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The Next Internet Revolution

Speeding up construction of ‘new types of infrastructure’ is expected to provide new stimulus to China’s next round of stabilizing investment and growth

By NewsChina Updated May.1

Many local governments across China highlighted “new types of infrastructure” in their annual work reports for investment and development in 2019, echoing an emphasis on the national level. In January, the National Development and Reform Commission, China’s top economic planner, declared it the new focus of construction in 2019.  

The term was first mentioned during the Central Economic Work Conference in December 2018, an annual meeting where the nation’s economic policy is set for the coming year, which defined it as new areas of technology, including 5G, artificial intelligence (AI), the industrial internet and the Internet of Things. Different from traditional infrastructure like railways and highways, new types of infrastructure make the digital economy possible. The construction of new types of infrastructure like 5G and the industrial internet had already begun to pick up before the government renamed the concept to attract more attention.  

Among the major fields involved, the industrial internet, which aims to update the overall industrial system by connecting humans, machines and data through the internet, is receiving unprecedented attention ever since upgrading the manufacturing industry was raised to a new strategic level and became a focus of global competition. The annual government work reports of 2018 and 2019 both mentioned developing industrial internet platforms. The combining of technologies like cloud computing, big data, AI and operation technology with industrial internet development provides a major engine to drive the creation of new types of infrastructure.  

Speeding up the construction of new types of infrastructure is expected to promote upgrades of traditional industries and become an important stimulus to drive economic development and stabilize investment, according to Liu Duo, president of the China Academy of Information and Communications Technology. In an interview with NewsChina, Liu explained that challenges remain, as new infrastructure construction enters its critical stages, particularly in developing the industrial internet.  
NewsChina: How will the construction of new types of infrastructure help stabilize China’s economic growth? 

Liu Duo: In recent years, broadband and 4G internet technologies have played a vital role in driving China’s economic and social development. Amid this rapid technological evolution, the industrial internet, 5G and AI are becoming key in the shift toward digitalization in various fields, and their roles in the country’s economy are increasingly prominent to provide strategic support and navigate innovation. At present, China is facing a complex international environment and domestic pressure from its economic slowdown. So speeding up the construction of new types of infrastructure is extremely important for stabilizing the country’s investment and growth while maintaining high-quality economic development. 

First, accelerating construction of new types of infrastructure will demand investment in the internet and other supporting facilities. Meanwhile, it will boost investment in related industries and attract more capital to ICT (Information and Communication Technology). Take 5G technology as an example. Investment in the 5G network is predicted to reach 2.4 trillion yuan (US$357.6b) between 2020 and 2025, which will bring an output of 34 trillion yuan (US$5t), an important driver of economic growth. 

Also, investment in new types of infrastructure will spur new products such as 5G mobile phones, terminals for new energy vehicles, smart homes and wearable devices, and generate new applications, business models and forms of business, including ultra-high definition video (UHDV), the next generation of social networking, immersive games and holographic videos. This will lead to growth in information consumption in both quality and quantity. 

Last but not least, it will empower traditional industries by enhancing the formation and development of new technologies, business organization and industry clusters. This will promote supply-side structural reform and the upgrading of the economic structure.  
NC: The industrial internet was mentioned again in this year’s Government Work Report by the State Council, China’s cabinet. What challenges does China face in developing the industrial internet? 

LD: China has made impressive progress in the development of the industrial internet, but difficulties remain. China lacks core technologies and products. China has to rely on other countries for chip technology, base software and industrial control systems. As a result, China has to import products like high-end equipment and sensors, making it vulnerable to embargoes.  

In addition, the service capabilities of Chinese enterprises are still lagging. The country lacks companies able to provide solutions for the whole supply chain of an industry. The products and solutions emerging right now can’t meet the demands of China’s industrial transformation and upgrading, and must improve to become more forward-looking and systematic.  

It is also difficult to promote the application of the industrial internet across China. The conditions of different regions, industries and companies vary greatly. Many small- and medium-sized companies are still Industry 2.0 [characterized by electricity-powered assembly lines and mass production]. This makes it harder and more complicated to promote the use of the industrial internet. 
Plus, there remains a shortage of capital and talent. It’s common for leading international companies to invest billions of US dollars in developing their industrial internets. But Chinese companies, even the bigger ones, usually invest only several million. Also, the industrial internet covers many fields including industry, IT and communication, so it needs large numbers of talents and skilled workers to integrate industry and ICT. However, there is a severe shortage now.  

Last, security urgently needs strengthening. Because of the rapid advancement of the industrial internet, demand for security has expanded [as the internet is integrated into more fields and sectors]. Enterprises are either unaware or unable to protect themselves in this new scenario.  
NC: What’s your advice for promoting the applications and fostering skilled personnel for the industrial internet?  

LD: The government should encourage more market players to work together. It should guide larger pioneering enterprises to share their experience with smaller companies upstream and downstream on how to use the industrial internet.  

Second, it should encourage the Alliance of Industrial Internet [a platform in Beijing for the research, industrial promotion and international cooperation of the industrial internet] to build demonstration projects and set standards in different industries. This will also help promote the use of the industrial internet.  

Also, local governments and major industrial parks across the country should be encouraged to increase their support for innovations that will enhance the use of the industrial internet and related services. They should improve their public service to foster new business models and new forms of business.  

To address the talent shortage, China should encourage industries, universities and research institutes to collaborate. This can be done by, among other ways, establishing inter-disciplinary majors and coursework at universities.  

Social organizations, which include industrial associations and the Alliance could create public service platforms to increase awareness of the industrial internet and provide vocational education programs to foster talent and skilled workers. Indeed, enterprises can play a huge role in cultivating talent. They can either train their own or recruit new talent from around the world.  
NC: What incentives are already in place for developing the industrial internet in China? What more can be done? 

LD: The development of the industrial internet involves a lot of fields and funding. Enterprises can’t do it alone. That’s why there are government-supported innovation projects to research key technologies and integrated applications [coordinated application of science, technology, society and business to develop solutions to complex challenges] to develop networks, platforms and security systems for the industrial internet.  

Some places, including Guangdong and Fujian provinces and Shanghai, have set aside special funds to develop an industrial internet. In June 2018, China’s Ministry of Industry and Information Technology released a work plan that calls for cooperation with other ministries to provide more financing and services for enterprises focused on the industrial internet.  

More policy should push forward the innovative development of the industrial internet. More funds should be available to cover more related projects, especially those focusing on the research and development of key technologies. Authorities can attract more private capital to set up special funds for the industrial internet. Financing can also be further improved. Local governments and industry organizations can play an active role in building platforms that bring together enterprises in need of capital and financing. Each part of the stock market, including the 

Main Board, ChiNext [a stock market for smaller high-tech companies in Shenzhen], the National Equities Exchange and Quotation [an exchange where shares of small non-listed companies are traded] and the upcoming sci-tech innovation board, can contribute to the development of the industrial internet. Financing through credit, bonds and equity should provide a full range of support.