Coverage of fourth-generation wireless (4G) networking services continues to expand across China. The annual Government Work Report delivered by China’s State Council earlier this month stated that the government will push the development of the fifth generation wireless (5G) in China and laid out its 5G plans ahead in 2018. According to the plan, China could reach full commercialization of 5G networking services by 2020. According to MIIT, the number of the base station across China increased by 0.593 million to 6.19 million in 2017. We expect the number of base station required for a full commercialized of the 5G network would be 50% more than 4G base stations already deployed. Besides, the 5G technology would require a full technical upgrade in the optical transport networks, and the fixed investment needed should be far more than the investment spent on 4G. ZTE Corporation is a global leader in telecommunication equipment manufacturer, which dedicated to the design, development, production, distribution, and installation of a broad range of advanced ICT-related systems, equipment, and terminals. The company should be one of the major beneficiaries of capex upcycle of Chinese telecommunication service sector in 2019 as pre-commercial testing of 5G services in China begins. We suggest investors to buy ZTE’s shares as a medium-to-long term holding.

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