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As the world economy struggles in its tenuous efforts to bottom out， China is advancing on a delicate rebalancing act of its economy， amid a prolonged slowdown. With pressure mounting to find new growth engines， economists， officials and a range of business people gathered at the 2013 World Industrial and Commercial Organizations （WICO） Forum， held in Beijing from October 28 to 29. At the top of the agenda were how to add more value to manufacturing， and find ways to increase information consumption.
Adding value
Since the reform and opening-up process began， China’s industrial sector has remained airborne， with the country occupying the position of global leader in terms of its manufacturing output， with annual industrial added value exceeding 20 trillion yuan （$3.28 trillion）.
Despite double-digit growth in factory output over the past three decades， China’s industrial growth depends mainly on cheap labor costs， external demand， and investment， sometimes even at the expense of the environment.
To that end， the Chinese Government has called for the refinement of the industrial sector by creating more value-added products and services.
As Chinese premier li Keqiang pointed out during the 2013 Summer Davos， the“miracle” of Chinese economic development has shifted to a “second season” from its“first one.” The essence of this shift should be from a quantity-speed model to one of quality-benefit.
li Yizhong， Chairman of the China Federation of Industrial Economics and former Minister of Industry and Information Technology， said China should steer away from the old path of rampant industrial expansion and focus instead on value-added output.
li Yizhong said China’s industrial sector faces many challenges， including rising costs， a lack of innovation and core technology， mounting restrictions from the environment and natural resources and competition from both developed economies and developing countries.
“For instance， China produces 1.18 billion mobile phones， 350 million personal computers and 130 million TV sets every year. However， 80 percent of the high-end chips rely on imports， costing China $200 billion a year， more than what China spends on crude oil imports every year，” he said at the 2013 WICO forum.
In addition， the extensive model of industrial growth has led to increasing emissions， causing severe air， water and soil pollution.
“Chinese energy consumption per unit of GDP is twice that of the global figure and four times that of developed countries. We can’t continue on this old path，” warned li Yizhong. “China will not achieve industrialization until 2020. We shouldn’t replace the manufacturing industry with a service industry too soon，” he said， adding that China should instead transform or upgrade traditional industries and cultivate strategic emerging new industries to avoid the industrial sector from becoming marginalized.
“Besides， industrial players can extend their businesses to after-sales services， such as maintenance， long-distance consultation， industrial designs and information services，”he said.
Shenyang Blowers Works Group Co. ltd.， an equipment-manufacturing company based in northeast China’s liaoning province， is a good example of seeking new growth drivers by increasing value-added output amid economic slowdown.
Su Yongqiang， Chairman of Shenyang Blowers， said the company invested heavily in innovation by setting up research institutions， upgrading software， international communication and formulating a set of incentive policies to encourage innovation from its staff members.
The company has also set up subsidiaries that offer relevant services to equipment buyers. The profit margin of those serviceoriented companies can be over 20 percent， according to Su.
As a result， the sales volume of the company increased to over 10 billion yuan （$1.64 billion） in 2012， from only 2 billion yuan（$328.2 million） in 2005， he said.
Song Zhiping， Chairman of China Building Material Group， agreed.
“The world cement output is expected to reach 4 billion tons in 2013. Of this total， 2.3 billion tons is produced in China. Overcapacity is a problem for the sector，”Song said. “So， we focus on classification of different types of cement and increased added value in cement output. This has led to exorbitant profits for my company.”
Information consumption
With China’s economy posting a prolonged slowdown in the past two years， the Chinese Government has been trying to steer the country away from an over-reliance on invest-ment and exports， to a more consumption-led growth pattern.
Information consumption， a field that involves e-commerce， information products and services consumption and intelligent terminal products， has been a highlight of government efforts and played an increasingly prominent role in driving economic development.
According to the Ministry of Industry and Information Technology （MIIT）， China’s mobile Internet users have surpassed 800 million and the annual growth of information consumption is 29 percent from 2009 to 2012. Information consumption is expected to exceed 2 trillion yuan （$328.2 billion） in 2013. Xiao Chunquan， Director of Operation and Coordination Bureau of the MIIT， said every 10 billion yuan （$1.64 billion） spent in information consumption will bring about 33.8 billion yuan（$5.55 billion） in GDp growth.
“Rapid growth in information consumption will greatly unleash consumption potential，” he said.
Authorities are looking to support the consumption of information products and services and make the sector a new engine for boosting domestic demand and driving economic growth.
By the end of 2015， the consumption of information products and services is expected to grow at an annual pace of at least 20 percent to reach 3.2 trillion yuan （$518 billion）. By then， e-commerce business revenues will exceed 18 trillion yuan （$2.95 trillion）， with online retail sales hitting 3 trillion yuan （$492.3 billion）， according to a guideline released by the State Council in August.
For the past nine months， the country’s communication sector raised its business revenue to 870.9 billion yuan （$143 billion）， up 8.6 percent year on year. The trading volume of domestic e-commerce market reached 7.5 trillion yuan （$1.23 trillion）， an increase of 35 percent over the same period last year.
last year’s Singles Day （November 11） saw over 213 million Internet users swarm Taobao and Tmall， customer-to-customer and business-to-customer platforms operated by the Hangzhou-based Alibaba Group， for its 24-hour 50-percent-off carnival. Together the sites raked in a record 19.1 billion yuan （$3.07 billion）， up 260 percent year on year.
luo Wen， Chairman of China Research Institute of Electronic Information Industry Development， points out that there are several obstacles standing in the way of the development of information consumption， including poor information infrastructure， slow broadband access speed， flawed consumption environment and a lack of policy support.
At present， China’s broadband penetration rate is only 21 percent， a far cry from that in developed countries， such as 95 percent in Canada， 80 percent in Japan， 79 percent in South Korea and 70 percent in the United States， said luo， adding that China needs to greatly expand broadband access and actively create a favorable environment to promote consumption in the digital age.
Adding value
Since the reform and opening-up process began， China’s industrial sector has remained airborne， with the country occupying the position of global leader in terms of its manufacturing output， with annual industrial added value exceeding 20 trillion yuan （$3.28 trillion）.
Despite double-digit growth in factory output over the past three decades， China’s industrial growth depends mainly on cheap labor costs， external demand， and investment， sometimes even at the expense of the environment.
To that end， the Chinese Government has called for the refinement of the industrial sector by creating more value-added products and services.
As Chinese premier li Keqiang pointed out during the 2013 Summer Davos， the“miracle” of Chinese economic development has shifted to a “second season” from its“first one.” The essence of this shift should be from a quantity-speed model to one of quality-benefit.
li Yizhong， Chairman of the China Federation of Industrial Economics and former Minister of Industry and Information Technology， said China should steer away from the old path of rampant industrial expansion and focus instead on value-added output.
li Yizhong said China’s industrial sector faces many challenges， including rising costs， a lack of innovation and core technology， mounting restrictions from the environment and natural resources and competition from both developed economies and developing countries.
“For instance， China produces 1.18 billion mobile phones， 350 million personal computers and 130 million TV sets every year. However， 80 percent of the high-end chips rely on imports， costing China $200 billion a year， more than what China spends on crude oil imports every year，” he said at the 2013 WICO forum.
In addition， the extensive model of industrial growth has led to increasing emissions， causing severe air， water and soil pollution.
“Chinese energy consumption per unit of GDP is twice that of the global figure and four times that of developed countries. We can’t continue on this old path，” warned li Yizhong. “China will not achieve industrialization until 2020. We shouldn’t replace the manufacturing industry with a service industry too soon，” he said， adding that China should instead transform or upgrade traditional industries and cultivate strategic emerging new industries to avoid the industrial sector from becoming marginalized.
“Besides， industrial players can extend their businesses to after-sales services， such as maintenance， long-distance consultation， industrial designs and information services，”he said.
Shenyang Blowers Works Group Co. ltd.， an equipment-manufacturing company based in northeast China’s liaoning province， is a good example of seeking new growth drivers by increasing value-added output amid economic slowdown.
Su Yongqiang， Chairman of Shenyang Blowers， said the company invested heavily in innovation by setting up research institutions， upgrading software， international communication and formulating a set of incentive policies to encourage innovation from its staff members.
The company has also set up subsidiaries that offer relevant services to equipment buyers. The profit margin of those serviceoriented companies can be over 20 percent， according to Su.
As a result， the sales volume of the company increased to over 10 billion yuan （$1.64 billion） in 2012， from only 2 billion yuan（$328.2 million） in 2005， he said.
Song Zhiping， Chairman of China Building Material Group， agreed.
“The world cement output is expected to reach 4 billion tons in 2013. Of this total， 2.3 billion tons is produced in China. Overcapacity is a problem for the sector，”Song said. “So， we focus on classification of different types of cement and increased added value in cement output. This has led to exorbitant profits for my company.”
Information consumption
With China’s economy posting a prolonged slowdown in the past two years， the Chinese Government has been trying to steer the country away from an over-reliance on invest-ment and exports， to a more consumption-led growth pattern.
Information consumption， a field that involves e-commerce， information products and services consumption and intelligent terminal products， has been a highlight of government efforts and played an increasingly prominent role in driving economic development.
According to the Ministry of Industry and Information Technology （MIIT）， China’s mobile Internet users have surpassed 800 million and the annual growth of information consumption is 29 percent from 2009 to 2012. Information consumption is expected to exceed 2 trillion yuan （$328.2 billion） in 2013. Xiao Chunquan， Director of Operation and Coordination Bureau of the MIIT， said every 10 billion yuan （$1.64 billion） spent in information consumption will bring about 33.8 billion yuan（$5.55 billion） in GDp growth.
“Rapid growth in information consumption will greatly unleash consumption potential，” he said.
Authorities are looking to support the consumption of information products and services and make the sector a new engine for boosting domestic demand and driving economic growth.
By the end of 2015， the consumption of information products and services is expected to grow at an annual pace of at least 20 percent to reach 3.2 trillion yuan （$518 billion）. By then， e-commerce business revenues will exceed 18 trillion yuan （$2.95 trillion）， with online retail sales hitting 3 trillion yuan （$492.3 billion）， according to a guideline released by the State Council in August.
For the past nine months， the country’s communication sector raised its business revenue to 870.9 billion yuan （$143 billion）， up 8.6 percent year on year. The trading volume of domestic e-commerce market reached 7.5 trillion yuan （$1.23 trillion）， an increase of 35 percent over the same period last year.
last year’s Singles Day （November 11） saw over 213 million Internet users swarm Taobao and Tmall， customer-to-customer and business-to-customer platforms operated by the Hangzhou-based Alibaba Group， for its 24-hour 50-percent-off carnival. Together the sites raked in a record 19.1 billion yuan （$3.07 billion）， up 260 percent year on year.
luo Wen， Chairman of China Research Institute of Electronic Information Industry Development， points out that there are several obstacles standing in the way of the development of information consumption， including poor information infrastructure， slow broadband access speed， flawed consumption environment and a lack of policy support.
At present， China’s broadband penetration rate is only 21 percent， a far cry from that in developed countries， such as 95 percent in Canada， 80 percent in Japan， 79 percent in South Korea and 70 percent in the United States， said luo， adding that China needs to greatly expand broadband access and actively create a favorable environment to promote consumption in the digital age.