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China Takes Further Steps To Boost Strategic Emerging Industries

07/10/12

Source: King and Spalding’s Trade and Manufacturing Alert
Related Topics: International Trade

Lingna Yan

As reported in the January 2011 Issue of the Trade & Manufacturing Alert, in October 2010, China unveiled its determination to develop seven strategic emerging industries in the State Council’s Decision to Accelerate the Development of Strategic Emerging Industries. The seven “strategic emerging industries” are (1) energy-saving and environment protection, (2) new-generation information technology, (3) biology, (4) high-end equipment manufacturing, (5) new energy, (6) new materials, and (7) new-energy cars. Recently, China made an important step to further the 2010 Decision. The State Council approved the 12th Five-Year National Development Plan of Strategic Emerging Industries (the “12th Five-Year National Plan”) at a standing meeting held on May 30, which is a detailed national plan designed to implement the supporting policies for the development of the seven industries over the 12th Five-Year period, i.e., 2011 to 2015.

The 12th Five-Year National Plan clarifies the priority development directions and tasks of the seven industries. In particular, the energy-saving and environment protection industry should (1) make breakthroughs in efficient energy utilization, pollutant prevention and safe disposal, and resources recycling technologies; (2) develop new and efficient energy saving, advanced environment protection, and resources recycling equipment and products; and (3) promote clean production and low carbon technologies. The new-generation information technology industry should accelerate the construction of next-generation information networks and make breakthroughs in new-generation information technologies. The biology industry should strengthen the development of biological resources utilization technologies and equipment and accelerate the construction of a modern biology industry. The high-end equipment manufacturing industry should give priorities to developing modern aviation equipment, satellites, modern railway transportation equipment, offshore engineering equipment, and intelligent manufacturing equipment. The new energy industry should promote the industrialization of renewable energy technologies. The new materials industry should give priorities to developing new functional materials, advanced structural materials, and composite materials, and engage in the R&D and industrialization of common basic materials. And the new-energy cars industry should accelerate the R&D and industrialization of the core technologies of key parts and materials. The Plan also singles out 20 major projects for government support.

A number of local governments also have formulated detailed plans to cultivate and promote these industries in their jurisdictions. For example, Guangdong Province, one of the largest provinces in terms of the scale of strategic emerging industries, promulgated its provincial 12th Five-Year Development Plan of Strategic Emerging Industries on March 6, 2012, targeting a 127 percent growth of gross output value by 2015. To accomplish the target, Guangdong Province declares that it will employ a series of subsidy measures to support the strategic emerging industries, including but not limited to loan interest subsidies, grants, tax exemptions and reductions, and equity infusion.

Chinese companies in the strategic emerging industries can expect significant subsidies from both the central government and local governments during the 12th Five-Year period. As reported, the central government has set up a 7.5 billion RMB investment fund this year for the strategic emerging industries. Along with the approval of the 12th Five-Year National Plan, the central government launched the first batch of the Strategic Emerging Industry Development Special Fund for new-energy cars, new materials, and high-end equipment manufacturing companies, providing funds equal to 15 percent of investment in fixed assets, up to 40 million RMB for a single project. Subsidy contributions from local governments are also substantial. As of the end of 2011, approximately 24 provinces/municipalities established special funds to support the strategic emerging industries. For example, Beijing municipal government has set aside a 20 billion RMB special fund to support technological development and industrialization, and a 20 billion RMB government procurement fund to procure products of these industries over the 12th Five-Year period. Similarly, the provincial government of Guangdong Province has pledged to input 22 billion RMB in subsidies over the 12th Five-Year period for these industries.







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