China's New List Of Desirable Industries Could Alter Policies, Regulations

(Reuters) - China's economic planning agency on Monday published a new list of industries that it would encourage, restrict or ban, a blueprint that could have a far-reaching impact on investment activity China over the coming years.

The list will serve as a guideline for Chinese regulators in making policies on tax, bank credit, land and trade, and will also be a reference for Beijing to decide which foreign investors are welcomed.

In a statement summarizing the new guidelines, the National Development and Reform Commission (NDRC), said the list makes changes to the previous version, published in December 2005, to reflect technological change and industrial development.

"Some steel, non-ferrous and construction material products have seen serious over-capacity, for which we will no longer encourage ordinary capacity in these areas," the NDRC said.

For projects in sectors listed as "to be encouraged", investors often find it easy to obtain approval from the government, in addition to cheap bank loans and land as well as preferential tax treatment.

But for industries labeled as "restricted" or "to-be-eliminated", investors will find it hard to get governmental approval for new projects and to maintain operation. For example, such projects would be the first to be cut off at times when electricity is restricted because of power shortages.

The updated list has added new energy, inner-city railway transport equipment and public security devices into the "encouraged" category.

Automatic control systems for vehicles, high-speed precision bearings as well as key parts for new-energy vehicles will also be encouraged, according to the statement on the planning agency's website, www.ndrc.gov.cn.

A detailed version of the list was not immediately available.

The previous list published in 2005 is available in Chinese here

(Reporting by Zhou Xin and Tom Miles; Editing by Alex Richardson)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[Michael GE]

07:08 PM on 04/25/2011

"Security devices" ... sounds not bad for the US and/or UK.

From a German perspective, "new energy", "high precission bearings", "railways", "vehicle parts" sounds like an oportunity. OK, especially with GM having now introduced the Volt, some competition lies ahead. The question is: Does GM have the stamina to follow through the electric energy development if there is no relevant domestic market for that?

[toastt]

11:29 PM on 04/25/2011

It may sound odd, but part of their bailout i believe was on terms they would dedicate R&D and produce green vehicles including electric. US is the 2nd largest auto market, and after government tax credits, and the price falling in the next few years or so, I would say it is a very sustainable direction, especially if gas keeps spiking every few months.

[Christopher Hull]

01:28 PM on 04/25/2011

So let me get this right. China is actually following the advice of Adam Smith in the "Wealth of Nations" about using the power of government to regulate business and they are having eight to fourteen percent growth every year. We, here in the US are using Milton Friedmans "Free Market Philosophy" and have been negative growth and declining income for thirty years.
Does anyone see a problem with this on our end?

[benjamin harrison]

02:39 PM on 04/25/2011

No you don't haven't right at all.. china has almost no regulation to date but it is expected soon and expected by most economist to put the breaks on the overvalued economy as well as there currency then seeing inflation..do a little research next time..

[forty8r]

05:47 PM on 04/25/2011

You lie China's success a low wage workface and lack of environmental regulations in a short cut to catch up with the west. They regualte real estate so as to not create a real estate bubble of a false economy that stupid Americans do time and time again.

[Christopher Hull]

11:25 AM on 04/26/2011

Hi Ben, I never said I was completely right but you are incorrect. China has a LOT of regulation regarding it's internal trade/production. ONLY for the idiot US do they lower their standards and send us the the cheapest made, dangerous stuff. In China if you get caught violating their laws you have one year to clear your name and if you cannot prove your innocence they issue a death sentence. And they aren't going to put the brakes on too strongly because there are still 350 million more people expected to be moving to the cities in the next nine years or so. China isn't perfect. They do a lot of things that I think are bad for their own country and their people. BUT I do think they are doing a better job of trying to plan for the future of their country and their people than we are. And I agree I do need more research I've only been doing business with China for about five years and I still wish I understood their system and culture better.

[Michael GE]

06:23 PM on 04/25/2011

Just one thing, not meant as a critisism of your comment or yourself, it's just something I keep noticing.
I suppose it's because it was one of the most favoured talking points of troubled business sectors and politicians to "paper over" problems and we were a very receptive but not all too critical audience: There is no such thing as "negative growth" ... but a whole bunch of terms we use in daily life: "shrinking", "withering", "melting", "declining" ... etc. .

[Christopher Hull]

11:28 AM on 04/26/2011

Hi Mike, You are absolutely right. I normally proofread my posts and can't believe I didn't catch "negative growth." That is a mistake. I should have used "declining." I'm guilty of buying into the spin doctoring of the media. By using the words "negative growth" even though you know it's bad by the use of the word "growth" you don't have the same negative association as with "dying", "declining," "decimated" etc.
Thanks for making me think about what I was actually saying.

[reasonshouldrule]

01:11 PM on 04/25/2011

It would have been better, imo, to post this story when the "list" is actually available so we could see what those industries are.

[Michael Iverson]

01:08 PM on 04/25/2011

This is what modern day Mercantilism looks like. It is funny, Mercantilism was thought to be dead about 150 years ago, now its making a come back.

[OldTulsan]

11:17 AM on 04/25/2011

Chinese jetliner uses Western technology...

http://www.flightglobal.com/articles/2010/11/05/349329/china-special-c919-update.html
CHINA SPECIAL: C919 update

"...CFM Internatio­nal Providing the Leap-X1C engine that will power the aircraft. Has signed agreement with AVIC's Commercial Aircraft Engine to study the feasibilit­y of an assembly line and engine test facility in China.

GE Aviation Supplying the core processing system, cockpit display systems, on-board maintenanc­e systems and flight recorders with partner AVIC Systems.

Rockwell Collins Supplying the communicat­ion, navigation and surveillan­ce systems on the C919, as well as the in-flight entertainm­ent system and cabin core system. It is doing the work with Chinese partners China Electronic­s Technology Avionics (part of state-owne­d China Electronic­s Technology group), AVIC's China Leihua Electronic Technology Research Institute and AVIC's Shanghai Aero Measuremen­t-Controll­ing Research Institute.

Honeywell Providing fly-by-wir­e flight control system, inertial reference and air data systems, auxiliary power unit, wheels and brakes. It is partnering China's Flight Automatic Control Research Institute, Hunan Boyun New Materials and Changsha Xinhang Wheel and Brake.

Parker Aerospace Supplying the aircraft's hydraulics system, flight control actuation and fuel tank systems in partnershi­p with AVIC Systems.

Liebherr-A­erospace Providing the landing gear and air management systems through partnershi­ps with AVIC's landing gear manufactur­ing subsidiary in Changsha and Nanjing Engineerin­g Institute of Aircraft Systems.

Eaton Supplying the fuel and hydraulic conveyance systems, cockpit panel assemblies and dimming control system..."

[frank day]

09:40 AM on 04/25/2011

The 'free' market at work????

[reasonshouldrule]

01:11 PM on 04/25/2011

Excellent point (as yours usually are). This is the truth about "free" markets. The same thing happens, with a bit more complexity in terms of private and public support, in the U.S. Faved.