Reform, Innovation Driving Chinese Economy

Reform, Innovation Driving Chinese Economy

Reform, Innovation Driving Chinese Economy

When Shanghai INESA held its first technology meeting in Y 2010, a board erected at the door of the meeting room had almost nothing to display as there were no “decent” quality products at that time.

But things became different when the instruments and electronics products manufacturer held its second technology meeting 2 years later.

“We not only had new products, but also a whole set of solutions,” said Wang Qiang, Chairman of the state-owned enterprise (SOE) in east China’s business hub Shanghai.

The company, founded in Y 1960, is shifting from traditional electronics production to new industries such as Smart City construction and the Internet of Things.

At the end of Y 2015, after INESA acquired some private firms, its mixed-ownership subsidiaries accounted for 37.3% of assets and 56.4% of profits.

These changes reflect the substantial reforms in local SOEs in recent years in Shanghai, a city which has long taken the lead in such reforms, in policies, programs and practice.

SOE reforms play a vital role in the country’s economic restructuring. Local SOEs account for about 47% of all the country’s SOE assets, according to statistics released by the Finance Ministry last month.

In 1-H of Y 2016, the total revenue and profit of local SOEs in Shanghai reached RMB Yuan 1.4-T (US$213-B) and  RMB Yuan 149-B respectively, both growing faster than the national average, according to official statistics.

Progress has also been made with other SOE reforms to boost innovation in Shanghai.

At Shanghai International Port Group, 16,000 employees (about 72% of staff) hold a total of 410-M shares (1.8% of the company).

“The staff used to care more about their own salaries than company profits. Now they pay more attention to the corporate operation and management,” said Yan Jun, President of the SOE (state-owned enterprise).

Shanghai SOE reforms and performance have attracted investors. Late last month, an asset management company raised RMB Yuan 15-B for an ETF (exchange-traded fund) tracking an index of Shanghai SOEs, the 1st of its kind in Shanghai.

Shanghai will continue to make breakthroughs in capital management and accelerate the orderly flow of state-owned capital, said Jin Xingming, director of the Shanghai State-owned Assets Supervision and Administration Commission.

Home to China’s 1st FTZ (free trade zone), Shanghai saw 6.7% growth in 1-H, the same as the national rate, according to official statistics.

Indicative of its restructuring progress, the tertiary sector accounted for more than 70% of the Shanghai’s GDP (gross domestic product) for the 1st time. Financial, information, and creative industries all showed double-digit growth.

“Innovation-driven development has brought more positive impact to Shanghai’s economy,” said Shen Xiaochu, head of the Shanghai Development and Reform Commission.

Restructuring has also taken place in other parts of the country.

South China’s Guangdong Province, the country’s main manufacturing hub, is demonstrating a healthier development pattern with strong private investment.

Guangdong’s private investment during H1 saw 19.6% growth Y-Y, well ahead of the 2.8% recorded across the country. Private investment contributed to 90% of the total growth of investment in Guangdong over the same frame

Private investment can sensitively reflect the market environment. The rapid growth implies that the market is offering new opportunities, said Chen Hongyu, deputy head of the Guangdong economic society.

Statistics show that nearly 70% of private investment went into manufacturing and the tertiary industry.

Early restructuring moves have brought new energy to Guangdong’s economy, with high-end manufacturing and Internet-related services growing as favored sectors for investment.

During the first half of the year, high-end manufacturing in the province registered 10% growth Y-Y. The Internet-related service sector saw a 43% annual growth in revenue.

Guangdong Incode Automation is a company focusing on the research and production of encoders used in industrial robotics. These days deputy general manager Luo Rihui has been busy listening to venture capital organizations from around the world.

“As long as we have the core technology, capital will automatically come to us,” he said.


Ding Li, expert with the Guangdong Academy of Social Sciences, said that some traditional industries such as home appliances, textiles, furniture and porcelain in the province are embracing new technology and a business model for new development at a time when the economy is facing downward pressure.

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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