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Strategic Thinking on Optimizing and Upgrading Industrial Structure in Hebei Province
2015-07-28
By Wei Jigang, Research Department of Industrial Economy of DRC
Research Report No 142, 2014 (Total 4641)
Hebei Province enjoys a prominent strategic position. As is noted by Gu Zuyu, a geographer of the late Ming and early Qing Dynasty, in his Dushi Fangyu Jiyao (Essence of Historical Geography), Hebei “occupies the upstream and possesses the potential to defend attacks from the world, Wouldn't it be the now Zhili (an administrative division)?” In the new historical period, promoting the optimization and upgrading of the industrial structure in Hebei Province is of crucial importance for its overall development and integration of the Beijing-Tianjin-Hebei region. This undertaking calls for a global vision and strategic thinking. Based on the national, regional and provincial conditions, Hebei needs to position its industry in the light of domestic and international changes in industrial structure, choose its development direction in line with the market demand, regional labor division and coordination as well as industrial development pattern, and determine the breakthrough fields based on the existing foundations, strengths and weaknesses.
I. Changes in global industrial structure and the current industrial condition of Hebei Province
At present, the world economic structure has undergone major changes, and the world economic focus is shifting to Asia, with global industrial development showing features as listed below. First, new major breakthroughs will be seen in new science and technology as well as in new industry; integration between information network and entity industry is accelerated. These developments bring about profound impacts on the structure of the industry and trade in all countries, and most countries embark on the road of industrial upgrading. Second, globalization facilitates global connectivity and mobility, boosts the deepening of global labor division and the formation of global value chain; the trends of global research & development, global procurement, production, sales and service gain growing prominence. Third, global industrial transfer has shown new features. Some high-end manufacturing links flow back to the developed countries, while some low-end links shift to the developing countries with more cost advantages in primary factors; international competition becomes more fierce, and trade frictions and barriers are still on the rise; industrial development should meet the demand for the goods and services characterized by being green, energy-saving, environmentally friendly, intelligent, high quality, individualized and secure1.
In terms of the development of domestic industry, China has become the world's biggest power of manufacturing and trade, with great improvement in the competitiveness of some sectors. There is a sound basis of science, technology and human resources required by the industrial development. Its future development will display the market advantage of extra large scale.
In terms of the international trend in regional development, new features of the current times are embodied in regional economic integration, construction of urban agglomerations, regional blocs, and the establishment of Free Trade Area (FTA).
In terms of the regional economic development and labor division in China, while accounting for a large part of the total economy and with relatively well developed urban agglomeration, the Yangtze River Delta and Pearl River Delta have different emphasis on industrial selection and upgrading. For example, Shanghai focuses on the development of modern service industry and advanced manufacturing industry as well as the construction of international financial and shipping centers. Zhejiang, Jiangsu and Guangdong have their own leading industries, working out their own industrial upgrading plans. The Midwest emphasizes on the development of industries with advantages in location, environment and resources as well as traditional advantage and other specialty advantages. The Midwest also speeds up the undertaking of industrial transfers from the east. The Northeast stresses on equipment manufacturing and the consolidation of agricultural foundation. The Beijing-Tianjin-Hebei region is China's new growth point. Beijing vigorously develops the high-tech and modern service industries, and Tianjin put more importance in the development of heavy chemical industry, manufacturing industry, high-end and new technology, shipping, logistics and etc.
We will elaborate on the economic situation of Hebei in particular here. Hebei has seen a rapid annual average growth of economic development in recent years, ranking the sixth in the national GDP. Hebei Province is strong in economy, agriculture and industry, and rich in resources. As one of the 13 major grain producers, Hebei takes a decisive position in supplying grain to the country. Its iron and steel industry, petrochemical industry and equipment manufacturing industry are the three importance pillars for the province. Its output of steel, flat glass, penicillin and vitamin C runs the first in the country, boasting some famous brand names and resource advantages in coal, petroleum, iron, limestone and etc.
However, the problems of the industrial development in Hebei are also visible. The agriculture output is great in quantity but not in quality. The industry is huge in scale but not in strength. High-tech industry enjoys rapid growth, but the development of service sector seriously lags behind2. Here are some problems in industrial development as follows: poor innovation capacity; weak core competitiveness; homogeneous production; low-level repetition; lack of specialty industry; lack of profits from producing quality products; serious industrial overcapacity; scale expansion by overdependence on labor, land, resource and other factors; environmental degradation and resources depletion; big challenges of environmental control3; severe shortage of water resource4; growing conflict between human demand and land availability; inadequate development of various markets; low degree of outward-orientation and openness; week ocean consciousness; less developed non-state-owned economy and fewer small and medium enterprises (SMEs) compared with other developed provinces5; less satisfactory environment for the enterprises' development; low inclusiveness of industry and society; lack of well-developed metropolitan areas, sparse spatial layout of industries; lack of industry linkage; the development and capacity of railways, ports, aviation, logistics, supply chain management, marketing, R&D, finance, insurance to be improved.
II. Strategic thinking on optimizing and upgrading industrial structure in Hebei Province
1. Multidimensional perspectives and strategic objectives.
The optimization and upgrading of Hebei's industrial structure need to be considered from multiple perspectives of history, geography, growth, future, linkage, new technology, international situation and space.
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1According to the OECD research, measured at the purchasing power parity, China's GDP will account for 28% of the global GDP by 2030.
2In 2013, the GDP of Hebei's service sector is 10% lower than that of the national average.
3In 2012, Hebei's total energy consumption is of 302 million tons of standard coal, producing main air pollutants like NOx of 1.761 million tons, and SO2 of 1.341 million tons respectively. The three indexes rank the second, the first and the third in the country respectively. Among which, coal consumption by the industries of iron, steel, building material and electricity accounts for 89.6% of the provincial total, nearly 20% higher than the national average.
4The average water resource per capita in Hebei is only 1/7 of that of the national average.
5In 2013, the added value of non-state-owned economy in Hebei totaled 2.86802 trillion Yuan, accounting for 66% of the provincial GDP. In the same year, only 16 non-state-owned enterprises in Hebei are included in the list of China's Top 500 Private Enterprises, while Zhejiang has 139, Jiangsu 93 and Shandong 54 on the same list.
