IHS Global Insight Perspective | |
Significance | The new industrial guideline is one of the key follow-up documents supporting the deployment of China's new industrial policy in the 12th Five-Year Plan period. |
Implications | As expected, the new policy guideline focuses on capacity retirement, new strategic sector development, services sectors and environmental sustainability, in line with the broad direction outlined by the Five-Year Plan. |
Outlook | Other follow-up measures or plans for key industries will be unveiled soon in China, all with a possibly significant impact on industrial development over the next couple of years. |
The new guideline is an update of "the Guiding Catalogue for the Industrial Structure Adjustment" released in 2005, and has reflected a set of new industrial priorities that the Chinese government has laid down in the 12th Five-Year Plan (FYP). The catalogue comprises three groups of industrial sectors, those to be encouraged, to be restricted and to be eliminated, while permitted industries—i.e., those which don't fall into any of the three categories—are not listed in the catalogue. The biggest change is with the classification of encouraged sectors—the NDRC eliminated 175 entries and added 413 new ones. The listing for sectors to be eliminated has added 189 new entries, but has also taken out 157 old ones. While details for sectors to be eliminated and restricted are not released yet, steel, non-ferrous metals and construction industries—the main targets of capacity control in recent years—quite likely have been affected most.
The guideline will be used by the government as a basis in formulating and implementing investment policies as well as fiscal, land and foreign trade policies, according to the NDRC. For instance, encouraged sectors will receive credit support from financial institutions for the construction and operation of new projects, while projects in restricted sectors will face restrictions from project approval to financing and land supply. For sectors to be eliminated, bank loans will be called back.
The changes in the new guideline have reflected new priorities ranging from industrial structure upgrade and the reduction of overcapacity to the development of new strategic sectors and compliance with the new carbon emission mandate:
- Upgrade and Structural Adjustment: The catalogue for encouraged sectors has added 14 sectors, including new energy, urban rail transport equipment, public security and emergency-response products such as monitoring, alerting, emergency aid equipment, etc. In the meantime, the scope of encouraged services subsectors has also been expanded to cover 112 sectors, in line with the government's plan to raise the share of the services output in GDP by a much larger margin compared with in the previous Five-Year Plan period.
- New Strategic Sector Drive: The new strategic sector development policy has also been reflected in the guideline. For instance, a number of subsectors have been added under equipment manufacturing, automobile and shipbuilding in the encouraged sector catalogue, and examples include automated control systems, high-speed precision bearings, key components in new-energy vehicles, and specialised equipment for ocean engineering projects, among others.
- Capacity Reduction and Retirement: Reflecting the government's commitment to "step up retirement of outmoded capacity and reduce overcapacity" in the 12th FYP, the guideline has raised the bar of industry entry for sectors to be eliminated, with the specification of product standard/parameters as well as scale of operation.
- Environmental Sustainability: Another striking change of the industrial guideline is the much greater emphasis on environmental sustainability, as the NDRC has added subsectors related to clean production technologies, energy efficiency and emission reduction technology under almost all encouraged manufacturing sectors.
Outlook and Implications
The new industrial guideline is a follow-up of the overarching broad industrial development policy released as part of the 12th FYP. Indeed, one main component of China's economic transformation envisioned in the country's 12th FYP is a new industrialisation drive, which emphasises the building of a new modern industrial structure which utilises more advanced technology, which is cleaner and safer, and has higher added value and creates more jobs. The focus will be on upgrading the manufacturing industry, developing emerging and strategic industries, bolstering the services sector, strengthening energy/transport infrastructure and developing the oceanic economy.
This entails a sweeping overhaul of industrial policies. For traditional industries, policy changes will be the most drastic, and the focus is on reducing overcapacity, moving up the value chain and improving energy efficiency. Another main thrust will be the development of new strategic sectors, a main strategy for China to seize the commanding heights of new and high technologies. According to the 12th FYP, the country will raise seven emerging and strategic industries' share of national GDP to 8% by 2015, from the current less than 2%. The seven industries include energy conservation/environmental protection, new-generation information technology, biology, high-end equipment manufacturing, new energy, new materials and new-energy-fuelled vehicles. Services remain a development priority, as China tries to move from a resource/energy-intensive and job-light growth model to one that depends less on resource inputs and yet may create more jobs. According to the new FYP, the share of services sector in total GDP will be raised from the current around 43% to 47% by 2015, a 4-percentage-point increase in five years—compared with an increase of 3 percentage points planned in the 11th FYP.