Download Countermeasures and Suggestions for Resource-based Industrial

Countermeasures and Suggestions for Resource-based Industrial
Structure Adjustment of China in Financial Crisis
LI Zhuojie
Instructor in Zhengzhou University of Light Industry, Zhengzhou, China, 450002
[email protected]
Abstract: The resource-based industries have become the fastest growing sectors in the economy of
China. The regionalization trend is increasingly clear, the structures upgrade slowly, and the industrial
structure simplification is obvious. There are overcapacity problems as a whole, and the raw materials
and markets’ exteriorization is accelerating. Financial crisis leads to resource-based industries structure
contradiction more prominent, the existing policy of expanding domestic demand will not help the
resource-based adjustment of industrial structure. Countermeasures and suggestions for Resource-based
Industrial Structure Adjustment of China
Keywords: Financial Crisis, Resource-based Industries, Regionalization, Expanding Domestic Demand
1 Introduction
Since the reform and opening-up policy, the change of regional industrial structure of China, in
particular, the rapid development of export processing industry, which creates enormous market
demands for resource-based industries such as the coal, minerals products etc, giving a strong impetus to
the development of the resource-based industries, besides, there has been forming the economy system
relying on the resource-based industries in some areas. However, with the continuous expansion of the
resource development scale, the resource-based industries structure contradiction and overcapacity etc.
problems become increasingly serious, while the emergence and spread of financial crises make the
problems become more prominent.
With the rapid development of resource-based industries, as well as the increasingly obvious trend of
regionalization, the development of resource-based industries of China gradually brings the features
such as industrial structure upgrades slowly, the single regional industrial structures and similar area
industrial structures, the serious excess of industrial productivity and too high industrial extroversion etc.
This pattern results in over-exploitation of resources in the resource-based industries areas, making
some local areas, particularly some resource-based cities’ most mineral resources exhausted, regional
environmental degradation; besides, it leads to that the regional economic development rely on
resource-based industries heavily; it also inhibits the innovation vitality of the region, worsens the
innovation environment, stifles the innovation culture, leading to the recession for regional innovation
capability and innovative vitality. Under such influence, the economy of resource-based industries area
inevitably has a slow development, or even recession, thus affecting the sustainable development of
regional economic society.
The structural contradictions of resource-based industries, the serious excess productivity and
over-reliance on overseas markets, making there are different “resource curse” trends on the economic
development in the resource-based industries areas of China. Which meaning that the rapid growth of
resource-based industries doesn’t promote the sustainable development of regional economy, even the
continued deterioration of the environment in some areas, the economic growth becomes slow and the
terms of trade continues to be deteriorated and so on. Therefore, the adjustment of resource-based
industries of China is needed urgently.
2 Financial Crisis Impacts on the Adjustment of Resource-based Industrial
Structure
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As the rapid spread of the financial crisis in the world and the more deepening shocks to the economy,
the economic growth of China has become slow since the second half of 2008. In this context, as the
domestic and international market continues to shrink, the structural contradictions of resource-based
industries and industries excess etc. problems become more prominent.
2.1 Financial Crisis Causing the Industrial Structure Contradictions More Prominent
Due to the financial crisis, since the second half of 2008, the industrial added value growth of
resource-based industries slows down obviously, especially entering September, the growing rate drops
to its lowest level in recent years. After entering 2009, the growth rate of resource-based industries
began to recover, but the growth rate of natural resources mining is significantly higher than the growth
rate of processing industry that based on natural resources. For the resource-based industries of China
which is in the low-end value chain, the industrial structure needs to upgrade more urgently.
2.2 Shrinking External Demand for Resource-based Products Causing Overcapacity Problem
More Prominent
Affected by the declination of global industrial production, the price trend for resource-based products
on the international market begins reversal. The demands for resource-based products keeping dropping,
and the state’s export restrictions to the “three-high and one-capital” products, the export of
resource-based industries has been affected deeply.
2.3 Expanding Domestic Demand Policy Does Nothing to Resource-based Industrial Structure
Adjustment
In order to deal with the financial crisis’s impact on the economy of China, the country has issued a
series of stimulus policies for “keeping growth, adjusting the structure and expanding domestic demand”,
and bring out the four trillion investment plan and “top 10” industries adjustment revitalization plan,
including the adjustment revitalization planning about non-ferrous industry and steel which directly or
indirectly related to the resource-based industries. Overall, these stimulating domestic policies are
helpful to recover the market, help the enterprises to solve the difficulties, and benefit them from the
taxation etc. National investment plan and non-ferrous storage etc. actions have direct effects on
reducing the high inventory of domestic resource-based industries, alleviating overcapacity
contradictions, inhibiting production benefits’ decrease and help the enterprises remit the cash flow
pressure, thus the resources-based industries will benefit. But from the policy dynamics and policy
guidance, the national boosting domestic demand policies pay too more attention to “keeping growth”
and “expanding domestic demand”, and less attention to “adjusting the structure”, especially when there
are conflicts between the structure adjustment and economic growth, the structure adjustment will be
replaced by economic growth. Based on this point, the policy of boosting domestic demand and
industrial adjustment revitalizing planning obviously help the resource-based industries production
capacity’s recovery and growth, but not good for the solving of the structural contradictions and
overcapacity etc. problems.
3. Countermeasures and Suggestions for Resource-based Industrial Structure
Adjustment
For the structural contradictions of resource-based industries and overcapacity, the adjustment
countermeasures under the financial crisis should be on the basis of solving industrial overcapacity,
gradually promote the resources industry structures to upgrade, change the contradictions of the single
regional industrial structures and similar area industrial structures, in order to achieve the regional
economic development, from excessive dependence on resources shifted to technical progress and
system optimization dependence. Thus, in the short term, we need to achieve effective integration of
resources through the merger and reorganization among the enterprises, we should also gradually
promote resource-based economy industrial upgrading by technical transformation and innovation,
replace the low technological products by high value-added products, finally solve the serious
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overcapacity in the industrial system; in the long term, on one hand, we should gradually establish stable
supply bases of raw materials from overseas; on the other hand, we should gradually push the industrial
transformation and industrial integration of resource-based industries, surpassing the self-loop system of
resource-based industries and the new economic growth points of fostering regions.
3.1 Short-term Adjustment Measures
3.1.1 To guide the merger and reorganization among the enterprises, improve industrial concentration,
eliminate backward production capacity
From the resource-based industries’ concentration, there are many resource-based enterprises with a
small scale and wide distribution in China, which directly leads that the regional industrial structures are
similar and the industrial capacity has serious surplus. Therefore, we should actively make use of the
low-cost enterprise merger and reorganization under the financial crisis, guide the labor force, capital,
personnel and other key factors to concentrate on the resource-based enterprises with higher labor
productivity, capital profitability and factor utilization, speed up the trend of industrial resources
concentrating to high-performance enterprises, thereby enhance the concentration of resource-based
industries, and gradually eliminate backward production capacity.
According to the regional characteristics of resource-based industries, the resource-based enterprises
could improve the industrial concentration by horizontal mergers and vertical integration approaches.
The horizontal merger refers to the mergers between the manufacturers who produce and operate the
same kind products in the resource-based industries; while vertical integration refers to the mergers
between the manufacturers and the upstream or downstream manufactures. This not only mainly give
priority to the big resource enterprises, encourage and guide large-scale enterprises to merge and
restructure the medium and small enterprises, forming the resources development and processing pattern
which is led by the big resource enterprises, but also based on the resources, linked though the assets, to
encourage and promote resource integration and corporate restructuring by a variety of ways, achieving
professional management of resource-based enterprises, which is related to the integrated operation
among the industries, upstream and downstream enterprises.
3.1.2 To promote the structural upgrading for resource-based industries, expand the production chain,
and enhance the added value of resource products
Industrial chain refers to the whole chain formed by all the sections from initial raw materials to the
finished products’ production and consumption during the production process. In the industrial chain,
each section is formed by a number of interrelated but independent enterprises. At present, the
resource-based industries primarily based on resource development, raw material processing. The deep
processing for resources is relatively lack, it is at the bottom of the industrial chain, and the added-value
of the products is low. Therefore, we should gradually promote the structural upgrading of
resource-based industries, and expand the resource-based industries from large-scale, low-skilled, low
value-added mining and simple processing to the high-tech and high value-added deep-processing
section, so that we improve the resource-based industrial chain and enhance the added value of resource
products.
The structural upgrading of resource-based industries and chain expansion could be according to the
different types, use the technological transformation of industries, technological innovation and product
innovation and other means, to carry on from the horizontal and vertical two angles of industrial chain.
In the horizontal, we could be interlinked to the technology industrial base, has a certain advantage in
other industries where expansion of its quest for resources in the possibility of horizontal transfer
between industries. In the vertical, we should extend and expand on the basis of existing resource
extraction and processing, increase the processing depth of the products, promote resource-based
enterprises to develop new products, increase the added value of the products, in order to drive the
upgrading of regional resource-based industries, fundamentally overcome the relative surplus situation
of resource industries caused by low-grade products.
3.2 Long-term Adjustment Measures
Resource-based industries have its own law of development; diminishing trends of production profits
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and the irreversible industries decline make the long-term adjustment measures for resource-based focus
on the sustainable development of regional economy. This needs to be in accordance with life cycle of
resource-based industries: On one hand, we should gradually implement the effective strategies for
overseas resources, to ensure raw material supply of resource-based industries and extend the industries’
life cycle; On the other hand, we should gradually promote the industrial restructuring and industrial
integration for resource-based industries, to surpass the self-reinforcing and self-loop system of internal
resource-based industries by fostering new economic growth points for the region.
3.2.1 To promote the overseas resources strategies step by step, to ensure the long-term supply of raw
materials of the resource-based industries and extend the industrial life cycle
As the rapid development of resource-based industries and gradual upgrading of outward extent, the
supply of raw materials for resource industries is increasingly dependent on overseas markets, which
raises the prices of foreign resources continuously. Thus, the resource-based industries of China suffer
large losses, and are subject to corporate giants of international resources. Therefore, we need to
gradually promote the resource-based enterprises to establish a long-term overseas resources strategy to
ensure the supply of raw materials for resource-based industries, in order to achieve the sustainable
development and life-cycle extension of resource-based industries.
The main tasks of overseas resources strategy for resource-based industries are to establish stable
overseas resource bases. On one hand, this needs to promote domestic resource-based enterprises to
have natural resources mining planning to invest overseas, or to cooperate with foreign capital to
develop the natural resources of foreign countries, forming the overseas resources assurance system with
certain scale; On the other hand, we should have plan to solve the shipping and the corresponding
infrastructures well, which ensures the smooth transportation of resources.
3.2.2 To guide the transformation of resource-based industries, and gradually surpass the self-loop
development path of resource-based industries
With the continuous development and utilization of resources and the continuous reduction of total
resources, the resource-based industries built on the basis of the natural resources advantages are bound
to shrink. This will require that you actively guide the transformation of resource-based industries while
upgrading the industries, with the new leading industries full of vigor and vitality to replace outdated,
backward, facing toward recession, old resource-based industries, gradually change the regional
economic development’ over-reliance on the original advantage resources, to achieve the coordination of
industrial structure in resources region and the sustainable development in economy.
The top priority of transformation for resource-based industries is to select appropriate continuous
leading industries, in accordance with regional comparative advantages and human resource
endowments. However, as the market mechanism could not effectively and smoothly achieve the
continuous leading industries’ replacing the original industries. Therefore, it requires the government’
support in the capital, technology, human and markets etc. aspects. Firstly, this needs to strengthen the
market’s effects on continuous leading industries, respect for the resource allocation of market
mechanisms; Secondly, we should develop a variety of policies and measures which are conducive to
the development of leading industries, to increase the degree of control by the government on the
development of leading industries, effectively solve the “market failure” problems in fostering leading
industries; At last, we need to find ways and means of cultivating new continuous leading industries,
coordinating the harmonious development between leading industries and non-leading industries.
In the selection, cultivation and development process of continuous leading industries, the
transformation of resource-based industries also needs to focus on the transformation of declining
resource-based industries. The transformation of declining resource-based industries is mainly carried
on by two ways the holistic transfer of the enterprise to other regions as well as its assets, staff and
workers transfer to other industries and trades. The holistic transfer means to transfer parts of the
resource-based enterprises to the new similar resources areas, so that the productive capacity of the
resource-based enterprises continues to play a role, the formation of this transfer is relatively easy; but
the second transfer form for industries is difficult, because quite a lot of assets of resource-based
enterprises can not be relocated to other places to continue to be used, and a majority of workers lack of
other qualities and skills in addition to resource extraction or processing. Therefore, we should create
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conditions to actively use the first form for realizing the declining resource-based industries transferring
to the new resource regions. But for the resource-based enterprises which have lost viability and
couldn’t be transferred, we should take the most rational way to make them exit the industry markets
smoothly through bankruptcy, merger, restructuring, leasing and transition to production etc. means.
3.3 To guide the convergence of resource-based industries with other industries, to foster new
economic growth points for the region
Industry convergence is the dynamic development process that during the informationization process,
high-tech and the industry have effects on traditional industries, making two or multi-kinds of industries
form the new industry through mutual infiltration. In different industries, the industrial convergence will
be carried on in different ways, finally urge the advancement and rationalization of industrial structure,
and frame the new convergence industrial system. In the context of economic globalization and rapid
development of high-tech, the convergence between resource-based industries and other industries could
quickly improve the productivity and competitiveness of resource-based industries, bringing about the
innovation and optimization effect, structural change effect, organization optimization effect,
competition advancement effect, consumption advancement effect and regional integration effect etc.
The industry convergences of resource-based industries are mainly the extension convergence among
industries (i.e. the complementarities and extension among industries to achieve the convergences) and
the restructuring convergence of intra-industry. This needs to conform to the development situation of
industry convergence, and carry on innovation in conception, implement transformation on strategies, to
establish the main mechanisms for enterprises which could promote industry convergence. Then through
strategic alliances, conglomerate merger and many other forms to achieve the reasonable flow of
economic resources, overcome the traditional operation, to achieve core competencies flexibility based
on different technologies innovation and management innovation convergence, to accelerate the
convergences between resource-based industries and other industries, and foster new economic growth
points for the region.
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