China’s 13th Five Year Plan places significant emphasis on innovation, Internet Plus, new media and information technology. It encourages the integration of the internet with traditional sectors of the economy and promotes internet-based innovations. The Plan states that China should “promote the transformation and upgrading of publishing, film and television production, arts and crafts, and other traditional industries”.
The government’s core objective is to make the internet and related industries a new source of economic growth. The rationale for focusing on this objective include:
- the need to find new engines of economic growth in light of broader trends in the Chinese and global economies
- the need to fully capture the opportunities offered by new technological and industrial revolutions
- the increasing demand for higher quality and more efficient industrial sectors.
According to the Plan, the fixed broadband household coverage ratio should be increased from 40% in 2015 to 70% by 2020. The mobile broadband subscription rate should be increased from 57% in 2015 to 85% by 2020. These infrastructure enhancements will help expand the size and influence of China’s emerging internet economy.
In order to achieve the objectives of the Plan, the government will take the following steps:
- It will continue to support innovation and invest heavily in projects under China’s Technological Innovation 2030 initiative, including the Space-Ground Integrated Network (SGIN) and big data projects.
- New information technology will be supported by the government as a strategic emerging industry, while the industrialisation of Virtual Reality and Interactive Film technologies as well as other emerging industries will be recognised as new sources of economic growth.
- Pilot programs for “special management shares” in news, publishing and media companies will be introduced during the five-year period of the Plan. The special management shares regime involves a special shareholding structure which effectively prevents hostile takeovers during structuring and financing, and ensures that the founding shareholders have the most decision-making rights and control.
- The government will attach greater significance to the Internet Plus initiative. In July 2015, the State Council released the Guiding Opinions on Promoting the Development of Internet Plus to promote in-depth integration of various traditional sectors with Internet finance.
We explored many of these themes in our recent GSMA Mobile World Congress Shanghai Post-Event Report 2015.
The land of opportunity?
Opportunities for international businesses in China
We are likely to see a number of growing opportunities for cross-border investment and trade in the innovation, Internet Plus, new media and information technology areas. These include:
- Accessing a growing Chinese consumer base which has a very strong (and increasing) demand for purchasing overseas high-end consumer goods via the internet. This trend is being driven by increasing investments in internet infrastructure, the formation of new online shopping and payment habits, and the rapid development of social networks.
- Taking advantage of China’s growing film and television production industries. China’s box office revenue is increasing rapidly and, for the time being, foreign films are very popular with Chinese consumers.
- Entering China’s fast growing internet-related industries. Underlying the huge business potential for China’s Internet-related industries are its massive population and its growing middle class.
Opportunities for local businesses in China
As a result of the Plan, we expect to see enormous business opportunities in China for the following industries:
- ICT-related industries: particularly in the development of 5G mobile communication technologies and infrastructure for broadband and mobile communications (especially in remote regions in China’s mid-west and ‘smart cities’ in the mid-east).
- Industries related to the Internet Plus initiative: cloud storage, big data and cloud computing in related industries such as health, education and financial services, wearable mobile devices, and the Internet of Things.
- Internet finance:the legal framework for Internet finance has become clearer since the release of the government’s Guiding Opinions on Promoting the Healthy Development of Internet Finance in July 2015. This creates a more certain environment for internet finance companies to grow.
- Film and publication industries: China’s box office revenue in 2015 exceeded RMB 40 billion, representing an increase of 47.4% compared with 2014. With the publication of the Film Industry Promotion Law, China’s film industry faces a prosperous future.
From planning to implementation
For the Chinese government to implement its plan we anticipate that the following legal and regulatory matters will be addressed:
- A relaxation of the restrictions on foreign investments in internet-related sectors.
- Finalisation of the Network Security Law (a draft has been released) to provide a statutory basis for the protection of personal information, and to facilitate the development of Internet-related industries.
- Incorporation of the concept of “special management shares” into the corporate legal framework.
- Finalisation of the Film Industry Promotion Law (a draft has been released) and the improvement of laws and regulations relating to content publication to adapt to changes in publication and video production in the internet era.
- Enhancement of intellectual property protection.