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A Regional Analysis of Major Chinese Industries and its Implication

Author Cho, Chuel et al. Date 2018.12.20 Page
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? China’s rapid economic growth has resulted in many changes in its Industrial sector, which vary over regions as well as individual industries. This study investigates the regional characteristics of such changes for three Chinese industries, specifically for shipbuilding, steel, and mobile-phone industries, and provides some policy implications regarding 

 First, we investigate the regional concentration in production and find that it varies across industries. In mobile-phone industry, which shows the highest concentration over the three industries, almost half of production(46.3%) is conducted in a single province, Guangdong. Shipbuilding industry also shows a high regional concentration; more than
one third of production(36%) is occurred in Jiangsu Province, and over 90% of national production takes place at only six regions(provinces or cities) including Jiangsu. Meanwhile, the regional concentration in steel industry is lower than two other industries as production plants are distributed relatively evenly across the nation.

 Also, we find that the regional concentration varies over time as well as across industries in accordance with the structural transformation in the national industrial sector. When we look at the production statistics for shipbuilding industry, the production shares of Shanghai and Jiangsu were similar in 2007, about 24~25% respectively, but it has been decreased in Shanghai to 14.8% while increased in Jiangsu to 36%. Recently, the shares show upward trends in some regions like Shandong and Guangdong provinces, but downward trends in Liaoning and Zhejiang provinces. In case of steel industry, the share of major production region, Hebei Province, has continuously increased as existing plants are becoming lager caused by the influence of structural
transformation. The shares of Shandong and Anhui provinces also have been increasing with the same reason while those of Jiangsu, Liaoning, and Henan provinces, traditionally major crude steel production regions, have been stagnant or decreased. In mobile-phone industry, a typical labor-intensive industry in China, major production plants are moving toward middle-west regions. Although Guangdong Province still remains as the major production region, the production shares of middle-west regions, such as Chongqing, Henan, and Jiangxi provinces, have been increased drastically.

 As the regional concentration in Chinese production varies across industries and over time, Korean industry needs to react strategically in coping with those changes in China. Specifically, we could consider the strategy for each industry and each region.

 For example, in shipbuilding industry at Shanghai and Liaoning Province, where many state-owned enterprises are located, maintaining the current technology gap in large and higher-value added ship would be an strategic option. For Jiangsu Province, which has a large proportion of private companies, it would be a tactful approach to develop small and special high value-added vessels. As for Guangdong Province, we should respond not only to the development of special high-value-added small and medium-sized special vessels, but also to cost reduction through smart-yard technology. With regard to Zhejiang province, which has strength in vessel refurbishing, it is necessary to establish a strategy to expand existing service area such as repair, maintenance, design and consulting of vessels and offshore plants based on our accumulated shipbuilding experience.

 In steel industry of China, five regions including Hebei, Jiangsu, Liaoning, Shandong and Guangdong are the major export regions. Thus those regions are our main import partners. However, it is also fact that product mix, oversupply scale, and policies are very different from region to region. Accordingly, in order to compete with Chinese steel providers in the domestic market or the global market, it is necessary to monitor china’s steel industry by each major region and by each product. Also, an advanced strategy to compete with chinese product in export market is required as China is actively implementing policies to improve production efficiency, energy conservation and pollutant emissions reduction. Focusing on specific region, for Hebei and Jiangsu provinces we need to be prepared for the introduction of the national standards for multi-complex plates and high performing pipeline, as the production capabilities of them increase in these regions.

 In mobile-phone industry, we will need to reinforce the premium and product differentiation by expanding investment in new technologies and innovative investment that will preemptively respond to market demand. In other words, since we have competitiveness in core smartphone parts such as mobile memory semiconductors, OLED displays, cameras, and batteries, and since we still maintain our competitiveness gap compared to China, it would be important to keep making strategic investments to maintain our competitiveness.?