Economic Transformation through Industrial Restructuring
overcapacity, namely, to eliminate capacity that can’t meet the requirements of technology, energy consumption and environmental protection.
Recently, the severity of smog in China’s cities has enhanced decision-makers’ resolve to accelerate the elimination of overcapacity. At the 4th China Steel and Iron Energy Conservation and Emission Reduction Forum held in 2013, Liu Bingjiang, member of the National Committee of the CPPCC and vice director of the Department of Total Pollutants Control of China’s Ministry of Environmental Protection, said that in order to prevent the recurrence of large-scale smog, the focus of energy conservation and emission reduction of the 12th Five-year Plan period would be on the steel and iron industry. Many experts also suggest that while setting the entry thresholds for this industry, more thought should also be given to factors relating to environmental protection, such as energy saving and emission reduction, rather than to economic indexes such as production capacity and volume.
Hebei Province’s steel and iron output has ranked first in the country for 12 consecutive years. On November 24, 2013, a blare marked the start of the province’s move to cut its 6.8 million tons of overcapacity as the shaft furnace of Tangshan Xingye Industry and Trade Co., Ltd was demolished. “Of course, eliminating ‘high energy consumption’ and ‘high pollution’ capacity is like cutting our own flesh. It will hurt and even damage our ‘sinews’ or ‘bones’; however, it is also like removing toxins to cure illness. Only by cutting down overcapacity can we emancipate advanced production capacity. Therefore, we should organically combine acceptance, transference, integration and elimination and enhance the surveillance and prediction of overcapacity of different industries to make adjustment plans according to different practical conditions,” said Yang Jing, president of the Chinese Academy of Governance.
Ways to Transform and
Upgrade
At the outset of 2014, the Chinese government stipulated in its open files that the industrial restructuring, transformation and upgrading would be sped up this year. At the same time, the focus of the next step is on making industrial development more coordinated, reconstructing and upgrading the manufacturing industry, and propelling development of the service industry.
“Rather than abandoning traditional industries, economic transformation aims at innovation. There are no declining traditional industries, but rather declining industrial traditions,” Li Yizhong stated. He believes that China’s economic development has entered the phase of significant industrial, technological, organizational and market restructuring.
Wang Chang, deputy to the National People’s Congress and head of the Industry and Information Technology Department of Hebei Province, also pointed out that a large part of emerging industries springs from traditional industries. Many have undergone technological innovation and transformation to upgrade to new industries.
At present, iron and steel enterprises in Hebei are undergoing a positive transformation. Some extend the industrial chain to consume their productivity locally. Others make use of mines in other places or venture into the equipment manufacturing industry. More importantly, the enterprises now pay more attention to upgrading technologies and products as well as innovations so as to raise added value and reduce resource consumption.
“Today, steel and iron is the leading industry of Hebei, followed by equipment manufacturing and petrochemicals. By the end of the 13th Five-year Plan period, the equipment manufacturing industry is expected to be elevated to the province’s pillar industry. In the future, industries involving electronic information, biological medicine and new energy will be greatly encouraged as well,” Wang Chang said.
On top of that, development of the service industry is encouraged to facilitate economic transformation and upgrading. Among 200 major projects launched in Tangshan in 2013, 95 were industrial projects, 71 were modern service projects, 15 were modern agricultural projects and 19 involved infrastructure and basic energy resources. Ventures in modern service and modern agriculture accounted for 43 percent of major projects. In the meantime, continued constructions are under way. Luanzhou ancient town cultural and tourism project in Luanxian County is one such example. In addition, the first-phase construction of Wanjia Trade and Logistics Park in Qian’an and Wanli Shopping Center in Tangshan has been completed and put into use.
“The labor-intensive service industry is able to create more job opportunities that better integrate the low-income population into a region’s economic development and could also stimulate domestic demand,” Wang Chang said.
Industrial upgrading and economic transformation must be supported by deepening reform and optimizing the external environment. The Chinese government has lowered its GDP growth target to 7.5 percent in recent years to enhance the effect of economic development and send a message to “seek improvement in stability” to Chinese enterprises that are faced with industrial transformation and upgrading. According to Zhang Qingwei, deputy to the National People’s Congress and Hebei provincial governor, realizing an upgraded economy in the province requires a sacrifice in economic growth rate.
Li Yizhong stated, “China is now closer than ever to reaching its goal of great rejuvenation. It is important to seize strategic opportunities, seek new sources of growth and accelerate industrial upgrading to finally achieve economic transformation.”
