Accelerating Adjustment of the Industrial Structure and Upgrading Industries

From: English Edition of Qiushi Journal Updated: 2011-09-20 13:45
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 One current focus of the effort to improve the pattern of China’s economic development is accelerating adjustment of the industrial structure. This is a crucial period of profound changes in the economies of both China and other countries. We must lose no time in adjusting and upgrading China’s industrial structure since this will have a general impact on implementation of the reform and opening up policy and on socialist modernization, making it a major strategic task.

 China’s industries have withstood the rigorous test of the international financial crisis.

 The year 2009 was one of the most difficult of the new century for China’s economic and social development. We carried out a package of measures to address this challenge, carefully taking into consideration that “protecting industries means protecting growth, employment and stability,” and diligently implemented them to bring about a sharp turnaround and an increase in the growth rate of industries in a relatively short period of time that has continued to strengthen, with an overall growth of 11% for the year.

 We devoted a great deal of effort to expanding domestic demand and stabilizing exports. We implemented policies to promote rural sales of home electrical appliances, farm machinery, cars and motorcycles as well as a program to swap old automobiles and home electrical appliances for new ones and a policy of halving the purchase tax for passenger cars with an engine displacement of less than 1.6 liters. These measures have been effective in boosting domestic consumption. The export rebate rate was lowered seven times, increasing total tax rebates of industries for the year by 153 billion yuan and playing an important role in reversing the drastic downturn in China’s exports.

 We devoted a great deal of effort to making adjustments in key industries and carrying out a revitalization plan. At the time when industrial development met with the greatest difficulties the CPC Central Committee and the State Council introduced an adjustment and revitalization plan for key industries. In order to implement this strategy, the National Development and Reform Commission and the Ministry of Industry and Information Technology worked out an adjustment and revitalization plan for ten major industries and formulated 165 detailed regulations for implementation and introduced them one at a time, comprehensively strengthening industrial guidance. Implementation of these policies has been effective in strengthening the confidence of enterprises and ensured steady development of key industries.

 We worked hard to exploit the prominent role of enterprises in making technical transformation. The State Council of China set up a special fund of 20 billion yuan in the central government budget for making technical transformation, focusing on supporting efforts of enterprises to make technical transformation to address weak links such as problems with the quality of their products, energy conservation and consumption, environmental protection and production safety. Appropriations from the central government for 4,441 projects attracted investment of 632.6 billion yuan from other sources in 2009, 28 times the amount from government appropriations.

 We made a major effort to merge, reorganize and eliminate backward enterprises and conserve energy and reduce emissions. Moves to merge and reorganize enterprises in the key industries of machine-building, metallurgy, automobiles, non-ferrous metals and information technology were accelerated and initial progress was made in eliminating backward production capacity in the steel-making, iron smelting, cement, plate glass, electrolytic aluminum and coke industries. Energy consumption per unit of added value for large-scale industrial enterprises dropped more than 9% between 2008 and 2009 and chemical oxygen demand (COD) and the volume of sulfur dioxide emissions continued to drop.

 We worked hard to promote the development of strategically important emerging industries. The focus of support was the development of the information technology, high-end equipment manufacturing, new energy, new materials and bio-medicine industries as well as production service industries, such as software services and modern logistics. Good results were achieved in improving the performance of traditional industries by upgrading their applicable information technology, promoting new growth areas in the economy.

 We worked hard to improve the environment for the development of small and medium-sized enterprises. We took full advantage of our role as the leading department to create a better environment for the development of small and medium-sized enterprises by formulating favorable policies and regulations, offering loans and credit, providing financial and tax support and developing government service platforms. Small and medium-sized enterprises were provided with guarantees for a total of 850 billion yuan of loans by 4,800 guarantor organizations.

 The city of Anshan in Liaoning Province, China’s major steel production base, is known as “China’s steel capital.” Anshan Steel and Iron Plant became China’s first iron and steel enterprise when it went into operation 60 years ago. Known as “the cradle of the Republic’s iron and steel industry,” it was the first in New China to make cast iron and the first to produce steel. However, the proportion of regular local government revenue coming from the steel industry has gradually dropped from 70% to 30%. Upgrading of the industrial structure has gradually changed Anshan, transforming this city once known for steelmaking and dependent on industry into a thriving city that is home to a wide variety of businesses and helping to put the city on the track of sustainable development. August 1, 2009, city residents paddle boats in February 19th Park in Anshan./ Photo by Xinhua reporter Ren Yong

 We worked hard to make scientific and technological innovations, improve quality and develop brand names. We made major independent innovations in key areas and continuous improvement in the level of independence and proportion of domestic production for major equipment, and a number of scientific and technological advances are being rapidly applied in actual production. We improved overall product quality control to attract customers and promote development, focusing on producing more varieties, improving quality, developing brand names and improving service.

 We need to take full advantage of the strategic opportunities presented by industrial transformation and upgrading.

 Chinese industry will be facing a tangled and complex situation for some time, making the task of accelerating structural adjustment and transforming the pattern of economic development a daunting and pressing task.

 First, there have been profound changes creating major challenges for the development of Chinese industry and increased application of information technology. Looking at the external environment for development, the global economic structure is rapidly shifting, gradually forming a new pattern. Developed countries are again working to develop the real economy and introducing new concepts such as “reindustrialization,” “low-carbon economy” and “smart planet,” and accelerating plans to develop new energy sources, new materials, IT, environmental protection and life sciences. These developments are putting a great deal of pressure and constraints on China’s economic development. Looking at the internal environment for development, the deep-rooted contradictions and problems in Chinese industry are being exacerbated by the impact of the international financial crisis. These are mainly evident in the irrational industrial structure, the serious surplus production capacity in some industries, the excessive reliance on investment and exports, the weak ability to make independent innovations and the lack of core technologies and brand names. Overall, China still occupies a position in the middle or lower end of the system of the international division of labor. Chinese industry still mainly relies on the consumption of large amounts of material resources, which puts a serious strain on resources and the environment and this is not sustainable. At the same time, we must be aware that there are also unprecedented strategic opportunities for the restructuring, transformation and upgrading of Chinese industry. The major developed countries, which have been badly hurt in the international financial crisis, are confronted with profound shifts in market demand, the supply structure and the structure of trade, making their economic recovery slow and weak. It will take a long time for them to carry out the required structural adjustments. Objectively, this will give China precious time and space to speed up structural adjustment and transform the pattern of development. In addition, the “reverse pressure mechanism” present during an economic downturn often increases the pressure for and drives adjustment of the economic structure and industrial upgrading.

 Second, China has entered a new period in which development must be promoted by structural adjustment and transformation and upgrading of industries. Chinese industry has enjoyed a long period of rapid development, but is now facing new pressure to make periodic adjustments in the current stage of development, which must rely on transformation and upgrading of industries. At the same time, conditions and a good material foundation in China favor acceleration of structural adjustment. Chinese industry must carry out transformation and upgrading against a background of continuing industrialization, increasing application of IT and urbanization.

 Third, the central government has formulated a series of major policy measures to give a strong boost to transformation and upgrading of China’s industries. To cope with the international financial crisis, the central government has formulated policy measures to strengthen domestic demand, worked hard to expand consumer demand and promoted the development of new areas of consumer spending and launched a two-year, 4 trillion yuan investment plan to guide and stimulate non-government investment. In addition, the government has devoted a great deal of effort to cultivating strategically important emerging new industries, worked hard to promote technical transformation and independent innovations, and accelerated implementation of key state science and technology projects. Implementation of these major policies will provide an important guarantee for successful transformation and upgrading of industries.

 Approaches and measures for carrying out structural adjustment and transformation and upgrading of industries

 The main objective of structural adjustment and transformation and upgrading of industries is to put Chinese industry in a beneficial cycle and accelerate progress on the new path of industrialization with Chinese characteristics by shifting from the current extensive development model that mainly relies on expansion of scale and excessive consumption of energy and resources to sustainable development with greater emphasis on quality and efficiency.

 We need to promote steady and rapid development of industry and lay a good foundation for structural adjustment and transformation and upgrading of industries. At present, we need to continue improving the supply structure and stimulating domestic demand as the fundamental way for ensuring steady and rapid development of industry, focus on improvement of the various policies on promoting consumption, strengthen the contribution of consumer demand to industrial growth and maintain a proper balance between reliance on domestic and overseas demand.

 We must seize the current strategic opportunities to accelerate adjustment of the industrial structure. In line with the requirements posed by progress in industrialization and upgrading of the structure of consumer spending, we need to adjust the proportions of light and heavy industries, improve the overall level of technology and the product structure, promote integration of the manufacturing industry and service industry, and work to balance development of labor-intensive, capital-intensive and technology-intensive industries. We need to raise the degree of concentration of industries in consideration of market competition, economy of scale, division of labor and interrelationships among different industries, to form an industrial structure with chains of related industries, key leading enterprises, a good mixture of large, medium-sized and small enterprises, and upstream and downstream enterprises in the industrial chain all thriving. We need to continue developing industrial functional regions with diversification, set up a mechanism to promote balance and interaction among industrial regions and develop a new pattern in which the development of each region is in line with resource availability, energy supply and environmental capacity and the leading industries in each region have their own outstanding features and advantages.

 We need to concentrate efforts on the key links to truly improve the mode of development. One, we need to accelerate technical transformation of enterprises, promote internal development of industries and as quickly as possible set up a permanent mechanism to promote technical upgrading of enterprises. Two, we need to merge, reorganize and eliminate backward production facilities, reduce the excessive production capacity present in some of the industries and curb construction of redundant production facilities. Three, we need to work very hard to reduce industrial energy and resource consumption and reduce industrial emissions and pollution to develop industries that use resources efficiently and are environmentally friendly. Four, we need to concentrate more industrial enterprises in industrial bases and industrial parks to promote intensive development of industries. 

 We need to integrate efforts to increase application of information technology with the process of industrialization by making greater use of information technology. We need to closely integrate efforts to increase application of information technology with the process of industrialization at every possible point and at every level, in enterprises, in industries and in geographical regions. We need to speed up improvement of traditional industries through the use of information technology and work out and implement policy measures to encourage development of the internet of things to expedite the birth of new industries. We need to promote domestic research, development and application of software and hardware, and development of e-commerce and e-government. 

 We need to follow an innovation-driven development path with strengthening our ability to make independent innovations as the motive force. We need to bring together scientific and technological resources to make breakthroughs in core and key technologies using major science and technology projects as the turning points. We need to intensify the role of enterprises as the principal parties responsible for making technological innovations by promoting concentration of the necessary factors and resources in enterprises guided by market forces and aided by combining production, education and research. We need to follow a strategy of improving the quality of industrial products and developing domestic brands, and make innovations in products and marketing. In addition, we need to follow a strategy of developing standards and intellectual property rights to build a core group of domestic intellectual property rights and technical standards. 

 We need to deepen reform of institutions and mechanisms and improve the system of policy guarantees. We need to continue regulating the market through a combination of market forces and macroeconomic regulation, work out fiscal, taxation, financial and environmental protection policy measures to promote elimination of backward production facilities, merging and reorganization of enterprises, and greater application of IT and industrialization, as well as improve policies related to social security, personnel and employment that will promote the transformation and upgrading of industries to develop a system of guarantees for success in the transformation and upgrading of industries.   

(From Qiushi in Chinese, No. 6, 2010)

Note:  Author: Minister of Industry and Information Technology of the People’s Republic of China

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