Shanghai will carry out 48 key projects in the field of new infrastructure in the next three years with a total investment of 270 billion yuan ($38.14 billion), according to the action plan on promoting new infrastructure construction (2020-22) issued by the Shanghai Municipal Government. The 35-point plan aims at turning Shanghai into a leading city in the world in terms of scale and innovation capacity of new infrastructure by the end of 2022.

"Accelerating new infrastructure construction is not only beneficial for expanding effective investment, but also a very important method to empower new economy," said Ma Chunlei, head of the Shanghai Municipal Development and Reform Commission, at a press conference held by the Shanghai Municipal Government Information Office on May 7.

The concept of new infrastructure was first put forward during the Central Economic Work Conference held in December 2018, which identified 5G networks, artificial intelligence (AI), industrial Internet and the Internet of Things as new infrastructure.

On March 4, 2020, a meeting of the Standing Committee of the Political Bureau of the Central Committee of the Communist Party of China decided to accelerate construction of new infrastructure, and broadened its scope to cover 5G networks, industrial Internet, data centers, AI, ultrahigh voltage, inter-city transit system as well as new-energy vehicles and charging stations.

"New infrastructure is an important area of effective investment. Construction of 5G networks and big data will serve as the foundation for information technology development, and the construction of new infrastructure, especially digital infrastructure, will bring the development of manufacturing and service industries," Liu Zhe, Vice President of the think tank WANB Institute, said in an interview with Caijing magazine.

"In the short term, it is difficult for new infrastructure construction to make up for the 'hard gaps' created by the novel coronavirus in the Chinese economy, but it will play an active role in ensuring stable employment and reviving the market," he said.

Four major areas

The Shanghai action plan names four major areas of new infrastructure construction: new generation of networks, new innovation infrastructure, new integrated platforms based on AI and new smart terminals.

"Shanghai, with its strong comprehensive competitiveness, is in a leading position in terms of network infrastructure, data centers, computing platform scale and major science and technology infrastructure in China. It is also the first provincial-level government in the country that has issued new infrastructure plans," Wang Gaoxiang, General Manager of the Urban Economy Research Center with CCID Consulting Co. Ltd., told Caijing.

He said new infrastructure construction is the best way to stimulate demand in the short term and increase supply in the long run; it is also an essential means to expand new consumption, new manufacturing and new services. Relying on new infrastructure, Shanghai is laying digital foundations for an international megacity, which will be a role model for other cities in their construction of new infrastructure.

Zhang Jianming, Deputy Director of the Shanghai Municipal Commission of Economy and Informationization, said at the May 7 press conference that the commission has identified over 70 key projects as well as nearly 20 reserve projects in the fields of new networks and new platforms for the next three years. They involve a total investment of 200 billion yuan ($28.25 billion), of which 50 billion yuan ($7.06 billion) will be realized within this year.

According to Zhang, 5G technology will be a key digital infrastructure supporting the digital, network-based and intelligent transformation of the economy. By the end of the first quarter of 2020, Shanghai had built over 18,000 5G outdoor base stations and small indoor stations. The city plans to invest 10 billion yuan ($1.41 billion) in 5G development this year to build another 12,000 outdoor base stations and 32,000 small indoor stations to realize full 5G coverage in the city center and suburban towns.

Besides 5G, data centers have a special place in the construction of new infrastructure and are regarded as the cornerstone of data, computing and networks. Shanghai is a leader in China in terms of the scale of data centers. There are more than 120,000 data centers in Shanghai, and by the first quarter of next year, the city will build another 60,000 data centers with a total investment of 12 billion yuan ($1.69 billion), which will stimulate 38 billion yuan ($5.37 billion) of investment in other fields.

In the future, Shanghai will look for ways to intensify the construction of and investment in data centers and build data centers with higher flexibility and computing capability, said Zhang.

Sources of funding

Compared with traditional infrastructure such as railways, highways, airports and water conservancy facilities, new infrastructure is attracting investment from diverse sources.

"Compared with traditional infrastructure, a major difference in new infrastructure is that private capital is the main source of funding," Ma said, adding that in the 270 billion yuan of investment in the 48 new infrastructure projects in the next three years, government investment will account for only 60 billion yuan ($8.47 billion), while the remaining 210 billion yuan ($29.66 billion) will come from private investors.

Private investment can also play an important role in mitigating the effects of the novel coronavirus.

"Market players should act as the major force and what the government should do is to guide the investment, with policies being the foundation and key," Ma said.

According to Shanghai's action plan, to accelerate the construction of new infrastructure, the city will support policy banks, development financial institutions and commercial banks to establish a 100-billion-yuan ($14.12 billion) special credit fund to enable private investors to get low-cost, long-term financing, thus encouraging more private investors to participate in new infrastructure construction.
An executive meeting of the State Council on April 28 called for innovating the modes of investment, giving priority to market-based investment and supporting the participation of diverse types of investors. Financial institutions are encouraged to innovate their products and improve services, and the government should better facilitate investment.

More reforms needed

Since most of the sectors in new infrastructure are emerging hi-tech industries, supporting institutional reforms are needed to accelerate the construction of new infrastructure.

Ren Zeping, chief economist of the Evergrande Think Tank, said in a research report that different from traditional infrastructure, new infrastructure requires support from fiscal, financial and industrial systems.

Regarding fiscal policies, the policy of additional tax deductions for research and development must be readjusted and tax rates for hi-tech businesses should be lowered. In terms of monetary and financial policies, the government should provide support in credit, mergers and acquisitions, initial public offerings and bond issuance. As for industrial policies, new infrastructure should be incorporated into national strategies and local economic and social development plans.

Ren also suggested furthering relaxing market access to new infrastructure and opening projects with high earnings to private investors.

To address the problems in the construction of new infrastructure, Shanghai will optimize the industrial layout and improve regulations and standards to attract private investors, Ma said.
 

Source : Beijing Review