China Council for the Promotion of International Trade (ccpit) 2009 Preface

Chapter 10 Relevant Policies and Regulations of China's Light Industry

Light industry policy is an important part of national economic plan and policy system. Correct policy formulation and implementation are preconditions to ensure the healthy development of light industry, proper allocation of light industry resources and to promote the modernization and rationalization of industrial structure and organization structure of enterprises so as to preferably carry out national guideline and policy to develop light industry.

1. Industrial Development Policies

10.1.1 Readjustment and Reviving Layout of Light Industry

On May 18^th 2009, the State Council officially passed Readjustment and Reviving Layout of Light Industry, which proposed that during 2009 to 2011, the key for light industry readjustment and reviving relied in restructuring and industrial upgrading, as well as promoting energy-saving & emission-reduction and eliminate backward production capacity. As a significant industry in national economics, China’s light industry is important in terms of enriching market, increasing export, providing employment and serving agriculture, farmers and rural areas. Light industry plays a decisive role in economic and social development. This Layout is formulated as an comprehensive action plan to face the influence of international financial crisis, fulfill the general requirements of sustaining economic growth, boosting domestic demand and adjusting structure by the Party Central Committee and State Council, ensure the stable development of light industry, enhance structure adjustment, and promote industrial upgrading.

Guiding concept of the Layout: carry out the spirit of 17th National Congress of CPC in an all round way. Guided by Deng Xiaoping Theory and the important thought of the “Three Representatives”, we must carry out the scientific outlook on development, take comprehensive measures to expand urban and rural markets, consolidate and expand international market and maintain a stable development of light industry according the general requirements of sustaining economic growth, boosting domestic demand and adjusting structure; conduct technology reform, promote the building of self-owned brands, eliminated backward production, enhance light industry restructuring and industrial upgrading through enhancing independent innovation; develop new light industry of green ecology, quality safety and circular economy, and consolidate its pillar position to flourish market, provide employment and serve agriculture, farmers and rural areas.

Basic principles: boost domestic demand, stabilize international market; give priority to key industries, culture leading enterprises; support small and medium enterprises, promote employment; accelerate technology progress, eliminate backward production capacity; ensure product quality and enhance food safety.

Layout goals: keep a stable production growth, achieve results in independent innovation, optimize industrial structure, reduce pollutants remarkably, eliminate backward production capacity, and promote safety in an all round way.

Major tasks for industrial adjustment and revival: 1. foreign and domestic markets: stimulate domestic consumption, increase efficient supply, maintain and expand international market, and amplify foreign trading service system.2. Independent innovation capability: raise automation level of key facility, promote key technology innovation and industrialization, and provide good public service. 3. Conduct technology reform: raise the overall technology level of light industry, promote energy-saving and emission reduction among enterprises, and adjust production structure. 4. Special task on food processing safety: rectify food processing enterprises, clear food additives and illegal additives, improve supervision ability on food safety, raise food industry access threshold, and enhance the construction of credit system of food industry enterprises. 5. Build self-owned brands: support dominant brand enterprises to acquire and reorganize, reform technology, and build up innovation ability, promote industrial integration, increase industrial concentration and enhance brand enterprise power. Support the competitive domestic enterprises to go out and implement localized production, open up international market, expand production coverage, and improve brand influence. Improve certification and testing system, actively conduct exchanges and cooperation with major trading partner countries at various levels, raise the international society’s recognition of certification and testing results, and create self-owned brand internationally. Enhance self-owned brand protection, step up propaganda efforts, and raise the awareness and sense of responsibility of enterprises and society to protect famous self-owned brands. 6. Industrial transfer orderly: integrating optimized regional layout, encourage the areas with resource advantages to summarize and draw lessons from industrial cluster development, improve construction conditions and business environment, receive actively industrial transfer. 7. Production quality level: set up production quality security mechanism, speeding up in formulating industrial standards and revision. 8. Self-management of enterprises: increase legal awareness, enhance self-discipline of enterprise, improve enterprise quality in all round way, raise their awareness and sense of social responsibility to operate according to law. 9. Eliminate backward production capacity: build up industrial dropping out mechanism, make clear elimination standards, quantify elimination index and intensify elimination efforts.

Policies and measures: increase home appliances subsidy program in rural areas. The government will further increase export tax rebates for certain products, adjust processing trade catalogue, solve agriculture stock problems, enhance technology innovation and reform, enhance financial support, support small and medium-sized enterprises, improve industrial policy guidance, encourage mergers and acquirements and exert association functions.

Layout implementation: relevant departments of the State Council shall formulate corresponding policies and measures as soon as possible according to the Layout division, enhance communications and collaborations to ensure the smooth implementation of the Layout. Each area shall combine local situation and make specific implementation programs according to the goals, tasks and policies and measures in the Layout and ensure practical results.

10.1.2 Paper Industry Development Policy

Paper industry is an important basic material industry closely related to national economic and social development. The consumption of paper and paper board is a sign to measure a nation’s modernization and civilization level. Paper industry bears the characteristics of intensive capital and technology, remarkable scale profits. With strong industrial linkage and large market capacity, it is a new growth point for national economic development and plays an important role in driving the industrial development of forestry, agriculture, printing, packaging, machine manufacturing etc. On October 15^th 2007, National Development and Reform Commission proposed Paper Industry Development Policy. The Policy including 12 chapters: foreword, policy aims, industrial layout, fiber materials, technology and facilities, production structure, resource conservation, environmental protection, industry assess, investment and financing, paper consumption and others.

Paper industry policy aims: moderately control the construction of paper and paper board projects. By the year of 2010, increase paper and paper board production capacity of 26.50 million tons, eliminate outdated production capacity of 6.50 million tons, and make effective production capacity of 90 million tons. Decrease quantity of water intake for one ton of paper product to 80 m³ from 103 m³ in 2005, decrease combined average energy consumption (standard coal) to 1.10 ton from 1.38 ton in 2005, decrease total pollutant emissions(COD) to 1.40 million tons from 1.60 million tons in 2005. Establish a new paper industry development mode of resource conservation, environment friendly, harmonious development.

Paper industry layout: paper industry layout shall be adjusted from north to south to form a new rational industry layout. The south of Yangtze River is a key area for paper industry development, which focuses on building up integration project of forestry and paper and accelerate the development of pulp and paper making industry. The southeast coastal area is a key area for building up integration projest of forestry and paper; the middle and lower reaches of the Yangtze river shall bring the initiative of existing key enterprises, speed up in culturing or introducing construction subject of forestry and paper integration project, and develop gradually into a key are of this project; the southwest area shall make a rational use of wood and bamboo resources and turn resource advantage into economic advantage, pay attention to both wood pulp and bamboo pulp; Yangtze River Delta and Pearl River Delta shall take account of making paper with wood pulp and waste paper at home and abroad. In principle local wood pulp projects in these two areas are not arranged.

The north of Yangtze River is optimal adjustment region of paper industry. Material structure adjustment, enterprise number reduction and enhancing production concentration attach great importance. Huang-huai-hai region shall eliminate outdated straw pulp production capacity, increase the usage of commercial wood pulp and waste paper, moderately develop integration of foresty and paper, control paper pulp project with large water consumption, accelerate regional industry upgrading, ensure to develop paper industry while not to increase or reduce water consumption and pollutant emission; the northeast area shall accelerate the construction of paper production base, promote enterprise reform, raise their competitiveness, while not to establish new pulp and paper making enterprise in principle; the norhtwest are shall accelerate the integration of paper industry and control production expasion via merger & acquisition and reorganization of leading enterprises.

Paper industry technology and facility: the R & D priorities of pulp and paper making are as follows: paper board machine technology and machine in set with annual output capacity above 300,000 tons; cultural paper machine with width of 6 meters, speed of 1200 meters/minute and annual output capacity above 100,000 tons; toilet paper technology and machine in set with width of 2.5 meters and speed of 600 meters/minute and above; chemical machinery pulp technology and equipment in set with annual output capacity of 100,000 tons which boasts high efficiency and low energy consumption; waste pulp technology and equipment in set with annual output capacity of 100,000 tons and above; R & D on new craft, technology and equipment of pulp and paper made without wood material, especially the development of recycle technology and equipment of straw alkali; technology and equipment of water conservation and energy-saving. On the basis of existing situation, paper industry shall promote independent innovation, form independent intellectural rights and realize set equipment localization as soon as possible.

Paper industry structure: support domestic enterprises to develop about 10 advanced pulp and paper enterprises with annual output of 1 to 3 million tons, and develop a certain number of multi-regional, cross-department, and cross-ownership large and competitive pulp and paper making enterprise groups with annual output capacity of 3 million tons via M & A, alliance, reorganization and extension. Raise industrial concentration level. By the year of 2010, paper and paper board total output of top 30 pulp and paper making enterprises shall account for 40%, rather than 32% nowadays, of the total output.

Paper industry access: domestic investment subjects entering paper industry shall have advanced technology, a great amount of capital, rich management experience and high credit. Enterprise asset-liability ratio is smaller than 70%. Bank credit is above AA class. Paper industry development shall realize scale economy and stress starting size. The single production line of newly built or extended pulp making project shall meet the following standards: annual output of chemical pulp reaches 300,000 tons, annual output of chemical machinery pulp reaches 100,000 tons, annual output of chemical bamboo pulp reaches 100,000 tons, and annual non-pulp output reaches 50,000 tons. The single production line of newly built or extended paper making project shall meet the following standards: annual output of newsprint reaches 300,000 tons, annual output of cultural paper reaches 100,000 tons, annual output of linerboard and white board reaches 300,000 tons, and annual output of other board projects reaches 100,000 tons. Tissue paper, specialty paper, board project and upgrading of existing production line are beyond scale access conditions.

10.1.3 Industrial Policy for the Dairy Products Industry

Dairy products industry is one of the industries with the fastest growth speed since China’s dairy industry entering new era. The development of dairy products industry is a great drive force to enrich urban and rural markets, improve dietary structure of residents, improve the national physique, optimize agricultural industry structure, increase farmer’s incomes and promote the building of new socialist countryside. On May 29^th 2008, the National Development and Reform Commission issued Industrial Policy for the Dairy Products Industry. The Policy includes 12 chapters in total: foreword, policy aim, industry layout, industry access, raw milk provision, technology and equipment, investment and financing, production structure, quality security, organization structure, resource conservation, environmental protection, dairy products consumption and others. The main content is as follows:

Policy aims: by 2012, China’s average milk possession per capita will reach 42 kilograms. By 2010, dairy products output will reach 23.50 million tons. Among which, dry dairy production will reach 3 million tons; liquid dairy products production will reach 20.5 million tons. By 2012, dairy production will reach 28 million tons, of which dry milk production will reach 3.5 million tons, while emulsified production will reach 24.5 million tons.

Dairy industry layout are: the layout of the dairy industry should give full play to the resources of the traditional dominant regions, adjust and optimize the layout of key producing areas in the northeast, north, northwest of China. Hasten the elimination of the capacity with irrational layout, small scale, and backward technology; the South area, based on the actual local conditions, shall gradually expand the scale of the dairy industry; suburbs of big cities shall peed up the pace of modernization of the dairy industry. A new pattern of the dairy industry shall be formed with distinctive characteristics, reasonable layout, and coordinated development.

Dairy industry access conditions: the enterprises to enter dairy industry, fullfil the requirements of "Dairy Processing Industry Access Conditions". The provisions different from the Conditions or newsly added provisions shall be subject to the Conditions.

Investors into the dairy industry must have a stable milk base, strong economic strength and anti-risk ability, rich management experience, good reputation and strong sense of social responsibility. They shall meet the following conditions: existing net assets are not less than two times of the capital required for the proposed dairy project. The total assets are not less than three times of total investment required for the proposed project. The rate of assets-liabilities shall not exceed 70%. They must make profits for three consecutive years; lending credit rating assessment by financial institutions at the provincial level or above the provincial level shall achieve AA level and above; they must have a good social image and abide by law.

Dairy industry milk supply: Northeast dairy processing zones focus on the development of the large cow-breeders (family farm), standardized farming district, moderate size dairy farm, while build a number of high-standard modern dairy farm; North China dairy processing zones focus on the development of professional of farms and large-scale plot, expand the scale of breeding to improve intensity; South dairy processing zones focus on the development of milk and animal species adapted to the local climate characteristics, support the building of buffalo milk source base; Raw milk dairy base in processing zone in suburbs of big cities shall be constructed mainly towards scale and standard farming. Farm environmental governance attaches great importance.

Technology and equipment of dairy industry: stick to principle of combining introduction and independent research and development, encourage innovation, develop advanced and applicable technologies and equipment with our own intellectual property rights. Pay attention to the platform construction of national and corporate dairy technology and engineering research centers and key laboratories etc.; continue to carry out the key common dairy technology research, integration and demonstration; promote autonomization of dairy equipment, and improve dairy production technology and equipment manufacturing standards.

Dairy processing equipment research focuses on large-scale milk production equipment with daily processing capacity of 500 tons raw milk, low-temperature spray drying equipment, daily processing 100 tons of raw milk cheese production equipment, membrane filtration equipment, saving multi-effect equipment, cream separator, complete set of equipment sterilization and aseptic filling with daily processing capacity of 100 tons raw milk, complete set of milk whey processing equipment and pressing equipment, etc.. Research and develop methods and equipment of raw materials and finished products testing, on-line inspection during production process and non-destructive testing. By 2012, autonomization rate of complete sets of squeezed milk equipment, milk pre-treatment equipment, shall reach 85% or more while autonomization rate of sterile canning equipment shall reach 60% or more.

Investment and financing of dairy industry: The large-scale dairy enterprise groups with annual sales income of more than 2.0 billion should study and formulate long and middle term development programs based on the national dairy industry's industrial policy. Encourage mergers, acquisitions and restructuring among domestic dairy companies and equipment manufacturers. Foreign-invested enterprises who conduct above acts shall process in accordance with national laws and regulations on foreign investment regulations and the rules.

Dairy Quality Safety: establish strict security control system, strengthen inspection and quarantine of imported dairy products, ensure the safety of dairy products through overall control on raw milk production, acquisition, processing, marketing and other aspects and enhancing the quality and safety production license certification. Revise standards for raw milk purchase, some dairy product standards, formulate product standards of cheese, whey powder, cream products etc.. Establish a sound standard system for dairy products. Popularize mechanized milking and reduce pollution in the production chain. Strengthen the milk station management, accelerate the formulation of design standards of milking station and milk collection station and the operating procedures of milking, and milk collection. By 2012, mechanized milking rate of the main producing areas will reach 80% and more.

10.1.4 Implementing Measures on Pilot's Policy to Distribute Household Electrical Appliances

In December 2007, the Ministry of Commerce and the Ministry of Finance issued the Notice to Distribute Household Electrical Appliances to the Countryside on the Pilot's Policy to raise rural residents’ purchasing power on household appliance with government subsidies. Shandong, Henan and Sichuan are the pilots provinces with pilot products color TVs below 1500 yuan, refrigerators below 2000 yuan and mobile phones below 1000 yuan. In October 2008, the government included more provinces to conduct this policy including Inner Mongolia, Heilongjiang, Anhui, Hubei, Hunan, Guangxi, Chongqing and Shaanxi. Washing machine also became a pilot product. In accordance with the export tax rebates, the central and local governments give 13% of the sales price subsidies to farmers who buy pilot products, in order to activate the purchasing power of farmers to speed up the upgrading of rural consumption, and expand rural consumption and promote coordinated development of external demand and domestic demand. On December 31^st 2008, the General Office of the State Council proposed Opinions of the General Office of the State Council on Invigorating Circulation and Expanding Consumption, which called for full promotion of household appliances to the countryside. From February 1^st, 2009, the Policy is extended from 12 provinces (zones and cities) to the whole country. Meanwhile, home appliances such as motorcycles, computers, water heaters (including solar, gas, and electric heaters). Household Electrical Appliances to the Countryside play a role to activate the purchasing power of farmers to speed up the upgrading of rural consumption, and expand rural consumption and promote coordinated development of external demand and domestic demand and provide a foundation to the development of household appliance industry. to the countryside policies included in the scope of subsidies from the provinces (autonomous regions and municipalities) based on local needs to increase part of the subsidies varieties to choose from. In April 2009, the Ministry of Finance and the Ministry of Commerce and other ministries issued a notice "Detailed Rules and Regulations for Household Appliances to the Countryside" to ensure full implementation of the work of household appliances to the countryside into practice.

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