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$1 TRILLION: Big China boost to key industries

Beijing, December 2, 2010

China is considering  investments of up to $1.5 trillion over five years in seven  strategic industries, sources said, a plan aimed at  accelerating the country's transition from the world's  supplier of cheap goods to a leading purveyor of high-value  technologies.

Analysts expressed scepticism at the sheer amount of money  -- it equates to about 5 percent of China's gross domestic  product on an annual basis -- but said that the eye-popping  headline figure was an indication of the government's  determination to catalyse a structural shift in the economy.

The targeted sectors include alternative energy,  biotechnology, new-generation information technology, high-end  equipment manufacturing, advanced materials, alternative-fuel  cars and energy-saving and environmentally friendly  technologies.     

The central government itself would most likely not  deliver the bulk of the money, but would seek to spur spending  by corporations, investment by local governments and lending  by banks.

The Central Economic Work Conference, the key annual  meeting at which top leaders chart out economic policies for  next year, is likely to endorse the plan for the seven new  strategic industries when it convenes later this month.

"The State Council is considering a plan to invest up to 2  trillion yuan ($300 billion) each year in the seven new  strategic industries over the next five years," a source with  ties to the leadership and direct knowledge of the proposal  told Reuters.     

Beijing has said before that it wants to promote the  sectors, a policy that it hopes will make the country less  dependent on low-end, dirty manufacturing. The value-added  output of the seven strategic industries together account for  about 2 percent of GDP now. The government has said it wants  them to generate 8 percent of GDP in 2015 and 15 percent by  2020.     

By pushing these sectors, China would be making a big bet  that technology can help bridge the gap between limited  supplies of commodities and the rapidly growing demand that  has propelled the country to become the world's second-biggest  economy.     

The ruling Communist Party's 2011-2015 five-year plan calls for "cultivating and developing" the sectors. But to date, the government has given no figure for how  much money it will spend as part of the five-year plan for  reshaping the economy.

The proposed investment in the sectors would rival the  government's two-year 4 trillion yuan stimulus package which  came to a close in November.

"It's one of these figures that is so big that even if it  is exaggerated the actual figure is probably still big," said  Ben Simpfendorfer, an economist with Royal Bank of Scotland in  Hong Kong.

Chinese officials sometimes declare vast investment  ambitions as a way of rallying support for spending  initiatives, even if the numbers ultimately fail to live up to  their original billing. - Reuters




Tags: China | Energy | industries | IT | biotechnology |

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