urban rail networks that connect neighboring cities, and the development of an industrial internet for connected factories.

Regional governments will lead investment into the program. Guangzhou Province, located in the south, plans to spend 1 trillion yuan over the next few years. The funding will go into 5G base stations and expanding the network of electric-vehicle charging stations.

The province will also develop roads dedicated to testing autonomous vehicles, as well as adding 200 hydrogen stations for fuel cell vehicles. Altogether, the spending program will span more than 700 projects.

In northeastern Jilin Province, new infrastructure investments are on track to top 1 trillion yuan by 2025. Other provinces, as well as tier-one cities such as Beijing and Shanghai, have put together their own three- to five-year plans.

The 5G network has enjoyed the quickest development. There are over 700,000 base stations across China, making for one of the largest coverage areas in the world.

It is believed that more than 6 million base stations are needed to cover the entire country. Installing the stations are state-owned telecoms such as China Mobile.

Private internet companies are deepening their involvement in new infrastructure construction and operation. Tencent Holdings announced last May it would spend 500 billion yuan over five years in that domain. The investment will span cloud computing and AI, all the way to 5G.

Alibaba Group Holding said in April that it will invest 200 billion yuan over three years in data centers among other areas.

Through this spending, Chinese leadership aims to prop up the national economy that has been damaged by the coronavirus and to revive the high-tech industry. In the government work report Premier Li Keqiang delivered in May, he said "priority will be given to new infrastructure" in the interest of boosting consumption and facilitating structural reforms.

The proposed five-year economic plan through 2025, released by the Communist Party in November, cited new infrastructure development as an area of focus.

The U.S. administration under former President Donald Trump implemented restrictions against exporting 5G and AI components and technology to Chinese enterprises. The new government under President Joe Biden is expected to take a cautious approach toward China's development of high-tech. It remains to be seen if the Biden White House will ease the restrictions.

China's public and private sectors are developing a native ecosystem for the next-generation industry in anticipation of prolonged tensions in the technology field. But China has an abundance of tech enterprises that make use of high-level software and semiconductors produced by American companies.

Chinese President Xi Jinping has given voice to the "dual circulation" economic development model, which reduces dependence on foreign suppliers through a domestic cycle of production, distribution, and consumption as well as an "external circulation" that has yet to be defined. If this vague approach fails to pan out as expected, it would risk delays to new infrastructure building.

Wang Yi, China's foreign minister who doubles as state councilor, extended a gesture of goodwill to the incoming Biden administration during an interview with the state-owned Xinhua News Agency published on Jan. 2.

"China-U.S. relations have come to a new crossroads, and a new window of hope is opening," Wang said.

Meanwhile, concerns have surfaced within China of excess investment.

When it comes to new infrastructure development, "government agencies should not lead in the same manner as conventional infrastructure construction, but rather the role should be delegated to private enterprises," said a piece published in the Study Times, a newspaper connected to the Central Party School, the institution that trains Communist Party leaders.

Regional governments "should avoid implementing investment for the purpose of gaining political points or prestige," said one expert.

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