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Analysis of the Trend of Changes in the Industrial Structure and Choice of Leading Industries in China During the Tenth Five-Year Plan Period
Yang Jianlong
Research Report No 195, 2000
To get hold of the basic trend of changes in China’s industrial structure during the Tenth Five-Year Plan period, it is necessary to take into consideration at least three factors: first, the general law of changes in industrial structures taking place along with the growth of income levels; second, the basic trend of changes in industrial structures in recent years; and third, readjustment of systems and development strategies, and changes in the internal and external environments for industrial development.
I. The General Law of Changes in Industrial Structure
International experience has shown that during the process of industrialization in a country, changes in the industrial structures usually start from the development of the light industry, extend gradually to the heavy industry centering around basic industries, and move into the development period when the raw material industry and the energy industry get the spotlight. On the basis of full development of the basic industries, the industrial emphasis will move toward the processing and assembling industry to continuously deepen the degree of industrial processing and increase the added value of products, thus entering the period of a high degree of processing. What goes on simultaneously are changes in the composition of key factors in industrial production (we refer here mainly to the relationship of integration between labour force, technology and capital). At the early stage of industrialization, industrial development as a whole would center around the light industry, and the textile industry in particular. Labour force with certain skills would hold an important position in industrial resources. With the progress of heavy industrialization, the development of the raw material industry and the fuel and power industry would call for input of large amounts of capital, thus putting capital under the spotlight. With the transformation of the structures of industrial sectors moving toward the direction of a high degree of processing, technology would replace capital to become the most important factor among industrial productive forces. The process of industrialization demonstrates itself, therefore, in three orderly periods of development, namely, the period when labour-intensive industries play a dominant role, the period when capital-intensive industries hold a leading position, and the period when technology-intensive industries get the spotlight.
The evolution of the industrial structures since the China’s reform and opening to the outside world can be roughly divided into three periods. The first period ran from 1978 to 1982. During this period, the light and the textile industries were put in a priority position in economic development for the purpose of solving the issue of imbalance between the light and heavy industrial structures resulting from the development strategy of overemphasizing the heavy industry. Within a few years, the proportion of the light industry rose from 43 per cent to 50 per cent. The second period started from the mid-1980s. During this period, development of the light and the heavy industries in a basically balanced way was achieved. The third period started from 1992. During this period, with the rise of the level of per-capital income, the demand for durable consumer goods started to grow, thus spurring the rapid development of the electromechanical industry centering around the household electric appliance industry. At the same time, investment in capital construction with a view to reduce restrictions of bottlenecks in infrastructure facilities and the basic industries spurred the development of basic industries, and a comparatively noticeable trend of heavy industrialization occurred once again in the industrial structure of China. By 1998, the added value of the heavy industry accounted for 60 per cent of that of the industrial sector as a whole.
It can be said that in the recent 20 years, changes in the industrial structures of China started from correction of the distortion of traditional industrial structures. Viewed as a whole, however, the overall trend has followed the general law of industrialization in other countries in the world. At present, the industrial structures of China are moving into a period of a high degree of processing -- with the processing and assembling industry playing the central role, and a period of transition from labour-intensive and capital-intensive industries to technology-intensive industries. As the manufacturing industry has taken up a fairly big proportion of the national economy and the processing and assembling industry has developed to a considerable size, there will be a comparatively small possibility of any remarkable increase in the overall size and proportion of the processing industry at the stage of new structural changes. Rapid growth of some capital and technology-intensive industries, especially those with outstanding contributions to the improvement of the technology overall level of industries, such as the electronics, digital-controlled machine tool, precision chemical, and automobile industries, will dominate in such structural exchanges. As for most processing sectors, their emphasis should be put on the readjustment of product mix according to market demands, acceleration of pace in the development of products representing new technology and new technical processes, and improvement of product quality. What should be emphasized is that the equipment industry of China, especially the machinery industry which provides major technical equipment, will be one of the fields to boost the upgrading and transformation of industrial structures and achieve high-speed growth during the next period. Pushed by the huge demand growing out of the upgrading of equipment in various industries and sectors, implementation of a strategy of substitution of imports, and quickening of the pace of localization and enlargement of the proportion of key equipment products will be the major content of industrial growth in this field.
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