| Manufacturing industries to continue rapid expansion |
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| Tuesday,March 22,2005 Posted: 10:14 BJT(0214 GMT) |
BEIJING, March. 21 -- Soaring domestic demand and a massive influx of foreign investment will ensure that China's manufacturing sector continues to enjoy stunning growth rates, according to Xu Kuangdi, president of the Chinese Academy of Engineering.
"China's manufacturing output now ranks third in the world behind the United States and Japan, after overtaking Germany in 2003," Xu told the 2005 China Development Forum at the weekend.
The manufacturing sector will maintain annual growth rates of 14 to 15 per cent over the next five years, sources from the Chinese Academy of Social Sciences predicted earlier this year.
This far outstrips the GDP growth of 8 per cent expected over the same period.
This bold expansion in the country's pillar industry can be attributed to soaring domestic demand and higher amounts of overseas investment.
Xu pointed out that China's rapid economic growth has accelerated the nation's need for industrial products.
More than half of these are required to satisfy domestic demand, according to Xu.
"All the products from the resource processing sector are consumed domestically to boost the energy-hungry economy," he said.
"And over 50 per cent of light industry and mechanical and electrical manufacturing is for domestic consumption."
Of the 17 sectors in the manufacturing industry, light industries like textiles and the production of daily utilities account for 30 per cent, resource processing such as oil refining takes up 33 per cent, and another 36 per cent comes from mechanical and electrical manufacturing.
The remaining 1 per is contributed by other sectors in the manufacturing industry, according to industry sources.
Another factor that fuels the manufacturing industry is the strong international demand for industrial products and high levels of foreign investment in the industry in China.
According to official statistics, the manufacturing sector accounts for 91.2 per cent of China's foreign trade and 70 per cent of its foreign direct investment (FDI).
Over 50,000 foreign companies had invested US$559 billion in the sector by the end of November last year, according to statistics from the Chinese Academy of Engineering.
And there was an aggregate research and development investment of US$4 billion from more than 600 transnational companies by June 2004, according to the same sources.
Beijing is home to 60 per cent of the foreign research bases due to the capital's advantages in terms of education and research.
Foreign firms also have research centres in Shanghai, Shenzhen, Chengdu and Nanjing, said sources.
Low production costs and research are the two reasons for this large inflow of foreign investment to the sector, said Xu.
"For example, the costs for developing a market in China are just 7 per cent that in the United States, and hiring an experienced software engineer in 'Silicon Valley' in the United States is 10 times costlier than it is in China," he said.
But experts warn that the sector's sustainable development could be undermined by a number of factors.
The industry's fast growth is based on high consumption of energy resources and the heavy environmental pollution.
According to industry sources, China's manufacturing industry accounts for 63 per cent of the nation's energy consumption, 20 per cent to 30 per cent higher than the international average.
"If we do not adopt measures to improve the industry's energy efficiency, energy shortages and environmental pollution will paralyze the manufacturing sector's further growth," said Xu, adding that this is already starting to happen.
In addition, manufacturers' ignorance of intellectual property rights also impedes the sustained rapid growth of China's manufacturing industry, Xu pointed out.
The technology patents applied in China's manufacturing sector total only 33 per cent of those in the United States and 25 per cent of those in South Korea, according to industry sources.
(Source: China Daily)
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