Industry and manufacturing in China from Wikipedia

Industry and manufacturing in China

from Wikipedia

Since the founding of the People's Republic, industrial development has been given considerable attention. Among the various industrial branches the machine-building and metallurgical industries have received the highest priority. These two areas alone now account for about 20–30 percent of the total gross value of industrial output.^[111] In these, as in most other areas of industry, however, innovation has generally suffered at the hands of a system that has rewarded increases in gross output rather than improvements in variety, sophistication and quality. China, therefore, still imports significant quantities of specialized steels. Overall industrial output has grown at an average rate of more than 10 percent per year, having surpassed all other sectors in economic growth and degree of modernization.^[112] Some heavy industries and products deemed to be of national strategic importance remain state-owned, but an increasing proportion of lighter and consumer-oriented manufacturing firms are privately held or are private-state joint ventures.

The predominant focus of development in the chemical industry is to expand the output of chemical fertilizers, plastics, and synthetic fibers. The growth of this industry has placed China among the world's leading producers of nitrogenous fertilizers. In the consumer goods sector the main emphasis is on textiles and clothing, which also form an important part of China's exports. Textile manufacturing, a rapidly growing proportion of which consists of synthetics, account for about 10 percent of the gross industrial output and continues to be important, but less so than before. The industry tends to be scattered throughout the country, but there are a number of important textile centers, including Shanghai, Guangzhou, and Harbin.^[113][114]

Major state industries are iron, steel, coal, machine building, light industrial products, armaments, and textiles. These industries completed a decade of reform (1979–1989) with little substantial management change. Prior to 1978, most output was produced by state-owned enterprises. As a result of the economic reforms that followed, there was a significant increase in production by enterprises sponsored by local governments, especially townships and villages, and, increasingly, by private entrepreneurs and foreign investors. The 1996 industrial census revealed that there were 7,342,000 industrial enterprises at the end of 1995; total employment in industrial enterprises was approximately 147 million. The 1999 industrial census revealed that there were 7,930,000 industrial enterprises at the end of 1999 (including small-scale town and village enterprises); total employment in state-owned industrial enterprises was about 24 million. The automobile industry has grown rapidly since 2000, as has the petrochemical industry. Machinery and electronic products became China's main exports. China is the world’s leading manufacturer of chemical fertilizers, cement, and steel. By 2002 the share in gross industrial output by state-owned and state-holding industries had decreased to 41%, and the state-owned companies themselves contributed only 16% of China’s industrial output.

China’s construction sector has grown substantially since the early 1980s. In the twenty-first century, investment in capital construction has experienced major annual increases. In 2001 investments increased 8.5% over the previous year. In 2002 there was a 16.4% increase, followed by a 30% increase in 2003. The manufacturing sector produced 44.1% of GDP in 2004 and accounted for 11.3% of total employment in 2002. Industry and construction produced 53.1% of China’s GDP in 2005. Industry (including mining, manufacturing, construction, and power) contributed 52.9% of GDP in 2004 and occupied 22.5% of the workforce.

Energy production has increased rapidly, but it still falls considerably short of demand. This is partly due to artificial energy prices that have been held so low that industries have had few incentives to conserve. Coal provides about 75–80 percent of China's energy consumption. Petroleum production, which began growing rapidly from an extremely low base in the early 1960s, has basically remained at the same level since the late 1970s. There are large petroleum reserves in the inaccessible northwest and potentially significant offshore petroleum deposits, but about half of the country's oil production still comes from the major Daqing oilfield in the northeast. China has much, and partially undeveloped, hydroelectric power potential and natural gas reserves. The government has made plans to develop nuclear power plants in the coastal and western regions (see Nuclear power in China).

Overall, the distribution of industry remains very uneven, despite serious efforts from the mid-1950s to the late 1970s to build up industry in the interior at the cost of the major cities on the east coast. While percentage growth of industry in the interior provinces generally greatly exceeded that of the coastal areas, the far larger initial industrial base of the latter has meant that a few coastal regions have continued to dominate China's industrial economy. The establishment of special economic zones in coastal areas only heightened this disparity. Shanghai by itself accounts for about 8–10 percent of China's gross value of industrial output,^[114] and the east coast accounts for about 60 percent of the national industrial output.^[111] The rate of industrialization increased and diversified after the early 1990s. Notable were the development of aerospace, aircraft, and automobile manufacturing. In addition, China expanded rapidly into the production of pharmaceuticals, software, semiconductors, electronics, and precision equipment.

Steel industry

China is the largest producer of steel in the world and the steel industry has been rapidly increasing its steel production. Iron ore production kept pace with steel production in the early 1990s but was soon outpaced by imported iron ore and other metals in the early 2000s. Steel production, an estimated 140 million tons in 2000, was increased to 419 million tons in 2006. Much of the country's steel output comes from a large number of small-scale producing centers, one of the largest being Anshan in Liaoning.

China is the top exporter of steel in the world. Export volumes in 2008 were 59.23 million tons, a 5.5% fall over the previous year^[115]. The decline ends China's decade-old steel export growth.

Automotive industry

By 2006 China had become the world’s third largest automotive vehicle manufacturer (after US and Japan) and the second largest consumer (only after US). Automobile manufacturing has soared during the reform period. In 1975 only 139,800 automobiles were produced annually, but by 1985 production had reached 443,377, then jumped to nearly 1.1 million by 1992 and increased fairly evenly each year up until 2001, when it reached 2.3 million. In 2002 production rose to nearly 3.25 million and then jumped to 4.44 million in 2003, 5.07 million in 2004, 5.71 million in 2005 and 7.28 million in 2006. In 2007, 9 million automobiles are expected to be produced and the country could become the number-one automaker in the world by 2020. Domestic sales have kept pace with production. After respectable annual increases in the mid- and late 1990s, passenger car sales soared in the early 2000s. In 2006, a total of 7.22 million automobiles have been sold, including 5.18 million units of passenger cars and 2.04 million units of commercial vehicles.

So successful has China’s automotive industry been that it began exporting car parts in 1999. China began to plan major moves into the automobile and components export business starting in 2005. A new Honda factory in Guangzhou was built in 2004 solely for the export market and was expected to ship 30,000 passenger vehicles to Europe in 2005. By 2004, 12 major foreign automotive manufacturers had joint-venture plants in China. They produced a wide range of automobiles, minivans, sport utility vehicles, buses, and trucks. In 2003 China exported US$4.7 billion worth of vehicles and components. The vehicle export was 78,000 units in 2004, 173,000 units in 2005, and 340,000 units in 2006. The vehicle and component export is targeted to reach US$70 billion by 2010.

The market for domestically produced cars, under a local name, is likely to continue to grow both inside China and outside. Companies such as Geely and Chery are constantly evaluating new international locations, both in developing and developed countries.^[116]

Other industries

Services

China's services output ranks seventh worldwide, and high power and telecom density has ensured that it has remained on a high-growth trajectory in the long-term. In 2005 the services sector produced 40.3% of China’s annual GDP, second only to manufacturing. However, its proportion of GDP is still low compared with the ratio in more developed countries, and the agricultural sector still employs a larger workforce. Prior to the onset of economic reforms in 1978, China’s services sector was characterized by state-operated shops, rationing, and regulated prices. With reform came private markets and individual entrepreneurs and a commercial sector. The wholesale and retail trade has expanded quickly, with urban areas now having many shopping malls, retail shops, restaurant chains and hotels. Public administration has still remained a main component of the service sector, while tourism has become a significant factor in employment and as a source of foreign exchange. The potential for growing services in China through franchising is huge.^[117]

Tourism

China's tourism industry is one of the fastest-growing industries in the national economy and is also one of the industries with a very distinct global competitive edge. The total revenue of China's tourism industry reached USD 67.3 billion in 2002, accounting for 5.44% of the GDP. It dropped, largely due to SARS, to USD 59 billion in 2003. Nevertheless, for areas rich in tourism resources, tourism has become the main source of tax revenue and the key industry for economic development.

The total number of inbound tourists was 91.66 million in 2003, and that of tourists staying overnight was 32.7 million, about 10 times of the number in 1980. International tourism receipts were USD 17.4 billion in 2003. China's ranking for both the overnight tourist arrivals and tourism receipts were among the world's top five in 2003. However, there is unlikely to be a big increase in the inbound tourism market.

China's domestic tourism market makes up more than 90% of the country's tourism traffic, and contributes more than 70% of total tourism revenue. In 2002, domestic tourists reached 878 million and tourism revenue was USD 46.9 billion. The five-days-per-week and long vacation schemes have increased leisure time for the Chinese people and spurred market demand in domestic tourism and led to its prosperity.

A large middle class population with strong consumption power is emerging in China, especially in major cities. China's outbound tourists reached 20.22 million in 2003, overtaking Japan for the first time. Currently there are 65 countries/areas open to Chinese tour groups. Putting aside the threat of SARS and other unexpected events, based on the current economic growth situation and the social development of China, China's outbound tourism is poised to achieve a new growth peak.

Driven by the flourishing tourism industry, China's tourist hotel sector is expanding rapidly. At the end of 2003, China had a total of 10,093 tourist hotels and more than 820,000 rooms. 773 of these tourist hotels were foreign-funded. The number of foreign-funded (inclusive of Hong Kong, Macau and Taiwan investments) four- and five-star tourist hotels made up 26% and 30.02% of the national total, respectively.

In 2003, there were a total of 11,522 travel agencies in China, among which, 1,349 were international ones and 10,203 were domestic ones. While overall tourism market concentration rose, there was a drop in the market position of the traditional three key travel agencies. As competition heightened, China's tourism industry on the whole, had begun to start earning low profits, even while it was expanding its scale of operations.

Currently, there are approximately 15,000 natural, cultural and man-made places of attraction which are above county level. Presently, Hong Kong investors are the main participants in the establishment of tourist attractions in China. In 2001, Sichuan became the first province to propose renting out the operation rights of 10 scenic areas to foreign investors.

According to the plan by China National Tourism Administration, the number of inbound tourists, foreign exchange earnings from tourism and the domestic market size are targeted to have an annual growth of 4%, 8% and 8%, respectively, in the next five to ten years. It is also forecast by the WTO that China's tourism industry will take up to 8.6% of world market share to become the world's top tourism industry by 2020.

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