This article was revised and translated based on the original version delivered in International Monetary Institute, Renmin University of China, April 3, 2020.

Dai Wensheng, Senior Research Fellow of IMI; Professor of School of Finance, Renmin University of China.

At the Central Economic Work Conference in December 2018, centering on the important task of facilitating the formation of a strong domestic market, the construction of new infrastructure such as 5G, artificial intelligence (AI), industrial Internet, and the Internet of Things (IoTs) was proposed. Since the beginning of 2020, in the face of the adverse impact of the COVID-19, the downward pressure on China’s economic growth has continued to increase, and the task of achieving the year’s economic and social development goals seems even more challenging. In the case of limited consumption and exports, it is necessary to give full play to the key role of investment to stabilize economic growth.

On March 4, 2020, the Standing Committee of the Political Bureau of the Communist Party of China Central Committee was convened, and the meeting proposed the speeding up of new infrastructure construction such as 5G networks and data centers. At the current stage, it is crucial for all regions to promote the resumption of work and production, establish a moderately prosperous society in an all-round way, and fight against poverty. The central government will now reiterate new infrastructure and specify the direction from the national strategic level for economic reconstruction and high-quality development after the pandemic.

Unlike traditional infrastructure projects such as railroads, highways, and airports, new infrastructure refers to infrastructure construction that focuses on the technology side, with greater emphasis on digitalization and intelligence. It comprises seven major fields including 5G networks, industrial Internet, inter-city transportation and inner-city rail systems, data centers, AI, ultra-high voltage, and new energy vehicle charging stations. New infrastructure has the dual attributes of stabilizing economic growth and promoting technological innovation, and vigorously promoting new infrastructure construction can not only help achieve the short-term goal of hedging the negative impact of the pandemic situation, but also support China’s medium- and long-term goal of converting old and new growth drivers. To allow new infrastructure to release new momentum and help achieve high-quality economic development, it should start by establishing new concepts, broadening project financing channels, enhancing application orientation and talent training, and clarifying the relationship between new infrastructure and strategic emerging industries.

New infrastructure for economic growth

Promoting new infrastructure helps stabilize Chinese economic growth. As an important infrastructure facility serving traditional industries and emerging industries, increasing investment in the field of new infrastructure will become an important means of stabilizing economic growth. Considering the example of 5G base station construction, cultivating emerging technology industries such as industrial Internet, telemedicine, AI, and digital economy will directly or indirectly drive billions of trillions in economic output. At present, the new generation of information technology is being deeply integrated with the manufacturing sector and other real economy sectors. Promoting the new infrastructure construction such as 5G infrastructure, Big Data centers, and industrial Internet will generate large-scale and long-term investment needs, and a strong consumer market that is constantly evolving.

Therefore, on the one hand, new infrastructure can directly play a more important role in stabilizing investment and promoting consumption; on the other hand, it will also accelerate the technological transformation and upgrading of traditional basic industries; optimize the overall investment structure; and have a deep, revolutionary, and all-round impact on the real economy. Our country’s accelerated promotion of new infrastructure construction will help grasp the trend of the integrated development of the digital economy and the real economy, and create conditions for stabilizing economic growth, achieving the goal of fully building a well-off society, and fighting poverty.

Promoting new infrastructure helps achieve high-quality economic development. While traditional infrastructure construction supports China’s rapid economic growth, it also has the problem of low investment efficiency, and new infrastructure will mainly achieve high-quality economic development by improving efficiency. Considering ultra-high voltage construction as an example, it has the advantages of long-distance, large-capacity, and low-loss transportation, which will help China form large-scale “West to East” and “South to North” power transmission patterns, optimize the energy consumption structure, reduce energy losses to enhance the allocation of factor resources, and promote the green and efficient development of the economy.

The year of 2020 marks the end of the 13th Five-Year Plan and also the beginning of the 14th Five-Year Plan. The economic structural transformation still has a long way to go. Therefore, the proposal of new infrastructure can not only stimulate short-term domestic demand, but more importantly, accelerate the replacement of old growth drivers with new ones in China, and enhance the ability of sustainable economic development. New infrastructure embodies the properties of advanced science and technology, and can significantly improve the quality and operation efficiency of traditional infrastructure, eliminate backward production capacity, increase labor productivity, and promote the optimization and upgrading of economic structure. It can provide strong technical support for China’s supply side to cut overcapacity and strengthen areas of weakness, which are essentially consistent with the connotation requirements of high-quality economic development.

New infrastructure for releasing new growth drivers

Facing the COVID-19, we should turn pressure into motivation and be good at turning crises into opportunities. From a dialectical perspective, every crisis contains new development opportunities. Turning crises into opportunities and providing new growth drivers for high-quality economic development by advancing the new infrastructure construction needs to start from the following aspects.

Establishing a new concept to promote new infrastructure

Local governments at all levels should review the importance and urgency of new infrastructure from a strategic perspective, conscientiously implement the central government’s deployment, and actively promote the prevention and control of the pandemic and the construction of major new infrastructure projects. Moreover, they should realize that digitization is an important basic project to promote the modernization of the national governance system and enhance governance capabilities, and an important driving force for achieving high-quality economic development.

In fact, in the battle of prevention and control of this pandemic, areas where digital construction started earlier are more proactive in using Big Data to track the pandemic’s history of contact with the crowd, and accelerating the work resumption through intelligent factories. Traditional infrastructure supports the real economic cycle, while new infrastructure such as 5G base stations and Big Data centers support the digital economic cycle. All relevant departments of different regions should recognize the significant development scope and application prospects of the digital economy, grasp the development trend of future industries and economic formats, and lay out new infrastructure in advance with new concepts.

Broadening project financing channels to support new infrastructure

Infrastructure project financing has always been an important factor restricting infrastructure investment. In particular, the local governments face a high debt ratio, and it is particularly important to actively expand the financing channels for new infrastructure projects.

One approach is to adopt a proactive and effective fiscal policy, and on the premise of controlling the proportion of local debt, increase investment in new infrastructure projects by optimizing the budget expenditure structure, issuing local government special bonds, and increasing special transfer payments.

The second is to adopt a flexible and appropriate monetary policy, use targeted interest rate cuts and other methods to implement precise support for new infrastructure projects, guide funds to follow the projects, refrain from using a deluge of stimulus, and effectively reduce project financing costs.

The third is to widely mobilize the enthusiasm of private investment, reasonably introduce investment and financing models such as public–private partnerships as well as venture capitals, and attract enterprises and social capital to participate in new infrastructure projects.

The fourth is the demonstration and siphoning effects of policies on financial credit investment, encouraging state-owned commercial banks and other financial institutions to alleviate the financing difficulties faced by new infrastructure projects through various methods such as equity investment and debt investment, and support the promotion of new infrastructure project.

Strengthening application orientation and personnel training to promote new infrastructure

The aim of digital application in pandemic prevention and control is to solve practical problems in accordance with social needs. In the process of promoting new infrastructure construction, all localities should proceed from the major needs of serving the economic and social development, seize the historical opportunity of a new round of scientific and technological revolution and industrial revolution, strengthen the application orientation, and further define the new infrastructure from the three aspects of when to implement it, what to build, and where to develop it. For example, as “digital soil” is the key foundation of cloud computing, Big Data, AI, blockchain, IoTs, and other technological innovations, it is essential to improve layout capabilities of 5G infrastructure and Big Data centers.

Promoting new infrastructure construction requires new technologies, and the application of new technologies requires high-level inter-disciplinary talents. Government departments at all levels should become a bridge to communicate with enterprises, universities, and research institutes. They should aim at the development of national strategic emerging industries such as Big Data, AI, new energy, and new generation information technology, and guide universities and scientific research institutes to actively transform and upgrade traditional engineering majors, cultivate new engineering majors, and train new engineering and technical talents that adapt to and lead high-quality development of the economy.

Clarifying the relationship between new infrastructure and strategic emerging industries

The development of strategic emerging industries needs new infrastructure as support. Theoretically, new infrastructure refers to infrastructure construction focused on science and technology, which retains the typical characteristics of infrastructure-externality, mainly led by the government. Strategic emerging industries, led by the markets and enterprises, are based on the extension of new infrastructure. For example, the 5G network as a new generation of communication infrastructure is the foundation of related emerging industries such as smart manufacturing and healthcare. The development of strategic emerging industries requires infrastructure such as ultra-high voltage, digital centers, and industrial Internet.

Therefore, when promoting new infrastructure in various regions, project construction should make scientific decisions, focus on effectively linking with key emerging strategic industries in the region, strengthen government–enterprise collaboration, and fully demonstrate the application of new technologies and the feasibility of projects to avoid new production over-capacity and waste of resources due to repeated construction, and improve the efficiency of capital use and resource allocation.

Accelerating the construction of new infrastructure is an important measure that concerns the overall situation of economic and social development. It is an important starting point for promoting high-quality economic development, and a key means to winning international competitive advantages. The Chinese government accurately grasped domestic and international staged changes in pandemic prevention and control and economic situation, and referred the new infrastructure to a new strategic height indicating the direction of the current and future high-quality economic development. China should speed up the new infrastructure construction to achieve prevention and control of the COVID-19 as well as the goal of high-quality economic development.