2006 CHINA’S INDUSTRIAL DEVELOPMENT REPORT
2006 CHINA’S INDUSTRIAL DEVELOPMENT REPORT——Philosophy of Science Development and Transformation of Economic Growth Mode
（Executive Summary）
The industrialization starting from the way of extensive growth is a common phenomenon if we look at the history of economic development from most countries in the world。However“cut-throat”competition and governments directly participating local games are the two remarkable features for the last over 20 years of China’s economic development。The most successful progress in the philosophy field during the period 10th to 11th Five-Year Plan is China understood that only readjusting the general means of control and policymaking is a far way to realize the fundamental change of the economic growth mode。China must introspect deeply the ideology of development and guide social and economic development with the philosophy
of science development。Therefore，whether China is able to realize the transformation of economic growth mode，it depends on fostering the ideology of science development in order to change of social value，ideologies of competition and business civilization。Industrialization with over 1 billion people participating in China consumed an extremely large amount of resource and made a great impact on environment is a most difficult problem for human。It is obvious，only transforming growth mode and taking sustainable development with resource-saving and well-protected environment that might push forward industrialization，China will be able to realize economic and social modernization。Therefore，whether China is able to change the growth mode depends on obtaining the innovation of theory，technology，institution and management under the guidance of science development philosophy。
Chapter 1
Industrial Growth Pattern
Now the traditional Chinese industrial growth pattern is faced with serious constraints in terms of profit margins，intellectual property，international market，resource environment，core technology and restriction of the social responsibility。Meanwhile，the general demand based on a scientific view of development，including building the“four kinds of societies”，realizing the“five major transformations”，setting up an innovation-oriented country，also pose a great challenge to the traditional industrial growth pattern。So to establish a new kind of industrial growth pattern driven by innovation is both a great demand to break those constraints and a choice to deal with the great challenge。The following measures shall be urgently taken so as to accelerate the transformation of the industrial growth pattern mainly in the these aspects，respectively，the construction of the financing system for technological innovation，the recreation of the financial policies for technological innovation，the restructuring of the initiative policies for human capital property right and the intensification of the construction of the corporate self-accumulating capability，the perfection of the foreign trade policies，the implementation of the government procurement policy and the reform of the scientific and technological management system。
Chapter 2
Industrial Structural Adjustment and Upgrading
During the 10th Five-Year Plan period，China’s industrial structure developed and changed with the basic features of the fast growth of resource-intensive heavy and chemical industries in China。The macro-control policy possessed an inhibitory effect on the blind expansion of the fixed assets investment scale but there appeared to be problems concerning the comparative excessive production capacity in some industries，but it was a new contradiction that also affected the coordinated development of the national economy。Solving this contradiction，it is necessary to bring the fixed assets investment scale under control，consolidate the market competitiveness，perfect the techno-economic norms and eliminate
outmoded production capacity。During the 10th Five-Year Plan period，the product sales income of the hi-tech industry reached an annual growth rate of 29%。In the export turnover of hi-tech products，the foreign invested enterprises accounted for 93.23%，which indicates that China’s hi-tech industry development was mainly attributable to the capital and technological injection of the multinational corporations。During the 11th Five-Year Plan period，as required by the new type path of a new road to industrialization，the orientation and tasks of China’s industrial structural adjustment is to adhere to the market-oriented and enterprises-centered principle，to consolidate the self-innovation capability as a key，continue to bring into full play the competitiveness of the labor-intensive industry，adjust and optimize the product structure，enterprise organizational structure and industrial allocation，upgrade the overall technological level and comprehensive competitiveness and promote the fundamental change of the development from large-scale enterprises to powerhouse。
Chapter 3
Industrial Investment and Macroeconomic Regulation
In recent years，China gained rapid growth in industrial investment with a remarkable recovery in the proportion of the overall scale of investment in fixed assets for the whole society and the remarkable shift towards manufacturing industry and the west regions。Although the autonomous increase capacity of industrial investment has initially taken shape，yet the excessive growth of investment brought a lot of problems，obviously highlighting the consolidation of the industrial extensive growth mechanism and the lower investment efficiency。Particularly，the former structural contradictions became even more serious；the bottleneck between resources and environment seriously restricted the economic development；
irrational investment and low-level expansion of investment triggered off a new round of production capacity surplus；the economic returns for the whole industry fell down on a large scale and the financial risks and pressure greatly increased；“development zone fever”proliferated the duplicated construction and waste of resources。So the strategy to maintain the steady growth of the industrial investment and raise the investment efficiency shall be oriented towards the further reform of the investment system and the enhancement of the marketlization of investment；it is urgent to adjust industrial investment structure and consolidate the intensive growth capacity，to optimize the industrial organizational strncture and upgrade the scale economy benefits，to strengthening regional coordination and cooperation and promote the spatial agglomeration of production capacity。In dealing with the duplicated construction and exorbitant competition the excessive industrial investment，the central government should take effective measures and lay stress on economic structural adjustment，transformation of the growth mode and sustainable development as the development objectives by reinforcing the orientation of the industrial policy，reforming the resource price formation mechanism，regulating the competitive order and restricting the local government’s investment impulse，so as to further strengthen and improve the macroeconomic regulation。
Chapter 4
Retrospect and Prospect：Relationship and Impact of Demand＆Supply of Energy
During the 10th Five-Year Plan period，China’s energy demand and supply relationship became tense，on one hand，affecting the normal operation of the national economy；on the other hand’greatly stimulating the energy production and energy construction。The main reasons for the tense relation during the 10th Five-Year Plan period between the demand and supply of energy resources lie in the economic overheat。The accelerated development of the heavy and chemical industries，and the excessive control of the demand and supply relationship in the past，insufficiency and inefficiency in enhancing the energy-efficiency and conservation of energy，all of which are the very reasons leading to the escalation of the energy consumption in China，
so energy consumption is much higher than the economic growth。The relation between supply and demand in energy is the vital foundation for the formulation of the energy policy，and also is the key point and orientation that might affect the central government’s energy strategy。The insufficient supply of energy in China promoted the central government to transform its energy strategy from the aspiration of the self-equilibrium as the core to the utilization of the domestic and overseas energy resources in its strategy；the excessive consumption of energy not only created ecological environment problems and energy security problems but also impel China’s energy policy to transform from the encouragement of the supply and demand equilibrium to energy conservation and environment protection。The 11th Five-Year Plan further made it clear that the guiding principle of the development of China’s energy industry，based on the domestic demand，construct a steady，economical and clean energy supply and demand system。
The fundamental way out for survival and development for China’energy is to raise efficiency so as to iron out the demand and supply contradiction。It is highly important to raise the energy through the concerted development of agriculture，industry and service；it is necessary to raise the energy utilization rate，reduce the environment pollution as a vital standard of the structural adjustment；enhancing energy utilization rate by ingenious innovation shall be highly accentuated as the important approach and means；it is also imperative to bring into full play the role in the positive adjustment of energy production and consumption played by price and taxation so as to perfect the price system of energy。
Chapter 5
Land Use for Industrial Purpose and Relevant Land Use Policies
Land is one of the primary production factors in the industrial production activities，so under the condition of the clearly established land ownership，ground rental and land price will be the most fundamental tool in adjusting the allocation of land resources for all the relevant purposes。However，the use of most of the land in practice is subject to the influence of the public policy，so it is rather beneficial to eke out the problems appearing in the market by means of the appropriate planning and restriction instituted by the public procedures and give full play to the market mechanism and the reasonable allocation of land。Since the reform and opening up and with the rapid advancement of the urbanization，it is evident that the urban construction land use takes the trend of the escalating expansion，thus bringing the relevant problems of waste of land resources；industry is still saddled with some problems in the urban areas：
firstly，as the land acquired by enterprises is lower priced with lower demand for environment protection，which leads to the redundant development of industrial investment in all places；secondly，there still exists the huge interest mechanism for the local government in requisition-land and reservation-land transfer，which instigates the local government to positively maneuver the land transactions in the disguise of purchase of land for the real purpose of selling the land for higher gains；thirdly，the government at all levels lack the function of public management of the land resources。It is necessary to take a basket of solutions to smoothen out the multifaceted problem of lower utilization of land for the industrial purpose。Essentially，it should base China’s land management on the basic guideline of the marketlization of the land resources and the governments shall phase out of land expropriation and the land trading market with its priority shifted towards the formulation of land planning and execution of the relevant laws and regulations。In the short run，the governments should be devoted to pushing forward the following policies：firstly，correctly dealing with the relation between efficiency of land use and the environment protection；secondly，deepening the reform of the land use system and giving boost to the market allocation of land resources；thirdly，taking root in tapping the potentiality for 1and resources and optimizing and revitalizing the stock land；fourthly，intensifying the role of planning of the land and optimizing the allocation and the structure of land use。
Chapter 6
Ingenious Technological Innovation in Industry
During the 10th Five-Year Plan period，China constantly improved its capability in enhancing its independent innovation of its industry，mainly characterized by：steady input of scientific funds in technological innovation and personnel input；ever-increasing growth of the output of technological innovation（in terms of numbers of patents and published theses）and the establishment of a large batch of independent innovation-oriented basic platforms and key projects，which have thus far constituted the main body of the technological innovations in our country。As far as the raised funds for scientific and technological innovation，R＆D expenditure and R＆D personnel expenditure are concerned，enterprises account for more than 60%of the national total expenditure。Yet from the perspective of efficiency of the independent technological innovation in industry，the total amount in transfer of scientific and technological achievements gained a strong momentum during the 10th Five-Year Plan period，and moreover，the average turnover of the single technological contracts increased considerably，
which clearly illustrates that the technological content of the independent innovation in China is on constant rise。In respect of the industrialization of the scientific and technological achievements，China Torch Program，Spark Program and programs for the popularization of the key scientific and technological achievements produced favorable returns。At present，the gap between China and foreign1 countries is greatly narrowed in terms of the independent technological innovation in industry and international level。However there is still obvious gap in some other aspects，mainly because of China’s lack of strength in R＆D input and lack of capability in adaptation and assimilation of foreign scientific and technological achievements and insufficient supply of skill-oriented talents。In the coming five years，there will be a favorable opportunity available to China’s independent technological innovation in industry。As we know，the overall awareness of the independent innovation in the whole society is greatly raised；the powerful national strength paves the economic foundations of the enhancement of independent technological innovation；
China has accumulated a large contingent of talents and practical technology；and it is easier for China to acquire the new technology under the context of its reform and opening-up；the immense internal market demand expands wider space for the technological innovation。But all taken into account，China still entails more injection of state financial support for the basic research。Integrated innovation and the enhancement of the national scientific and technological quality，and besides，importance shall be made to the vocational education with greater efforts。
Chapter 7
Industrial Consumer Goods Market in China
During the 10th Five-Year Plan period，our country’s industrial consumer goods market maintained an overall momentum characterized by sufficient supply but flat demand，which，however，does not indicate that the national industrial goods consumption has reached its saturation point。Yet on the very contrary，adversely affected by segmentation of urban-rural dualistic economic structure and obvious regional economic disparity，there appear remarkable consumption disequilibrium。That is to say，at the present consumption stage where the industrial goods are still taking the lion’s share in the market，but some people’s industrial goods consumption is contained to some extent。During the 11th Five-Year Plan period，the industrial consumption goods will enjoy a wider market space。
If we follow the scientific development outlook and strive vigorously for the objectives of building a well-off society in an all-round way，it is rather imperative to expand domestic demand and explore for more market opportunity as the dynamic engine to fuel the sustainable economic growth。The key of implementation of the macro strategy and policy measures to strongly stimulate the consumption growth lies in the increase of the disposable income of the middle and low income groups and strengthen the consumption capacity of the low income people，particularly the farmers while the national income is continuously enhanced，thus transforming the huge potential demand into the effective and realistic demand。Due to the restraint of the resource environment and the demand of the social development stage，it is an extremely urgent task at present that the“scientific concept of consumption”with the main connotations of“greenness”and“civilization”be positively advocated。
Chapter 8
Industrial Management System and Enterprise Reform
During the 10th Five-Year Plan period，China’s industrial management system and enterprise reform yielded significant results。Yet during the 11th Five-Year Plan period，China’s industrial management system and enterprise reform shall focus on transferring the function of the government，improving the state-owned assets supervision system，deepening the further reform of the monopoly industries and public utilities，adjusting the allocation and structure of the state-owned economy，pushing forward the construction of the legalization of the industry associations，accelerating the structural adjustment of the corporate organizations and transforming the large-sized state-owned enterprises into stock entities。The basic ideas for further promoting the industrial management system and enterprise reform should follow the this trend：transforming the governmental functions so as to streamline all kinds of relations，
thus genuinely establishing the leading status of the enterprises in market competition，market investment and technological innovation；vigorously improving the government’macro-regulation so as to create the favorable external environment for the development of the enterprises；establishing and improving the state-owned assets supervision and management system so as to bring the operators of the state-owned enterprises，the state-owned assets and major policy decisions into the systematic supervision and control；adjusting the corporate organizational structure so as to establish the structural scale rationality of the large，medium and small enterprises and giving impetus to the development of the corporate agglomerations and large-sized corporate groups so as to establish the orderly competitive patterns for the sustained，stable and coordinated development for large，medium and small enterprises；giving full scope to and regulating the industry association so as for the enterprises at large to conduct all kinds of basic social services。
Chapter 9
The Competition Order and the Optimization of the Competitive Environment
Market economy system is not just characterized by competition，but also by fairness and effectiveness of the competition。During the 10th Five-Year Plan period，with China’s economy being integrated into global economic system and its forgoing ahead with its marketlization at high speed，China has strengthened and enriched competitive orders，laws and regulations under the circumstances of competition market，and has made advancements in such fields as removing some restrictions on the market access，reforming the supervisory system，vertical organization restructuring，introducing the non-state-owned capital，establishing the franchise system，etc。As a result，
the local protectionism was restrained to some extent，the good effects of market competition in promoting innovation，economic growth and social development，has drawn close attention from people of all walks of life。However，China’s competitive order and competitive environment are still confronted with some knotty problems，such as，the local protection and administrative monopoly，monopolistic mergers and acquisitions，protection of intellectual property and intellectual property abuse and corporate self-discipline restrictive pricing，all of which shall be immediately straightened out。During the 11th Five-Year Plan period，China shall positively take advantage of the promulgation of“Anti-Monopoly Law of the People’s Republic of China”and the revision of“Law of the People’s Republic of China for Countering Unfair Competition”，and resolutely change the long existing tendency of attaching great importance to the industry policy while giving insufficient attention to competitive policies，by taking competitive policy as one of the fundamental policies of the socialist market economic system and guarding against and bringing to justice any kind of restrictive competitive behaviors that undermines efficiency and fairness。
Chapter 10
Employment and Guaranteeing the Rights and Interests of the Laborers
China’s present employment situations can boil down to the following features，respectively，the comparative surplus of laborers，the increasingly conspicuous employment structural contradictions，and the ever-increasing absorption of laborers by enterprises of the non-public sectors and small-sized enterprises and the transfer of redundant laborers from the rural areas to the urban areas as a vital source of migrant workers。So in this situation，the general laborers are at a disadvantage while bargaining over wages，working conditions in seeking employment in cities。Furthermore，there still remains much to be desired when the goveinmnent exercises the legal enforcement to regulate the labor relationship，particularly lacking in strength in restraining the enterprises from illegal doings and safeguarding the legal rights of the laborers；some local governments fail to guarantee that the labor legal system shall be effectively maintained and effectively observed，and there even appear such numerous cases of violation of the labor legal rights at the sacrifice of the interests of the general laborers；
insufficient personnel and lack of funds on the part of the labor and social supervisory departments and that in simplistic working manner；as far as the laborers at large are concerned，there has not been any trade unions available that stand up for the collective interests of the general laborers and the existing trade unions lack in independence，so there appears phenomena which typically reflect the serious infringement upon the legal rights of the laborers。Therefore，to iron out this problem，we shall vigorously improve and upgrade the legal system and give impetus to strengthening the labor supervision and protection so as to improve the efficiency of labor supervision and protection and modify the solution mechanism of the labor disputes and give full play to the trade union’s role of safeguarding the legal rights of the laborers，lay emphasis on the professional training of the laborers and ensure that the correct orientation is maintained in public opinion。
Chapter 11
The Concerted Development of Producer Service Industry and Manufacturing Industry
Viewed from the experience of the developed countries，the producer service industry is strongly interrelated to the manufacturing industry in terms of development。On the one hand，the producer service industry，to a large extent，depends on the development of the manufacturing industry；on the other hand，the rapid development of the manufacturing industry cannot be devoid of the support of the high-end producer service industry。This article briefly summarizes the development status of the modern logistics，financing service industry and information service industry。Furthermore，by analyzing the input and output table of the industrial affiliation status of the producer service industry and the manufacturing industry，it can be easily seen that the affiliation affinity between the producer service industry and the manufacturing industry in terms of development is still at the lower level。
From the point of view of the requirements of the economic growth，it is urgent to boost the concerted development of the producer service industry and the manufacturing industry。The basic approaches to promote the concerted development of the producer service industry and manufacturing industry mainly include：on the one hand，through further deepening the relation of corporate division and optimization of the manufacturing structure so as to upgrade the development quality of the manufacturing industry；on the other hand，effective measures should be taken to speed up the development of the producer service industry by perfecting the basic conditions，promoting the system innovation and ascertaining the development key points and further intensifying the reform and opening up。
Chapter 12
Environment Protection and Industrial Development
During the 10th Five-Year Plan period，the completed industrial pollution prevention targets are better than that of the urban pollution prevention，but there are some targets not well fulfilled。The quantity of the industrial sewage discharge continuously increased，but the discharge quality of the poisonous pollutants from the discharged wastes took a downturn on a continuous basis，reaching the industrial swage treatment target as set forth in the 10th five-Year Plan。Compared with the water pollution situation，China’s waste gas treatment situation was even more serious。Sulfur dioxide discharge quantity target was not complied with。The discharge quantity of the waste solid gas dropped markedly，but the quantity of disposal of the dangerous substances from the solid waste was rather low and the comprehensive utilization rate didn’t comply with the predicted targets；the serious environment problem caused by the trans-regional flow of the resources remained unsolved。Our country’s 11th Five-Year Plan clearly specifies that the aggravating trend of the biological environment shall be basically curbed，the total quantities of the main pollutants and wastes shall decrease by 10%，
and the greenhouse gas emission shall be effectively controlled within the environment protection target。To realize this target and avoid the reappearance of the similar situation during the 10th Five-Year Plan period when some targets were not complied with，the following measures shall be effectively taken：conducting biological tax reform and establishing the builder beneficiary system；establishing the compensation system and introducing the overall compensation mechanism in draining area compensation；establishing regional biological compen-sation funds；effectively utilizing the market mechanism to promote the implementation of the bio-logical compensation policy；applying the emissions right tradable system and raising the efficien-cy of controlling pollution；strictly controlling the new pollution and vigorously promoting clean production by means of technological innovation。
Chapter 13
Development of Foreign Trade＆Change of the External Environment
During the 10th Five-Year Plan period，China’s foreign trade gained the momentum in rapid growth，with obvious features demonstrated in the following aspects：improvement of the export structure，larger percentage of exports in electromechanical products and hi-tech products and the enhancement of the import and export market structure and the diversification of the main-body structure in foreign trade。The expansion of the export dimension enables China to continuously raise its status in the system of the international division of labor，yet it also sustains the shock of the change in the pattern of the international trade。With the intensifying competition from the international market，there appears a series of unprecedented changes in the external environment impairing China’s economic development，presenting a concentrated expression of the following features：price fluctuations of the energy and raw materials in the international market；
the prevalence of the new trade protectionism and frequent recurrence of trade disputes；the interest conflicts between countries caused by the appreciation of the RMB exchange rate and the trade frictions，which poses a new challenge to the sustainable development of China’s economic and trade intercourse with foreign countries。To adapt to the changes of the international environment and the domestic situation，China will，under the premise of continuous expansion of its reform and opening up and on the basis of the scientific development outlook，conduct the strategic adjustment to promote its foreign economic and trade development：accelerating independent innovation and transform the foreign trade growth manners；further completing the exchange rate formation mechanism and steadily advancing the process of the convertibility of the RMB；positively guiding the domestic enterprises to participate in overseas investment；establishing and perfecting the risk management system so as to push forward China’s opening up to the outside world；extensively conducting international cooperation activities and creating a favorable external environment to facilitate China’s economic and trade development
Chapter 14
Excavating Industry
During the 10th Five-Year Plan period，the development trend of China’s excavating industry tallies deeply with the orientation of the heavy and chemical industries with rapid growth rate。China’s excavating industry maintained the steady development in terms of its industrial structure during the 10th Five-Year Plan period and the corporate efficiency was increased to some extent。And during the same period，the industry was confronted with problems like insufficiency of the upstream and downstream integration，lower capacity of the comprehensive utilization of the resources，lower level of industrial concentration and frequent occurrence of the safety incidents，etc。During the 11th Five-Year Plan period，the upstream and downstream integration and the corporate vertical association of China’s excavating industry will be greatly intensified and more and more mega-sized corporate conglomerates will be cultivated。