China’s New Infrastructure

Drivers for China's new infrastructure investment:

• Government prioritization aimed at enabling efficient data collection, power distribution, and mass computing power to elevate social productivity.
• Acceleration of digitalization trends due to COVID-19 social distancing measures and physical constraints, driving shifts toward remote maintenance, smart education, smart medical care, and smart logistics.
• Continuation of pre-existing structural trends including smart home appliances and smart city development.

Scope and market sizing:

• The seven key sectors are: 5G base stations, data centers, ultra-high voltage, EV charging piles, intercity rail, subway systems, and artificial intelligence/industrial IoT.
• Total projected investment from 2020–2025 is estimated at $2.1 trillion, growing at 9% annually.
• Excluding ultra-high voltage and railway systems (focusing on strict digital content), the market size is $1.3 trillion, growing at 17% annually.

Three-stage rollout strategy:

• Phase 1 (Communication System Buildup):
  • Deployment of 5 million 5G macro base stations (1.3x the 4G footprint), requiring $153 billion in investment (2019–2025).
  • Satellite internet deployment to provide complementary connectivity in harsh environments (e.g., deserts, open seas).
• Phase 2 (Digital Infrastructure Ramp-Up):
  • Target of 300,000 industrial enterprises to become cloud-based by 2020, representing a 10% industrial IoT penetration rate.
  • Projected industrial IoT penetration growth to 45% within five years, driven by a 33% public cloud market share.
  • Expansion of data centers required to host mass data generation from industrial IoT and broader societal digitalization.
• Phase 3 (Fruit-Bearing Period):
  • Expected to commence after 2023, focusing on delivering economic benefits to the real economy through complex supply chain optimization and vast manufacturing integration.

Sector-specific implementations and traditional infrastructure shifts:

• State grids are shifting toward digitalized investment by partnering with internet firms (e.g., Baidu, Alibaba) to create digital grids and energy data centers, increasing spending on secondary equipment and software.
• Railway and urban transit systems are being managed via digital integration (cloud, big data) to handle high-density infrastructure expected by 2025, with a focus on improving passenger services and train operations.

Long-term economic impact projections (by 2025):

• Direct creation of over 200,000 engineering jobs annually.
• Potential cost savings of $700 billion for China's manufacturing sector (approximately 25% of 2019 manufacturing capacity) if industrial IoT penetration reaches 45%.
• Biggest end markets for cost savings identified as electronics, power, machinery, and energy sectors.