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5 White Paper on the Business Environment in China
consumption was seen to o er a graceful solution to the e plan also entailed the closure of highly-polluting and
issue of diminishing export opportunities; the move toward ine cient manufacturing operations, tax incentives for the
non export-oriented manufacturing among foreign invested export of machinery, the import of technology not domestically
enterprises has been tracked by AmCham South China’s available and domestic research and development15 as well as
annual State of Business study since 2006 (the 2013 results special nancial support for SMEs.16
of which are reproduced in Part IV): in 2006, 46 percent
of companies participating in the study reported focusing By 2011, this nancial support was claimed to have had
primarily on selling goods to the domestic Chinese market. a strong positive e ect by CITIC Securities Chief Economist
Zhu Jianfang (see below).17
is gure reached 51 percent in 2007, 57.5 percent in 2008,
72.5 percent in 2009 and 75 percent by 2010. In line with these goals, PRC Vice President Xi Jinping
told attendees of the 2010 World Investment Forum in
Encouraging domestic consumption has become Xiamen that the government would “encourage more foreign
increasingly critical for the Chinese government as investment in high-end manufacturing industries, high-tech
overall exports—a large chunk of which are constituted industries, modern services industries, new energy, energy-
by manufactured articles—continue to slow amid tepid saving and environmental protection industries. We will
economic growth in the west and the PRC’s worryingly chilly encourage foreign investors to move to and increase investment
diplomatic relations with several of its neighbors in Asia. in the central and western regions, and develop labor-intensive
industries meeting environmental requirements in the central
China Daily reports that “according to statistics released and western regions.”18
by the China Chamber of Commerce for Import and Export
of Light Industrial Products and Arts-Crafts, the total Unsurprisingly, Vice President Xi’s points later reappeared
transaction volume for light industrial products declined in the 12th Five-Year Plan.19
by 7.67 percent [between November 2011 and November
2012],” while “those for other products, such as machinery Modernization e orts, in fact, are not exactly new. e
and electric products, textiles and apparel, also declined.”11 National Bureau of Statistics reported in 2012 that the “total
value of the high-tech manufacturing industry hit 8.8 trillion
e Ministry of Commerce reported 287 new foreign yuan in 2011, 5.9 times its value in 2002.”7
investment projects in light industry over the course of 2009,
utilizing $1.69 billion.12 By 2010 that amount had reportedly One emerging aspect of high-tech manufacturing on
jumped to $49.6 billion in FDI over the course of the year the Mainland is the increased use of robotics. China Daily
and $28.5 billion over the rst half of 2011.13 reports that:
Despite the rapid growth and all the bene ts it carried e average labor cost in China has nearly doubled
with it, however, the majority of Chinese manufacturing in the past ve years, going to more than 40,000
has historically (since the “opening up”) added relatively yuan ($6,400, 4,900 euros) a year in 2011 from less
small amounts of value and has been highly labor- and than 25,000 yuan a year in the beginning of 2007,
environmentally-intensive. Although progress has been and according to global consulting rm Ernst & Young.
continues to be made, there remain signi cant portions
of the manufacturing industry (and China’s economy as a But according to a report this year by the International
whole) that, while creating jobs and contributing to GDP, Federation of Robotics, there were 74,300 operational
also have side-e ects such as high and ine cient energy robots in China at the end of 2011, up 42 percent
consumption, environmental damage and, due at least in from 2010.20
part to the government’s own macro-level development
strategy, noticeable regional imbalances in development While the up-and-down seems to have potential
and prosperity. e “Go West” plan to drive labor-, energy- as a humorous infographic, the phenomenon itself is
and environmentally-intensive activities to poorer inland both noteworthy and likely to increase in prevalence
provinces and regions and the increasing emphasis on as the Mainland continues attempts to modernize its
indigenous innovation and domestic consumption can be manufacturing sector.
considered strategies to address these issues.
Notable Policy Activity
Another method by which to address these issues has turned
out to be the 2009 stimulus e ort itself; the plan associated Continuing Changes to Tax Policy
with the manufacturing industry, however, explicitly included A new round of tax refunds were eliminated on July 15,
the goal of generating 3 million jobs in light industry over
three years, in addition to “structural adjustment” and 2010, covering 406 products mostly “considered to be high
industrial upgrading.14
190
consumption was seen to o er a graceful solution to the e plan also entailed the closure of highly-polluting and
issue of diminishing export opportunities; the move toward ine cient manufacturing operations, tax incentives for the
non export-oriented manufacturing among foreign invested export of machinery, the import of technology not domestically
enterprises has been tracked by AmCham South China’s available and domestic research and development15 as well as
annual State of Business study since 2006 (the 2013 results special nancial support for SMEs.16
of which are reproduced in Part IV): in 2006, 46 percent
of companies participating in the study reported focusing By 2011, this nancial support was claimed to have had
primarily on selling goods to the domestic Chinese market. a strong positive e ect by CITIC Securities Chief Economist
Zhu Jianfang (see below).17
is gure reached 51 percent in 2007, 57.5 percent in 2008,
72.5 percent in 2009 and 75 percent by 2010. In line with these goals, PRC Vice President Xi Jinping
told attendees of the 2010 World Investment Forum in
Encouraging domestic consumption has become Xiamen that the government would “encourage more foreign
increasingly critical for the Chinese government as investment in high-end manufacturing industries, high-tech
overall exports—a large chunk of which are constituted industries, modern services industries, new energy, energy-
by manufactured articles—continue to slow amid tepid saving and environmental protection industries. We will
economic growth in the west and the PRC’s worryingly chilly encourage foreign investors to move to and increase investment
diplomatic relations with several of its neighbors in Asia. in the central and western regions, and develop labor-intensive
industries meeting environmental requirements in the central
China Daily reports that “according to statistics released and western regions.”18
by the China Chamber of Commerce for Import and Export
of Light Industrial Products and Arts-Crafts, the total Unsurprisingly, Vice President Xi’s points later reappeared
transaction volume for light industrial products declined in the 12th Five-Year Plan.19
by 7.67 percent [between November 2011 and November
2012],” while “those for other products, such as machinery Modernization e orts, in fact, are not exactly new. e
and electric products, textiles and apparel, also declined.”11 National Bureau of Statistics reported in 2012 that the “total
value of the high-tech manufacturing industry hit 8.8 trillion
e Ministry of Commerce reported 287 new foreign yuan in 2011, 5.9 times its value in 2002.”7
investment projects in light industry over the course of 2009,
utilizing $1.69 billion.12 By 2010 that amount had reportedly One emerging aspect of high-tech manufacturing on
jumped to $49.6 billion in FDI over the course of the year the Mainland is the increased use of robotics. China Daily
and $28.5 billion over the rst half of 2011.13 reports that:
Despite the rapid growth and all the bene ts it carried e average labor cost in China has nearly doubled
with it, however, the majority of Chinese manufacturing in the past ve years, going to more than 40,000
has historically (since the “opening up”) added relatively yuan ($6,400, 4,900 euros) a year in 2011 from less
small amounts of value and has been highly labor- and than 25,000 yuan a year in the beginning of 2007,
environmentally-intensive. Although progress has been and according to global consulting rm Ernst & Young.
continues to be made, there remain signi cant portions
of the manufacturing industry (and China’s economy as a But according to a report this year by the International
whole) that, while creating jobs and contributing to GDP, Federation of Robotics, there were 74,300 operational
also have side-e ects such as high and ine cient energy robots in China at the end of 2011, up 42 percent
consumption, environmental damage and, due at least in from 2010.20
part to the government’s own macro-level development
strategy, noticeable regional imbalances in development While the up-and-down seems to have potential
and prosperity. e “Go West” plan to drive labor-, energy- as a humorous infographic, the phenomenon itself is
and environmentally-intensive activities to poorer inland both noteworthy and likely to increase in prevalence
provinces and regions and the increasing emphasis on as the Mainland continues attempts to modernize its
indigenous innovation and domestic consumption can be manufacturing sector.
considered strategies to address these issues.
Notable Policy Activity
Another method by which to address these issues has turned
out to be the 2009 stimulus e ort itself; the plan associated Continuing Changes to Tax Policy
with the manufacturing industry, however, explicitly included A new round of tax refunds were eliminated on July 15,
the goal of generating 3 million jobs in light industry over
three years, in addition to “structural adjustment” and 2010, covering 406 products mostly “considered to be high
industrial upgrading.14
190
