China’s grand digitalisation plan to give a shot in the arm to country’s battered internet sector, analysts say

The ruling Communist Party has unveiled a new digitalisation plan, placing central importance on digital infrastructure and data resources. The move is expected to provide relief for country’s Big Tech sector, which has been battered by a long regulatory crackdown. — SCMP

The Chinese government’s newly unveiled digitalisation plan is expected to deliver a shot in the arm to the country’s battered internet sector, analysts say.

The grand plan, issued by the ruling Communist Party and State Council on Monday, prioritises digital infrastructure and data resources, both of which are essential to creating a “digital China” by 2025.

Calling for an acceleration of new growth engines including 5G, Internet of Things (IoT) and supercomputing, the plan highlights the value of the country’s vast treasure trove of data, which policymakers added as a new production factor in April 2020, elevating it to the same category as land, capital and human labour.

The plan also states that China will continue to support healthy development of “platform” firms, and analysts at CMB International said on Tuesday that it will likely provide clearer guidance and policy support for the long-term growth of China’s internet firms.

The plan “further clarifies the strategic significance of constructing a ‘digital China’,” the analysts wrote in a research note. They added that leading companies such as Tencent Holdings, Alibaba Group Holding, Baidu and have “always been looking to make their tech infrastructure accessible and leverage their technology to help digitise the real economy and look for growth opportunities”. Alibaba owns the South China Morning Post.

Tencent shares fell 1.7% in Hong Kong on Tuesday while Alibaba lost 3.2% amid a broad pullback for tech shares.

The plan also calls for the integration of digital technologies into a range of economic, cultural and social areas, including agriculture, finance, healthcare and transport.

“Fostering deep integration between the digital and real economy and driving revolution in production and governance through digital technologies, so as to add momentum to the great rejuvenation of the Chinese nation,” the plan states, making the connection between digital technologies and national rejuvenation for the first time.

The plan’s issuance comes just months after Chinese regulators reversed a two-year long regulatory crackdown on monopolistic practices and the “irrational expansion of capital” in the technology sector.

In mid-December, the central leadership of the Chinese Communist Party and the country’s cabinet pledged support in a strategic report for the country’s tech giants, encouraging the development of online entertainment and healthcare, and supporting autonomous driving and autonomous delivery services.

The grand plan announced on Monday also calls for the accelerated development of an array of technologies from 5G mobile networks, IoT applications, data centres and supercomputing technologies, calling them the “new growth engines”.

Xiang Ligang, founder of the Beijing-based telecoms-focused information portal, said that the well-thought-through plan – if executed properly – could strengthen China’s digital infrastructure and build out industrial chains to support various business applications.

“From 5G, the Beidou [satellite system] to supercomputing and data centres, [the plan aims to] build a complete system on which various business applications can be developed,” he said, adding that “as long as the plan is properly implemented – even 70% of it – then it will help improve the economy and bring down costs across industries”.

China could also export its digital development and governance model to other countries, according to Song Tao, head of the research institute at Beijing-based think tank Jazzyear.

“[China] could export its expertise [in digital development] to Belt and Road Initiative countries, including both digital infrastructure and solutions,” he said. – South China Morning Post

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