Economic Restructuring in China Speeds up in SARS Time

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Last updated at: (Beijing Time) Monday, May 26, 2003

Economic Restructuring in China Speeds up in SARS Time

The outbreak of severe acute respiratory syndrome (SARS) has changed the buying habits of Chinese consumers, much as the September 11 incident did the lifestyle of many Americans.

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The outbreak of severe acute respiratory syndrome (SARS) has changed the buying habits of Chinese consumers, much as the September 11 incident did the lifestyle of many Americans.

Sales of air conditioners in big cities were about half that inprevious summers as people feared contracting SARS via the units.

Zhu Dacheng, general manager of a Sino-foreign joint venture, said the market demarcation of electric household appliances wouldchange as Chinese people bought more clothes dryers, dishwashers, air filters and larger refrigerators.

Many Chinese manufacturers suddenly realized the potential risks and restructured their product lines. One Beijing clothing factory worked around the clock to meet the increasing market demand for masks, but most of the gauze masks ended up in the storehouse of the factory as many picky Beijingers opted for the protection of imported N95 masks.

"The market prospect of our products was revised overnight," a supplier said.

Official figures showed 95 percent of the 600 major Chinese-made commodities were in greater supply than demand, as SARS made businessmen realize there was a big gap between what people really needed and what the factories turned out.

The upsurge in the consumption of cars, health products and e-commerce illustrate the transition of consumption patterns.

The impact of SARS turned out to be a driving force accelerating reform in some monopolized industries in China.

The slump in passenger traffic incurred heavy losses on China's three biggest civil aviation companies, prompting them to solve the chronic problem of bloated operational costs. The airlines postponed ordering new jetliners, increased cargo carriage, reduced passenger flights and rescheduled flight routes. Some of them even considered to streamline fuel expenses and employee salaries.

Government officials and Chinese entrepreneurs reconsidered their investment decisions. The State Development and Reform Commission (SDRC) warned against excessive capital investment in the metal melting industry and raised the threshold for approval of new projects and bank loans.

As some local governments rushed to approve construction of airports, automobiles, towns and real estate development projects in a bid to promote local economy, the central government issued orders to prohibit duplication in capital investment.

The SDRC also drafted a policy guiding the development of the automobile industry so as to avoid redundancy in production capacity.

After more than 20 years of fast economic growth, China now pays more attention to the quality of economic growth than to the growth rate.

The Chinese government announced recently that when investing, it will give priority to constructing public health infrastructure,improving farmers' living conditions, expanding employment and developing the western regions of the country.

Meanwhile, the government will also increase financial support for traditional industrial zones in northeast China, and has allocated one billion yuan to fund the improvement of basic education for this fiscal year.

Local experts said the gradual change in the fields of government investment reflected increasing importance attached to social development. The government wants to do more to letting economic growth benefit most of the people, especially farmers, the experts said.

Recently, the Chinese government allowed private enterprises access to wider areas of investment and financial service and gave them tax incentives. These moves were not only aimed at stimulating economic activities as SARS hit, but also designed to transfer the role of the government in a market economy.

Chris Devonshire-Ellis, senior partner of consulting firm DezanShira & Associates, said as China had joined the World Trade Organization and had more experiences in the development of market economy, the country would continue to offer more business opportunities for the world.

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