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Shanghai’s 12th Five-Year Plan on Industrial Development

Shanghai Municipal Information Office held a press conference on February 29 to answer questions about the city’s 12th Five-Year Plan for Industrial Development. Following are the highlights of the press conference:

Liu Jian, deputy director of the Shanghai Municipal Commission of Economy and Information Technology

Dragon TV: I’d like to ask Mr Liu about the city’s efforts to phase out outdated factories and optimize its industrial mix during the 11th Five-Year Plan period (2006-2010). What are the targets set in the 12th Five-Year Plan?

Liu Jian: During the 11th Five-Year Plan period, especially from 2007 to 2010, we eliminated or upgraded more than 2,800 industrial projects, saved 4.8 million tons of coal. But the adjustments also incurred a loss of 100 billion yuan in product value. We made following achievements through these adjustments:

First, Shanghai’s functions as a metropolis further strengthened. We reclaimed more than 3,066 hectares of land for the development of service industry, including R&D companies and corporate headquarters.

Second, the city’s environment has improved markedly. Industrial emissions of COD and sulfur dioxide have decreased significantly.

Third, the city has become safer with the removal of 149 chemical enterprises that had hazards in production and storage. Shanghai residents are much safer than before.

Fourth, the city’s industrial structure is further optimized. I just said that during the 11th Five-Year Plan period, heavy industry, including chemical industry, shrank from 23.9 percent to 20.6 percent in contribution to total industrial output value. Small enterprises in fertilizer, cement and metal production are leaving the city one by one.

During the 12th Five-Year Plan period, it will remain a major task for Shanghai to phase out its backward industries. We have three targets: First, promoting industries that are energy-efficient and have low emissions; second, evaluating the performance of an enterprise based on its energy and emission cuts and safety record; third, expanding industrial adjustment from a single enterprise or project into the entire sector or region.

During the 2011-2015 period, our restructuring efforts will concentrate on 12 industries. Chemical enterprises with high risks will either be located in an industrial zone or be shut down. Some sectors will be eliminated altogether or asked to reduce production scale.

We will pay more attention to industrial zones beyond the Outer Ring Road, such as the Taopu Industrial Zone, and to the protection of water sources, such as the upstream of the Huangpu River. Some industrial parks are also subject to environment-oriented adjustment, such as the Wujing Industrial Park.

Xinhua: As the global economic situation is changing, what problems are confronting Shanghai’s industries? What are the bottlenecks in industrial development? What are the challenges to be dealt with during the 12th Five-Year Plan period?

Liu: Honestly speaking, what we achieved during the 11th Five-Year Plan period did not come easily because we encountered the global financial crisis. Now the world economy has entered the slow-lane; international competition is heating up; protectionism is prevailing; and the market demand is dwindling. The external environment is becoming increasingly complex. That is our No. 1 challenge.

The second challenge is from within. Shanghai’s manufacturing sector has its own problems to solve. We have many constraints. For example, the city is short of land with only 160 square kilometers available for industrial development.

We are also short of energy. During the 11th Five-Year Plan period, Shanghai cut energy consumption per unit of industrial output by 28 percent. The target set in the 12th Five-Year Plan is much higher.

The third challenge is how to strengthen Shanghai’s capability for innovations. By the international standards, some Shanghai industries and products can only occupy the low and middle levels of the supply chain. However, Shanghai has an important advantage — the concentration of universities and research institutes. It means the city has a vast talent pool and huge potentials. The question is how to transform innovations into productivity.

Therefore, we will focus on strategic, emerging industries, especially major projects, to absorb talented people and stimulate the city’s industrial development.

STV: Two questions for Mr. Liu. You just talked about “two doubles” in the development of strategic, emerging industries and productive service industry. How do you compare the increase with that of the previous five-year plan? Second, does the slowdown in industrial growth mean the role of manufacturing industry is decreasing?

Liu Jian: I’ll answer your second question first. During the 11th Five-Year Plan period, the city’s industrial added value grew 11 percent while its industrial output growth averaged 12.8 percent a year. I don’t think it was slow because the total scale of Shanghai’s industry is already very large, especially in heavy industries like steel making, petrochemicals, and auto making.

During the 2011-2015 period, Shanghai’s GDP is expected to grow by about 8 percent. Its industrial added value is expected to growth by 6 to 7 percent. However, it does not mean that the manufacturing industry is no longer as important as before because we don’t just emphasize on volume but also on quality of growth. We want the manufacturing industry to be both bigger and stronger and we want to raise the quality level of our industry. That’s more important.

Therefore, Shanghai will establish a modern industrial system led by strategic, emerging industries, supported by modern manufacturing industry and productive service industry. The purpose is to optimize our industrial structure.

Now back to your first question about the “two doubles.” We have made strategic, emerging industries a priority for development during the 12th Five-Year Plan period with a focus on major projects in 11 industries, ranging from new-energy vehicles to the Internet of Things, large passenger aircraft, large integrated circuits, and smart grid.

In developing strategic, emerging industries, Shanghai will have four priorities, namely 1) major innovative and influential projects, 2) major enterprises that serve as role models in their sectors, 3) guaranteed supply of resources, particularly land, and 4) policy support and breakthroughs in relevant regulations.

For the productive service industry, I think it is very important to take advantage of the city’s tax reform aimed at replacing sales tax with value added tax and encourage manufacturers to separate from productive service companies.

We are also considering how to make the best use of the remaining 390 square kilometers of land available for industrial projects. We will pay attention to issues vital for the development of the productive service industry, such as product research and development, after-sale service, supply chain management, e-commerce and professional financial service. All these entail talent recruitment and training in order to succeed.

Wenhui Daily: Can Mr. Liu tell us how Shanghai will ensure industrial investment is in sync with project development during the 12th Five-Year Plan period?

Liu: Keeping investment scale at pace with project development is the key to sustainable industrial growth. During the 11th Five-Year Plan period, especially after 2007, we kept fixed asset investment at about 140 billion yuan a year, averaging an annual increase of 4.6 percent, but our industrial added value and industrial output value enjoyed a growth rate of 11 percent and 12.8 percent respectively. During the 12th Five-Year Plan period, we will continue to optimize the investment structure, maintain a proper investment scale, and raise the investment efficiency.

In optimizing the investment structure, we will first make sure that strategic, emerging industries will have the priority for investment. Second, we will increase investment in technical upgrading. In 2015, investment in technical upgrading is expected to account for half of our total industrial investment, 10 percent points higher than that of 2005. The 12th Five-Year Plan targets a further increase by 5 percentage points to reach 55 percent of total industrial investment.

Third, we will strive to improve the city’s investment environment through a R&D platform, system integration and brand management. These are all soft power that should be strengthened through an optimized investment structure.

Xinmin Evening News: As it is a national strategy to integrate the IT industry with the manufacturing industry, what progress has Shanghai made in this regard and what measures have been considered to spur the integration as a national trial?

Liu: Our department has two tasks during the 12th Five-Year Plan period. The first is to foster strategic, emerging industries and the second is to help Shanghai develop into an intelligent city. The integration of the IT industry and the manufacturing industry is the key to achieving the two tasks. In the past three years, we already fulfilled the goals set in the 11th Five-Year Plan and Shanghai ranks first among the eight regions selected by the national government to pilot the integration.

As for measures to spur the integration, they are already spelled out in the 12th Five-Year Plan. You can find them on the Internet. During the five-year period we will concentrate on key projects, major enterprises, core industrial parks and important sectors. The integration of the IT industry and manufacturing industry can help solve a lot of problems as in energy saving, emission reduction, product research and development, and e-commerce.