An economic boost
- By Lan Xinzhen
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E-mail Beijing Review, September 5, 2013
Business opportunities
With Huawei, ZTE and other Chinese telecom terminal manufacturers trying to enter the huge U.S. market, some U.S. telecom companies, such as Cisco, Oracle and EMC, have gained a share in China. The Broadband China strategy will offer opportunities to all companies competing here.
According to implementation plans, China will encourage private investors to participate in broadband network construction and operations, ensuring fair access at residential communities, airports, expressways and subways. It will also promote fair and open market competition.
China Telecom Inc. may benefit the most from the plan because it now operates the country's largest broadband network ChinaNet, which is also the largest cable broadband network in the world in terms of size and number of users.
In the past 15 years, China Telecom has increased the speed of its broadband three times—in 1999, 2011 and in August this year. It is building broadband networks that can reach up to 100 Mbps.
The Ministry of Industry and Information Technology (MIIT) estimates that by 2015, China's investment in broadband network infrastructure will total 1.6 trillion yuan ($260 billion), of which 570 billion yuan ($93 billion) will be for broadband access. Every yuan of direct investment in broadband infrastructure will bring 3-4 yuan of investment in related industries. Therefore, by 2015, the Broadband China strategy may encourage more than 4.8 trillion yuan ($780 billion) of investment in related industries.
To telecom carriers and terminal manufacturers, this will be a huge cake. A report from CITIC Securities Co. Ltd. says when implementing the Broadband China strategy, what China should be concerned about is not lack of investment, but excessive competition among manufacturers, which will hurt profits.
New growth engine
The Broadband China strategy will make information-related consumption a new engine of economic growth. The State Council issued a document on August 14 to boost information-related consumption, proposing that by 2015 such consumption will reach 3.2 trillion yuan ($520 billion), with average annual growth of over 20 percent.
Zhu Hongren, chief engineer of the MIIT, says broadband networks are boosting a new round of information technology development across the globe. Many countries give top priority to boost broadband speeds as a means to be more competitive globally in a variety of industries.
Zhu thinks with the fast development of the Internet, China's consumption of information products and services will grow rapidly while emerging consumption in household broadband access, online videos and shopping, social media and mobile payments are driving up economic growth.
According to the MIIT figures, China's information-related consumption stood at 1.72 trillion yuan ($280 billion) in 2012. It stimulated 930 billion yuan ($152 billion) of output in related industries. Of the total, the consumption volume of smart phones, tablet computers, smart TVs and other smart terminals reached 1.03 trillion yuan ($168 billion).
E-commerce is another rapidly growing sector in China. In 2012, China's e-commerce transaction volume reached 8 trillion yuan ($1.31 trillion), of which 1.3 trillion yuan ($210 billion) came from the online retail sector. It is estimated that in 2015 the transaction volume will surpass 18 trillion yuan ($2.94 trillion), and the size of online retail will hit 3 trillion yuan ($490 billion).
Miao Wei, Minister of Industry and Information Technology, says at a time when the role of investment in stimulating economic growth is weakening and exports are declining, boosting information-related consumption will help expand domestic demand and ensure stable growth in the long run. Establishing a long-term system to promote information consumption is exactly what China needs right now, Miao says, as the country shifts to a new growth model.
A report by Guotai Junan Securities Co. Ltd. says when broadband access increases by 10 percent, GDP will grow 1.4 percent. Enhancing broadband services may be the boost that China's economy needs.
Ensuring security
While Bai, the Beijing worker, says increasing broadband speed and expanding coverage are important, cyber security is even more so.
Rampant computer viruses and hacker attacks have become quite the norm in China. Almost every computer has at least one anti-virus software installed. At present, there are 14 cyber security companies in China. Finance and telecom companies are the two biggest markets for cyber security software.
After the Everbright Securities Co. Ltd. incident on August 16 (see issue No.35 of Beijing Review), the public has become highly concerned about the security of computer systems. According to a statement of the China Securities Regulatory Commission on August 18, there were design flaws in Everbright's trading system, which led to a glitch and brought chaos to the markets.
Under the Broadband China strategy, expanding broadband coverage will be combined with ensuring cyber security, said Zhu at the MIIT.
"I hope in future, when I enjoy high speed, my computer will not become a channel infringing on my privacy," Bai said.
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