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UPDATED: August 6, 2012 NO.32 AUGUST 9, 2012
A New Hope
China's strategic emerging industries come to the forefront as boosters of economic growth
By Liu Xinlian

According to Wu Jinxi, Director of the Research Center for Strategic Emerging Industries at Tsinghua University, while exploring paths to a stronger China, heavy industries and the property and processing industries all failed to provide an adequate source for growth momentum.

"The only driving force that could make China's economy strong is the strategic emerging industries," said Wu.

According to Ju Jinwen, a researcher with the Institute of Economics of CASS, boosting the strategic emerging industries is essential for China to compete with advanced countries.

China has realized that these new industries are key to any economic shift. They will contribute to solving a variety of problems such as low added-value in exported products, huge energy consumption, serious environment pollution and labor shortages.

"Spurring the growth of strategic emerging industries is a viable way to transform China's industrial structure in the short term," said Ju.

Rapid industrialization and urbanization in recent years have consumed large amounts of energy and had an adverse effect on China's environment, Zhang said.

Energy saving and environmental protection are notably emphasized in a new line of projects. In the power sector, projects that will yield larger generating capacities are gaining favor over smaller ones. Similar changes are taking hold in metallurgical and building materials industries.

Cashing in

The success or failure of the new development plan for strategic emerging industries hinges on one factor: capital, specifically private capital.

According to the State Council, spurring the development of emerging industries means greater market reform and freedoms, and a market admission mechanism for private capital will be needed.

"We have found that state-owned companies are usually favored as pillar or sensitive industries and are often given generous support in more competitive sectors such as auto and telecom industries," said Ren Zhiwu, Deputy Director of the Department of High-Tech Industry at NDRC.

For emerging industries, local governments are not permitted to provide preferential policies for state-owned enterprises or use barriers to restrict private investment with regard to capital investment, production capacity, land use and government procurement.

Private enterprises should also be given equal treatment with regard to access to construction funds, venture capital and other public resources, Ren said.

Although the level of foreign participation in the nation's emerging strategic industries has not yet been clearly defined, international investment is expected to be courted.

"The development of emerging industries will spark a new round of foreign investment, as these sectors offer golden opportunities that foreign investors can't pass up," Luo Jun, Secretary-General of the Asian Manufacturing Association, told China Daily.

Worries and warnings

While the country mulls over which efforts will best boost the emerging sector, overcapacity and blind investment are taking their tolls on the fledgling industries.

Some business sectors have shown signs of overheated investment. Many provinces and regions have placed developing the solar photovoltaic industry and new energy vehicles as the centerpiece of their latest five-year development plans, Zhang said.

For example, more than 300 cities in China are trying to develop the solar photovoltaic industry, mostly driven by short-term interests, said Shi Lishan, Deputy Director of the New Energy and Renewable Energy Department with the National Energy Administration (NEA).

Last year witnessed prices plunge for the solar PV industry along all segments of the supply chain, causing substantial losses to most Chinese solar PV makers.

China's current overcapacity hiccup isn't just restricted to the solar industry. The country now has nearly 80 wind power equipment manufacturers. In 2010, its wind power capacity increased 62 percent year on year to reach 41.8 million kw, ranking first in the world.

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