中国城市化2.0：新基建机会手册（英文版）.pdf

MChinas Urbanization 2.0New Infrastructure Opportunities Handbook The new infrastructure push affirms our view that smart supercity buildup a key enabler of Chinas Urbanization 2.0 is fast-tracked. We expect capex in six key segments to reach US$180bn p.a. in 2020-30, almost 2x the past three-year average, benefiting key players. Robin Xing, Jenny Zheng, and Zhipeng Cai are economists. They are not opining on securities.Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.+= Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to FINRA restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.March 22, 2020 09:00 PM GMT加入投行群微信：18622069179MContributors MORGAN STANLEY ASIA LIMITED+Robin XingEconomist+852 2848-6511Robin.XingmorganstanleyMORGAN STANLEY ASIA LIMITED+Jenny Zheng, CFAEconomist+852 3963-4015Jenny.L.ZhengmorganstanleyMORGAN STANLEY ASIA LIMITED+Laura WangEquity Strategist+852 2848-6853Laura.WangmorganstanleyMORGAN STANLEY ASIA LIMITED+Gary YuEquity Analyst+852 2848-6918Gary.YumorganstanleyMORGAN STANLEY ASIA LIMITED+Kevin Luo, CFAEquity Analyst+852 2239-1527Kevin.LuomorganstanleyMORGAN STANLEY TAIWAN LIMITED+Sharon ShihEquity Analyst+886 2 2730-2865Sharon.ShihmorganstanleyMORGAN STANLEY ASIA LIMITED+Yang LiuEquity Analyst+852 2239-1911Yang.LiumorganstanleyMORGAN STANLEY ASIA LIMITED+Eva HouEquity Analyst+852 2848-6964Eva.HoumorganstanleyMORGAN STANLEY ASIA LIMITED+Jack YeungEquity Analyst+852 2239-7843Jack.YeungmorganstanleyMORGAN STANLEY ASIA LIMITED+Zhipeng CaiEconomist+852 2239-7820Zhipeng.CaimorganstanleyMORGAN STANLEY ASIA LIMITED+Fran Chen, CFAEquity Strategist+852 2848-7135Fran.ChenmorganstanleyMORGAN STANLEY ASIA LIMITED+Sara WangEquity Analyst+852 2239-1230Sara.WangmorganstanleyMORGAN STANLEY ASIA LIMITED+Hangjie ChenEquity Analyst+852 2848-7168Hangjie.ChenmorganstanleyMORGAN STANLEY ASIA LIMITED+Camille XuResearch Associate+852 3963-0692Camille.Xumorganstanley加入投行群微信：18622069179MChinas Urbanization 2.0New Infrastructure Opportunities Handbook The new infrastructure push affirms our view that smart supercity buildup a key enabler of Chinas Urbanization 2.0 is fast-tracked. We expect capex in six key segments to reach US$180bn p.a. in 2020-30, almost 2x the past three-year average, benefiting key players. Why now? China is eyeing “new infrastructure“ projects to mitigate the economic impact of COVID-19 and tackle its big city problems. This effort includes 5G base stations, Industrial Internet of Things (IIoT), artificial intelligence and data centers, ultra high voltage, inter-city high-speed railways and rail transit, and electrical vehicle charging stations. Its part of countercyclical measures to offset the near-term growth shock but it could also fast-track smart super-cities, which leverage next-generation technologies to boost long-term productivity and make cities faster and more livable. See The Rise of Chinas Supercities: New Era of Urbanization, October 10, 2019. What is the scope of investment? Our bottom-up estimates sug-gest that the annual average investment in new infrastructure would reach US$180bn in 2020-30, almost 2x the average over the past three years, led by AI and data centers, intercity HSR and rail transit, and 5G base stations. Meanwhile, the average share of private capex in new infrastructure could also pick up to 38% in the next decade (vs. 28% in 2017-19), with more private participation in IIoT and railways. Potential policy catalysts to watch for: 1. Tax: This could include tax incentives for IIoT adoption and related R 2) digitalization of old-economy industries; 3) new lifestyles in smart supercities. We highlight 22 companies as immediate beneficiaries of this theme: Our selection is based on exposure to segments geared for high growth potential and/or leadership status compared to peers.加入投行群微信：18622069179M4Contents 5 Summary Tables7 New Infrastructure in Focus12 Segment Details加入投行群微信：18622069179MMORGAN STANLEY RESEARCH 5Exhibit 1:AI and Data Centers, Intercity HSR and Rail Transit, and 5G BTS to Lead the New Infrastructure Investment in 2020-305827354657110141223410 10 20 30 40 50 60EV Charging StationUHVIndustrial IoT5G Base StationIntercity HSR & Rail TransitAI & Data Centers2017-192020-30EAnnual Average Investment by Segments, USD BnIntercity HSR & RailTransitAI & Data Center5G Base StationIndustrial IoTUHVEV Charging StationsSource: Company Data, Morgan Stanley Research estimatesExhibit 2:Summary of New Infrastructure InvestmentOverall(USD Bn)Private Share(%)Overall(USD Bn)Private Share(%)5G Base Station Infrastructure(Gary Yu) 12 0% 35 0%- Relaxation of policy restrictions on “Speed Upgrade & Tariff Reduction“- A cut in electricity fees, as 5G BTS tend to consume more power than 4G- More local government provision of existing public buildings for 5G BTS deploymentLow- 5G adoption is faster than early 4G cycle after four months of service launchIndustrial IoT(Sharon Shih) 14 30% 27 60% - More tax incentives and R&D subsidies to boost incremental upfront investment Low- High customization neededArtificial Intelligence & Data Centers(Yang Liu) 41 44% 57 44%- More carbon quota for data centers in tier-1 cities- Lower electricity tariff- Policy support for further market consolidation Low- Strong demand and previous tight supplyUltra-high Voltage (UHV)(Eva Hou) 10 0% 8 0% - Smoother approval process by National Energy Administration High- Most of the UHVs in operation are under-utilizedIntercity HSR & Rail Transit(Kevin Luo) 23 25% 46 50% - More smooth approval process by NDRC - More policy support to broaden funding channels and attract private investmentLow- Railway investment to focus more on HSR in eastern China and city-suburb connectivity in city clustersEV Charging Stations(Eva Hou, Jack Yeung) 1 76% 5 75% - A cut in tariffs charged to EV charging operators Medium- Market may start to consolidate in case of overcapacity, given the segment is mainly funded by private sectorTotal New Infrastructure 100 28% 177 38% More support needed on tax, financing, and regulation LowSegments Potential Policy Catalyst to Watch for Risk of Overcapacity2017-19 2020-2030ESource: Company Data, Morgan Stanley Research estimatesSummary Tables加入投行群微信：18622069179M6Exhibit 3:Summary of key stock beneficiaries and rationale by investment themesSource: Morgan Stanley Research.加入投行群微信：18622069179MMORGAN STANLEY RESEARCH 7What is new infrastructure? Chinas policymakers have been mulling support for new infrastruc-ture in recent meetings after calling for more support for 5G and industrial Internet during the Politburo meeting on February 21, the top leadership reiterated the importance of accelerating investment in 5G and data centers during the next Politburo meeting on March 4. According to official definition, new infrastructure includes 5G base station infrastructure, industrial IoT (Internet of Things), AI (Artificial Intelligence) and data centers, UHV (Ultra High Voltage), intercity HSR (High-Speed Railways) and rail transit, and EV (Electric Vehicle) charging stations. Why now? Boost to new infrastructure would be part of countercyclical easing to mitigate COVID-19 disruption in the near term. In our base case, Chinas GDP growth is likely to drop to -5% YoY in 1Q20 before a 2Q20 rebound into expansion territory, reaching 4% in full-year 2020. We cite the large-scale suspension of production suspen-sion in February resulting from the COVID-19 outbreak, the slow pace of business resumption in March, and weaker external demand amid the developing global recession (See Seismic Waves of Covid-19 to Trigger a Global Recession, March 17, 2020)Beijing has signaled tolerance for lower growth and will probably push the deadline of “doubling 2010 GDP“ out a quarter, to 1Q21. Even so, we still see a meaningful stimulus package to ensure labour market stability and facilitate an above-trend recovery in 2H20, with cyclically adjusted primary augmented fiscal deficit to widen by 230bp of GDP in 2020. We expect half of this stimulus to go into infrastructure investment, particularly the new infrastructure proj-ects, as recent Politburo meetings suggested. New Infrastructure in Focus.and sustain Chinas productivity growth over the medium term: The policy support for new infrastructure is in line with our view that policymakers are shifting urbanization strategy from boosting physical infrastructure (roads, railways, and highways) in an even-handed manner (such as Western Development since 2000) to promoting smart supercities. More emphasis will be put on boosting digital infrastructure, clean energy, and interconnectivity of key city clusters. This will make cities faster, safer, greener, and more livable, helping address big-city prob-lems (which have been a key impediment to further urbanization in the old growth model) and enhancing cities capacity to accommo-date more population forging a new phase of urbanization toward 2030 (See The Rise of Chinas Supercities: New Era of Urbanization, October 10, 2019). In particular, the COVID-19 outbreak has reminded us of the impor-tance of enhancing efficiency in allocating social resources and keeping population density in cities at a proper level. This could be achieved with the adoption of next-gen technologies (5G, AI, and big data analysis) and more developed intercity and intracity transporta-tion networks. For instance: l The buildup of cloud hospitals and an integrated public healthcare database could match healthcare resources with patients better, reducing the unnecessary waiting time in hospitals.l Development of more interactive online courses could break the geographic constraints on high-quality education resources. l Shorter intercity and intracity commuting times thanks to high-speed commuter trains, smart traffic control systems, shared mobility, and automated vehicle technologies would encourage people to live in suburban and satellite cities rather than city cen-ters. 加入投行群微信：18622069179M8Exhibit 4:Boost to New Infrastructure to Help Tackle Key Hurdles to Further UrbanizationSource: Morgan Stanley Research 加入投行群微信：18622069179MMORGAN STANLEY RESEARCH 9Exhibit 6:Expecting More Private Participation in Industrial IoT and Intercity HSR and Rail Transit0%0%44%50%60%75%0%0%44%25%30%76%0%10%20%30%40%50%60%70%80%5G Base StationUHVAI & Data CentersIntercity HSR & Rail TransitIndustrial IoTEV Charging Station2017-192020-30EShareof Private Sector in InvestmentSource: Company Data, Morgan Stanley Research estimatesExpecting annual capex to double, with higher private participationOur industry analysts estimate that the average annual investment for new infrastructure could reach US$177bn in 2020-30, almost twice the past three years annual average (US$100bn in 2017-19). This will be led by more capex investment in AI and data centers, intercity HSR and rail transit, and 5G base stations (see Exhibit 5). Meanwhile, we expect that the average share of private investment will also pick up to 38% over the next decade (vs. 28% in 2017-19). We expect doubling in the private share in two areas (Exhibit 6):l Industrial IoT (60% in 2020-30 vs. 30% in 2017-19)l Intercity HSR and rail transit (50% in 2020-30 vs. 25% in 2017-19)In contrast, our industry analysts expect SOEs to continue to domi-nate investment in 5G base stations and UHV. Exhibit 5:AI and Data Centers, Intercity HSR and Rail Transit, and 5G BTS to Lead the New Infrastructure Investment in 2020-301101412234158273546570 10 20 30 40 50 60EV Charging StationUHVIndustrial IoT5G Base StationIntercity HSR & Rail TransitAI & Data Centers2017-192020-30EAnnual Average Investment by Sector, USD BnSource: Company Data, Morgan Stanley Research estimatesPotential policy catalysts to watch for In our view, more policy support on the three fronts below would be positive catalysts for new infrastructure development: l Tax: This could include tax incentives for industrial IoT adoption and related R&D, and cuts in electricity charges for heavy power-intensive 5G base stations, data centers, and EV charging opera-tors. l Financing: This would entail more issuance of local government special bonds to support construction of HSR and railway transit, and continued market-oriented reforms to increase the attractive-ness of new infrastructure to private investors. l Regulation: Possible measures include smoother project approval processes (particularly for the UHV and railway con-struction segments), less pricing restriction for 5G services, and more carbon quotas for data centers in tier-1 cities.The NDRCs approval is most significant. Also, we think the policy should broaden financing methods and improve returns on invest-ment to encourage the private sector to participate in intercity HSR and rail transit investment. How to manage the risk of overleveraging and overcapacity A key market concern is whether a strong government boost to new infrastructure could lead to a repeat of the debt-disinflation cycle, as seen in 2012-16. In our view, three factors are needed to manage the such risk: 1. Modest scope of investment: As mentioned previously, our bottom-up estimates suggest that the average size of invest-ment needed for new infrastructure will be less than US$200bn p.a. in 2020-30. Thats roughly 8% of Chinas annual infrastructure FAI in the past five years and 20% of incremental infrastructure credit in 2019. 2. More transparent funding channels: Policymakers have endeavored to improve the transparency of government financing for infrastructure over the past three years, by grad-ually replacing local government financing vehicle (LGFV) loans and shadow bank financing with local government bond issuance. Meanwhile, higher private sector participation in new infrastructure (we expect 38% in 2020-30 vs. 28% in 2017-19) would help increase equity and corporate bond financing. 加入投行群微信：18622069179M103. Better asset quality: Our Industrials team for China believes that new railway investment will focus more on HSR in eastern China and city-suburb connectivity in city clusters, which could generate stronger investment returns. Meanwhile, more investment in digital infrastructure is a good sign. We see strong demand from the continued development of smart supercities. In particular, we see fas