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Compared to the construction of traditional infrastructure in the wake of the global financial crisis, the stimulus package is much internet projects with investment reliant on market forces and private investment.
As part of its post-COVID relief package, China is ramping up plans to construct new digital infrastructure across the country — including building 5G networks, artificial intelligence AIInternet of Things IoTintercity high-speed rail, and setting up research and development institutions. In doing so, a new wave of government support for private sector participation can be seen — through the issuance of special bonds, encouraging public-private partnerships, or extension of credit support.
New opportunities now exist for early investors looking to participate in these fast-growing technology industries and subsectors.
In addition, large industry players have the chance to invest in projects that will propel the commercialization of emerging technology. Foreign investors should continue to follow-up on the latest policy developments in their target area of investment, as more government policies will likely be released shortly to guide the development of each of these new technologies.
The new infrastructure includes seven key areas: 5G networks, industrial internet, inter-city transportation and rail system, data centers, AI, ultra-high voltage power transmission, and new-energy vehicle charging stations. Originally touted as a way for China to achieve domain independence and accelerate its industrial upgradation, the new infrastructure plan has transformed into a long-term national economic strategy.
- Yet, specific industries, and within these industries, specific IoT use cases, clearly stick out.
- «Коламбия пикчерз» было гораздо дешевле снять эту картину в Испании, нежели в Египте, а мавританское влияние на севильскую архитектуру с легкостью убедило кинозрителей в том, что перед их глазами Каир.
- IoT spending IoT industry drivers and investments
Information infrastructure The foundation of this technological development and refers to technology that increases productivity, speed, accuracy, and breadth of information collected, stored, disseminated, and analyzed. This includes 5G, IoT, industrial internet, AI, cloud computing, blockchain, data centers, and internet communication network infrastructure.
Integrated infrastructure Fusion infrastructure formed through the application of internet, big data, AI, and other technologies to support the transformation and upgradation of traditional infrastructure. This includes constructing inter-city high-speed rail and inner-city rail systems, charging stations for electric vehicles EVsand ultra-high voltage UHV power transmission. Broadly speaking, these three categories have three main functions — innovative infrastructure forms the basis of research and development that is needed for building next-generation products; information infrastructure are the tools which we can use to upgrade our traditional industries; and integrated infrastructure is the large-scale and integrated application of these technologies to build the framework for the development of smart cities across China.
Since the NDRC clarified the scope of what is new infrastructure, 25 provinces have launched their own local plans.
Zhejiang province, home to tech giant Alibaba, also committed to a new batch of projects — 61 percent of which internet projects with investment in the high-tech field, a 20 percent increase from the previous year. In terms of 5G networks, China has committed to constructing five million 5G base stations by the end of — a fold increase in less than five years. Which sectors are open to foreign investment?
Compared to the state-led investment push in traditional infrastructure in the wake of the global financial crisis, the biggest distinction in the stimulus package is that this time round the government is much more reliant on market forces and private investment.
Still, each sector will see varying degrees of government investment.
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Consequently, private technology firms will need to assess whether they willing to align their participation with government directives to form partnerships with state-owned-enterprises. For example, research and satellite communications will have a high government investment ratio, whereas application developments, virtual reality, 3D printing, and smart robot production will typically be comprised of private investments and have relatively low industry barriers for foreign investment.
Based on these lists, foreign investment in internet data centers and 5G networks face the most stringent restrictions, while investment in industrial internet, NEVs, and AI are generally perceived to be the most foreign-investment friendly — with many upstream and downstream subsectors featured on the encouraged list. How do you need to adapt your business strategy for China?
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Recently, China also released the exposure draft of its Catalogue of Encouraged Industries for Foreign Investment Editionwhich further encourages foreign-invested enterprises to participate in the high-tech development of its manufacturing industry.
The draft catalogue proposes to expand the list to include a further 56 items, adding manufacturing of LiDAR light detection and ranging and millimeter-wave MMW radars related internet projects with investment autonomous driving technology as forts binary options as manufacturing of charging piles. In the fields of computer, communication, and electronics manufacturing, the proposed list added manufacturing of smart wearable devices, intelligent unmanned aerial vehicles UAVscustomer service robots, and smart home systems and equipment.
Though this draft catalogue is still currently undergoing its final round of public consultation, if implemented, it will further open up a range of high-tech sectors to foreign investors.
Foreign-invested enterprises who invest in encouraged industries will be subject to tariff exemptions, preferential land prices, looser regulation of land uses, and lowered corporate income tax. However, those industries that appear on the negative list will either be restricted or prohibited from foreign investment entry.
Though direct investment in infrastructure may not be a viable option for SMEs, there are many opportunities either upstream or downstream of the supply chain where they can participate. There are two sides to the potential opportunities available for SMEs — supply and demand.
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Businesses can either choose to participate in the construction and manufacturing of these new technologies or participate in the commercial application of these technologies across various sectors.
Diversify your Asia supply chain On the supply side, there are other opportunities that exist on the periphery of this large-scale infrastructure build. For small-to-medium enterprises, many opportunities exist in the upstream manufacturing of equipment and downstream program development of the industry chain and are encouraged by the government.
Take 5G for example — though investment in the network itself is, in practice, an area that is restricted to a few large Chinese players, there are opportunities that exist within the internet projects with investment chain. Using the same 5G example, which offers a combination of faster speed, higher capacity, and lower latency — this will enable the digitalization of traditional business models.
As 5G technology matures, there will be greater opportunities for it to be applied across industries. Traditional industries, such as medical care, education, retail, manufacturing, services, and logistics will all inevitably have to shift towards digital business models that will adapt to the radical digital transformation or application of new technologies.
We can help you develop your China market entry strategy Going forward, a much clearer distinction will now be made between foreign and domestic players, a point strongly emphasized by the recent Hinrich Foundation report. Indeed, this is already starting to precipitate with the emergence of the China Standards Planwhich is an initial blueprint of the standardized processes and specifications to ensure products in the tech industries worldwide are built to work together seamlessly.
Though a growing sense of techno-nationalism will inevitably follow, a complete technology about dealing centers is unlikely to prevail as technology supply chains still require the participation of many foreign players. In China, one clear example of this is the semi-conductor industry where China still overwhelmingly relies on foreign companies for its supplies — only 16 percent of its semiconductors are produced in the country as of Although China has spent billions of dollars in earlier decades to create a domestic semiconductor industry — a critical component of the technology supply chain — this has so far come with little success.
Managers and strategic investors should seek out experts on the ground to craft an appropriate market-entry strategy that accounts for the newly arisen challenges in an increasingly competitive but opportunity-filled landscape.