Broadband Internet in the Chinese Crisis Economy

If the United States represents a full integration of monopoly-finance capital and the Internet, China, as a latecomer country, is poised to adopt a similar goal of making broadband more central to the Chinese style capitalism in the aftermath of the 2008 global economic crisis. A review of recent trade journals can provide a sense of the new trends we are already seeing: Telecom operators have competed to expand their wired and wireless broadband networks, recently under the state’s new national broadband strategy. Broadband is expected to become the platform for trade in software and IT services, such as logistics, E-commerce, and consulting. Meanwhile, cloud computing and the Internet of things, the two “most promising” ICT applications, are equally seen as the new, trillion-dollar information service industries, capable of transforming the wider economy and social life. Important questions arise concerning what policy and structural changes it takes to create a broadband-based economy in China: Specifically, what changes do state-market interactions go through amidst the crises facing telecom operators and the Chinese economy in general? What are the major considerations in the state’s broadband policy? How do competing telecom operators concerned with their own interests also articulate their roles as the state’s internal rebalancing instruments? And how does the state, in tandem with telecom operators, strive to retain commanding heights despite changing business dynamics? If the earlier phase of Internet development had facilitated China’s entry into the networked global production, broadband development, especially after 2005, expressed the state’s new desire to shift China from its export-driven economy to one more dependent upon domestic consumption. As a concrete means to achieve China’s anticipated escape from its ambivalent position in the global economic order and its ambition to participate more competitively in advanced global IT economies, broadband development involves more than just network upgrades. Indispensible are a destructive creation of telecom business models and a slew of systematic efforts to create societal demand for broadband-based applications. Indeed, without consumption, there is no growth and expansion. How will the Chinese government stimulate demand for broadband service and applications? So, while the industrial policy literature often assesses state intervention concerning resource input and capacity buildup, this paper aims to understand a demand-centric intervention. Specifically, what pivotal projects have been carried out to create a broadband-based economy? What verifiable policy, institutional, and structural changes have been pursued to make broadband commercially viable? And how do pre-existing structural, institutional, and social tensions define the parameter of future directions? By relying on a wide combination of trade journals, newspapers, and government documents, this paper provides a critical-historical interpretation of China’s broadband project in connection to the crisis economy and China’s rebalancing efforts. After reviewing China’s Internet development since the mid 1990s, which had been driven by global structural forces, bureaucratic capitalist rivalries, and the state’s strong desire to incorporate China into world IT economies, the paper moves on to discuss 1) changing state-market interactions and accompanying tensions when renationalization of broadband development has become a global trend in the post-crisis context and 2) telecom operators’ uneasy transformation into information service providers and the wider efforts to create demand for broadband-based applications.