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Home >> Business
UPDATED: 17:56, March 23, 2005
Economic Review: Urgent change needed in manufacturing industry growth pattern
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It is badly needed for China's manufacturing industry to change its growth pattern, according to a senior Chinese official.

It is known to all that the manufacturing industry has served as a "engine" to promote the country's rapid economic growth over the past two decades.

But, "it is facing serious challenges" because of high energy consumption, low output and production efficiency, low value-added products, heavy pollution and shortage of high technologies, said Vice Chairman of the National Committee of the Chinese People's Political Consultative Conference Xu Kuangdi.

In his view, to change the current growth pattern of the manufacturing industry is a better way to solve the problems.

China should rely on technological progress, adopt environment-friendly manufacturing technologies, improve products' quality and increase added-value products, while reducing consumption of resources, Xu was quoted by Tuesday's Economic Information Daily as saying.

At the same time, China should strive to protect intellectual property rights while enhancing its technological development capability and transforming its manufacturing industry from a "factory" of processing low and medium products into a manufacturing center in the world, he said.

Energy consumption by the manufacturing industry made up 63 percent of the country's total, 20 percent or 30 percent higher than that of the world level.

According to Xu, China mainly exports labor-intensive products with low technology, and the added-value of the exports is only 26.23 percent, respectively 22 percent, 22 percent and 11 percent lower than that of the United States, Japan and Germany.

"If the industry continues to base its growth on the huge consumption of energy and other resources at the expense of environment pollution, its growth will slow in the next 20 years,"Xu said.

Li Rongjie, president of the Anhui Fengyuan Group, said that the industry is in a serious situation following the price increases of oil, iron ore and other raw materials worldwide.

The world oil price soared to 55 US dollars per barrel recently. The price of iron ore will increase by 71.5 percent this year, after China's largest steel maker, the Shanghai-based Baosteel Group, agreed to the price hike with two of the world's leading iron ore providers, Australian resource giant Rio Tinto Ltd. and Brazil's Companhia de Vale do Rio Doce (CVRD), on February 28.

Li warned that China's effort to become the "world's workshop" in the past 20 years would be in vain if the government adopts no effective measures in this regard.

China's average per capita expenditure on business research and development is only 1.2 percent that of the United States and 1.1 percent of Japan.

In the government work report delivered by Premier Wen Jiabao during the annual session of the National People's Congress on March 5, Wen said the expenditure on scientific research and experiment would account for 1.5 percent of the nation's GDP this year.

This is a good signal, experts said.

Feng Fei, director of the economic research department of the State Council Development and Research Center, suggested the government should focus attention on developing industries with growth potential to realize the goal of transforming China from a big manufacturing country to a strong one.

He urged the industry to develop and manufacture home brand and high value-added products instead of processing and assembling products for foreign companies.

Experts said that China's rapid economic growth has been achieved at the expense of environment.

Economic reports from China's 31 provinces, municipalities and autonomous regions for 2004 showed that the GDP of Guangdong, Shandong, Jiangsu and Zhejiang provinces all exceeded one trillion yuan (120.48 billion US dollars), making them the top four provinces in the country.

The GDP of Guangdong in south China was 1.604 trillion yuan, ranking first in the country with a year-on-year increase of 14.2 percent.

Meanwhile, Chen Guangrong, deputy director of the provincial environmental bureau, admitted in a report last June that the deterioration of the province's environment has exceeded the economic growth rate.

According to Chen, the province's GDP grew 13.6 percent in 2003, while the discharge of carbon dioxide, sulfur dioxide, nitrogen dioxide and waste water increased 10.2 percent, 13.6 percent and 14.8 percent and 10.3 percent respectively.

Shandong Province in East China is another example. In 2004, its GDP stood at 1.5 trillion yuan, ranking the second in China, and its per capita income was 2,000 US dollars. The result was achieved at the expense of environment as its discharge of carbon dioxide ranked first in China.

The rapid growth of China's manufacturing industry has been largely based on cheap labor. A survey conducted by the State Statistics Bureau in the Pearl River Delta area, south China, showed that the average monthly income of farmers in this area is around 600 yuan (about 73 dollars), almost the same as it was 20 years ago.

The low wages resulted in difficulties for businesses in coastal provinces in south and southeast China to recruit employees after the Spring Festival in early February. Some businesses were even forced to close due to shortage of workers.

According to a report by Xinhua Telegraph Daily, Chinese businesses made just one dollar in profit from exporting a DVD set which sold at 38 US dollars on the international market.

It seems China's days as a strong world manufacturing center still have a long way to go.

Source: Xinhua

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