Download Status Quo and Development Countermeasures of the Secondary

Status Quo and Development Countermeasures of the Secondary
and Tertiary Industry in Guangdong Province
LIN Hongling
Guangdong University of Technology, Guangzhou, China, 510520
Abstract: In order to better optimize Guangdong’s industrial structure, improve industrial quality,
heighten development level of the secondary and tertiary industry in Guangdong province in all aspects,
and promote Guangdong’s economic development, this paper finds out main problems existing in the
development of the secondary and tertiary industry in Guangdong province as well as reasons by
analyzing development status quo of the secondary and tertiary industry and making a comparison
between level of development of the secondary and tertiary industry in Guangdong province and
counterparts at home and abroad. Then it recommends countermeasures for accelerating development of
the secondary and tertiary industry in Guangdong province and makes suggestions on how to strengthen
the synergistic effect between the secondary and tertiary industry.
Key words: Guangdong, Secondary Industry, Tertiary Industry, Development Trend, Countermeasure
1
Introduction
During the period of “the tenth five-year plan”, value added proportion of the primary, secondary,
and tertiary industry in Guangdong province changed to 6.2:50.7:43.1 in 2005 from 8.2:45.7:46.1 in
2001. Proportion of the primary industry gradually decreased while that of the secondary industry kept
stable (highest 50.7% in 2005 and 45.5-50.7% in the rest years). On the contrary, proportion of the
tertiary industry gradually increased with a small fluctuation. In order to better optimize Guangdong’s
industrial structure, improve industrial quality, heighten development level of the secondary and tertiary
industry in Guangdong province in all aspects, and promote Guangdong’s economic development,
experts and scholars recommend their countermeasures for development of the secondary and tertiary
industry. This paper is a sub-project of the project named “Comparative Studies on Development Level,
Interactive Relationship and Development Trends of the Secondary and Tertiary Industry in Guangdong
province”, which is a bidding project of Statistics Bureau of Guangdong province. It finds out main
problems existing in the development of the secondary and tertiary industry in Guangdong province as
well as reasons and recommends countermeasures for accelerating development of the secondary and
tertiary industry in Guangdong province and makes suggestions on how to strengthen the synergistic
effect between the secondary and tertiary industry by analyzing development status quo of the secondary
and tertiary industry.
2 Development status quo of the secondary and tertiary industry in Guangdong
province
2.1 General Introduction to the Secondary Industry in Guangdong Province
Guangdong ranks first among provinces in China in terms of development of secondary industry. In
2004, its value added of the secondary industry reached 889.029 billion RMB (value of that year),
ranking the first place in China. Its overall industrial value added was 989.137 billion RMB in 2005,
increasing by 15.8% compared to that in 2004. Viewing from general scale, Guangdong still ranked the
first place nationwide. Its nine major industries created value added of 610.845 billion RMB, increasing
by 20.3% compared to that in 2004. The rate of contribution for the province’s industrial growth was
77.2%.
Starting from requirements for new industrialization, three major indicators, economic creation
capacity, technological innovation capacity, and environmental protection capacity, are selected to
evaluate development level of Guangdong’s secondary industry.
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Economic creation capacity: Guangdong ranks the sixth place in China in terms of economic
creation capacity of the secondary industry. Apart from scale factors which have an obvious advantage,
scores of other common factors are negative. Though Guangdong’s secondary industry has a strong
advantage in gross output value and scale, it is not good enough in terms of industrial profit, efficiency
of labor, economic benefit and product sale, which have a serious impact on its rank.
Technological innovation capacity: Guangdong ranks the first place in China in terms of technological
innovation capacity of the secondary industry, with obvious advantages. Viewing from a single factor,
Guangdong gets the highest score in terms of technology scale factor, which surpasses Jiangsu (ranking
the second place) and Zhejiang (ranking the third place) decisively. But its score of human resource
factor is negative, far lower than Beijing, Shaanxi, Liaoning and other provinces. Viewing from scores
of factors, Guangdong has a high score of technology scale factor but its score of output factor is low.
This indicates that, in the development process of the secondary industry, Guangdong has a weak
capacity to convert technology into productivity. Main reasons for low score of output factor include:
inadequate independent innovation capacity; main technologies depend too much on foreign countries;
excessive imitation, etc.
Environmental protection capacity: Beijing, Tianjin and Heibei have a stronger environmental
protection capacity than Guangdong. Guangdong has a stronger one than Yangtze River delta region and
Shandong. The reason is that the waste gas and water release factor is excessively high. It is a problem
left from traditional manufacturing industry. Some cities in Guangdong province are suffering from
increasingly serious air pollution. A majority of places in Guangdong are still under the threat of serious
acid rain pollution. In the first three quarters in 2004, the acid rain frequency reached 55.7%, increasing
13.5% compared to that of last year. More and more cities are polluted by acid rain.
2.2 General Introduction to the Tertiary Industry in Guangdong Province
Since the reform and opening up policy, Guangdong’s tertiary industry has been developing rapidly.
Value added of the tertiary industry grows by 14.1% annually. In 2004, value added of Guangdong’s
tertiary industry reached 590.375 billion RMB, accounting for more than 1/8 of total value added of the
tertiary industry in China. Guangdong ranks first among provinces in China in terms of development of
tertiary industry. Generally, wholesale and retail industries are most profitable. Profits from information
transmission, computer service, software, renting and commercial service, resident service and other
service industries make up the largest proportion of value added. They have a high accumulation
capacity, which means faster development speeds, higher profitability and more competition. Wholesale
and retail industry’s net production tax makes up the largest proportion (33.3%) of value added. Their
proportion is 50% higher than that of financial industry (14.4%) which ranks the second place.
With respect to comprehensive strength, Beijing and Shanghai are most developed areas in China in
terms of development of tertiary industry. Guangdong ranks the third place. It has relative advantages in
development scale, speed and operating benefits of tertiary industry. But it is weak in development level,
industrial structure and sustainable development. It has an unreasonable industrial structure and weak
sustainable development capacity. Yangtze River delta region and Zhejiang rank the fourth place and
fifth place respectively. They bring a great challenge to Guangdong.
As for key industries, Guangdong ranks the first place in China in terms of transportation, storage and
post, accommodation, catering, and tourism industries in which it has obvious advantages. Meanwhile, it
has a disadvantage of high asset-liability ratio. Guangdong’s real estate industry ranks the third place in
China. Though this industry is very developed, overheat conditions of investment and economic bubble
may occur. This may have a side effect on sustainable development of the real estate industry.
Guangdong’s education industry ranks the fourth place. Such ranking mainly depends on its higher
education scale advantage and development speeds. Its education quality is only at medium level in
China. Therefore, it is a key for Guangdong province to promote its higher education to a higher quality
level.
3 Main Problems Existing in the Secondary and Tertiary Industry in Guangdong
Province and Analysis of Reasons
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3.1 Unreasonable international structure and undeveloped industrial development
(1) Main problems existing in internal structure of the secondary industry
Though Guangdong has made certain achievements in internal structure adjustment of the secondary
industry, many unreasonable points still exist. 1) The proportion of internal trade in the industry is not
reasonable. 2) Processing degree in the industry is unbalanced. 3) Hi-tech manufacturing industry
mainly focuses on electronics while other industries have a low proportion. 4) Equipment manufacturing
industry lags behind. 5) Structural pollution is serious and energy utilization efficiency needs improving.
In 2003, 94% of gross industrial output value and 92% of industrial value added from hi-tech
manufacturing industry come from electronic communication manufacturing industry. On the contrary,
information, chemical manufacturing, pharmaceutical, aviation and aircraft manufacturing, medical
equipment and instrument manufacturing industries have a low proportion in terms of either number of
company, gross output value or value added.
(2) Problems existing in internal structure of the tertiary industry
Viewing from output value structure, transportation, post & telecommunication, whole & retail, and
catering accounted for 46.25% of value added from Guangdong’s tertiary industry in 2004, real estate
industry 13.97%, finance & insurance industry 7.82%, other service industries 31.96%. Emerging
tertiary industries, e.g. finance & issuance, social service, tourism, science & technology research, have
an obviously low proportion and they always develop at slow speeds. Their development speed is even
lower than average level of the tertiary industry and their output value also shares a smaller and smaller
proportion. If these social and technological industries cannot be developed fully, it will be hard for
Guangdong province to realize industrial upgrading and the strategy of “developing toward
technologically-intensive industries”.
3.2 The degree of opening up is not enough
Guangdong is a strong power of manufacturing industry, focusing mainly on export-oriented
economy. Its total export & import volume reached 357.13 billion USD (including 193.954 billion USD
of export volume) in 2004. Even so, it still faces a problem of low degree of opening up because:
First, its emerging technological industries and potential industries have a low export-oriented
index. In addition to transporting equipment manufacturing industry and instrument, stationer goods and
office equipment manufacturing industry, traditional textile & costume industry and food industry are
dominant in the export-oriented economy.
Second, Guangdong’s foreign investment sources are too concentrated and only a small number of
areas are attracting foreign investment. Foreign direct investment (FDI) of Guangdong, especially
Zhujiang River Delta Region, mainly comes from Hong Kong, Macao and Taiwan. Investors in these
regions are characterized by small sum of investment, low technological content, and labor-intensive
type. Therefore, it is not good for promoting international competitiveness of Guangdong’s products.
Meanwhile, Guangdong is at a low level of FDI utilization.
Third, service opening-up degree is low. Opening-up degree of Guangdong’s tertiary industry is far
lower than that of manufacturing industry. In 2003, 2,086 service projects were approved in Guangdong
province. Contracted FDI and actually-invested foreign investment for service industry were 3.829
billion and 2.152 billion USD, respectively accounting for 19.8% and 21.5% of total foreign investment
in the province. However, FDI invested in the secondary industry was 7.729 billion USD, accounting for
77.2% of total foreign investment in the province.
3.3 Industrial growth rate is low
Low industrial growth rate is mainly caused by low total asset contribution ratio. Total asset
contribution ratio refers to an enterprise’s capacity to make all its assets to reap profit in a certain period.
It shows an enterprise’s operating achievement and management level and is a core index for evaluating
and auditing the enterprise’s profitability.
(1) Low profitability of a part of pillar industries leads to low growth rate of the secondary industry
Viewing from the comparison between GDP of industries and investment proportion of fixed assets, the
secondary industry’s contribution ratio to GDP growth increased to 55.4% in 2004 from 39.5% in 1990.
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However, the proportion of secondary industry investment in total fixed asset investment decreased to
43.0% from 59.6% in the same period. This shows that the industry used less investment to realize more
output growth and made great contribution for the entire economy. Energy source exploiting industry
and tobacco industry in Guangdong have a high total asset contribution ratio, reaching 124% and 80%
respectively. Catering and manufacturing industry have a total asset contribution ratio of 14%. In
contrast, pillar industries, such as machinery manufacturing, information, and electronic industry, only
have a total asset contribution ratio of 7-10%. Pillar industries have a large scale but their profitability is
low. Thus the industrial growth rate of the secondary industry is also low. In addition, Guangdong has a
low self-innovation capacity, is short of core technologies and located at the low end of the industry
chain. As a result, its secondary industry growth rate is low.
(2) The tertiary industry makes little contribution for economic growth.
The proportion of tertiary industry investment in total fixed asset investment grew to 56.6% in 2004
from 11% in 1990. But the tertiary industry’s contribution ratio to GDP growth only increased to 36.8%
from 35.8%. Though the tertiary industry investment shared a larger proportion, its contribution ratio to
economic growth decreased. Reasons were as follows: a large part of tertiary industry investment in
Guangdong did not shape up fixed assets and service supply capacity; a large number of service
providers were immature and lack of studies on service demands and service markets; service projects
are repeatedly built and, as a result, cut-throat competition appeared; service products were not saleable
and service facilities have to be put into storage and left unused.
4 Countermeasures for Accelerating Development of Guangdong’s Secondary
and Tertiary Industry
4.1 Countermeasures for Accelerating Development of Guangdong’s Secondary Industry
(1) Keeping putting more efforts to strengthen the reserves for development and maintain sustainable
industrial development
Adequate efforts must be put into the industry, reform and innovation must be carried out, and
more industrial investment must be attracted from various channels. Specific measures include:
attracting foreign investment and nongovernmental investment; strengthening inter-province economic
cooperation; attracting domestic investment; making fully use of financial policies to encourage
enterprises to increase their investment; applying and innovating financial market’s investment and
financing function; activating stock assets by means of asset restructuring, etc.
(2) Guiding investment directions and optimizing the industrial structure
Special attention should be paid to such industries as communication equipment, computer and
other electronic equipment manufacturing industry, chemical industry, smelting and calendaring industry,
electricity & heat generation and supply industry, apparatus, instrument, stationer goods, office
equipment manufacturing industry, petroleum and natural gas exploiting industry, petroleum processing,
coking, nuclear fuel processing industry, electrical appliance, machinery and device manufacturing
industry, gas production and supply industry, transporting equipment manufacturing industry, general
and special-purpose equipment manufacturing industry, paper, presswork and stationer goods
manufacturing industry, and metal product industry.
(3) Improving self-innovation capacity and heightening industrial competitiveness
In the development process of secondary industry, Guangdong has a weak capacity to change
technology into productivity. In this case, it should take more measures, such as attracting more foreign
investment, encouraging enterprises to establish a cooperative relationship and strategic alliance with
transnational companies, developing self-owned key and core technologies step by step, putting more
efforts in technological reconstruction, making high technologies more widely distributed in the
information, chemical pharmaceutical, general and special-purpose equipment manufacturing, and
machinery and device manufacturing industries, attaching importance to technological achievement
marketization and industrialization, laying stress on intellectual property protection, etc.
(4) Increasing the opening-up degree of emerging technological industries and potential industries
Guangdong is a strong power of manufacturing industry, focusing mainly on export-oriented
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economy. But its export-oriented index of emerging technological industries and potential industries is
low. Therefore, it is necessary for emerging technological industries and potential industries to increase
the export-oriented degree so as to narrow the gap between them and international counterparts.
4.2 Countermeasures for Accelerating Development of Guangdong’s Tertiary Industry
(1) In combination with Guangdong’s traditional advantages and future global economic and social
development treads, Guangdong’s tertiary industry should lay stress on developing productive service
industry, financial industry, tourism, cultural service industry, conference and exhibition industry, and
modern logistics industry so as to make the structure of tertiary industry more reasonable. It should also
further promote development of emerging industries, e.g. finance, insurance, consulting, real estate and
tourism industry, and make fully use of capitals and resources so as to further push on development of
tertiary industry, enlarge its capacity to promote economic growth, make Guangdong’s industrial
structure more reasonable and reach a higher level and promote rapid and healthy development of
Guangdong’s economy and society.
(2) Guangdong should gradually break the monopoly in the field of finance, insurance,
telecommunication, information network, tourism, real estate, public utilities, loosen the market access,
accelerate steps of opening up policy, speed up the pace of nongovernmental and foreign investment
accession, quicken the management system reform of tertiary industry, and eliminate system obstacles
of industrial development.
(3) Guangdong should bring its advantage of neighboring Hong Kong and Macao and high opening-up
degree into full play. With WTO as an opening framework and CEPA as a cut-in point, it should also
accelerate its steps to make its service industry internationalized and grasp the decisive occasion of
service industry. In the process of expanding opening up, it should strengthen the studies on service
trade strategies and tactics so as to make use of the demand of international market for service products
to push on development of tertiary industry.
(4) Guangdong should encourage the service industry to introduce into advanced technologies and
up-to-date equipment to rebuild traditional service industry, develop emerging service industry, and
increase technological contents and quality of service products.
(5) Guangdong should take the opportunity of the 2010 Asian Games (held in Guangzhou) to develop
transnational service trade and promote the development of logistic service industry, tourist service
industry, education service industry, financial service industry, IT and media service industry, sports
industry, and real estate industry.
4.3 Suggestions on Strengthening the Synergistic Effect between the Secondary Industry and
Tertiary Industry
(1) Making use of pillar industries under the secondary industry to promote harmonious development
of the tertiary industry
Guangdong should accelerate development of pillar industries under the secondary industry to
promote harmonious development of the tertiary industry. Under the secondary industry, emerging
industries, e.g. communication, computer, electronic equipment manufacturing industry and electrical
appliance, machinery and device manufacturing industry, have a strong indirect capacity to promote
development of the tertiary industry. However, such promotion capacity has not been released fully due
to the restraint of industrial development level. Therefore, it is a must-be to accelerate development of
these pillar industries so as to make them produce a greater indirect and direct promotion capacity for
the tertiary industry and promote harmonious development of the secondary industry and tertiary
industry.
(2) Development of key industries under the tertiary industry further pushes on the secondary industry
Special attention should be paid to tourism, culture, health, social security, public welfare, sports
and entertainment industries under the tertiary industry so as to further push on development of the
secondary industry. Of them, tourism should be set at a more important position. The total consumption
coefficient of Guangdong’s tourism to the secondary industry has reached 1.0464, one time higher than
the national level (total consumption coefficient 0.4). Therefore, development of tourism can promote
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development of the secondary industry and even the whole national economy.
(3) Eliminating the restraint of internal industries under the tertiary industry against the secondary
industry and economy
In order to eliminate the restraint of internal industries under the tertiary industry against the
secondary and economy, attention should be paid to develop the transporting & storage industry,
wholesale & retail industry, finance & insurance industry, and renting & commercial service industries,
especially the transporting & storage industry. Currently, these four industries are restrained most in
Guangdong. Of them, the transporting & storage industry (induction coefficient 1.9193) is restrained
most. The other three are representative industries of modernization and upgrading under the tertiary
industry. Their influence becomes larger and larger with the development of economy. If they are not
developed well, they will restrain other industries’ development. Therefore, priorities should be given to
their development.
(4) Stimulating consumption of the tertiary industry to push on economic development of the
secondary industry
Consumption of the tertiary industry should be stimulated by expanding domestic demands so as to
push on development of chemical industry, paper, presswork and stationer goods manufacturing industry,
electricity & heat production and supply industry, communication equipment and other computer-use
electronic equipment manufacturing industry. Final consumption of the tertiary industry is inducing to
production. Chemical industry is mainly driven by medical industry while paper, presswork and
stationer goods manufacturing industry is promoted by culture, sports and entertainment industry.
Electricity & heat production and supply industry, communication equipment and other computer-use
electronic equipment manufacturing industry are important auxiliary industries for modernization and
upgrading of the tertiary industry. Consumption of the tertiary industry can be stimulated by expanding
domestic demands to push on development of these industries.
(5) Increasing consumption demands of the secondary industry to realize the circulation with other
systems
Industries under the tertiary industry to which final consumption of the secondary industry is
inducing include transporting & storage industry, wholesale & retail industry, finance & insurance
industry, and renting & commercial service industries, which have a close relationship with the
secondary industry. Increasing consumption demands of the secondary industry is helpful for realizing
the circulation with other systems, especially rural resident consumption. The influence ratio reaches
12.6%. This indicates that 12.6% of the rural consumption’s inducting effect reacts to the secondary
industry through the circulation with other industries. Compared to other places in China, Guangdong’s
transporting and storage industry is promoted most by the secondary industry.
(6) Guiding demands of the tertiary industry correctly through governmental consumption to realize
larger promotion to the tertiary industry
Consumption demands of the tertiary industry can push on the development of the secondary
industry most, then export and then investment. Of them, governmental consumption demand of the
tertiary industry can push on development of the secondary industry most. Though the governmental
consumption only accounts for a small proportion of tertiary industry consumption, it can push on the
consumption most with the help of the secondary industry. Therefore, the tertiary industry demands
should be guided by governmental consumption correctly so as to push on development of the tertiary
industry.
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Conclusions
Generally, this paper only carries out qualitative analysis on present development situations of the
secondary and tertiary industry in Guangdong province to find out main problems existing in
development of the secondary and tertiary industry as well as reasons. It makes suggestions on
countermeasures for accelerating development of the secondary and tertiary industry and strengthening
the synergetic effect between the secondary and tertiary industry. Then the project will make use of the
Input-Output Table of Guangdong and China in 2002 revised according to the economic census data of
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Guangdong province to analyze the economic and technical links and ripple effects between the
secondary and tertiary industry and among their internal industries so as to reveal the position of the
secondary and tertiary industry and their internal industries in the national economic system and the
structural proportion relationship of the secondary and tertiary industry and conduct a quantitative
forecast on main development indices and development trends of the secondary and tertiary industry in
Guangdong province.
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The author can be contacted from e-mail : [email protected]
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