A Research For Effects Of Telecommunications Infrastructure On The Economic Growth Of China

Since the reform and opening up policy was carried out, China's telecom has gone to be the pillar industry of the national economy, while in the past it was the bottleneck of economic development. There are at least three distinct aspects which suggest how telecom leads to economic growth: Firstly, continued growth in the telecom sector effectively stimulates demand for investment and consumption; Secondly, in the development of the information, telecom plays a decisive role in effectively promoting the process of information construction; Thirdly, its successful development leads other industries to develop in the optimizing way, such as manufacturing industry, and causes rapid development of the national economy. At the same time, economic growth expands the demand for telecommunications infrastructure construction, and promotes the development of the telecommunications industry.This research takes the two-way causality relationship between telecommunications infrastructure and economic growth into consideration, and based on studies both at home and abroad, theoretical framework that deals with effects of telecommunications infrastructure on economic growth is built. In this paper, telecommunications infrastructure is considered to influence economic growth through the following two mechanisms: sector spillover effects and spatial spillover effects. The effect of telecommunications investment on economic growth increases substantially after accounting for spillover effects between the telecom and other sectors of the economy, and the effect runs in the long term. Telecommunications infrastructure also has location effect impacting the coordinated development of all regions, which comes to be spatial spillover effects. Spatial spillover effects can be either positive or negative. The positive spillover effect means that telecommunications infrastructure investment can promote the economic growth of the region where it is located, as well as the economic growth of other regions. While negative spillover effect means that the investment in one region has negative effect on the other region's economic growth, especially neighboring regions.In this paper, simultaneous equation and spatial weighted matrix are used to investigate the sector spillover and spatial spillover effects of telecommunications infrastructure on China's economic growth, using province level panel data from 2000 to 2005. Findings indicate that telecommunications infrastructure plays a strategic role in China's economic growth, and also indicate that it has a negative spillover effect on China's regional growth. The results of this research can help policy makers derive policy and plan recommendations on how to direct investment of telecommunications infrastructure.