A dozen Chinese governmental departments – notably including the Ministry of Industry and Information Technology – are jointly promoting the merger and restructuring of nine key Chinese industry sectors. At a press conference held on January 23, MIIT emphasized that market considerations will be a dominant factor in this process. In addition, MIIT will continue to promote the transformation and upgrading of industry this year and will focus upon improving the quality and efficiency of enterprises, with an expected goal of 10% growth in 2013.
The nine industrial sectors where merger and restructuring will be accelerated are:
- Rare earths
- Electronic information
- Agricultural mechanization
There are about 900 listed companies involved in these industries, accounting for half of the listed companies in the Chinese domestic A-share market at present.
Currently, the organization of these sectors shows low concentration and a lack of leadership enterprises. This has resulted in prominent problems, such as product duplication, excess production capacity and unhealthy price competition. The process envisioned by the Chinese government is not a “forced marriage” implemented by mandate. Rather, a fair regulatory and financial environment will be provided along with various supporting services. Systemic and institutional obstacles hindering merger and restructuring will be eliminated, including rules and procedures that do not conform to national standards.
In 2012, Chinese industry stabilized a falling growth rate and declining corporate profitability in the first three quarters, and a recovery was becoming evident. Data showed that the added value of larger industries in China grew 10% last year, and the profit of larger industrial enterprises increased 3% year-on-year in the first 11 months. Based upon comprehensive analysis of these industries in China, and the restructuring efforts described above, a growth target of 10% has been established for 2013.
Recent serious air pollution concerns have sounded an alarm about Chinese industrial pollution emissions. China must make great strides in industrial energy saving and emission reduction to reduce pollution levels and to facilitate future preventive measures. For example, a series of comprehensive measures including economic, legal, technological and necessary administrative means will be adopted to accelerate the elimination of inefficient production facilities, improve the clean production level of industries including steel, cement, petrochemicals and nonferrous metals, expand pollution prevention in motor vehicles, promote the ecological design of industrial products, and expedite the development of the environmental protection industry.
While opportunities exist to greatly improve the performance of Chinese industry, various challenges are not subject to Chinese control. For example the growth of overseas markets, and their demand for Chinese products, is difficult to predict. Even domestic demand is uneven, given the many interacting forces at play. Therefore better marketing and better analytical models, along with a continued emphasis on new market areas, product development, and quality, are called for.