Scientific and technological innovation is expected to stabilize and strengthen the country’s industrial economy

China’s intensified efforts to pursue innovation-driven development. [LI MIN/CHINA DAILY]

Upgrades and initiatives aim to achieve high-quality development. Ma Si reports.

China’s intensified efforts to pursue innovation-driven development and cultivate competitive small and medium-sized enterprises will help further stabilize supply chains and boost the country’s sprawling industrial economy, officials and experts said. .

The government is committed to promoting science and technology innovation to upgrade industry, eliminate supply bottlenecks and achieve high-quality development through innovation, according to the work report. 2022 from the government.

He said China will make a big effort to boost core manufacturing competitiveness, promote stable industry performance, ensure the supply of key raw materials and spare parts, and launch initiatives.

These factors will enable leading companies to fully play their role in safeguarding the stability and security of industry and supply chains.

This year, China will strengthen its policy of providing additional tax relief for research and development costs, increasing the coverage of deductions for small and medium science and technology enterprises from 75% to 100%.

Tax breaks will also be given to companies investing in basic research, while policies will be improved on accelerated depreciation of equipment and tools, and preferential corporate tax for new and high-tech companies.

According to the report, the government will launch a number of industrial foundation re-engineering projects, help upgrade traditional industries, accelerate the development of advanced manufacturing clusters and launch a national program to foster strategic emerging industry clusters.

It will also favor specialized and sophisticated companies that produce new and unique products.

The moves come after the country’s manufacturing output topped 31 trillion yuan ($5 trillion) last year, the world’s highest figure for the 12th consecutive year, which accounted for more than 27 percent of the National GDP.

During the two sessions, Xiao Yaqing, minister of industry and information technology, who oversees the industry’s top regulator, said that despite the challenges, China’s industrial economy continued its trend. to stabilization and recovery in the first two months of this year, with industrial chains and supply chains becoming more resilient.

According to Xiao, the country’s manufacturing sector has become more technology-oriented, accelerating digitalization and green transformation and reflecting the fact that China’s industrial structure has been further optimized and upgraded.

Various levels of growth were also seen in crucial sectors such as containers and computer chips.

Last year, the turnover of China’s IC industry topped 1 trillion yuan for the first time, with annual growth of 18 percent, according to estimates from the China IC Industry Association. semiconductors.

Basic competitiveness

Despite this growth, Xiao said last month, “We are also clearly aware that there are still many problems. For example, the core competitiveness of the manufacturing sector is not strong, the quality of the supply system needs to be improved urgently, and there are still many risks to the security and stability of the industry and chains. supply.”

He also warned that national development is facing the triple pressure of shrinking demand, supply shocks and weakening expectations in the current external environment, which has become more complex, severe and uncertain.

Against such background, the ministry pledged measures, such as strengthening the resilience of industrial chains, strengthening new information infrastructure and supporting small and medium-sized enterprises, with the aim of boosting the economy. country’s sprawling industry.

Li Yizhong, president of the China Federation of Industrial Economy, an industrial association in Beijing, said that to remove obstacles to industrial upgrading and development, industrial foundations must be consolidated and weak links must be strengthened.

“We must redouble our efforts to improve technological innovation and emergency responses, as well as accelerate breakthroughs in key technologies, such as high-end chips and fundamental software,” said Li, who is a former Minister of Industry and Information Technology.

Further efforts are also needed to boost investment in digital infrastructure such as fifth-generation cellular wireless technology, aka 5G, and semiconductor fabs, he said.

“Previously, we adopted the foundry model in semiconductors, that is, we design, test and package the chips, but leave the production and manufacture of the chips to others,” said Li.

“As a result, we no longer have the capacity to manufacture high-end chips, which leaves the domestic semiconductor sector vulnerable to possible sanctions from other countries. It is a weak link in the industry. semiconductors that we need to strengthen.”

Li said further integration of the digital and real economies is also needed to stabilize supply chains, while internet companies and industrial enterprises should work more closely.

Creative centers

Eager to nurture the high-quality development of the manufacturing sector, the ministry said more national manufacturing innovation centers will be established to achieve breakthroughs in core technologies.

By the end of last year, 21 such centers had been set up across the country, covering areas such as semiconductors, new energy vehicles and smart sensors.

To build a modern industrial system, experts called for more efforts to support small and medium-sized enterprises, which will help strengthen the resilience of industrial chains and boost innovation and vitality of the industrial economy.

Yang Yuanqing, Chairman and CEO of Lenovo Group, said that SMEs are not only an indispensable part of industry and supply chains, but also an important source of innovation, and they contribute significant to employment.

However, in the process of digital transformation, many SMEs face challenges, such as weak digital tools and lack of funds and talent.

Meanwhile, some don’t know how to embrace digitalization, said Yang, who is also a deputy to the National People’s Congress.

A digital transformation acceleration platform could be built to provide digital assessment consulting, training and financing solutions to SMEs, while further efforts are needed to develop an indexing system to better assess the level of digitization of SMEs in order to offer more targeted assistance, he added. .

According to Yang, established companies such as Lenovo should play a bigger role in driving the joint innovation and development of SMEs up and down the industry and supply chains.

He said Lenovo has built a digital management platform with its domestic SME suppliers to help them achieve digital transformation, and it has also supported local competitive SMEs through venture capital investments and purchasing. their technologies and components.

“Little Giants”

Bearing in mind the crucial place of SMEs, the Ministry of Industry and Information Technology aims to contribute this year to the development of around 3,000 “little giant” companies, which will focus on a niche market and will master key technologies with a high capacity for innovation.

The plan is part of the ministry’s broader efforts to boost creativity in SMEs and foster a better business environment for them.

China aims to cultivate 1 million innovative SMEs by 2025, according to a government guideline on SME development under the 14th five-year plan (2021-25).

“For China, innovation capabilities and well-balanced supply chains have played an increasingly important role during the country’s economic development,” said Li Chao, chief economist at Zheshang Securities.

“The ‘little giant’ companies, able to fill some of the country’s weak spots, will help improve industry and supply chains and enable China to become a manufacturing powerhouse.”

A research note released last year by investment bank China International Capital Corp said the average revenue growth rate of listed Chinese ‘small giants’ had outpaced that of listed non-financial and non-petrochemical companies. A shares.

They are likely to become future “hidden champions” like those (comparable companies) in Germany, and could even make an important contribution to industrial growth, he said.

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