Emerging Industries (Bi-Monthly Newsletter, Issue 12)

Date: 30 Jun 2016
IT Industry embraces new round of changes
China’s IT industry has seen huge changes since the early days of computing. Speaking at the 2016 China IT Industry Annual Meeting, Lu Shan, head of the China IT Industry Research and Development Institute outlined this evolution from the earliest computers to the PC, to the internet and cloud computing. According to Shan, the IT industry enters into a new cycle every 10-15 years.
Sun Huifeng, CEO of CCID Consulting, claims that the IT industry is now entering a new cycle thanks to the following major changes:
A ubiquitous wireless network resulting from new IT infrastructure constructed for cloud computing and 4G mobile telecommunication
New economic patterns in the IT industry backed up by new industrial elements and big data.
A boom in new business models over the next 3 – 5 years which will coincide with the rise of the shared economy.
A green revolution which will enable further efficiency in the IT industry.
Virtual Reality becomes prevalent once more
China’s 13th Five-Year Plan called for further innovation in virtual reality. In support of this proposal, the China Virtual Reality Industry Alliance was established on 30 March 2016. Its members include more than 100 government bodies, research institutes, service providers and enterprises. The alliance enjoys support from the national government as well as various municipal governments. For example, Nanchang Municipality has announced it plans to turn Nanchang into the world’s first virtual reality city, while Chengdu hosts a virtual reality industry park.
Virtual reality technology has long been merchandized and its commercial application can be traced back to the 1990s. However, due to space limitations and high costs, it is expected that the industry will be concentrated in theme parks, shopping malls and high-end internet cafes.
China outpaces foreign counterparts in promoting sharing economy
The term “sharing economy” was first proposed in China in a document released by the Chinese government in 2015 and was subsequently promoted in the NPC (National People’s Congress) and CPPCC (the Chinese People’s Political Consultative Conference) in 2016. According to the China Sharing Economy Development Outlook 2016 released by the Chinese National Information Center, the market aggregate of the sharing economy in China totaled RMB1.96 trillion in 2015.
According to Zhang Xinhong, Head of the Informationization Research Department of the State Information Center, the sharing economy will create new growth engines in China, and will bring mutual benefit for all involved. Zhang proposes broader participation from third party institutions and the public to ensure sound co-regulation and governance over the sharing economy. China has made multiple innovations in promoting the sharing economy and has outpaced some of its foreign counterparts in this regard.
Cleantech sector set to rebound amid growing public concern
To date, the cleantech sector continues to be substantially underfunded despite strong government support since 2012. According to a report released by China’s central bank, China has only invested 15% of the RMB 2tn it pledged to spend to reduce pollution. More investment will be needed in order to build a greener and cleaner China.
The Chinese people want a cleaner environment and have come to recognize the benefits of clean technology. By investing in China’s cleantech sector, investors can expect to gain both public esteem and juicy returns.
Supply-side reform to remove excess capacity and grow strategic emerging industries
Zhang Xiaoqiang, Former Deputy Director of China’s National Development and Reform Commission, said in an interview that the supply-side reform currently proposed by the State aims not only to cut down on excess capacity but to meet other demands as well. As outlined in China’s 13th Five-year Plan, added value from strategic emerging industries shall contribute to 15% of the country’s GDP, one of the requirements of supply-side reform.
As China’s economy slows, traditional industries face a number of challenges, such as higher energy consumption, pollution, overcapacity and rising labor costs. In this context, the growth of strategic emerging industries will outpace that of traditional industries by 4-6 percentage points.
Under the 13th five-year plan, China shall prioritize energy-saving and bio-friendly technologies, information technology, high-end equipment manufacturing, new materials and new-energy vehicles. Chinese enterprises are expected to increasingly invest in the development of new products and technologies. The government meanwhile is expected to encourage innovation through financial support and preferential policies.
Environmental supply-side reform: The need for a sound pricing system
Pent-up demand for environmental protection has been unleashed in recent years amid the growing concern of the Chinese government and stricter scrutiny of environmental protection projects. At present, the demand for stronger environmental protections is not being met. Supply side reform is needed to help increase supply by removing outdated capacity and mechanisms.
As opposed to the manufacturing sector, where overcapacity is a major concern, the environmental sector is currently in desperate need of a sound pricing system. For the past 30 years, China has rapidly grown its economy at the expense of the environment, creating a huge need for environmental protection. At present, environmental costs are not taken into account when deciding the prices of products, and China has a long way to go in this regard.
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