2011 report to congress - U.S.-China Economic and Security Review ...

dkrause on DSKHT7XVN1PROD with $$_JOB92from a current combined share of 3 percent of Chinese GDP to 8percent by 2015 and 15 percent by 2020. 333Willy Shih of the Harvard Business School told the Commissionthat the 12th Five-Year Plan is a ‘‘continuation of a long-termstrategy of capability building that has been in place for decades’’and is strongly aligned with other guiding policies from the centralgovernment, in particular, the National Medium- and Long-TermPlan for the Development of Science and Technology (MLP), issuedin 2006. This plan articulated the goal of making China an innovation-orientedsociety. 334The 12th Five-Year Plan calls for funding SEI development andincreasing the scale of government and capital-market investmentin SEIs and proposes using various subsidization policies to supportthe SEIs. As with other five-year plan policies, the nationalfive-year plan only provides general guidance, and regional governmentsare responsible for devising precise subsidies and policies.For example, in May 2011, the Taiyuan City government passed an‘‘opinion’’ on speeding up the development of SEIs, which calls forvarious local government measures to enable SEIs to account for20 percent or more of Taiyuan City GDP and develop locally brandedSEIs worth 1 billion RMB (about $157 million) or more by2015. 335To achieve its SEI goals, the central and local government andprivate sectors would have to spend between $600 billion and $2.1trillion over the next five years, according to industry experts’ estimates.336 The central and local governments will likely combinethis investment with preferential tax and procurement policies toensure that Chinese firms emerge as global leaders, or ‘‘nationalchampions,’’ in these industries within the next five years. Similarpolicies previously have been successful in establishing ‘‘nationalchampions’’ in industries such as telecommunications, steel, andrailway, although it is unclear how much of this success can be attributedto China’s domestic innovation and how much to technologytransferred or illegally copied from foreign producers. Forexample, in the railway industry, China went from producingsteam engines just over ten years ago to competing internationally,including a joint proposal with General Electric for constructingbullet trains in California. 337According to Ministry of Finance Chief of Staff Hu Jinglin, theministry will actively use finance and taxation policy to support thedevelopment of the SEIs, including providing multiple channels forfinancing. The ministry will encourage its regional offices to developrelevant policies based upon local conditions and will encouragelocal governments to take a share in SEIs and actively developinvestment funds. 338 According to the National Development andResearch Commission’s draft, ‘‘Major Tasks and Measures for Economicand Social Development in 2011,’’ released during the EleventhNational People’s Congress on March 5, 2011:We will quickly formulate and implement a developmentplan and supporting policies for strategic emerging industries,set up a special fund for promoting their development,expand the scale of venture capital investment in them, formulatea guiding list for developing them, and work out industrystandards for major emerging industries. We willVerDate Nov 24 2008 13:46 Nov 10, 2011 Jkt 067464 PO 00000 Frm 00104 Fmt 6601 Sfmt 6601 G:\GSDD\USCC\2011\067464.XXX 067464