China Advised to Heed 'Cored' Industrialization

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Last updated at: (Beijing Time) Tuesday, January 07, 2003

China Advised to Heed 'Cored' Industrialization

In the 16th National Congress of the Communist Party of China held on November 8 to 14 last year, China decided to embark on a track of the "new type of industrialization". Nevertheless, local governments are translating the Party's industrial strategy in their own way.

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While speeding up its industrialization, China must pay attention to the industries likely "hollowed out" by local governments.

"Local economic planners are shunning farther and farther away from the manufacturing sectors and will probably end up dragging China into a mire of 'cored industrialization'," Fan Gang, director of the State Council-affiliated National Economic Research Institute, was quoted as saying by the Nanjing-based Yangtze Evening Post, a newspaper sponsored by east China's Jiangsu Province.

By the "cored industrialization", Fan refers to an industrial structure with heavily invested tertiary and hi-tech industries but inadequately capitalized primary and secondary ones, for example the agricultural, mining and manufacturing industries.

In the 16th National Congress of the Communist Party of China held on November 8 to 14 last year, China decided to embark on a track of the "new type of industrialization": While keeping abreast of the advancing hi-tech and information industries, China will maintain its industrialization drive on the condition of a high scientific content, a low degree of resources consumption and environmental pollution, and a high employment rate.

Nevertheless, local governments are translating the Party's industrial strategy in their own way: They grapple to swarm into the so-called hi-tech and service sectors, tags of a higher degree of "modernization".

Analysts attribute local officials' zeal for the hi-tech and modern industries to the bureaucratic pyramid in current China. Through revving up the hi-tech prosperity, local officials hope to polish their administrative performance and pave their pipeline of promotion.

Therefore, their industrial plan comes more out of the bureaucratic politics than the economic consideration.

As a matter of fact, quite a few economic endeavors of the Chinese central government tend to fall apart or get crippled because of local governments' self-designed economic thrusts.

Both the run-away inflation during 1988-89 and 1993-94 and the currently looming deflation can partially be traced to local governments' perversities in carrying on their own businesses.

The off-balance industrial structure is simply another illustration of the discordance between the central and local governments.

Since 1995, labor force in the manufacturing sector has been shrinking, while the number of workers in the tertiary industry shoots up along the way.

To date, two-thirds of China's technical professionals are working in the tertiary industry. Only one-sixth of them are employed in the manufacturing sector, according to the newspaper.

Correspondingly, the percentage of the total social investment into the manufacturing has been going down over the past five years.

"It's ridiculous for all cities to spearhead the hi-tech industries," the newspaper quoted Zhu Gaofeng, an expert with the Chinese Academy of Engineering, as saying.

"Without development in the manufacturing sector, all the other industries can hardly grow healthily, which will further worsen the unemployment problem, impede the general improvement of people's living condition and even jeopardize the nation's stability and security."

By PD Online Staff Forest Lee

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