Power of China's heavy industry

Guo Shiping, The Straits Times, Asia News Network, Singapore

Many Chinese were surprised by the decision made during the third plenary meeting of the Chinese Communist Party's (CCP) 16th Central Committee in October to accelerate growth in the north- east of the country.

With the nascent development of western China yet to produce significant results, what could be the reasons for pumping resources into another region?

Premier Wen Jiabao conducted three study tours of the north- east this year. Clearly, its development has entered the main agenda of the Chinese leaders.

Sources note that while the central government made the evaluation on economic grounds, political factors played a major role in the decision. One of these was the need to salvage China's heavy industries.

Chinese think-tanks have, on many occasions, argued that China's market reforms have made the mistake of basing economic growth on light industries and the fast-growing service sector, and overlooking its heavy industries. As a result, these have been shrinking gradually.

An authoritative research agency even predicted that China would have no heavy industries in five years, if it continued to ignore their development. If this happened, China's sustainable development would clearly be affected.

Premier Wen has noted that while the coastal regions have grown rapidly over the past 24 years, the north-east, where the majority of China's heavy industries are concentrated, has hardly progressed. For China to lose its heavy industries would be a blow to it as an emerging superpower.

Almost all members of the CCP's Politburo believe that China not only needs heavy industries, but should also devote major efforts to develop them. Without these industries as its foundation, China will not be able to become a superpower.

As China moves up the global gross domestic product (GDP) ranking, it gains more international recognition as a superpower. It is, therefore, unimaginable that heavy industries do not factor in its GDP growth, as they do for other global powers. They are highly developed in countries such as the United States, Sweden and Germany.

Sources say China's concept of a superpower encompasses not just economic but also military and technological strength. To achieve that, no efforts should be spared in developing its heavy industries. The policy to accelerate economic development in the north-east is, therefore, laying the foundation for China to become a superpower.

Another important consideration is that China needs a strong heavy industrial sector to handle world situations which become volatile.

North Korea may touch off military conflict between China and the U.S. The latter is almost certain to put Pyongyang on its agenda after next year's presidential election, as it will never allow the communist state to possess nuclear weapons. It won't rule out military action to prevent that from happening.

China would be in a quandary if U.S.-Pyongyang relations reach that stage. As it was involved in the Korean War, and would obviously want to maintain the status quo in East Asia, it would definitely sell weapons to North Korea to defend itself.

Taiwan is another likely source of military conflict. Taiwanese President Chen Shui-bian would push Taiwan towards independence if he were re-elected. China would have to resort to force if the independence movement pushes past the limit. That would set it up for a clash with the U.S.

Then there is the worldwide fight against terrorism. All these point to the need to develop a strong military industry.

Heavy industries are also crucial to China's ambitions to expand its space program.

As Premier Wen has noted many times, most of the talent for the program is in the north-east, which is also an important base for the development of the program.

With the success of Shenzhou V, China now aims to build its own space station to bring it up on par with the United States and Russia.

Finally, developing the north-east would also change China's export structure. Light industries currently form the bulk of its exports, and trade imbalances have incurred the displeasure of other countries.

European countries with a concentration of heavy industries, such as Germany and Sweden, do not face as great a pressure as China. By developing its heavy industries, China can cut its reliance on light industry exports and face less pressure from the international community.

Of course, China cannot achieve any of this overnight. Sources say its heavy industries will first have to stop being reliant on imports, before they can become export-oriented.

But the decision is a timely one, as other provinces have already started to take advantage of the situation in the north- east.

Last year, Guangdong made a request to fully develop its assembly manufacturing sector. It has always been controversial whether this southern province is suited for developing heavy industries, but there is no such doubt about the north-east.

Nor is there doubt that the decision to develop the north-east was taken by the government after much deliberation and is one which will bring about a strategic transformation for China.

The writer is a professor of economics at Shenzhen University in China.