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

Major achievements in the development of light industry

The rapid development of China’s light industry since the beginning of the new century has led to a notable improvement of scale and capacity of enterprises, the constant promotion of competitiveness of the industry, and the remarkable contribution of the industry to expand employment and to benefit agriculture.

I. Continual Rapid Development of Light Industry

Light industry has been developing rapidly since 2000. From 2000 to 2008, the added value of enterprises above the designated size increased 5.2 times, indicating an annual growth of 22.9%. The value added of industry (VAI) realized by light industry achieved RMB2, 623,530million Yuan, amounting to 20.3% of the total VAI of the entire industry of China and 8.7% of GDP (Gross Domestic Production); the total amount of profit and taxes of light industry achieved RMB627,800 million Yuan in the first eleven months of 2008, amounting to 14.8% of the total amount of profit and taxes of the entire industry of China.

Diagram 2: Annual Gross Production of Light Industry (2000-2008)

亿元：100 million yuan

利税总额：Total profits and taxes

利润总额：Total profits

Diagram 3: Growth of Profit & Tax and Growth of Profits of Light Industry (2000-2008)

II The production of greater food industry amounts to one third of the total light industry, bringing about remarkable benefit for agriculture.

The value of production of seven industries of agricultural and sideline food processing, plastics, food, papermaking, home appliance, beverage and feature occupies 71.44% of the total value of production in light industry, and the greater food industry combined by agricultural and sideline food processing industry and food industry amounted to 33.09% of the total value of production of light industry, with the growth rates of 34.40% and 29.58% respectively and being the leaders in growth rate in the whole industry.

The profits gained by the greater food industry mentioned hereinabove amounted to 30.69% of the total profits of light industry, and the growth rate of profits are 20.75% and 26.88% respectively, ranking high among industries in the field. The development of food industry plays a significant role in boosting the income of farmers. 70% of industries in light industry and 50% of the value of production in light industry involve agricultural and sideline food processing industry, which brings bout direct benefit to more than 200 million farmers and then plays an essential role in solving the problems concerning “Agriculture, Farmers and Rural Areas”.

Diagram 4: Gross Value of Production industries in Light Industry in 2008

III World-leading production of various light industry products

The production of more than 100 types of products in light industry including bicycle, sew machine, battery, beer, furniture, daily ceramics, lamps, air-conditioner, washing machine, microwave, shoes and piano rank No.1 in the world, making China a real big country of light industry.

IV Strengthening Competitiveness of the Industry

Up to now, 49 enterprise technology centers have been built in light industry and certificated by the State, providing powerful support for the development of new craftsmanship, new technology, new equipment and new products. The value of production contributed by new products grew from RMB333, 700 million RMB Yuan in 2005 to nearly RMB660 billion in 2008, which means an annual average growth rate of 34.2%. The introduction, digesting and absorbing of technology and key equipment have brought about a notable promotion of the level of technology and equipment in key industries, and powerful capacity for integrated innovation and independent innovation have been formed in industries in pulp & paper making, home appliance, plastic articles and leather.

Internationalization of light industry and its global impact

The continual improvement of internationalization level in light industry can be indicated by the continual growth of the proportion of foreign-funded enterprises in China’s light industry, and particularly by the great increase of export of light industry products and the continual growth of share in international market.

The total export of light industry products in 2008 amounted to USD309, 200 million, occupying 21.7% of the total export of the country. It is also 3.4 times of the amount in 2000, contributing an annual growth rate of 20.2%. The prices of exported products have been rising, and the trade surplus contributed by light industry over the years exceeded 76% of the total amount of trade surplus of the country in each year. During the period form 1996 to 2008, the trade surplus realized by light industry amounted to USD1, 022,300 million, which is equal to 66% of the total amount of foreign exchange reserve of China.

Up to now, one quarter of the light industry products in China are exported to more than 200 countries and regions in the world, constituting important force for China to participate in international competition and cooperation in the situation of economic globalization. The market share of products including home appliance, leather, furniture, down products and bicycles has achieved 50%, among which minor home appliance occupies 80%, air-conditioner, microwave and down coat 70%, bicycle 65% and daily ceramics 60%. China has become an important production base for light industry products.

Key opportunities and challenges for light industry

China is now at the critical period towards the realization of a moderately prosperous society, which also brings about new situation for light industry. Advantages are provided, but there are also many restraining factors, i.e. the coexistence of opportunity and challenge. Generally speaking, opportunity goes beyond challenge, which is beneficial for the further development of light industry.

Opportunities brought about by globalization and international industry transfer

The in-depth development of globalization indicated by the continual trend of globalization in market, production, investment, finance, science and technology, the expansion and acceleration of cross-country circulation of production factors and industrial transfer and the continually deepening mutual tie and influence between China’s economy and the world economy are also providing opportunities for us to make a better use of foreign investment, technology and resources as well as the global market promote upgrading of domestic light industry and the sustained and rapid development of the industry. As one of the earliest industries in the process of gradual integration of China’s economy into the world economy, light industry in China can make a full use of the resources from both domestic market and international market to develop and expand.

The continually deepened integration between economies in the world brought about by economic globalization urges the global industrial economy into another round of restructuring and transfer. The transfer of labor intensive industries such as leather, shoemaking, furniture, pen-making and glasses from advanced countries like America, Japan and some European countries to China is of great benefit for China in international competition and in making a better use of comparative advantage in light manufacturing industry.

Opportunities brought about by continually increasing demand of the future market

China has entered the new era of building a moderately prosperous society in all respects and the acceleration of the process of socialist modernization since the beginning of the new century, during which there will be the acceleration of industrialization, informatization and urbanization, the upgrading of consuming structure among urban and suburban citizens, and consequent acceleration of industrial restructuring. International experience reveals that the consuming features of citizens of a country during the period of the promotion of average GDP from USD1000 to USD3000 will be transferred from survival-based to development-based, i.e. from having enough to eat and to wear, durable consumer goods to use and houses to live to better foods and clothes, improved living conditions, higher quality of durable consumer goods and the expansion of service consumption. Correspondingly, there will be further promotion of industrial structure and the improvement of technological level.

Opportunities brought about by the key concern in China’s economy on consumption growth

The report of the 17^th National Congress of CPC stated, “To attain the objectives for economic development, it is essential to significantly accelerate the transformation of the development pattern and improve the socialist market economy. We need to vigorously push forward strategic economic restructuring and make greater efforts to improve China's capacity for independent innovation as well as energy and environmental conservation, and to enhance the overall quality of the economy and its international competitiveness. We need to deepen our understanding of the laws governing the socialist market economy, introduce institutions to give better play to the basic role of market forces in allocating resources, and form a system of macroeconomic regulation conducive to scientific development.” Therefore, “We should accelerate transformation of the mode of economic development and promote upgrading of the industrial structure. We must keep to the new path of industrialization with Chinese characteristics, pursue the policy of boosting domestic demand, particularly consumer demand, and propel three transitions in the mode of economic growth: the transition from relying mainly on investment and export to relying on a well coordinated combination of consumption, investment and export, the transition from secondary industry serving as the major driving force to primary, secondary and tertiary industries jointly driving economic growth, and the transition from relying heavily on increased consumption of material resources to relying mainly on advances in science and technology, improvement in the quality of the workforce and innovation in management.

The report of the 17^th National Congress of CPC provides theoretical guide as well as political safeguard for better and faster development of light industry. As a consumer goods industry with close relationship with primary industry and tertiary industry, light industry must undertakes new historic mission. Light industry will grasp the new historic opportunities and make greater contribution to the progress from a big industrial country of light industry to a powerful industrial country from a high starting point and a wide view with long-term plan and brand-new distribution.

The long-term rapid development of light industry has also brought about many conflicts and problems that restrain the development of the industry, which are mainly as follows.

Weak capacity for independent innovation

One of the long-term problems concerning light industry are characteristic of inadequacy in independent innovation, loose connection among production, learning and research, lack of initiative mechanism for innovation and weak core competitiveness. The exported products are mainly in the form of OEM processing, with less independent knowledge property right and low added value. The key technical equipment in papermaking, diary products, beverage and meat products are mainly introduced from foreign countries, and 95% compressors of inverter air-conditioner, chips of key parts of LEC and movement of high-quality watch rely on import.

Emergency need for industrial restructuring

The problems concerning light industry can be described as follows: too large amount of intermediate and low-end products and too small amount of products of high quality and high added values; slow development of key enterprises and low-level industry concentration; intense processing capacity in coastal regions such as Guangdong, Shandong, Zhejiang and Jiangsu as well as backward development in middle and western regions; the major export market is in developed countries and a diversified market structure has not been formed; repeated construction and blind expansion; excessive production capacity in soy bean oil, alcohol, diary products, gourmet powder, citric acid, etc.; existence of a part of industries of heavy pollution and backward production capacity, e.g. small projects in papermaking, leather and alcohol.

Arduous task in energy-saving and emission-reduction

Compared with international standards, there is still a great gap in the indexes such as water consumption, energy consumption and pollutant emission per value and per product, e.g. the emission of COD of pollutants in light industry amounted to 50% of the total amount in the entire industry of the country; emission of waste water amounted to 28% of the total amount in the entire industry of the country; the control standards of pollutants in papermaking, food, leather and battery industries are still in fairly low level except that of COD, causing tougher tasks for energy-saving and emission-reduction in these fields.

Sharp problems concerning food security

The problems concerning food industry are as follows: small scale of manufacturing and operating enterprises; backward manufacturing techniques; low-level management; inadequate systems for safeguarding food security; disordered market competition; inadequate efforts in industry self-discipline and poor performance in enterprise credit. The regular events concerning food security in recent years have done great harm to the general image of the industry and constituted urgent need for the construction of safeguarding capacity for food security.

Severer competition with other developing countries

The further development of China’s economy has led to the continual increase of prices in labor force, raw materials and energy, and consequently the gradual loss of advantages of light industry in China. The changes of exchange rate of RMB have especially brought about great impact on various industries such as daily ceramics, home appliances, bicycles and leather products which depend primarily on export, and consequently the further shrinking of profits. Meanwhile, the changes of exchange rate of RMB and the rising of some developing countries which have the similar industrial structure to that of China make them become powerful competitors of China’s light industry by making a full use of their late-developing advantages as well as advantages of low prices for resources and labor force.

Challenges from trade conflicts and non-tariff barriers

The international situation is relatively stable, but adverse factors, uncertain factors and new challenges that influence world economy and trade development are still on the rise. The strengthened restraints on the demand in light industry market may bring about bad influence to the export of products of China’s light industry.

The increasing export of products of light industry into the international market has also brought about tougher situation in trade conflicts for China’s light industry. Meanwhile, the expansion of opening up puts light industry enterprises into a wider and deeper participation in economic globalization, which will inevitably lead to tougher competition. More barriers will be set by developed countries in tariffs, technology and environment, and there will be tougher international competition from resources, market, technology and talents, particularly with the rise of neo-protectionism. Light industry products in the global scope are relatively excessive, which causes the traditional protectionism such as high-amount tariffs and quotas continue to exist in the form of technical barriers and anti-dumping charge, and even become prevailing in certain circumstances, particularly the global financial crisis, during which various countries have initiated many measures to protect trade activities of their own, creating a peak season for trade conflicts.