High Growth Sectors Lead China's Economy: Economist

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Last updated at: (Beijing Time) Friday, March 28, 2003

High Growth Sectors Lead China's Economy: Economist

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Industrial sectors in China are undergoing a profound change in growth patterns and those involving real estate, automobile, machine-building and urban infrastructure have pushed the economy into a new cycle of faster growth, according to a leading economist.

Liu Shijin, a senior economist and director of the Research Department of Industrial Economy of the Development Research Center under the State Council, told the China Industrial Development Forum in Beijing recently that equilibrium in growth among different sectors had been broken since the end of 2001.

The automotive, coal, food processing and machine-building sectors have moved to the forefront in terms of performance, followed by the pharmaceutical, building materials, electricity, and textile and garment sectors.

Some industrial sectors are becoming the engines of the new economic growth cycle, Liu told the forum which was sponsored by the Research Department of Industrial Economy and Northeast China Securities Co., Ltd.

Performance is no longer influenced by short-term factors, but by longer-term considerations, Liu said.

A group of rapidly growing industries with outstanding characteristics has emerged in China, Liu believed.

The first group consists of auto-related industries, including synthetic materials, tire manufacturing, iron and steel (particularly steel sheets and belts for automotive use) and machinery (numerical control machines in particular) sectors.

The whole production scale of the group is believed to be 2.5 to three times the auto industry itself, accounting for seven to 8.5 percent of China's gross domestic product, with its future contribution to the national economy being predicted at 12 percent or so.

The second group comprises industries relates to property development, including iron and steel, building materials and upholstery sectors as well as property management and community services.

There is still a large potential for the group as urban incomes kept growing and the urbanization drive progressed at a faster pace, according to Liu.

The third group is made up of the machine building sectors, of which the ordinary machinery sector has seven of its sub-sectors resurging rapidly during in recent years.

The fourth group mainly produces daily-use consumer goods, such as aquatic and dairy products, vegetable oil, wine and soft drinks, paper, stationeries, toys, sports goods and entertainment equipment as well as high-grade home electrical appliances.

Liu pointed out that in the new economic growth cycle, high growth industries will have different sustaining forces.

The growth cycle for sectors such as automotive and residential housing will be long, possibly lasting scores of years, while that for sectors such as electronics and telecommunications will be shorter.

Industrial growth will promote urban expansion and vice versa, and several large strips of industrial cities will take shape, Liu predicted.

In 2003, cars and homes will continue to sell well, and the automotive and real estate sectors will subsequently fortify their status as two pillars of the national economy, said Liu.

The two sectors will also drive related industries, including construction-related metallurgical goods, the rubber and synthetic materials sectors. All these will stimulate a fast growth in capital investment.

Demand for consumer electronics and the ongoing national computerization drive, which is based on the e-government campaign, will become major propelling forces behind the information technology industry, Liu added.

Basic industries, such as coal and power, are expected to grow steadily in a cozy macro economic climate this year, according to Liu.

Meanwhile, China's accelerated opening-up drive will promote the readjustment, reform and development of the financial industry, Liu forecast.

Liu believed China has a growth cycle of at least 20 more years.

This will be closely related to the urbanization process and a growth in domestic demand. However, the predicted speedy economic growth may be slowed, if demand remains listless in rural areas, Liu warned.

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