China to Boost Domestic Demand by Facilitating Information Consumption

August 19, 2013 Posted by China Briefing Reading Time: 4 minutes

Aug. 19 – The State Council of China recently released the “Opinions Regarding Facilitating Information Consumption and Boosting Domestic Demand (guofa [2013] No. 32, hereinafter referred to as the ‘Opinions’),” providing guidelines for encouraging the development of information consumption in the next few years. Information consumption is a macro-level concept generally defined as the consumption of information products and services (such as internet access services, cloud computing services, e-commerce platforms, software, and telecommunication services).

Following the promulgation of the Opinions, the State Council issued “Broadband China Strategy and Implementation Plan (guofa [2013] No. 31, hereinafter referred to as the ‘Broadband Plan’)” on August 17 to further clarify the strategic plan of broadband construction and show China’s plans to maintain its claim as the world’s largest internet population.

“Building a mechanism that could keep information consumption steadily growing for the long term will effectively boost demand and create new areas of economic growth. It could also facilitate consumption escalation and industry transformation, and improve living standards in China. It will have benefits both in the short and long term,” said Minister Miao Wei of the Ministry of Industry and Information Technology (MIIT).

Research has shown that an increase of RMB10 billion in information consumption will drive GDP growth of RMB33.8 billion, according to Cao Shumin, the president of the MIIT’s China Academy of Telecommunication Research.

The Opinions state that China should have more than RMB3.2 trillion in information consumption and at least a 20 percent average yearly growth rate by 2015. Transaction amounts of e-commerce and online retailing should exceed RMB18 trillion and RMB3 trillion, respectively.

China also plans to significantly improve its IT infrastructure by realizing 20 Mbps of household broadband access capacity for all cities, 100 Mbps for certain cities, and 4 Mbps for rural areas by 2015. In addition, the nation’s 3G network coverage will be enlarged and by 2020, the 3G network should basically cover all cities, and 3G/LTE users will exceed 1.2 billion, according to the Broadband Plan.

The Broadband Plan also adds that by the end of this year, China will have more than 210 million fixed broadband users with a 55 percent penetration rate with regards to city households, and a 20 percent rate within rural households. These figures will be increased to 270 million fixed broadband users accounting for 65 percent of city households and 30 percent of rural household by 2015, and 400 million fixed broadband users, 70 percent of all household by 2020.

The Opinions stipulate that the administrative measures for recognizing high-tech enterprises will be improved. High-tech internet enterprises recognized by relevant authorities will be able to enjoy preferential tax rate for corporate income tax. It also states that the telecommunication industry will soon be included in the pilot reform of value-added tax in lieu of business tax, which means buying supplies and equipment with the purpose of producing relevant products or providing relevant services will be tax deductible.

Further, the Opinions state that it encourages private capital to participate in the construction of broadband network infrastructure. Currently, the telecommunication infrastructure market is controlled by three large state-owned enterprises – China Telecom, China Unicom, and China Mobile.

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