Industrial structure adjustment


Updated Thu, 30 Jun 2005 00:00:00 GMT

So far as how to further adjust and optimize China's industrial structure, so as to unleash the potential of economic growth is concerned, first of all, we should make clear the fundamental characteristics of China's industrial structure and the existing problems.

In China, the proportion of the secondary industry is high, but the technology level of it is comparatively low. The tertiary industry still cannot adapt to the development of national economy and its structure is yet to be upgraded. In general, the energy consumption intensity of the industrial structure is comparatively high. Meanwhile, on account of the rapid growth of the economic aggregate, the total consumption of energy and the total amount of pollutant discharge are still increasing.

Although the development of Chinese industry has been geared to the globalization process, it is still in the downstream of the value chain, and mainly focuses on the non-core parts manufacture with low added value and the labor-intensive assemblage. At last, the driving function of industry to employment is less effective. The decline of employment elasticity is mainly caused by two aspects: on the one hand, the industrial structure is changing, as in recent years, the proportion of labor-intensive industry is a little lower than before. On the other hand, the intensity of different industries' output and absorption of employment are also changing.

With a view on the general rule of economic development, in the market economy with the almost formative buyers' market, the growth of demand and the change of its structure are usually the main factors that lead to the change of industrial structure. Experts analyze that the factors of demands that influence China's future industrial structure are as follows:

Domestic consumption demands

While the consumption level has been promoted greatly, the structure of China's resident consumption has been changed notably. Firstly, the proportion of expenses on food is decreasing while the proportion of expenses on service is increasing. The upgraded consumption structure will directly encourage the development of relevant tertiary sectors. Secondly, the market demands for living necessities, such as clothes and food of residents, and consumer durables like TV sets and fridges are still great, but the hierarchy of demands will be continuously elevated. Thirdly, the demands for high price consumer goods such as automobiles and houses will be gradually released.

If the short-term demands are misjudged as long-term trends, the corresponding investment will be misled, thus the expansion of investment and productive capacity will surpass that of demand. Therefore, as for the future adjustment, optimization and upgrading of industrial structure, the judgment on whether the increasing trend of commodity consumption is short-term or long-term should be fully based on researches. The arrangement of industrial structure should not only satisfy the short-term increasing demands for commodities, but also avoid surplus of productive capacity resulted from excessive investment.

Domestic investment demands

Firstly, with the degree of industrialization improved, the structural changes of investment demands will take place. The demands for intermediate input and capital products will increase continuously, thus promoting the development of relevant industries. Meanwhile, as more services are invested in the manufacturing industry, much space has been opened up for the development of service industry.

Secondly, the further melioration of the infrastructure will promote the development of raw material industries like the steel industry and the cement industry. Thirdly, the upgraded urbanization will bring forth more investment opportunities.

Export demands

In recent years, with the larger and larger shares of Chinese labor-intensive products in international market, developed countries think that the employment in their relevant industries is impacted. Although there are specific terms in the WTO Agreement, which set restrictions upon openly declared trade barriers, the undue influences of various hidden barriers are still comparatively large. As a result, it is necessary for China to improve its industrial structure and technical classification and produce and export products with higher technical contents so as to avoid trade frictions.

Experts believe that China's future adjustment to its industrial structure should follow the following fundamentals.

It should be propitious to improve national competitiveness and upgrade the status of industry in the global value chain, which always determines a country's overall industrial competitiveness. Generally speaking, if the industry is in the upstream of the global value chain, such as in the taches of R&D and design, the industrial competitiveness is relatively strong; contrariwise, the industrial competitiveness is relatively feeble. At present, most Chinese industries is in the downstream of the global value chain. Therefore, in order to improve the international competitiveness of the Chinese industries, their status in the global value chain must be upgraded.

It should be propitious to maintain a rapid growth. As shown in practice, different industrial development strategies always have different performance of increase. The adjustment, optimization and upgrade of the industrial structure must be advantageous to maintain the steady and rapid growth of the national economy.

It should inosculate with the improvement of technical level of industries. Currently, the technical classification of Chinese industries is comparatively low, which is not only disadvantageous to upgrade the status of China in the international division of labor but also disadvantageous to change the economic growth patterns fundamentally as well as the sustainable development of economy, society and environment.

Of course, it should also be propitious to fully exert the advantages of human resources, save natural resources and protect the ecology. Moreover, The industrial structure must be adjusted with the precondition of active participation of international division of labor. Firstly, the domestic insufficiency of raw materials and resources can be made up through the international market. Secondly, China needs to import primarily processed products from the international market to conduct further processing and deep processing. Thirdly, some of the high-end equipment & instruments and key technologies needed for the upgrading of China's industries must be imported from developed countries. Fourthly, a great deal of labor-intensive farm produce and manufacturing products should also participate in the international labor division in order to carve out their international market.