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When China’s wireless carriers debut their 5G networks this year, early adopters whose mobile phones can handle the ultra-fast speeds won’t be the only beneficiaries. Rolling 5G service out to the world’s biggest population also should give a boost to China’s digital economy, including makers of telecommunications equipment, platforms and applications for the internet of things, autonomous driving, surveillance and factory automation. It’s the kind of head start that will be expensive at first but could pay off well into the future.

1. What’s happening?

Major cities including Beijing, Shanghai and Shenzhen will get broad 5G -- or fifth-generation -- wireless coverage first, while some other cities will start with 5G hotspots. China’s three state-owned mobile operators have planned a combined capital expenditure of 302 billion yuan ($43 billion) this year, including an initial 130,000 base stations. (A state broadcaster also has a 5G license.) The main consumer benefits at first will be faster videos and games, more virtual reality applications and improved performance for mobile videoconferencing.

2. Are people signing up?

As of mid-October, about 10 million people had pre-registered (without obligation) for 5G service, according to the companies’ websites. That’s in a country with almost 1.6 billion wireless subscribers. But it should grow. GSMA, an industry group, estimates 5G connections in China will reach 460 million by 2025, while consulting firm Ernst & Young forecasts 576 million by then. Another researcher, CCS Insight, predicts 1 billion 5G users worldwide by 2023, with more than half in China.

3. Is China setting the 5G standard?

Not by itself, but more than ever before. China’s government and companies including Huawei Technologies Co., the world’s largest maker of 5G equipment; China Mobile Ltd., the world’s biggest wireless carrier; and computer maker Lenovo Group Ltd. have been deeply involved for years helping to set global standards for implementing 5G networks. That’s a contrast with the 4G and 3G introductions, where parties from the U.S., Europe and Japan steered the process with little input from China.

4. What about for the gear?

China’s 5G push, started in 2013, has created industry leaders like Huawei and ZTE Corp. and other firms that have secured many of the core patents that define the standard. Those companies will receive royalties from manufacturers of 5G equipment, fueling more research and development. They will also have an inside track to winning even more patents as deployment of the networks leads to further innovation.

5. How does 5G deployment affect sales?

Having a commercial 5G network up and running will allow China to leverage its advantage as the world’s largest pool of connected consumers to innovate and lower costs, helping it to sell components abroad as well. This is especially important when the U.S. has called on other countries to boycott equipment from Huawei, which it accuses of posing a security threat. Despite the U.S. pressure, Huawei said in July that it had signed more than 60 commercial contracts to supply 5G networks around the world, including at least 28 in Europe.

6. Is it only Chinese companies?

Some foreign companies are getting a piece of the pie. Swedish equipment maker Ericsson AB highlighted China as a key 5G market when it raised its 2020 sales outlook in October. Finnish rival Nokia Oyj has also won contracts for 5G gear in China.

7. What are the challenges?

The higher speed and reliability of 5G requires many more base stations, pushing up costs. Guotai Junan International Holdings Ltd., a securities broker, estimated that 5.5 million will be needed for 5G. (China had 3.7 million 4G base stations in 2018.) China Mobile, China Unicom Hong Kong Ltd. and China Telecom Corp. have all reported declines in profit growth, though their balance sheets remain strong. While costs are lower in China than in many other markets, the companies are still working to control spending on technology that isn’t expected to immediately result in higher revenue.

8. What’s happening in other countries?

South Korean carriers established the world’s first full commercial 5G services in April; they are expected to have 5 million subscribers by the end of the year. Operators in other countries including the U.S., U.K., Japan and Australia have also offered limited services to the public with plans to introduce wider networks in 2020. The ramp up may be slower than in China, where state-owned carriers have a government mandate to accelerate introduction.

9. What’s the broader impact?

China is betting big on transforming itself from an economy that makes products using others’ patents to one that develops new devices based on its own technology. By expanding capacity for gathering and analyzing massive quantities of data on everything from consumers’ credit-worthiness to traffic patterns, buying habits and machinery wear-and-tear, 5G networks can enable devices that learn to predict and respond to events. That should benefit local companies making gear for applications in autonomous driving, robotics, remote surveillance and virtual reality. The China Academy of Information and Communications Technology estimates the 5G market could account for 1.1 trillion yuan ($156 billion) or 3.2% of mainland China’s economic growth in 2025, generating 8 million jobs and adding 2.9 trillion yuan in economic value by 2030.

10. Is it a sure thing?

Analysts have questioned whether the faster services will prove compelling enough for consumers, other than those who simply want the latest technology. Aside from the phone, the service will be relatively expensive. Packages for today’s 4G service are as low as 19 yuan a month, or less than $3. China Unicom has said its 5G packages, which would include “a lot of data,” would start around 190 yuan a month. China Telecom will charge between 199 and 599 yuan, the Beijing Daily newspaper reported. China Mobile has yet to disclose its planned rates.

11. What comes next?

China is expected to be among the first, and certainly the largest, to introduce standalone 5G networks next year. Most of what’s been rolled out or in the pipeline is known as non-standalone 5G, which is an upgrade to existing 4G infrastructure. Standalone networks virtually eliminate lag time in transmission, enabling functions like remote surgery that would require extreme precision.

--With assistance from Gao Yuan.

To contact the reporter on this story: Shirley Zhao in Hong Kong at xzhao306@bloomberg.net

To contact the editors responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net, Dave McCombs, Paul Geitner

©2019 Bloomberg L.P.