China should accelerate the pace of 3G construction so as to drive up domestic consumption, suggested Zhang Jianxin, deputy of China?s eleventh National People?s Congress and the general manager of China Telecom?s (CHA.NYSE; 00728.HK) branch in eastern China?s Zhejiang province.

Zhang said that if China succeeds in replacing 2G with 3G within three to five years, it will generate direct consumption of 450 billion yuan, including 300 billion yuan in substitutive mobile phone purchase, and 150 billion yuan in new 3G service applications.

The consumption will drive the GDP up by more than one percentage point annually. 3G not only wakes a huge information consumption market, but also will evolve emerging industries, and create a large number of small- and medium-sized enterprises, to form a large industrial chain.

China Telecom, for one, purchased 93 percent 3G network equipment and accessory apparatus from domestic producers; the number of its CDMA terminal product providers grew from 50 in 2009 to 200 this year, while most of the addition are Chinese firms; and it has cooperated with over 540 national content providers. Besides, 3G is expected to help create more than one million jobs every year.

Therefore, Zhang suggested that Chinese authorities could allocate special financial subsidies for 3G sector, and give them to users via telecom operators. The government could also provide policy support, namely reducing and exempting taxes, subsidizing related research and development, and increasing government procurement.

source:iStockAnalyst