National Development and Reform Commission

September 27, 2007

I. Basic Information on Hi-Tech Industry Development

Since the Sixteenth Plenary Session of the CPC, China has seized the opportunity of international industrial transfer, through devoted efforts in creating environment for hi-tech industrialization and expanding international cooperation, China's hi-tech industry has scored world-acclaimed achievements. China now boasts the second largest hi-tech industry and second largest hi-tech export in the world, stepping into a new phase of growth.

An Increasingly Leading Role of Hi-tech Industry. Fast growth of hi-tech industry prompted readjustment of the industrial structure and makes it a new area for national economic growth. In 2006, the total revenue of hi-tech industry exceeded 5.3 trillion yuan, with its added-value contributing 8 percent of GDP growth. Sales of hi-tech manufacturing in 2006 amounted to 4.2 trillion yuan, nearly 3 times that of the year 2002. Hi-tech export stood at US$281.5 billion in 2006, more than 4 times of that of 2002, accounting for 29 percent of the total export volume in China. It is estimated that, in 2007, the total revenue of hi-tech industry will exceed 6.3 trillion yuan and hi-tech export will come to US$350 billion. The rapid growth of hi-tech service industry (network and digital content-related industry, etc), wide application and deep penetration of information technology and bio-technology, accelerating upgrade of traditional industry have been changing the production and living patterns of the whole society.

Substantial Internationalized development. China's hi-tech industry has utilized more foreign investment with the further opening up to the world and accelerating international industrial transfer. Multinational companies now set up thousands of research institutions in China. Technology intensive industries, such as IC industry, have witnessed substantially internationalized growth. Some leading enterprises have expanded abroad successfully. Hi-tech export volume has 43 percent annual growth from 2002-2006, taking up more than 10 percent of global market. Products such as computer, mobile phones, antibiotics and vaccines top the world market, making China an important manufacturing basis for global hi-tech products.

Great Breakthroughs in Key Technologies. China's independent development capability for hi-tech industry has been further enhanced. In IC, software, telecommunication, bio-medicine and other areas, China owns independent patent rights in 32-digit CPU, TD-SCDMA, WAPI, genetic medicines etc. The Next Generation of Internet, developed on the basis of IPv6, makes much headway. Manned flights also indicate that China has entered the rank of aeronautic and astronautic powers in the world. Industrial technologies and equipment making levels also improved considerably.

Remarkably accelerated industrialization. With the decision of the CPC Central Committee and the State Council in strengthening technological innovation, developing high technology and realizing industrialization, 41 national key special projects of hi-tech industrialization have been implemented with the construction of more than 2,400 hi-tech industrialization demo projects and more than 200 billion yuan of investment. Major scientific and technological research achievements in areas like new generation of mobile telecommunication, next generation of internet, digital TV, satellite navigation, photovoltaic technology and insect-resistant cotton have been successfully industrialized and a group of new industrial clusters have been established.

Accelerated establishment of industrial clusters. The scale of the hi-tech industry in the three regions of the Yangtze River Delta, the Pearl River Delta and Bohai Bay accounts for more than 80 percent of the national total. Major cities in these three regions have become core areas of industrial development with accelerated development of industrial bases of bio-medicine, aviation and aerospace, micro-electronics, photoelectron and software. High and new technological industrial parks and economic and technological development zones have become important habitat for the hi-tech industry.

Continually improved innovation capacity and infrastructure. The success of the independently designed and developed of the world's first Experimental Advanced Superconducting Tokomak fusion reactor facility and a dozen other national key science and technology projects further strengthens our scientific and technological capacity in original innovation. Since 2002, more than 20 national engineering and research centers of heavy technical equipment, bio-chip and other industries, 9 national engineering laboratories of bio-metallurgy and other sectors and 499 state-recognized corporate technological centers have been constructed, which initially establishes a basic supporting platform for the independent innovation of enterprises.

Environment for industrial development has been further improved. In recent years, central and local governments have adopted a lot of policies and measures to accelerate the development of hi-tech industry. The new Enterprise Income Tax Law provides the hi-tech enterprises with a more equitable environment for competition. The Circular of the General Office of the State Council Concerning Transmitting the Opinion of the Ministry of Science and Technology and Other Departments on Establishing the Venture Investment Mechanism, the Interim Measures for the Administration of Startup Investment Enterprises and the formulation of its supporting policies have made the startup investment enter into a new fast development stage, which has become one of the important financing channels for hi-tech enterprises. The regular issuance of the Guide of the Latest Priority Areas in High Technology Industry has played an important role in guiding the public investment, strengthening the policy synergy and accelerating the development of high technology industry. The industrial structure reform of the monopoly industries such as telecommunication has been deepened, favorable market competition mechanism and structure has been gradually established and the market environment for the hi-tech industry development has been improved.

II. Next Step Work Plan

The future period is crucial for the implementation of the Scientific Development Outlook and building of the harmonious society, as well as for the development of hi-tech industry from large to strong. In line with the requirements of industry gathering, scale development and expansion of international cooperation of the Eleventh Five Year Plan, we will continue to promote the development of hi-tech industry to shift from focusing on processing and assembly to independent R&D and manufacturing in the following six aspects.

First, to Establish a Relatively Improved Industrial Policy System. Advance the promulgation and implementation of industrial policies and industrial technology policies related to biology, digital TV, software and integrated circuit industry, study and formulate relevant policies and measures to further encourage the development of information services industry and new-type flat monitor and related components industry, and provide a more favorable environment to foster industrial independent development.

Second, to Implement Special Projects in Major Industry. According to the priorities specified in the"11th Five-year Plan" for hi-tech industry, the nation will concentrate on the implementation of nine major special projects including integrated circuit and software, new generation mobile communication, next generation internet, digital voice and video technologies, advanced computing, biological medicine, commercial airplanes, satellite as well as new materials, make breakthrough in a number of key common technologies that can give impetus to the entire industry, foster a number of hi-tech industrial clusters with independent intellectual property rights. And substantially promote the core competitiveness of industries such as electronic information, biology, aviation and aerospace, etc.

Third, to Smoothen Industry Financing Channel. The National Development and Reform Commission and the Ministry of Finance have commenced the pilot projects on startup investment supported by fiscal fund. For the next-step work, we will open up the financing channels for hi-tech enterprises by seeking support from policy-oriented financial institutes and speed up the process of getting hi-tech enterprises listed on the stock market. On this year's China Hi-Tech Fair, the National Development and Reform Commission will sign a series of documents with the State Development Bank and Shenzhen Stock Exchange, with an aim to explore possible approaches to tackle down the financing difficulties faced by hi-tech enterprises.

Fourth, to promote gathering development of the hi-tech industry. Industry gathering is a strategic way to optimize resource deployment and improve competitiveness of hi-tech industry. We'll continue to build a bunch of hi-tech industry bases which can help extend and complete the industrial chain by driving the development of related sectors. So that some industrial clusters with strong competitiveness can thus be built.

Fifth, to improve the level of international cooperation. Open development is a successful experience for hi-tech industry. On the basis of such major international cooperation projects as Airbus A320 assembly line and Intel's Dalian plant, we'll continue to encourage and guide international hi-tech companies to set up regional headquarters, R&D centers, procurement centers, training centers in China, encourage enterprises to explore overseas hi-tech market in an all-round way, steadily promote hi-tech enterprises to engage in strategic investment in overseas market, speed up their internationalized operation and participate in international technology alliance.

Sixth, To make greater efforts in renovate traditional industries through hi-tech. Targeting at the key and common technologies in energy efficiency, clean production and comprehensive utilization of resources, great efforts should be made to carry out special programs devoted to industrial technology development and build National Engineering Research Center, National Engineering Lab and National Certification Center for Enterprises' Technologies to enhance the capacity of independent R&D for industrial technology and alleviate the constraints brought by technology bottlenecks in industrial structure adjustment and change of growth pattern. Efforts should also be made to build e-governance and e-commerce demonstration projects so as to drive industrialization through informatization and improve the informatization level of the whole society.

(China Development Gateway September 27, 2007)