The recent changes in world dynamics have led to China prioritizing the development of its infrastructure. The country is pushing towards establishing a smart, innovative, and digitally-driven, and more attractive infrastructure for foreign investors. In this article, we’ll talk about the new China infrastructure plan and the opportunities available for foreign technology investors.
Outline of the New China Infrastructure
The Standing Committee of the Political Bureau of the Chinese Communist Party has announced at the National People’s Congress of 2020 that it will be spending around RMB 3.75 trillion on its special bonds program.
China has also introduced its COVID-19 relief package to revamp its digital infrastructure. It includes setting up a 5G network, inter-city bullet railways, Artificial Intelligence, and the Internet of Things (IoT). The country is also pushing more research and development centers for innovation in these areas.
Many new incentives are being introduced to advocate the Made in China 2025 and China Standards 2035 Plan. The government is also extending support to businesses in credit support, public-private partnerships, and issuing special bonds to companies. The government is promoting the new China infrastructure plan to become more self-reliant and speed-up its industrial renovation.
Key Sectors and companies in China’s new infrastructure initiative
Leading Chinese carriers: China Mobile, China Telecom, China Unicom
China Broadcast Network
Telecom equipment makers: Huawei Technologies, ZTE, Ericsson
Build 600,000 5G base stations across the country by the end of 2020, and 5 million to 5.5 million by 2025 to ensure nationwide 5G coverage
SenseTime, Megvii, Yitu Technology, CloudWalk Technology, Baidu, Alibaba, Tencent, Huawei, Cambricon, Horizon Robotics Technology
Build 20 Al innovative trial zones across the country by 2023
Big data centers
Huawei, Tencent, Alibaba, Inspur, Lenovo, Amazon Web Services, Intel
Build massive but undisclosed number of Amazon Web Services, big data centers, super-data centers and edge-computing data centers by 2025 to meet rising domestic demand for data storage
Huawei, Inspur, Yonyou, Alibaba, Tencent, Baidu
Build three to five world-class industrial internet platforms by 2025 to help a million enterprises make digital transformation
State Grid Corporation of China, China Southern Power Grid
Begin up to 16 ultrahigh-voltage projects this year, including expansions of power transformers and new converter stations
Intercity high-speed rails and rail transportation
CRRC, China Railway Signal & Communication, China High-speed Railway Technology
Expand the railway network by more than 4,000 km in 2020, including 2,000 km for high-speed railways
Electric vehicle charging infrastructure
State Grid Corporation of China, TGood, Star Charge, BYD, Contemporary Ampere Technology’s charging arm, Potevio Group, Huawei Cloud
Add 12,000 electric vehicle charging stations in 2020 and have more than 36,000 by 2025
Classification under the China Infrastructure Plan
In April 2020, the National Development and Reform Commission introduced a new classification for the China infrastructure plan. The category comprises three characteristics of new-generation technology:
- Innovative infrastructure: It includes infrastructure supporting industrial technology innovation infrastructure, science and technology infrastructure, and science and education infrastructure. For this, the government will set up more research and development centers and IT parks.
- Information infrastructure: It includes infrastructure to boost the speed, accuracy, and productivity in collecting, storing, analyzing, and transferring data. For this, the government will set up new data centers, centers to develop 5G networks, AI, cloud computing, blockchain, and the Internet of Things.
- Integrated infrastructure: It includes a blend of traditional infrastructure and AI, Big Data, IoT, etc. For this, inter-city high-speed railways, charging stops for electric vehicles, and ultra-high voltage (UHV) power transmission will be introduced.
The National Development and Reform Commission has defined the scope of the new China infrastructure. Based on this, 25 provinces in the country have also determined their local infrastructure plans.
For instance, Shanghai has introduced a program in which the next three years’ total investment target will be RMB 270 billion. Similarly, the Guangdong Province is also preparing for around 1230 significant projects with an investment of RMB 5.9 trillion.
Opportunities for Foreign Investors
Foreign investors in the technology sector have more opportunities to grow in China than ever. The country is gearing up to invite investments to commercialize technology and bolster private players to develop more technology innovation.
The government is also aiming to promote innovation and reinforce its technology sectors by inviting more foreign investors. This way, the country is trying to counter the impact of the coronavirus pandemic and re-achieve sustainability in its infrastructure. Thus, the opportunities for foreign investors are ample.
With lower restrictions, foreign direct investments will also increase in the technology sector. However, the FDI in technology sectors will still be as per the Special Administrative Measures for Access to Foreign Investment Negative List, and the Catalogue of Encouraged Industries for FDI Encouraged List.
The country has also released a 2020 edition draft of China’s Catalogue of Encouraged Industries for Foreign Investment. The draft includes many changes to invite more participation in the manufacturing sector for technology development. The draft expands the list with 56 more items for which FDI will be encouraged. These include manufacturing light detection and ranging and millimeter-wave radars, manufacturing smart wearable devices, intelligent crewless aerial vehicles (UAVs), customer service robots, and smart home systems.
Under the new China infrastructure plan, foreign companies that invest in the encouraged industries will receive numerous incentives. These include exemption to tariff, lower land prices, lenient real estate use regulations, and reduced corporate income tax.
Problems for Foreign Investors
Though the number of encouraged industries will be increased if the draft is approved, the industries added to the negative list will no longer have FDI entry or may have stringent restrictions.
Additionally, with the political impact on the technology industry worldwide, new investors may face more challenges to enter the Chinese market. Companies will require a strong business strategy and market entry plan to enter the Chinese market through the right channels.
Businesses will also need local assistance to leverage the growth opportunities available under the new China infrastructure plan. One of the best solutions for foreign investors and international companies is to opt for PEO services for their China expansion.
How a PEO can Help
Foreign companies can partner with a China PEO & Employers of Record to make the best of China’s new investment opportunities. An international PEO can help foreign companies with their complete market entry planning and local employment management. A PEO also removes the need for small companies to set up a legal entity altogether. This way, SMEs can profit from the opportunities available in the Chinese technology sector without a large budget or direct investment.
A PEO like Horizons can help foreign investors with their market research, business plan development, and business incorporation through the most accessible routes. Technology companies can also perform a detailed analysis of the encouraged and negative industries to make correct investment decisions.
Horizons offers a wide variety of HR solutions for employee management, payroll processing, legal and tax compliance, contract management, and much more. This way, the foreign company can quickly enter the Chinese tech market without worrying about its employment operations. Our local experts can also help companies set up their operations, take care of employee immigration, and execute their employee administration effortlessly.
By opting for our PEO services, you can transfer your expansion worries to us and quickly expand into China to leverage its new investment prospects. Contact Horizons today to know more about the investment opportunities available under the new China infrastructure plan and expedite your global expansion.