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China Issues 5G Licenses as Race to Build Networks Heats Up

3 min read

China approved four operating licenses for 5G networks, setting the stage for the super-fast telecommunications system amid simmering tensions with the U.S. over technology and trade.

The country’s three state-owned wireless carriers and China Broadcasting Network Corp. were granted licences for full commercial deployment, the Ministry of Industry and Information Technology said Thursday. The operators, China Mobile Ltd., China Telecom Corp. and China Unicom Hong Kong Ltd., have been testing the technology in several cities including Beijing and Shenzhen.

Full deployment of 5G networks in a country with almost 1.6 billion wireless phone subscriptions is expected to boost local companies making gear for applications in autonomous driving, robotics, remote surveillance and virtual reality. The faster-than-expected approvals also come as Shenzhen-based Huawei Technologies Co., the world’s largest manufacturer of networking equipment, has vowed to maintain its lead in the face of a U.S. campaign pressuring allies not to use the company’s products.

The battle over 5G network suppliers is part of what China sees as a broader push by the Trump administration to check the Asian country’s rise as a technology powerhouse. Along with the boycott of Huawei products, the Trump administration has effectively blocked U.S. companies from supplying Huawei with critical chips and software used in its components.

The Chinese government’s accelerating 5G licensing is probably aimed at ensuring carriers do not weaken plans to build as many as 110,000 5G base stations, assuming Huawei can deliver the necessary equipment using component inventories, wrote Edison Lee and Timothy Chau, analysts at Jefferies, in a June 5 note to clients.

“Huawei will fully support Chinese carriers’ 5G products in China,” the company said in a statement following the license announcement Thursday.

Trump’s Huawei Threat Is Nuclear Option to Halt China’s Rise

China continues to welcome foreign enterprises to its 5G market, Minister of Industry and Information Technology Miao Wei said Thursday, after the licenses were announced.

Shares of some 5G-related companies fell in Hong Kong and Shanghai trading after the license announcement, trimming gains made earlier in the week on expectations the companies would benefit from the push for the new networks.

China Tower Corp., the three major carriers’ infrastructure provider, fell 4% in afternoon trading in Hong Kong, paring its advance in the past four days to 8.5%. ZTE Corp., which makes handsets and telecom gear, dropped 4.5%, trimming its four-day rally to 6.8%.

Betting on the fate of the nation’s next generation of telecom networks has been one of the year’s hottest trades in China and Hong Kong. An index of telecom-related shares is up 19% this year, led by a 52% rally in ZTE’s Shenzhen-traded stock.

Read more here on stocks dropping after 5G license announcement

What Bloomberg Intelligence Says:

Huawei, Oppo and other information communication technology companies’ revenue growth should outpace other industries in China’s Greater Bay Area, driven by large national investments in technology such as 5G networks and provincial incentives to attract more talent immigration.

–Charles Shum, BI Industry Analyst

–Click here for the research

Beijing-based Xiaomi Corp. in March said it would introduce China’s first 5G phone in May or June. Huawei and ZTE, have also said they intend to offer handsets compatible with the technology this year.

Introducing 5G will directly add 6.3 trillion yuan ($912 billion) to economic output and 8 million jobs by 2030, the China Academy of Information and Communications Technology estimates.

— With assistance by Amanda Wang, and Yuan Gao(Updates with comment from analyst in fifth paragraph.)

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