In response to the epidemic, governments around the world have stepped up their investment efforts. At the same time, “new infrastructure" has become a buzzword. Research Center for Big Data in Finance, THUIFR looks at the concept of new infrastructure, its policy development context, and compares new infrastructure with traditional infrastructure. This article then analyzes the development of China's "new infrastructure" which has been used by local government as an force in the economic catch-up. Key areas of “new infrastructure” include construction of 5G, AI, data centers, and industrial areas targeting Internet technology, new energy technology and car battery development.
Compared with traditional infrastructure, “new infrastructure” has the following four characteristics:
- First, "technology comes first". On the basis of traditional infrastructure supporting the national economy and people's livelihood, more emphasis is placed on the integration of science and technology with real industries. Whether it is information infrastructure or integrated infrastructure, the purpose is to improve the intelligent level of industry as well as improve social efficiency through the construction of new infrastructure.
- Second, the potential application scenarios are broad. Take 5G industry investment in new infrastructure investment as an example. Currently, the downstream applications of 5G infrastructure is still in the exploration and expansion stage. Related applications such as the Internet of Things and cloud computing are in the high growth stage, and more and more application scenarios such as intelligent logistics, online exhibition and telemedicineare being gradually discovered. In a sense, traditional infrastructure is driving investment, while new infrastructure is driving demand for investment.
- Third, “new infrastructure” is more attractive to private capital and has a higher multiplier effect. Infrastructure construction has a certain public welfare attributes and low return on investment has become a key factor hindering private capital investment in infrastructure. However, new infrastructure, with its emphasis on science and technology, is more attractive to private capital.
Because government spending and investment has a multiplier effect it may crowd out private capital. Yet because “new infrastructure” is focused on emerging technology industries and its emphasize technology upgrading and domestic substitution, the economic benefits may include less spillovers.
- Fourth, it reshapes social behavior. In the early days of the train, the railway was a “new infrastructure”. The development of rail infrastructure and related infrastructure also led the formation of new social groups and behaviors. People abandoned the traditional carriage in favor of the more efficient and convenient trains, and this increased the efficiency of the whole society. New infrastructure with science and technology at its core has also reinvented social behavior in response to the COVID-19 epidemic. Cloud and mobile technology have profoundly changed the behavior pattern of social groups be enabling unprecedented use of high-speed information networks. Cloud offices, online education and live broadcast sales have endowed traditional industries with more and more possibilities to improve efficiency. This impact of these changes on behavior patterns is far reaching, and has created new job opportunities and new consumer demands.
Current development of new infrastructure
As of May 20, 2020, many regions have released their investment plans for key projects in 2020, with the total investment exceeding 10 trillion yuan. Given the impact of COVID-19 and the negative economic outlook, "new infrastructure" might become the main choice for central and local governments to drive economic growth.
Since the National Development and Reform Commission’s definition of “new infrastructure” is relatively recent, most current discussions and estimates of China's new infrastructure are mostly based on the previous industry classification research categories, such as 5G, big data centers, AI, industrial Internet, ultra-high voltage, new energy charging piles, and high-speed rail transportation.
Suggestions on new infrastructure
From the perspective of the international experience, the promotion of new infrastructure construction should not only focus on infrastructure construction, but should also focus on the construction of corresponding institutions. Supporting policies should be established to help coordinate functional institutions, regulation and related industries, financial market stability, and residents income distribution. While promoting infrastructure construction, it is also necessary to encourage the development of related industrial value chain application scenarios. In addition, while China's government remains the driving force of infrastructure construction and decision making, it must also give full play to the role of the market in emerging industry and high-tech industry. State-owned enterprises are the mainstay of national economy which take initiative to shoulder the main responsibility for construction and deep reform. At the same time, government should further enhance the support for private capital, liberalising entry, guiding new private capital investment and encouraging proper competition, so that the new infrastructure could better support China's economic development.