Liu Xiangdong​: Strengthening Key Support Points for the Modernization of the Industrial Chain

By—Liu Xiangdong 

In recent times, the development of strategic emerging industries such as new energy vehicles, new materials, artificial intelligence, industrial internet, and clean energy has been rapid. The high-end, intelligent, and green development is accelerating, becoming a major focus of industrial chain modernization and a crucial support for high-quality economic development.

Strategic emerging industries play a vital role in leading the country's future development. They serve as the main carriers of breakthrough technologies and are key to promoting the transition between old and new drivers of growth. The 20th National Congress of the Communist Party of China explicitly stated, "Promote the integrated development of strategic emerging industries clusters, and build a new generation of information technology, artificial intelligence, biotechnology, new energy, new materials, high-end equipment, green environmental protection, and other new growth engines." Currently, the proportion of value-added by strategic emerging industries in the gross domestic product (GDP) has exceeded 13%, and some sectors have become important pillars of the national economy, with a growing trend of cross-disciplinary integration. China is currently undergoing a critical period of transforming its development mode, optimizing its economic structure, and changing growth drivers. Faced with the triple pressures of shrinking demand, supply shocks, and weakening expectations, it is crucial to promote the application of new-generation information technology, biotechnology, and other technologies in traditional industries and accelerate the development of strategic emerging industries.

Data show that the GDP share of manufacturing added value in 2022 has risen by 1.4 percentage points from 26.3% in 2020. Strategic emerging industries such as new energy vehicles, industrial robots, renewable energy, biomedicine, and medical equipment played a crucial role. Industries with new dynamics, such as mechanical manufacturing and transportation equipment manufacturing, have continued to experience rapid profit growth this year. In recent months, the profits in the electrical machinery and equipment manufacturing industry have increased due to the growth in the production and sales of products such as power batteries and photovoltaic equipment. The development trends of the railway, shipbuilding, aerospace, and other transportation equipment manufacturing industries are also positive, driven by high growth in production and sales of marine engineering equipment and electric bicycles.

However, there are some existing issues that cannot be ignored. Risks and hidden dangers still exist in the industrial chain and supply chain of China's high-end manufacturing industry. The industry's foundational inputs are insufficient, and the overall industrial chain remains in the mid-to-low end. China's domestic market demand has not fully recovered, and the decline in prices of commodities such as crude oil and industrial metals has affected the prices of raw materials and equipment manufacturing products.

To address these issues, it is essential to maintain a problem-oriented and bottom-line mindset, sustain strategic determination, maintain existing achievements while expanding new ones, and systematically promote the transition between old and new drivers. There is a need to cultivate and develop strategic emerging industries more vigorously, fostering their growth in scale and providing effective impetus to drive the upgrading and development of traditional industries.

On one hand, promoting the growth of strategic emerging industries relies on designing incentive-compatible policy systems. It involves optimizing the allocation of resources such as technology, capital, talent, and data, stimulating the innovation vitality of various business entities, and enabling them to play a pivotal and leading role in the transition between old and new drivers. It is crucial to create an institutional environment conducive to the development of emerging industries, focusing on building a first-class business environment that is market-oriented, rule-of-law-oriented, and internationalized. The adjustment of unreasonable regulatory measures in various industries and sectors should be prioritized. The design of inclusive and cautious regulatory mechanisms for failures should be implemented, minimizing restrictions on pre-approval and filing for new product launches and new market entries. Procurement and government bidding procedures should be optimized, and the early-stage policy schemes for first units (sets) or first editions should be further improved to facilitate early market access for cutting-edge technologies.

On the other hand, driving integrated and clustered development in industries requires accelerating the virtuous cycle of technology, industry, and finance. By continuously enhancing internal connections and cycle speeds among these elements, it is possible to stimulate the driving force of financial services for technological innovation, accelerate the industrial transformation of technological achievements, and expedite the digital empowerment of various industries. Promoting collaborative and innovative development in key industrial chains involves nurturing more small and medium-sized enterprises with expertise, improving the competitiveness of leading enterprises and industry chain ecosystem-leading enterprises in technology and innovation, and building manufacturing innovation centers and competitive emerging industry clusters with international competitiveness, thereby providing new sources of energy and growth points for economic development.(The author is the Researcher of the Department of Macroeconomic Studies, China Center for International Economic Exchanges)

(The original article was published on Economic Daily on 26^th May, 2023)