China's Industrial Competitiveness Shows Sign of Decline

The Chinese Academy of Social Sciences' recent blue book on China's industrial competitiveness says that most of China's highly competitive industries are now facing fierce market competition. It warns that without effective measures, China's industries may slip in the international market.

Zhang Ru has more.
The report says that China's industrial competitiveness is now in a transitional period.

The country's first monthly trade deficit last March indicates a weakening in its industrial competitiveness.

Zhang Qizi, a researcher at the Chinese Academy of Social Sciences' Industrial Economy Institute and chief editor of the blue book, says China has traditionally been competitive in labor- and resource-intensive industries, such as steel, nonferrous metals and textiles.

But these industries have seen their advantages weaken.

"First, with the development of China's economy, the laborers' income and social welfare are also improving. Therefore the labor cost has increased. Second, the transformation of China's economic development pattern requires higher environmental protection standards. Thus the cost of environmental protection and resources has also increased."

Zhang Qizi adds that the global financial crisis has motivated some developed countries to adopt protective trade measures and develop low-carbon economy to enhance industrial competitiveness. These have also added pressure on China, a country that is still heavily relying on coal to fuel its economy.

The researcher warns that given the fact that China can't develop new competitive industries in the short term, the country could totally lose its industrial competitiveness if it doesn't maintain the advantages of its primary products.

"Our study shows that some industries in China are far behind those of developed countries. For example, the gap between China's aviation industry and that of the United States is too big. The market share of the U.S. aviation products is more than 30 percent, while that of China's is no more than 1 percent. In the pharmaceutical industry, countries such as the U.S. and Belgium have a market share of about 10 percent internationally, while China's is only half that of these countries."

The report says the key to maintaining China's industrial competitiveness is upgrading and reconstructing traditional industries.

But Zhang Qizi stresses that the government should give enterprises enough time to adapt to new policies.

"After China decided to transform its economic development pattern, different departments are launching various policies. Based on my study, these polices don't coordinate with each other very well. One policy may not have a big influence on these industries. But the companies may be under severe pressure if new policies are imposed on them simultaneously."

He suggests staggering implementation of the policies that could put pressure on companies. He calls on the government to establish an industrial competitiveness committee to study the effects of different policies on different industries.

For CRI, I am Zhang Ru.