On March 26, the Research Institute of The Bank of China released the 10th issue of 2020, with the theme of "Development Direction and Policy Suggestions of China's" New Infrastructure "under the Impact of COVID-19".
The article argues that the COVID-19 outbreak has had a big impact on both China and the global economy. In the future, investment in "new infrastructure" represented by 5G will become a new hope to light up the future of the Chinese economy by driving the economy in the short term and unleashing economic growth potential in the medium and long term. According to the Research Institute of the Bank of China, the total investment scale in the seven key areas of the "new infrastructure" in 2020 will be about 1.2 trillion yuan. Why start the "new infrastructure"?
For the reasons for starting the "new infrastructure", Ye Yindan, postdoctoral researcher of Bank of China Research Institute, analyzed two main reasons: first, the combined economic donward pressure and the short-term impact of the epidemic, which requires the old and new infrastructure investment to ensure steady growth; second, the "new infrastructure" investment is not only related to short-term economic growth, but also the foundation of future innovation-driven development.
Overall, the negative impact of the epidemic on the annual economic growth is inevitable. Therefore, counter-cyclical regulation policies need to increase efforts to stabilize growth and ensure employment. Investment, as the most important starting point of macro-counter-cyclical regulation, will play a more prominent role in supporting the bottom economy under the current situation. Infrastructure investment is now given the task of economic starter and booster. Investment in "new infrastructure" can not only support economic growth, but also inject strong impetus into innovation-driven development.
At the same time, "new infrastructure" is an inherent requirement for the replacement of old growth drivers of the Chinese economy and the foundation for future innovation-driven development, and forward-looking layout is crucial. The demand for "new infrastructure" is not the epidemic, which has only accelerated the process of "new infrastructure". As early as the end of 2018, the Central Economic Work Conference planned the layout of new infrastructure construction needed for future innovation-driven development, proposing to "accelerate the pace of 5G commercialization and strengthen the construction of new infrastructure such as artificial intelligence, industrial Internet and Internet of Things", from which the term "new infrastructure" was born.
At the beginning of 2020, under the impact of the epidemic, there was a strong call for counter-cyclical regulation focusing on infrastructure investment, and the process of "new infrastructure" was accelerated. The main areas include 5G infrastructure, ultra-high voltage, intercity high-speed rail and intercity rail transit, charging piles for new energy vehicles, big data centers, artificial intelligence and industrial Internet.
On March 4, the Standing Committee of the Political Bureau of the CPC Central Committee further pointed out that "we should increase investment in public health services and emergency supplies, and speed up the construction of new infrastructure such as 5G networks and data centers". In the short term, "new infrastructure" investment is expected to play an important role in boosting economic growth. In the long run, seizing the historic opportunity of 5G and other "new infrastructure" is of great strategic significance for stimulating investment vitality, optimizing the industrial structure and improving the potential of economic growth, so as to overcome the middle-income trap.
Where is the new part of the "new infrastructure"?
Ye Yindan analysis, the "new infrastructure" "new" can be seen from four aspects;
First, new areas of investment. According to the study, "new infrastructure" in a broad sense should not only include the seven key areas such as 5G, but also those in line with the direction of China's economic transformation and upgrading, including at least the following three aspects. First, the fields related to scientific and technological innovation and economic development, such as 5G base stations and related equipment, artificial intelligence, industrial Internet, big data centers and other infrastructure fields. Second, the areas related to the supply-side structural reform, such as emergency supplies support and related facilities exposed by the epidemic, infrastructure areas such as public health services; environmental protection related infrastructure areas such as sewage treatment, air treatment, natural environment protection, charging piles for new energy vehicles; social security related infrastructure areas such as education, medical care and pension. Third, related infrastructure areas related to new urbanization, such as improving the economic radiation capacity and personnel mobility of metropolitan areas and urban agglomerations, and improving the level and capacity of urban governance, including intercity high-speed rail and urban rail transit, smart transportation, smart city brain, and smart city security, etc.
Second, new investment areas. Infrastructure construction serves the population and industry, so the regional layout of infrastructure investment should be closely combined with the future population flow and industrial development trend. In the future, the newly urbanization population will gather more in urban agglomerations and metropolitan areas, which will bring resource pressure on rail transit, intercity railway, 5G and other communication infrastructure, education, medical care and many other aspects. Therefore, urban agglomerations and metropolitan areas will become the key areas for "new infrastructure" investment in the future, so as to expand the carrying capacity and economic radiation capacity of urban agglomerations and metropolitan areas. For the areas with population outflow, we should avoid the obvious waste of resources caused by large-scale infrastructure investment.
Third, the new investment entities and financing models."New infrastructure" needs to reform to improve the efficiency of infrastructure investment. In terms of investors, we should further open up market access in infrastructure construction, expand the scope of investors, actively attract the participation of private capital, and improve the efficiency of investment. In terms of financing mode, "new infrastructure" has its own science and technology gene, and should actively attract strong high-tech enterprises to participate in the investment, and actively explore the investment modes such as technology investment of high-tech enterprises.
Fourth, the new supporting policies and institutional guarantee requirements."New infrastructure" mostly belongs to high-tech industries, so there are new demands in the policy and supporting system guarantee. In terms of fiscal policy, we need to increase additional deductions for R & D spending, and promote low tax rates for high-tech enterprises to stimulate the innovation vitality of enterprises. In terms of monetary policy, on the basis of increasing low-interest financing and special loans, it is also necessary to accelerate the construction of a multi-tiered capital market, and provide more support in mergers and acquisitions, listing and bond issuance of high-tech enterprises.
Estimated investment potential in key areas of "new infrastructure"
The study sorted out the current basic development situation and future development goals of the seven key areas of "new infrastructure", and estimated that the investment scale of the seven key areas of "new infrastructure" in 2020 will be about 1.2 trillion yuan, accounting for about 7% of the total infrastructure investment in 2019. Among them, 5G base stations and related equipment investment is about 250 billion to 300 billion yuan, UHV related investment (including power grid informatization) is about 80 billion to 100 billion yuan, new energy vehicle charging pile investment is about 20 billion to 30 billion yuan, big data center, artificial intelligence and industrial Internet related investment is about 60 billion to 80 billion yuan, 30 billion yuan and 50 billion to 100 billion yuan, inter-city expressway and urban rail transit related investment is about 600 billion to 650 billion yuan.
Research Institute of Bank of China believes that in the future, with the focus of "new infrastructure", the growth rate of "new infrastructure" related investment may reach double digits and some segments; the proportion of "new infrastructure" investment will gradually increase from about 7% to about 15% -20%, and the substitution role of "new infrastructure" investment for "old infrastructure" investment will be further enhanced.
