Shanghai Daily news
As many local governments are enthusiastic to change their domains into production centers for high-tech, value-added items, some economists are warning they should not turn their backs on profitable mainstay industries. Samuel Zhang reports from the recent Shanghai International Industry Fair.
The sales generated by the recent Shanghai International Industry Fair, which closed on Tuesday, were down from a year earlier.
The six-day fair, now in its fifth year, sealed deals valued at 39.77 billion yuan (US$4.8 billion), an 8.63 percent drop from the 2002 fair.
The number of visitors was also down at 463,600, about 82,300 less than the previous year.
The local government has shifted focus of the event from the expensive high-tech, value-added products to profitable industries such as automobiles, paper production and aviation among others.
Despite the dwindling sales, analysts and visitors say the fair has become more practical and market-oriented.
At least, the good news was the participation of more foreign companies. This year, the fair managed to attract 317 overseas companies, up 12 percent from last year's 283.
While last year's fair shed light on the high-tech items, this year's main attraction was manufacturing equipments.
The "Chaoyue 1" hydrogen car was one exhibit that drew much interest. Looking much like an average family sedan, the vehicle's exhaust is only water. Once such technology is put into production, it is widely expected to contribute to the country's automobile industry, recently a powerful engine of China's economy.
"The 'Chaoyue 1' project will be a catalyst for the China auto industry's further development. It will address such concerns as environmental protection and energy supply," said Wan Gang, Tongji University's vice president and the person overseeing the 80-million-yuan research project.
"China's auto industry has developed very quickly. As a result, the country has to spend a lot of money to buy foreign oil. The production of such cars would make China less dependent on others."
As the domestic auto industry has boomed in recent years, currently one in every 120 people owns a vehicle, a figure that has lured many overseas carmakers into the market.
In the first nine months of this year, China manufactured more than 3.26 million vehicles, a 35.7 percent rise year-on-year. In 2002, sales jumped 56 percent to 1.126 million units.
At last year's fair, a social security card system displayed as a novelty technology for the local government proved to be a big hit. It ended up winning the first prize for technology innovation.
According to the Shanghai Social Security Card Center, more than 7.67 million Shanghai residents were using the card as of last month. The card has such integrated functions as medical care insurance, identification and marriage registration. In the future, all local grown-up residents will have this card.
The success of the smart card and the current interest generated by the hydrogen car are exactly the reason why the government hosts the annual fair, seen as a platform for technological innovation.
At the first fair in 1999, 650 exhibitors concluded deals worth about 4.5 billion yuan. Last year, deals worth 43.525 billion yuan were signed, a rise of 39.24 percent over 2001.
In recent years, more and more overseas companies have participated, bringing an international element to the fair.
Last year, the number of overseas exhibitors hit 283, up 52 percent from 2001.
Adding luster to the fair this year, heavyweights such as Siemens AG and General Motors Corp also gravitated to the Shanghai New International Expo Center where the event was held.
The participation of such international giants has no doubt pleased the organizers of the Shanghai International Industry Fair - compromising seven central government bodies, such as Ministry of Commerce, and the Shanghai municipal government. The exhibition organizers wish to see the fair develop into something similar to the globally renowned Hanover Fair in Germany.
"It's great to see more overseas companies exhibiting the latest technologies at the fair. The show and the resulting exchanges will help us to narrow the technology gap with the developed countries," according to Li Liangyuan, vice secretary general of Shanghai municipal government.
Tang Qingfu, vice director of Shanghai Foreign Economic Relations and Trade Commission, said that the government's involvement in the fair was set to dilute in the future.
"We are learning from some overseas exhibition companies in an attempt to make the fair more international and market-oriented," he said. "In the future, we hope to let the market decide the direction of the fair and attract more prominent overseas companies."
While the fair has highlighted the areas of technology and equipment manufacturing during the past two years, such a focus has its drawbacks, according to a local economist.
Chen Huai, a prominent economist from the Development Research Center of the State Council, says regional governments should not strictly focus on high technology at the expense of mainstay industries.
"The manufacturing industry and urbanization projects are the main sectors helping China to lead in world economy growth. Both should not be overlooked," he said.
"Can we afford the risk of high-technology investment if all the regional governments rush to this sector?"
Hu Jingyan, director of Foreign Investment Administration under the Ministry of Commerce, echoes Chen's warning.
"We have a large population of labor. Why we can't devote it to the manufacturing section," he said.
"Shoemaking, for example, can also have world-leading technology to make big profits. Why should we always be eyeing an industry such as IT?" said Hu.
According to Hu, there was about US$650 billion in investment worldwide last year. China attracted about US$52.7 billion.
He says now is the time to capitalize on such interest.
"We should grab the international capital flow when the international manufacturing industry is looking for new places to develop," he said. "If we fail, other countries with cheap labor, such as the Philippines, will take advantage of such opportunities."
At a forum held during the fair, experts called for greater cooperation among regional manufacturers in cities along the Yangtze River Delta and Zhujiang Delta in Guangdong Province.
"China has entered a stage when industrial clusters are closely linked with industrial competitiveness," said Liu Shijin, director of the Industrial Economy Research Department of the Development Research Center of the State Council.
"To effectively promote industrial clusters, we must first make clear that the most important function of government is to create an open and fair market environment, offer good public services and work on improving production," Liu said.
