How high tech innovation is reshaping China

11 Apr 2017

A vast new 5G network in China will enable data speeds up to 20 times faster than now available, potentially transforming the domestic economy as the country embraces high tech innovation. 

As China transitions its economy from manufacturing for export to one focused on service industries and domestic consumption, it is targeting technology as a growth industry. 

Macquarie’s Head of China A Share Research, Patrick Dai, says the Chinese government is lowering corporate tax rates, reducing red tape for new business and relaxing China’s strict immigration laws to encourage the industry and attract tech-savvy talent. Technology benchmarks are also included in the government’s 13th Five Year Plan. 

According to Dai, one of the most meaningful measures is the focus on developing world-leading technology infrastructure. He believes the 5G data network could provide the biggest opportunities for high tech businesses looking to innovate. 

The network, which will cost up to $US43.6billion, is being rolled out across 100 cities. It will also be the first network specifically built with the Internet of Things in mind. 

Macquarie technology analyst Chris Yu says the 5G network should help tap into the enormous growth potential in robotics, drones, high speed surveillance, assisted driver technology and virtual reality. He believes these industries hold the key to much of China’s high tech future. 

“So far much of the focus for these industries has been on the consumer market,” he says. “For example, virtual reality has been used in gaming and media.” 

“5G brings the potential to do so much more. It will let businesses connect a robot working on a factory floor with driverless trucks and delivery drones, all at once.” 

Yu says these industries could have wide-reaching application to sectors including agriculture, healthcare, emergency services and the military. 

There will also be flow-on benefits to other local industries. 

“Every driverless car requires 12 different cameras around the vehicle,” says Yu. “So that will mean camera lens manufacturers will have to produce more.” 

While China’s high tech industries are likely to be largely automated, Dai believes there will be increased employment opportunities in service industries such as tourism, education and healthcare as the country’s wealth and productivity increases.

For more information on the report 'From Made-in-China to Created-by-China' contact Macquarie Research.

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