This article was authored by APCO intern Nina Zholudeva
China is accelerating the deployment of fifth-generation mobile data technology (5G), which it sees as key to its ambition of becoming a global tech leader. By 2025, China is likely to be the world’s largest 5G market, with both public and private sector organizations in market demonstrating that virtually any industry can benefit from it. A glimpse at China’s 5G progress and applications can help foreign companies to understand how they can become part of the story.
CHINA’S PROGRESS AND CHALLENGES IN 5G
5G has been a top focus for China’s government since 2013, when three government agencies founded the IMT-2020 (5G) Promotion Group, which aimed to facilitate China’s leadership in the technology. Since then, the government has strengthened its commitment, with the innovation and commercialization of 5G being placed as a national priority in the 13th Five-Year Plan and the “Made in 2025” initiative, launched in 2015.
This incremental progress has accelerated since the onset of the COVID-19 pandemic, which was signalled in March 2020 when President Xi Jinping announced that China will further speed up the construction of “new infrastructure” projects such as 5G networks to support the country’s national recovery. Premier Li Keqiang echoed calls for the acceleration of 5G in his work report at the Two Sessions in May, despite the 9 percent budget cut in science and technology this year.
These are not empty promises. China’s three largest state-owned mobile carriers—China Mobile, China Telecom and China Unicom—spent RMB 34.2 (~$4.88 billion) to construct 130,000 5G stations last year. This year, they plan to increase the investment and number of new base stations by around five-fold, which will be partially subsidized by local governments. While their American counterparts might be spending more on 5G rollout, it’s much cheaper to build 5G infrastructure in China, which already has 15 times more stations than the United States.
The fact that up to 80 percent of these base stations are supplied by domestic companies also helps to expedite construction. Recent developments signal that China is well on track to achieve its goal of bringing 5G coverage to more than 300 of its largest cities by the end of 2020.
However, there may be bumps along the road. One of the biggest challenges will be to convince consumers and businesses to embrace the new technology despite its high cost. The three domestic mobile carriers currently offer 5G services starting from RMB 128-129 (~$18) per month, which is around four times more than 4G plans. The need to acquire devices that support 5G also increases the cost of adoption. Since November 2019, when 5G networks went online for the general public in China, the mobile carriers sold 65 million 5G subscriptions. This number looks small in comparison to China’s 1 billion 4G users.
HOW 5G IS CHANGING CHINA
5G provides a hundred times faster connection than today’s 4G, and supports up to a million devices per square km. It means not only reduced time for loading data, but also the possibility to unleash the potential of other technologies such as the Internet of Things (IoT), Virtual Reality (VR) and Artificial Intelligence (AI).
Through the COVID-19 pandemic, China’s healthcare sector has widely experimented with 5G capabilities. In Wuhan and other cities, doctors used 5G to instantaneously share data-heavy diagnostic results with colleagues for consultation and to examine patients remotely. In June, the first 5G fever clinic opened in Shanghai. The hospital’s 5G network transmits patient data to doctors’ offices in real time and enables robots to distribute drugs and meals to patients, reducing the risk of cross infection.
Various other industries in China have also explored 5G’s potential. China’s education sector has tested 5G as a way to integrate innovative technologies like VR into the classroom. In agriculture, 5G and sensors have increased crop yield by controlling and adjusting any changes in the environment of a greenhouse. In more tech-complex industries such as automobiles, 5G has helped to create completely new products from on-board entertainment systems to self-driving taxis.
These applications show that 5G’s potential to enhance business performance is unprecedented. Once 5G is adopted on a large scale in China, its economy is likely to become more efficient and productive. The China Academy of Information and Communications Technology (CAICT) forecasts that 5G will bolster total economic output to RMB 10 trillion (~$1.4 trillion) by 2025. This represents almost 10 percent of China’s GDP in 2019.
HOW FOREIGN BUSINESSES CAN TAP INTO CHINA’S 5G ECOSYSTEM
5G networks are already available in major Chinese cities and should cover most of the country in less than five years. Despite the main goal to support domestic development, now is the time for foreign companies to think about how they can seize the opportunities which will also arise.
To increase benefits, companies should:
1) stay informed of China’s 5G network development progress;
2) monitor central and local government initiatives to encourage wider 5G adoption; and
3) explore opportunities to create local partnerships.