Chongqing - "New infrastructure construction forms a crucial physical base for the progression of the digital economy, the transformation of production methods, and the enhancement of production efficiency in the era of the Fourth Industrial Revolution," articulated Xu Xianping, former Deputy Director of the National Development and Reform Commission and former Counsellor of the Counsellors' Office of the State Council.
The "new infrastructure" concept encompasses cutting-edge sectors such as 5G, artificial intelligence, the industrial internet, and the Internet of Things. Investment in "new infrastructure" surged in 2020 in response to the pandemic, as China strove to stimulate growth while avoiding an uncontrolled stimulus flood, as reported by Global Times.
Globally, the market value of New Infrastructure Construction Real Estate Investment Trusts (REITs) continues to rise while the market value of traditional real estate REITs declines. New Infrastructure Construction REITs have consistently shown strong market performance.
The 2023 REITs Development Summit: Public Wellbeing, Consumption, and Industry, took place at the Chongqing Yuelai International Convention Center from July 6 to 7. Attendees included Xu, who discussed the path of new infrastructure construction in China and its challenges and experiences.
Xu Xianping, former Deputy Director of the National Development and Reform Commission and former Counsellor of the Counsellors' Office of the State Council. (Photo/CRF REITs Forum)
Three innovative fields of digital infrastructure construction
Xu highlighted that during the 14th Five-Year Plan period (2021-2025), an investment scale of trillions of yuan is anticipated, generating significant market demand and strong growth momentum.
The digital economy will act as the primary engine, and three areas of innovation can be concentrated on in exploring digital infrastructure.
Firstly, data centers. Chat GPT, for instance, exemplifies big data, computational power, and large-scale models. Over the past five years, the annual growth rate of computational power has reached 30%, and the number of digital center base stations has grown annually by 30.2%. It is estimated that by 2025, there will be 18 million digital center base stations across the country, indicating swift expansion in this sector.
Chongqing, specifically, is among China's top ten data center clusters. Strategic planning of data center layouts, enhancing connections with national hub nodes, and promoting integrated collaborative innovation in computing power, algorithms, data, and application resources play a critical role.
Secondly, charging and swapping facilities for NEV (New Energy Vehicles). According to the New Energy Vehicle Industry Development Plan, NEV sales are projected to constitute 20% of total new car sales by 2025. After 15 years of ongoing efforts, battery-electric vehicles are expected to become the mainstream of new vehicle sales by 2035.
Charging and swapping facilities for NEV are integral to maintaining the consumption and development of the NEV industry. To cater to the demand for NEV, it is vital to accelerate the construction of new types of infrastructure that amalgamate charging, swapping, and energy storage, leveraging clean energy sources.
Thirdly, communication towers. China Tower has accumulated a total of 2.05 million operational 5G base stations, rapidly rising from 215,000 in 2019 to 1.587 million in 2022.
China Mobile, China Unicom, and China Telecom, the three primary telecom operators, account for over 90% of China Tower's business revenue. Through long-term service agreements, the tower leasing business has shown remarkable stability.
Leading companies in new infrastructure construction, like American Tower, Crown Castle, and SBA Communications in the United States, demonstrate risk-return characteristics REIT investors seek. China Tower's enterprise value-to-earnings ratio is about three times that of the tower companies in the United States, while the multiple of infrastructure leasing frequency to enterprise value is 12 times.
"This presents a novel approach and perspective for capital operations in the tower industry," added Xu. "It is a substantial and valuable asset, and how we manage it is essential."