China is to invest over 600 billion yuan (US$88 billion) in the electronics and communications industries over the next three years, according to a draft stimulus plan aimed at boosting domestic demand.

Most of the funds, around 550 billion yuan (US$81 billion) are likely to be invested in building up a new 3G network, according to Zeng Bin, an analyst with China Merchants Securities. "If approved, the plan will have a profound influence on China's electronic information industry," said Zeng.

"The plan aims to boost domestic market demand and help weather the financial crisis by promoting domestic products, and providing support to enterprises," an insider commented.

The draft plan, drawn up by the Ministry of Industry and Information Technology, covers a number of areas, including 3G networks, integrated circuit technology, flat-panel TV production, broadband communications and next generation Internet.

The government aim, say experts, is to maintain industry growth by promoting research and development, industry restructuring and promoting exports.

The plan calls for 3-G TD-SCDMA network coverage to be spread across China. There are also proposals for integrated circuit and Thin Film Transistor Liquid Crystal Display (TFT LCD) production lines, improved digital TV standards, and accelerating the upgrade of the Internet.

Flat-panel display manufacturing is seen as a key modernization of the television industry, and experts say the government may fund technical research and development by major television set producers such as Konka, Changhong and TCL.

The plan also promotes solar power up the agenda, prompting hopes that 2009 will be a takeoff year for the domestic solar industry.

Industrial added value in China's electronic product trade fell by 0.2 percent in November, and 2.4 percent in December, 2008. Profits of 123.2 billion yuan (US$18.03 billion) from January to November 2008 were just 1.1 percent up from the equivalent period in 2007. Exports grew 10.2 percent over the year, down 9.4 percent from 2007.

To counter these trends the government plans to raise the export refund tax rate for a number of electronic products to 17 percent.

(China.org.cn by Pang Li, February 16, 2009)