China to Provide US$600 Billion in Incentives for Emerging Industries

October 15, 2010 Posted by China Briefing Reading Time: 2 minutes

Oct. 15 – Leaked drafts of the central government’s 12th Five Year Plan show that Beijing intends to allocate RMB4 trillion (about US$600 billion) to develop key emerging industries.

The plan is currently being drafted by the Communist Party leadership in Beijing in their annual four-day session ahead of the National People’s Congress meeting in March. It’s at the NPC meeting that the next Five Year Plan is expected to be endorsed. The current one expires at the end of the year.

Two unnamed party officials involved with the drafting were quoted in the South China Morning Post as stating that the draft contains provisions for RMB4 trillion in financial support, expected mainly to be released through tax exemptions and financial incentives, in nine key industries.

These are:

New energy
New materials
Information technology
Biology and new medicine
Energy conservation and environmental protection
Aerospace
Marine
Advanced manufacturing
High-tech services

Beijing sees these specific industries as key components for the national economy to develop and for China to emerge as a fully competitive player in the global market. The draft is currently being studied by 350 central committee delegates before being modified into a final document to be presented by Hu Jintao at the National Party Congress in March.

The new Five Year Plan – China’s 12th, takes in the period 2011-2015. It is said to be divided into two sections, industries and regions, a marked difference from more recent Five Year Plans which concentrated on growth.

Concerning regions, Beijing has already begun to concentrate more on the development of Central and West China, with free trade and special economic zones having recently been opened in more remote locations. The 10-year-old “Go West” campaign, which also comes to completion at the end at this year, is to be replaced with a more specific regionally targeted series of incentives depending upon the exact needs of each province or city. In short, incentives in this sector are to become more detailed.

The 12th Five Year Plan will be promoted under the title “Inclusive Growth,” which Hu Jintao has already identified as meaning the spreading of wealth across all sectors of the Chinese community and to achieve balance in economic and social progress. Other issues said to be under debate include increased housing subsidies, medical care reform, education and social welfare improvements. China is also expected to lower its growth expectations to 7 percent over the next five years.

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