Emerging Industries (Bi-Monthly Newsletter, Issue 11)

Date: 27 Apr 2016
SASAC sets tone for 2016 SOE reform
In a recent interview, Xiao Qing, Head of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) said that a significant portion of China’s GDP is focused on heavy industries. For example, 70% of Chinese state-owned enterprises (SOEs) operate in heavy chemical industries. SOE reforms in 2016 will seek to dissolve or restructure companies with long records of deficit and excess manufacturing capacity such as those in the steel, coal and non-ferrous metal sectors.
SASAC’s Deputy Director Huang Danhua said announced that 286 central enterprises are currently listed on the Shanghai and Shenzhen stock exchanges, accounting for 10% of all listed Chinese enterprises and 20% of total market value. SASAC will make a strong effort to restructure those SOEs and make them competitive and rewarding for investors.
In keeping with the above, SASAC will shift its focus away from heavy industries and towards competitive and emerging strategic industries such as aerospace, nuclear energy, high-speed rail, new energy, new materials and smart grids.
China's National SME Development Fund kicks off in Shenzhen
China's National Small and Medium-size Enterprises Development Fund made its first investment in Shenzhen on 29 January 2016. This kicks-off the Chinese government’s RMB 60bn initiative aimed at supporting SMEs through financial reform and preferential policies. Six Chinese companies co-signed the first investment agreement covering China’s emerging and strategic industries, such as bio-medicine, information technology, high-end equipment manufacturing, and new energy.
The investment secured a total of RMB 6bn in capital commitments, of which RMB 1.5bn was provided by the central government, and the remaining RMB 4.5bn was provided by the Shenzhen municipal government and private companies.
Agreement on Financing Risk Compensation Fund for Strategic Emerging Industries Inked in Beijing
On 17 March 2016, a “Cooperation Agreement on Financing Risk Compensation Fund for Strategic Emerging Industries” was co-signed between China’s National Development and Reform Commission (NDRC), State Development and Investment Corporation (SDIC) and China National Investment and Guaranty Corporation (NIGC).
Under the agreement, the NIGC will be responsible under the NDRC’s guidance for the operation and management of strategic emerging industries, as well as cooperation with equity investment funds, local and regional guaranty entities and banks. The NIGC aims to use more than 60% of its funds to compensate cooperative agencies. It also plans to provide secure debt financing services as well as comprehensive support to Chinese corporations.
Strategic plan to promote traditional Chinese medicine
To further promote traditional Chinese medicine, China’s State Council unveiled its Strategic Plan on the Development of Traditional Chinese Medicine (2016-2030) on 26 February 2016, which gives clear instructions on how to promote traditional Chinese medicine abroad. Below are the key points of the strategic plan:
Key points of the Strategic Plan:
Strengthen communications relating to traditional Chinese medicine with foreign countries;
Introduce to other countries the techniques, technical standards and services relating to traditional Chinese medicine;
Unveil policies and provide the necessary public resources to support the trade of traditional Chinese medicine, overcome legal/policy/trade barriers imposed by other countries, and widen access to international markets;
Enhance the protection of intellectual property rights associated with traditional Chinese medicine; and
Encourage and incentivize traditional Chinese medicine producers to participate in the “One Belt, One Road” Initiative.
Traditional Chinese medicine producers have been instructed to harmonize the standards of traditional Chinese medicines with those in mainstream overseas markets and to work out detailed drug use instructions.
Nankai University research team succeeds in chemical synthesis of mannopeptimycins
Antibiotics have been widely applied in the fight against bacteria since the discovery of penicillin in the 1920s, and since then the average human life expectancy has increased by 15 to 20 years. However the misuse of antibiotics has caused the emergence of “super bacteria” which are increasingly resistant to antimicrobials, endangering human health.
A solution to this problem can be found in mannopeptimycins, a natural product first discovered in the 1950s known for its immediate effect against methicillin-resistant and vancomycin-resistant bacteria. This new type of antibiotic has an unusual structure and adopts a novel approach to antibacterial activity. However, total chemical synthesis proved challenging due to its complicated structure.
Fortunately, this problem has recently been solved. A research team led by Professor Gong Chen of Nankai University announced on March 2016 that after seven years of painstaking efforts, the team has managed to achieve total chemical synthesis of mannopeptimycins. Professor Gong Chen hopes the advance will enable the exploration of previously inaccessible mannopeptimycin derivatives.
Auto industry seeks to develop self-driving cars
In addition to their efforts to reduce emissions, automakers are also competing to build self-driving cars. It is expected that by the end of 2016 the auto industry will have invested $160bn in self-driving cars.
However, the technology still requires considerable refinement and development before it can be considered commercially viable. Chinese automakers remain far behind their foreign counterparts in sensor technology and environmental perception. Smart cars have also thus far proven unable to cope with the complex and chaotic conditions found on Chinese roads. In addition to these technological limitations, China lacks the regulations and policies necessary to support self-driving cars.
Strategic emerging industries to embrace disruptive innovations in years to come
China’s Thirteenth Five-Year Plan, which was unveiled at this year’s NPC and CPPCC sessions, gives clear instructions to “support the development of strategic emerging industries”. The main goal stipulated in the Plan is to grow the industrial value-added of strategic emerging industries to 15% of China’s total GDP.
The instructions were issued in the wake of excess production capacity within China’s traditional industries. To address the problem, China proposed supply-side economic reforms in 2015, part of which sought to reduce excess capacity, cut production costs and existing inventory stocks in traditional manufacturing sectors.
It is expected that the embrace of disruptive innovations in strategic emerging industries will help China with this economic adjustment.
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