China’s leading research, consulting and IT outsourcing service provider, and the first Chinese consulting firm listed in Hong Kong (Hong Kong Stock Exchange: HK08235), released its article on industrial planning and four-in-one for the Twelfth Five-Year plan period.
As this is the last year of China’s 11th Five-Year Plan, it is an ideal time to review the development of China’s electronics and information industry, and discuss the industry’s development strategies and regional industry development patterns for the coming five years.
The industry is experiencing high-speed growth in terms of scale and has reached a turning point in its development
The 11th Five-Year Plan, from 2006 to 2010, witnessed China’s electronics and information industry adoption of an innovation-oriented strategy, focused on transforming the growth model, advancing industry upgrades and enhancing China’s economic strength through the industry’s development. During the period, the industry continued to expand to reach a scale second only to the US. It also further optimized its industry structure, as well as improved its ability to innovate.
Meanwhile, a turning point emerged in the process of the industry’s development.
(1) The industry expanded at an average rate of over 35 percent from 2001 to 2006. However the rate was reduced to 23.6 percent, 17.9 percent and 12.5 percent, respectively, in 2006, 2007 and 2008.
(2) Investment was increasingly directed to upstream segments including electronic components, instead of the downstream segments including audio and video, computer and communications devices. In 2007, approximately 70 percent of the investment received by the industry was allocated to the component and material segments.
(3) Among the industry’s investors, the proportion of domestic companies was expanding. In 2007, the total investment by foreign-owned, foreign-funded and domestic companies, respectively, increased 7 percent, 21 percent and 38 percent year-on-year.
(4) The industry players were transforming from “introducing foreign businesses” to “going abroad”.
The transformation was in accordance with the requirements of the industry’s development. China’s electronics and information industry has long been powered by two forces: international industry transfers, which ensures rapidly expanding investment and capacity over a long period; and exports, which allow the US, Europe, Japan and South Korea to consume a significant part of China’s production. The strength of the two forces peaked after China entered WTO, building the industry into the world’s second largest. However, due to the recent global economic crisis, the existing industry development pattern experienced setbacks. First, China already holds 33 percent of the world’s electronics and information capacity, leaving limited room for further global industry transfer. Second, a drastic drop in overseas demand exerted a significant impact on China’s electronics and information industry, which adversely impacted the highly export-dependent development pattern. The extensive development pattern powered by investment, featuring processing trade and export-oriented economy, gave rise to several prominent problems: first, high dependence on foreign trade, which makes the industry vulnerable to external conditions; second, the lack of core strength, weak innovation capabilities and a low level of value-added production; third, increasingly severe resource shortages and environmental pollution.
Five-year outlook: to encourage domestic demand-driven growth
In the coming five years, it is critical that the industry alter the development pattern and encourage domestic demand-driven growth, which may involve attracting strategically important emerging industries, accelerating innovations and expanding the domestic market, with the aim of optimizing the industry structure, gaining core strength, improving the industry’s competitiveness to achieve sustainable growth.
Recently, China’s policy environment has also changed in a manner that will ease the transformation of the industry’s development pattern. On February 3, 2010, President Hu Jintao delivered a speech urging the country to transform the economic development pattern, continually advance economic development, enhance the Chinese economy’s international competitiveness and risk resistance capabilities, in order to ensure the high-quality development as well as expanding capabilities for further development. China’s central economic work conference in December 2009 also stressed that transformation of the development pattern will be a focus of China’s economic development in 2010. The Industry and Information Technology Minister Li Yizhong stated that the ministry’s work will center on “structure adjustment” and “pattern transformation” in 2010.
As for the local governments, during a period of economy and industry pattern transformation, they will have to take initiatives, closely follow the central government’s strategic guidelines, study the industry’s development rules and analyze the industry’s development trends to create a new “four-in-one” development pattern which combines initiative development, routine development, transposition development and oriented development.
Initiative development: to take the initiative in planning strategically important emerging industries
The global financial crisis has fundamentally changed the pattern of global economic development and consumption, as well as the climate for China’s economic and industry development. In face of the ongoing crisis, various countries are engaged in a new round of technology competition to bring creative innovations and industry-revitalizing methods to the world. For China, this presents both opportunities and challenges. During the post-crisis period, China is prepared to see international demand linger for a long time at a level far lower than that before the crisis due to changes in consumption patterns of developed countries. China will have no choice but to advance balanced sustainable development of its economy, adjusting for an innovation-powered and domestic demand-driven growth pattern. Regarding the new global economic reality, the central government decided to focus on developing strategically important emerging industries, as well as possessing core and key technologies in areas thought to be primed for breakthroughs. It is also in line with the state’s strategic goal of building an innovation-oriented country as depicted in the medium and long-term planning for science and technology development.
Premier Wen Jiabao, in a speech on how technology will facilitate China’s move toward a sustainable development model, stated that a strategically important emerging industry shall be able to produce products with stable market demand and bright market prospects, generate considerable profits as well as stimulate the development of other industries. He also named several key industries that are in line with the sustainable goal, including new energy, energy conservation and environment, new materials, life science, information networks as well as the utilization of space, ocean and deep earth. The electronics and information industry is of particular significance among the five strategically important emerging industries, with microelectronic and photoelectron materials and components, special-purpose electronic devices and materials, new generation mobile communications technology, next generation networks and basic software as key areas of future development. Meanwhile, the information technology based on microelectronics, photoelectron and software technologies is fundamental for other emerging industries including the new energy industry, the Internet of things and the new materials industry, while it is also closely related to life sciences and the technologies that support space, ocean and deep earth development.
Routine development: to revitalize the existing capacities and advance the convergence of informationization, industrialization and industry upgrade
The latest CPC report urged the country to develop a modern industry system through the convergence of informationization and industrialization, giving the convergence a high priority. The widespread application of information technology in various domestic economic areas may significantly improve efficiency, reduce resource consumption and production cost, as well as minimize environmental impact.
Currently, various local governments are combining the convergence of informationization and industrialization with leading local industrial areas. Guangzhou, Shanghai, Chongqing, Nanjing, Qingdao, the Zhu River Delta, Huhhot-Baotou-Erdos-Wuhai Zone, Tangshan and Caofeidian are the first batch of trial cities and regions. The trial has not only revitalized existing capacities, but has also created new capacities in emerging industries including automobile electronics, digital machine tool, and healthcare electronics. For instance, Guangzhou Municipality employed various measures to advance the convergence of the information industry and its traditional industries, which has led to industry upgrades and enhanced the local innovation capabilities.
Transposition development: to receive industries transferred from more developed areas
Globally, the electronics and information industry is currently going through a fourth key industry transfer. Taiwan, the Zhu River Delta, the Yangtze River Delta and the Bohai Region are transferring the medium and low-end sections to China’s central and western areas, and Southeast Asia and South America – a trend which began in recent years. China’s central and western areas, with its cost advantages, have been increasingly active in receiving the transfers from coastal and overseas electronics and information industries. However, these areas are confronted with competition from the Southeast Asia and South Africa. In the future, receiving the transferred industries will be an important approach for the central and western areas to achieve leapfrogging development.
Oriented development: to settle an appropriate orientation
In order to settle the industry policies for the coming five years, the local governments will either have to conduct investigations into the existing issues and determine what is blocking the industry’s development in the region, or to learn from the more developed countries and regions policies that will work to accelerate local industry development.
Specifically, local governments will settle several major projects, such as the marketing of strategic products, the research and development of key technologies, and major construction projects. The major projects will be reviewed and approved according to the demand of the region and necessary conditions, and will be adjusted and implemented in line with the state’s strategic needs and growth.
It is also advisable to establish major platforms to form a public service system supporting the industry’s continued development, which include a comprehensive information platform, a technology innovation service platform, and a public technology R&D and service platform. It will also necessitate the inclusion of an intelligent property and standardization platform, a training platform, a human resource service platform, and a financing service platform.
Source:http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20100318005437&newsLang=en
