Will telecommunication benefit from China's stimulus package?

While nobody failed to notice the USD 580 billion (!) stimulus package from the Chinese government, the current lack of details has left many wondering how much money would actually go into the telecommunication sector.

While not directly targeted by the package, there are a number of ways the sector could benefit. First, the Chinese government has indicated its wish to expand railway infrastructure. This is good news for China Mobile thanks to its merger with China Tietong (the telecom arm of the Ministry of Railways). Second, Beijing maintains strong investment in projects being undertaken under its informatization policy. Both domestic and multinational companies providing the equipment, as well as companies offering services are the most likely beneficiaries from ongoing investment in informatization. Third, investment in housing construction will further expand the market for fiber-to-the-home, again good news from the companies providing equipment.

Finally, and more cinically, the package may divert some of the funds initially earmarked for the construction of the 3G network. Adding to the difficulty for Chinese operators to secure financing on capital markets, the sector and the government may think twice about what technology to invest it!