Why Issue 3G Licenses in China Now? Simply.. Spur Investment and consumption

Monday, January 5, 2009 18:12
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Perhaps I am a being a bit overly inquisitive on this, but yesterday while watching CNBC, I was watching an analyst discuss the impact on stock prices that occurred from the announcement that the Chinese government will issue the long awaited 3G licenses.

Given the time it had taken to get to this point, and the speed by which this seemed to surprise everybody, it seems reasonable to ask why they should take such quick measures now.

In short, by doing this now (and let’s assume the licenses are actually given out) the Chinese government has essentially guaranteed that the major operators China Mobile (CHL) and China Unicom (CHU)will invest hundreds of millions in upgrading their networks.

Which will keep people employed, factories open, and achieve a number of macro targets

At the same time, as seen in the video below, it will spur the domestic consumers to go out and purchase a new handset.  Something that handset manufacturers desperately need, and are preparing for

[youtube width=”425″ height=”335″]http://www.youtube.com/watch?v=8be19UPHTOk[/youtube]

Which will keep people employed, factories open, and achieve a number of macro targets

Taking this one example, it is clear to see how a single policy change can impact the economy on a short and medium term scale.  Keeping factories open, people employed, and  consumers spending are three sweet spots for Chinese policy makers right now, so a quick gain will be logged once the investment begins.

For those looking 12 months down the road, keep an eye out for incentives packages that would spur consumers that are similar to the 2007 rebates for rural residents to buy household items.

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