As China emerges from the coronavirus crisis, the government is assessing the opportunities and challenges as it looking to further invest in ICT and other digital technologies as part of the country’s recovery efforts.
Responding to the COVID-19 crisis, several governments have announced fiscal stimulus packages to address the human crisis and save their economies. In China, where life has started to return to some degree of normality, the government has placed its recovery emphasis on investing in “neo-infrastructure”, a priority that was already part of its national development policy as early as 2018. The size of its planned neo-infrastructure investments in 2020, as announced by 25 provinces, amounts to RMB 42 trillion ($6 trillion).
The scope of China’s neo-infrastructure includes three main areas: information and communications technology (ICT), such as 5G, Internet of Things, satellite, artificial intelligence, cloud computing and blockchain; integrated infrastructure (i.e. applying digital technologies to upgrade intelligent transportation and smart energy); and R&D, particularly setting up more innovation centres and labs for science and technology development and education.
New economic models
The COVID-19 crisis shows how the virtual and real world helped create efficiency gains and reduce public health concerns, especially when it came to the flow of materials, human resources and production processes. Through ICT infrastructure, data from the real world gets generated and processed in the virtual world, while smart devices and innovative business models get delivered to the real world. Through R&D infrastructure, the virtual world receives technology inputs from the real world and intelligence gets delivered to knowledge workers and decision-makers.
Neo-infrastructure supports added value and is expected to empower new models in the economy by facilitating the movement of economic elements between the virtual and real worlds. These include industrial models that are data driven, achieving digital transformation ranging from equipment, production, workforce, enterprises and industry to the whole industrial ecosystem. In the case of China, enabling policies include lowering the technical and financial barriers for market entry by small and medium enterprises (SMEs) and facilitating the collaboration of economic players vertically in the industry chain and horizontally within the new industrial ecosystem.
China’s recent emphasis on neo-infrastructure may have been reinforced by the observation that companies are overwhelmingly embracing digital technologies in response to quarantines and lockdowns. Daily active users on Zooms video-conferencing platform jumped from 10 million to over 200 million in just three months. Industrial robots have been deployed to help companies reduce the dependence on traditional labour and customers are using online shopping and digital payment more frequently. Online education has also become a new normal in many countries. This trend is expected to grow as societies adapt to be resilient, which can contribute to an accelerated transformation to a digital economy characterized by 5G, artificial intelligence (AI), blockchain, Internet of Things (IoT) and big data.
This transformation to a digital economy comes with both opportunities and challenges for an inclusive green economy. On the opportunity side, a common recognition from the COVID-19 experience is the importance of building a resilient society. In this regard, digital technologies have an important role to play, as people have witnessed and experienced the benefit of telecommuting, distant learning and online shopping while living in confinement. Even after countries lift their restrictions on daily activities, the popularity of digital means is likely to grow, not only because of the remaining concerns over health risks, but also due to the efficiency gains as in the case of reduced commuting when working from home.
Sustainable infrastructure
Beyond its role in maintaining basic societal functions during times of crises, digital technologies can also contribute to aspects of the UN Sustainable Development Goals (SDGs). Appropriate deployment of neo-infrastructure is expected to accelerate progress towards the SDGs and to mitigate downward trends of sustainability. For instance, with more coverage of mobile networks, people from less developed areas would be able to access more quality education and more medical information. A study by the industry estimates that although the expansion of ICT infrastructure will lead to an increase in the carbon footprint by 1.25 Gt CO2 until 2030, this increase will be more than offset by a reduction of 12 Gt CO2 due to the low carbon-enabling effects of ICT, as this sector deploys low-carbon infrastructure and business solutions to support the activities of other sectors.
Here are some further illustrations of neo-infrastructure’s potential contribution to sustainability:
- Smart grid and e-vehicles: Modernizing power grid infrastructure provides a solution to the growing concern over energy efficiency, GHG emissions and energy independence. Real-time data from sensors and smart metre can help us better understand energy supply and demand, and hence lower peak demand and the associated costs, enable the use of clean energy and provide electricity more reliably. Smart grids can also release the pressure that the plug-in charging stations, infrastructure for electric vehicles, may cause to the grid by stabilizing the load. This will enable the use of cleaner e-vehicle and the development of the industry.
- Smart eco-city: Cities have one of the biggest potentials for the transition to a smarter and greener future. Beside the grid, all traditional municipal infrastructure (e.g. piping, road and construction, as well as the governance itself) need an upgrading, considering the increasing population dynamics and urbanizing trends. Digital access, IoT and AI can help reduce air pollution from road transport and contribute to clean water and sanitation through connecting and monitoring water points. Better monitoring of municipal solid waste data and smart waste management infrastructure can accelerate the zero-waste city initiative. The smart eco-city can connect the urban sphere to green economy visions, strategies and pathways.
- Digital health infrastructure: Telemedicine through mobile health apps with electronic medical records and real-time data from wearables is what ICT brings to healthcare. Digital health infrastructure, including integrated medical waste treatment facilities, will move the sector further with the help of big data and more accessible high-quality online medical training, making healthcare more transparent, efficient and raising the quality, in order to be better prepared and resilient to the next pandemic.
Economic recovery
Although countries may consider investing in neo-infrastructure as part of their post-COVID-19 economic recovery plans, the extent to which this sector can create jobs and boost economic growth remains unclear. Neo-infrastructure is unlikely to be a major job creator directly and in the short term due to the current size of the industry and technical skill thresholds of this job market, not to mention the jobs lost to automation, industrial robots, AI, etc. It can help improve the economic structure over time though by optimizing resource efficiency and empowering innovative business models, such as smart cities and industrial internet platforms. In so doing, neo-infrastructure is expected to contribute to potential system-wide employment growth in the medium and long term.
Social and environmental considerations
Apart from the lack of immediate job creation capability, neo-infrastructure also comes with other potential environmental and social issues, such as carbon footprint and digital gaps. Take carbon footprint, for instance. Although 5G stakeholders have actively explored engineering innovations in the deployment and AI-powered operations of the base stations for energy saving, the decisive element remains the share of renewable energy in China’s power grid and growth rate of China’s renewable energy market. A Greenpeace research shows the share of renewable energy consumption of data centres in China is 23% in 2018, lower than the overall renewable energy consumption share, 26.5%. In absolute terms, the mere construction, operations of neo-infrastructure and the resulting “economic models” would fuel more power consumption and GHG emissions, assuming China’s energy mix remains the same.
Another example concerns the ease of transactions in new consumption models and the incentives for upgrading smart devices, which could result in more e-waste. To address this issue, China’s post COVID-19 recovery policy outlines a plan of greening the value chain and establishing more predictable recycling networks of electronic waste, with joint efforts of 10 governmental agencies.
On the social side, neo-infrastructure could help fill the digital gap by improving access to the internet, computing power and analytical capacities for underserved segments of society and SMEs. If users are not equipped with adequate technical capacity, however, investments in neo-infrastructure could fuel business models that enlarge the knowledge gap within society.
Harnessing digital infrastructure
For countries where the starting point for a digital transformation is low, there are both advantages and disadvantages in making related investments. On the advantages side, the lack of existing ICT and ICT infrastructure in these countries means that the costs of conversion into the latest technologies are small. In addition, ICT is in general easier to access, share, use and learn about than many traditional manufacturing technologies. Leapfrog development is, therefore, achievable to some extent as in the case of the widespread use of mobile phones (and associated e-banking) in countries where landlines are limited. Investments in digital infrastructure are expected to bring about positive changes to the overall technical, economic and industrial patterns in these countries. One particular change might be the attraction to foreign digital firms that can bring potential knowledge spillover to local firms, and facilitate linkages between local firms and multinationals.
The disadvantages are reflected in the lack of adequate physical infrastructure in many countries that needs to work in conjunction with digital infrastructure to achieve system-wide effects. In countries where a high percentage of the population still lacks access to energy, water, mobility and shelter, the potential for digital infrastructure alone to bring about leapfrogging development will be rather limited. This points to the need to assess the relationship between physical infrastructure (hardware) and digital infrastructure (software), including their optimal combination. The sustainability of physical infrastructure also needs to be addressed in connection to its integration with digital.
Chengchen Qian is the National Coordinator for China of the Partnership for Action on Green Economy (PAGE) and the United Nations Environment Programme (UNEP) Coordinator of the Green Growth Knowledge Partnership (GGKP). Yaxuan Chen is a Programme Specialist at the United Nations Environment Programme (UNEP).