The blueprint for Digital China has been drawn up, with leading enterprises focusing on the digitalization of industries

A new round of investment in artificial intelligence, big data, blockchain, cloud computing and other fields may explode

In the first year of the 14th Five-Year Plan, the blueprint for the construction of Digital China has been drawn. Recently, the Outline of the 14th Five-Year Plan for National Economic and Social Development and the Long-Term Objectives for 2035 (referred to as the "14th Five-Year Plan") was released. The digital economy was listed separately, proposing to accelerate digital development, cultivate emerging digital industries, promote industrial digital transformation, and clearly put forward development goals. The agency pointed out that the digital economy has broad prospects, and emerging digital formats such as artificial intelligence, big data, blockchain, and cloud computing will usher in a new round of investment. The development focus will shift from digital industrialization to industrial digitalization, and leading companies are focusing on increasing their layout.

Roadmap for building Digital China released

In the "14th Five-Year Plan", "Accelerating Digital Development and Building a Digital China" is listed separately, emphasizing the cultivation and expansion of emerging digital industries such as artificial intelligence, big data, blockchain, cloud computing, and network security, building application scenarios and industrial ecology based on 5G, and carrying out pilot demonstrations in key areas such as intelligent transportation, smart logistics, smart energy, and smart medical care. Implement the "Cloud Computing, Data Use, and Intelligence Empowerment" action, build a number of international-level industrial Internet platforms and digital transformation promotion centers in key industries and regions, and accelerate the digital transformation of industrial parks. Among the main goals, it is proposed that the added value of the core industries of the digital economy will increase from 7.8% in 2020 to 10% in 2025.

In the 2021 Government Work Report, it was also proposed to accelerate digital development, create new advantages in the digital economy, and build a digital China. A series of policies related to the digital economy are also expected to be introduced one after another.

"The digital economy has become a new driving force for sustainable development amid global changes," said He Wei, deputy director of the Policy and Economic Research Institute of the China Academy of Information and Communications Technology. According to data from the Ministry of Industry and Information Technology, the scale of my country's digital economy reached 35.8 trillion yuan in 2019, accounting for 36.2% of GDP. Related companies are developing rapidly. Among the eight digital China concept companies that have disclosed their 2020 performance reports, seven have achieved positive growth in net profit attributable to their parent companies.

Industry experts said that emerging digital industries such as artificial intelligence, big data, blockchain, cloud computing, and cybersecurity mentioned in the "14th Five-Year Plan" may become the main direction of future policy promotion and will usher in explosive investment demand. Shengang Securities believes that "cloud computing, data and intelligence" will become the main line of digital China construction. Under the catalysis of policies, smart transportation, cloud computing, industrial Internet, artificial intelligence, and financial technology are expected to maintain high prosperity.

Southwest Securities Research Report shows that the National Development and Reform Commission's research team predicts that from 2020 to 2025, the total investment in key areas such as 5G networks, artificial intelligence, industrial Internet, Internet of Things, data centers, and cloud computing will be about 17.5 trillion yuan, with an average annual growth rate of about 21.6%; driving the scale of upstream and downstream industries in the industrial chain to increase by about 2.8 trillion yuan, with an average annual growth rate of about 22.6%. The China Academy of Information and Communications Technology predicts that the scale of my country's digital economy will reach about 60 trillion yuan by 2025, accounting for more than 50% of GDP. Hu Chao, Secretary-General of the Blockchain Working Committee of the Beijing Youth Internet Association and Vice President of OKLink Group, predicts that the commercial value generated by blockchain alone will exceed 300 billion US dollars in 2025 and is expected to reach 3 trillion US dollars in 2030.

"The development of China's digital economy is in its infancy and has very bright future prospects," said Xiao Yaqing, Minister of Industry and Information Technology, at the "Minister's Channel" of this year's "Two Sessions."

Enterprises increase their digital layout in the industry

According to the definition of China Academy of Information and Communications Technology, the digital economy includes the connotation of "four transformations", namely digital industrialization, industrial digitization, digital governance, and data value. Many institutions believe that industrial digitization will contain greater development space.

Ping An Securities said that industrial digitalization is expected to have a broader space. In the future, the focus of domestic digital economy development will shift from digital industrialization to industrial digitalization, with more emphasis on integrated applications. The focus of industrial digitalization will gradually shift from the service industry to the industrial and construction industries, and information technology will begin to deeply integrate with traditional industries.

Leading enterprises are focusing on the layout of industrial digitalization. As the core role of industrial digital transformation, operators have included 5G+ industrial digitalization investment in their capital expenditure expectations this year. China Merchants Securities said that cloud computing may become one of the most critical areas for operators' non-traditional business layout. For example, China Telecom's capital expenditure budget for 2021 is 87 billion yuan, an increase of 2.6% year-on-year, and it is expected to invest 39.7 billion yuan in 5G construction, a year-on-year increase of 1.3%. The capital expenditure for industrial digitalization in 2021 is expected to be 22 billion yuan, a year-on-year increase of 67%, with the main investment directions being cloud, IDC and other ICT-related investments.

Domestic operators have already created a number of benchmark projects in the fields of steel, energy mining, equipment manufacturing, education, and medical care, and have implemented demonstration applications in many industries such as smart ports, smart mines, smart power grids, smart factories, smart education, and smart medical care, promoting the intelligent transformation and upgrading of traditional industries. As for equipment vendors, companies such as ZTE and Huawei have also made early arrangements and carried out 5G application practices with hundreds of industry partners to enable digital transformation in all walks of life.

In terms of industrial digitalization, smart cars are a typical application. Software-defined cars have become a general trend. New car-making forces such as Ideal and Xiaopeng have emerged. Traditional car companies such as FAW, BYD, Geely, and GAC are also actively embracing digitalization. Technology companies such as Baidu, Huawei, and ZTE have also begun to make related layouts for smart cars. Alibaba and Tencent are also actively entering the market with the help of cloud platforms. From a software perspective, Guosen Securities believes that algorithms, high-precision maps, and autonomous driving operating systems are the main investment opportunities. Among domestic listed companies, companies such as ThunderSoft, NavInfo, and AutoNavi have also already made their moves.

There is also a vast space for agricultural digitalization. In recent years, domestic technology giants including Baidu, NetEase, Alibaba, Tencent, JD.com, and Huawei have all made plans. In 2019, Alibaba established a special digital agriculture division and proposed to build 1,000 digital agriculture bases to carry out full-link digital upgrades in the agricultural industry.

According to an analysis by BOC Securities, based on the laws of industrial development and policy orientations, digital transformation will be completed in the next 10 years or so, both as an overall battle and as a key breakthrough. It will be the dominant driving factor for China's economy, and each sub-sector will have booming opportunities.