Day 1 C2C Summit July 2016 - China Strategy and Internet Development

1. Zhangyanbin
Industry and Planning Research Institute, CAICT
Internet+: China ICT strategy & internet development

2.  Background of“Internet+”
 Connotation of“Internet+”
 Expected Tasks of“Internet+”
 Support to“Internet+”
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Contents

3.  The driving factors for Chinese economic growth include:
 Demand Factor: export, investment and consumption included;
 Resource Factor: labor, capital and resources included;
 Innovation Factor: Factor upgrade and structural optimization brought
about by new technology renovation and system reform;
 By releasing the long-term reform dividend and population dividend, we
leverage our original resource endowment in a low-cost way over the course
of globalization to unleash the huge economic energy.
 However, as the global economic dynamic saw big swing, thus the growth
pattern traditionally relying on factor input turns out to be unsustainable, and
the innovation factor becomes a priority, in particular the new technology
renovation represented by Internet;
 Growth is promoted by from being driven by production factor input towards
by improving productivity.
Macro-economic Background
-60
-40
-20
0
20
40
60
80
100
2013年2012年2011年2010年2009年2008年2007年2006年2005年2004年2003年2002年2001年2000年
三大需求对GDP的贡献比例
最终消费支出对国内生产总值增长贡献率(%)
资本形成总额对国内生产总值增长贡献率(%)
货物和服务净出口对国内生产总值增长贡献率(%)
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4. Internet Application: Consumer Internet Industrial Internet/Internet+
Internet
1970s 1980s 1990s 2000s 2010s
www.
ARPANET
Raise basic concept
of Internet
TCP/IP
Search
Engine
E-commerce
Mobile Internet
IOT
Cloud
Computing
Big Data
Social
Networking
Internet Commercialization
200719951969
Industrial Internet Energy Internet
2012
Academic Research Production ServiceLife Service
 Prior to 1995, Internet development was mainly driven by academic research.
 After 1995, as Internet technology advanced rapidly, search engine, e-commerce and social networking had been profoundly changing people’s consumption like garments, food, living, traveling and entertainment. In 1995 – 2007, Internet offered life services.
 After 2007, with gradual commercialization of cloud computing, SDN, IOT and big data, Internet provided production service more and more, i.e. supporting service for producers and manufactuers. Internet had been more and more closely integrating with
traditional manufacturing, energy, healthcare, education and transportation. Hence, the industry proposed the concept of “Industrial Internet”based on the combination of Interent and traditional industries.
 In January 2014, Caijing magazine publicized the article From Consumer Internet to Industrial Internet, where it said that “Internet would create a new age that can change both consumers' individual behavior and all industries, the government and the whole
society as well”, which was called “age of industrial Internet”
4
Internet has become the core driving force in Industrial Reform

5.  In 2014, China’s ICT industry grew by 11.4% year on year to a total of 15.5
trillion yuan in output, still higher than GDP growth rate. If at such a rate, it
was expected to achieve the target set by the 12th Five-Year Plan, which
was 16 trillion yuan.
 In 2015, China’s information and communications service sector got
revenue at 1.9 trillion yuan, up by 13.1% year on year, among which:
Internet-based business revenue stood at 1.14 trillion yuan, up by 30.5%.
The ICT manufacturing grew at a rate of 7.9% .
 The industrial structure continued to optimize. The share of ICT service
revenue was expected to rise to 34.4%, 1.2 percentage points up from the
previous year; Since 2010, the annual growth rate has kept at 1 to 2
percentage points higher.
5
23.8%
20.5%
17.8%
12.8%
11.4%10.40%
9.20%
7.80% 7.70% 7.50%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
2010 2011 2012 2013 2014E
2010-2014年中国ICT产业发展情况
中国ICT产业产值（亿元） ICT产值增长率（%)
GDP增速（%）
China’s ICT Industrial Development in 2010-2014
High-speed Growth of ICT Industry in China

6.  Background of“Internet+”
 Connotation of“Internet+”
 Expected Tasks of“Internet+”
 Support to“Internet+”
6
Contents

7. Different
Observations
“Internet+” is a new form of economic and social development that realizes in-depth integration of innovation
achievements by Internet with various economic and social areas to promote technical advancement, efficiency,
organizational reform and innovation and productivity of real economy, and widely takes Internet as infrastructure
and innovation factor.
How to perceive“Internet+”correctly
Official
Definition
Internet Companies: The crossover integration of IT with Internet as the core and various industries creates new
products, new businesses and new models and form new ecology linking all together.
Basic Telecom Operators: Internet is widely applied in various fields of production and service, thus forming a new
form of economic development.
Traditional Manufacturers: The process of diffusion, application and in-depth integration for new-generation IT with
Internet as the core in various economic, social and life sectors.
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8. Inclined to traditional concept of informatization and focus on network-oriented connection and information flow to solve the problems with
efficiency and management, more taking on the physical reaction.
“Internet+” is a new phase of deepened development of IT application and a new form of development based on “+ Internet”.
——Shift from tools to infrastructure, just like the power revolution a century ago.
——Emphasize putting issues into the open and sharing concepts or crossover and innovative mentality of Internet
——Emphasize the initiative of Internet in developing new economy and creating new momentum and also platform-based data aggregation and
in-depth application to generate chemical effect and amplification effect.
How to perceive“Internet+”correctly
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“+Internet”
“Internet+”

9. 9
“Internet+” will drive the Internet reform to the core of industries
Basic
Support
In-depth
Application
Promote transformation & upgrade
of traditional industries
Foster & develop new business types
and new model
Improve social and
livelihood security
Network Service Platform of Sany Heavy Industry
Remote Monitoring
Forecast & Early Warning
Remote Diagnosis and Maintenance
Enterprise Control Center (ECC)
Remote EngineeringMachinery
Cloud Hospital,
Smart Healthcare
On-line Education
“Internet+”
Backbone Network/ MAN/Access Network
IDC CDN

10. Reverse Penetration:
Internet converges with different industries
in different degrees and at a different time.
Converging with the tertiary industry in the
first place and to the deepest extent,
Internet gradually integrates with and
penetrates into the 2nd and 1st industries.
Path of “Internet+”-oriented converged development
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Time of convergence
Degree of convergence
1st industry2nd industry3rd industry
Finance
Accommodation
Logistics Catering
Entertainment Tourism
Agency Culture
Retail Real Estate
Individual Consumption
& Service
Traffic Livelihood
Healthcare
Public Service
Education
Governmental Affairs
Farming, Forestry,
Animal Husbandry,
Side-line Production
and Fishery
Manufacturing
Energy
Current: Overall
Penetration of Internet
into Manufacturing
Public Service

11. 11
 Background of“Internet+”
 Connotation of“Internet+”
 Expected Tasks of“Internet+”
 Support to“Internet+”
Contents

12. Guiding Opinions propose 11 dedicated campaigns and identify 40 key tasks
 Urgent tasks of transformation & upgrade
 Coordinate Manufacturing – Modern Agriculture
 Smart Energy – Efficient Logistics
 Integrate and create emerging business types
 Universal Finance – E-commerce
 Most concerned by the general public
 Green Ecology
 Basic support converged with innovation
 Entrepreneurship & Innovation - AI
Key task direction
11
“Internet+”
Dedicated Campaigns
Energy
Manufacturing
Agriculture
Logistics
Finance
E-commerce
Public Service
Traffic
Ecology
Entrepreneurship &
Innovation
AI
Integrate &
create emerging
business types
Urgent tasks of
transformation
& upgrade
Most concerned
by the general
public
Basic support
converged with
innovation
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13. Improve innovation of
national manufacturing
promote in-depth
integration of
informatization and
industrialization
Smart
Manufacturing
Customization Network-based
coordination
Service-oriented
transformation
Combination
《Made in China 2025》
“Internet” Coordinated
Manufacturing
As a generic technology and a bonding tool,
Internet can realize efficient coordination btw
businesses and individual users, businesses
and corporate users and businesses and
industrial chain, which will help improve
industrial quality, efficiency and upgrade.
Industrial manufacturing is an
important pivot of national
economy and a treasured tool of
development upgrade.
Priority Interpretation: “Internet+” coordinated manufacturing
Production
Pattern
Organization
Form
Management
Method
Business
Model
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14. Status Quo of Domestic Manufacturing Development
 Low production efficiency, 1.6, 2.3 and
2.4 times of US, Japan and Germany in
energy consumption of unit added value
for manufacturing
 Improper industrial structure
 Decentralized manufacturing resources
 Mal-distributed manufacturing
enterprises
Growing labor pressure4
 According to calculation of
manufacturing power indicator system
by CAE, our domestic
 The proportion of labor aged 15-64
started to go below 70% in 2010 and
would get to the peak in 2015.
 Our national labor participation rate
and labor population will turn negative
in 2030
1 Big but not strong manufacturing
Extensive Development Pattern5
3 Unbalanced Industrial Development
The wholesale price of an
Apple cellphone is $178.96,
among which China can get
only $ 6.5.
 Ratio of technology-intensive industries and production-type
service sector is low
2 Absence in the high end of value chain
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15. Competitiveness Original Current Improvement
Capacity (10,000 unit) 100 200 One time
Plant employment 1624 476 lower by 70%
① Layout: Flow model –based and flexible layout
② Front-process: highly flexible automation line
③ Logistics: flexible and unmanned smart distribution
④ General Assembly: highly flexible custom-made general assembly
⑤ Digital & smart: Full-process integration and interconnection with
iMES as the core
Case: Shenyang Refrigerator Plant of Hai'er Group realized overall management and flexible
manufacturing by monitoring ten thousands of sensors on every production line, which can
support over 500 models of lean production. It has become a factory of fastest production pace
and widest models undertaken within the global fridge industry.
Smart InterconnectionLogisticsFront-process General Assembly
 To take smart plants as the medium
to promote convergence and
application of Internet technology in
production, support smart
transformation of manufacturing and
create open, sharing and
coordinated smart manufacturing
industrial ecology.
Task 1: Vigorously develop smart manufacturing
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16.  Support enterprises in their
innovation on service model and
business model based on
personalized products via Internet
and providing decision-making
support to enterprises in
customization.
Case: In the garment custom-made model of Red Collar Group,
consumers can directly raise their demands on the service platform,
then the flexible production line can give immediate response. This
model can not only control the production cost, but also satisfy the
users' demands to the maximum extent.
Custom-
made
Platform
Order-placing
by users
Flexible
Production
In the condition of sluggish
textile and garment industry,
Red Collar Group scored
high-speed growth in
orders and operating
revenue by over 150%.
Task 2: Develop large-scale Customization
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17. Case: In the 31000 components and parts of ARJ21 regional jet by
COMAC, over 77% are developed and manufactured among 104
suppliers in coordination in over 10 countries.
 Fully leverage the leading role of
backbone enterprises in
manufacturing industry and the
service capability of public
platforms, promote Internet
orientation of diversified
manufacturing resources to
effectively realise industrial
coordination.
Task 3: Improve network-based coordinated manufacturing
Digital & network-coordinated R&D platform
4500 engineers and management staff
Digital
Administration of
whole-machine
digital prototype
Full 3-D
digital
simulation
Virtual rollout
of airplanes
Coordination Design, test and manufacture simultaneously
Region expansion: global coordination (26 overseas first-grade suppliers)
Application expansion: expand from R&D and production to trial voyage
and customer service
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18.  Encourage traditional enterprises to
launch value-added business
oriented to full lifecycle of products
via Internet technology, which, on
one hand will expand the value
room of products, and on the other
hand will drive the full-link quality
and efficiency improvement of
enterprises through effective
integration of data
Task 4: Accelerate service-oriented transformation of manufacturing
The successful application of Sany's engineering
machinery networking service improves the working
efficiency greatly, enhances product differentiation and
form the core competitiveness of enterprises.
Network Service Platform of Sany Heavy Industries
 Collect and store hundreds of data on various types of machines of Sany
 Aanalyze the typical behavior of users in operation in a timely manner
 Offer customers optimized solutions and comprehensive service
including real-time monitoring of equipment operation
Remote Monitoring and
Maintenance Platform
of Engineering
Machinery
Big Data Mining-based
Analysis System of
Working Condition
Smart Mobile APP Self-
service System
Usage
Effects
Service-based Manufacturing Model of Sany Heavy Industries Network
Host Numbering
Network Address
Remote Engineering &
Machinery
Real-time Mapping
Remote Monitoring
Prediction & Early
Warning
Remote
Diagnosis
Monitoring & Administration Platform
Network Access Center
Big Data
Storage & Processing
Active Maintenance
Access to about
100,000 devices
Smart Terminals
Mobile
Internet
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19. 19
 Background of“Internet+”
 Connotation of“Internet+”
 Expected Tasks of“Internet+”
 Support to“Internet+”
Contents

20.  Strengthen leadership
 Organize trials and pilots
 Promote implementation in an
orderly way
Implementation
Create environment
Consolidate basis
Increase support
 Improve network support capability
 Enhance innovative development capability
 Enhance talent and intelligence support
 Create open and inclusive environment
 Create environment for fair competition
 Create environment for overseas expansion
 Financial and capital support
 Financing support
“Internet+” Action Supporting System
Twenty five specific support measures are proposed regarding seven aspects of consolidating development basis, strengthening driving force of innovation,
creating relaxed environment, expand overseas cooperation, enhance intelligence development, increase guidance and support and do well organization
and implementation, etc.
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21. Lay solid foundation — foundation for industrial development
New demands of“Internet+”
 Promote the strategy of “Broadband China”, implement the requirements of State Council for speed-up and tariff cut and
accelerate the 4G network development and next-generation Internet commercial deployment
 Study the industrial Internet architecture system and build an open national innovation experiment and verification platform
Consolidate network basis
Specific Development Measures
 Offer people-to –people, people-to-machine, thing-to-thing
connection of contents and application
 provide highly reliable, low-latency, large-capacity and
wide-covering network access
 Flexible adaptation of network to application change,
interaction of cloud resource and network
 Deeper and wider customization and openness of network
capability and business
 More autonomous and controllable IT and equipment
support
 Safer and more reliable network, data and personal
information protection
 Improve platform building such as sensing network, industrial cloud service and big data system
 Properly deploy data center and content distribution network
Strengthen application basis
 Make more efforts to achieve breakthrough in those weak links in core chip sectors
 Accelerate the promotion of R&D and application on cloud operating system and industrial control real-time operating system
Substantiate industrial basis
 Enhance security protection of information network infrastructure and users’ personal information protection
 Improve the network safety monitoring and evaluation system and explore to set up the certification system for data security flow
Guarantee security basis
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22. Create open and inclusive industrial policies
Break industrial barrier, and relax the restriction on market access for integrated products and
service
 Implement Opinions on Deepening System Reform and Accelerating Innovation-driven Development Strategy
 Reform the industry access system, formulate and implement the negative list of industrial access and break
improper access barriers
 Currently, the regulators in various industries are carry out relevant work
Formulate and implement the negative list of Internet access in various sectors and allow
equal access by law to areas not included into the negative list management
 Implement the Decision of the Third Plenary Session of 18th CPC Central Committee : launch unified market access
system, and based on the formulation of negative list, various main market players can equally get access to areas
outside the negative list
 The introduction of negative list management model into domestic management is identified
 Currently, the cross-border e-commerce trial is introduced only in Hangzhou
Continue to deepen telecom system reform and accelerate entry of private capital into basic
telecom business
 As the basic conditions in telecom area are in place, trials can be carried out.
 To adapt to market situation requires that market access system be reformed, the ongoing and ex-post oversight be
strengthened and the reform of mixed ownership system be moved forward
 Currently, the reform actions are being taken on mobile resale commercialization, broadband access trial and
organization of Iron Tower Company.
Accelerate and deepen commercial system reform and promote liberalization of investment
and trade
 Implement the requirements about commercial system in the Decision of the Third Plenary Session of the 18th CPC
Central Committee and Notice of State Council on Circulating the Reform Plan of Registration System for
Registered Capital
 The investment and trade liberalization also requires reform and innovation in investment management system,
foreign exchange management, financial management and customization supervision.
 The industry and commerce administration has realized registration of subscribed capital and the system of
license first, operating permit second.
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23.  The amendment of Securities Law and the accelerated reform of registration system for stock issuance to lower the financing threshold
 Accelerate the roll out of emerging financing section to lower the financing difficulty
 Seven emerging industries of strategic significance and those identified by other national industrial plans
 “Ten major enterprises of key development fields for “made in China 2025”
 “Internet+”: enterprises of technical innovation type and those of business model innovation type and other innovation types
Key support
Establish a multi-level capital market
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24. Implementation —— by ministries and agencies
Ministries and agencies: Effectively match overall planning, platform building, information resource sharing and setting of convergence standards as well as
policies, etc.
 Inter-ministry joint conference
system (office in NDRC)
 “Internet+”Expert Consultation
Committee
 Innovate policy trials in
different areas and by different
agencies
 Implement major projects or
project pilots
Strengthen leadership Organize trials and pilots
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25. Local governments: Coordination in the vertical and work distribution in the horizontal guide proper allocation and efficient use of local resources.
Sign strategic cooperation agreements on “Internet” in
Shanghai, Tianjin, Chongqing, Sichuan, Guizhou,
Shenzhen and Changsha
Sign strategic cooperation agreements on “Internet” in
Shanghai, Shandong, Fujian, Yunnan and Ningbo
Local governments are
taking faster actions
 Study and formulate the locally fit “Internet+” action plan
 Improve service, courageously explore and draw on success experience with
each other
depend on execution capability and potency！
Implementation —— by local governments
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Thank You For Your Attention！