China Announces $1.5 Trillion Development Plan For Seven Strategic Emerging Industries
On October 10, 2010, China issued the State Council’s Decision to Accelerate the Development of Strategic Emerging Industries. The Decision included seven “strategic emerging industries:” (1) new-generation information technology, (2) energy-saving and environment protection, (3) new energy, (4) biology, (5) high-end equipment manufacturing, (6) new materials, and (7) new-energy cars. China identified these industries as having strong economic development potential.
Although “strategic emerging industries” now account for three percent of China’s gross domestic product (“GDP”), China has established a goal for these industries to generate eight percent of the country’s GDP by 2015 and 15 percent by 2020. The Decision, therefore, mandates increased support to these industries. Industry support will take place in the following manner. First, the government will establish special funds for the research and development of technology and to encourage innovation. Second, the government will give preferential treatment to investors in the form of tax incentives. Third, the government will authorize increased credit loan support. Fourth, the government will provide support to qualified enterprises in their efforts to raise capital. Fifth, the government will provide support to develop venture funds. Currently, several key governmental agencies are drafting the Development Plan of Strategic Emerging Industries, which will contain more details regarding this initiative. The Development Plan is expected to be issued in early 2011. Some sources have reported that China is considering investments of up to $1.5 trillion over the next five years and that the government might contribute approximately 5-15 percent of the $1.5 trillion each year (i.e., approximately $30 billion in each of the five years).
Certain provincial and local governments also have established preferential policies to support these strategic industries in their own jurisdictions. For example, the Shandong provincial government has established a special fund of approximately $300 million in 2010-2012 and provides various other subsidy programs. The Guangdong provincial government will provide approximately $300 million each year to support the strategic industries through loan interest subsidies and awards. The Suqian municipal government of the Jiangsu Province plans to establish a special fund providing $3.75 million each year for the next four years, as well as establishing other subsidy programs.
A number of companies that are considered to be strategic industries reported that they already have received subsidies from the government. According to China Securities Journal, about 38 companies reported receiving grants from the government, totaling approximately $157 million in grants this year. China plainly intends to focus on these strategic industries as part of its economic development strategy, and these industries will receive considerable support from the government in the future.