Economist Urges China to Continue to Develop Manufacturing

     BEIJING (MNI) - China needs to insist on developing its manufacturing

sector while new industries come into being and the country's industrial

structure is upgraded, according to an economist and advisor to the National

People's Congress.

     "Manufacturing is the backbone of the real economy," Yin Zhongqing, vice

chairman of the Financial and Economic Affairs Committee of the National

People's Congress, said at a forum entitled "Explore New Reform, Evoke New

Power" on Thursday in Beijing.

     "Developing new industries could also add new momentum" to the economy, he

said. "We cannot separate these two things or put them against each other."

     Traditional industries stabilize economic growth, boost employment, and are

major sources of revenue, Yin said, adding that both the amount and quality of

these industries need to be enhanced. He also pointed out that the trend at the

local level is that too much emphasis is placed on new industries and

traditional industries are ignored. 

     Yin said that although manufacturing becomes less important to any

economically maturing country, it should not mean that the manufacturing sector

is given decreased status.

     "Some developing countries fell into the 'middle income trap' because they

gave up on the manufacturing sector too early," Yin said, referring to the

situation where a country's growth slows after it achieves middle-income levels.

"Some developed countries also face economic structural imbalances due to the

underdevelopment of their manufacturing."

     Yin argued that China's manufacturing sector is the foundation for its

service sector, with the service sector ultimately serving the manufacturing

industry. China is also on the path of seeking new growth engines amid an

economic slowdown, thus the integration and development of both the

manufacturing and service sectors are very important, Yin said.

     The expanding gap between China's capital outflows and slowing capital

inflows is also a concern for China, Yin said. He said some Chinese companies

are not "going out," but "moving out," and as they do so are moving not only

their assets overseas but also their resources, leaving China at a disadvantage.

     Yin also said that the Chinese government plays too big a role in the

economic development, with "over-intervention" by the government a serious

problem.

     He stressed the need to specify the boundaries of the government and the

market, and utilize the market's decisive function in resource allocation to a

greater degree to achieve the goal of supply-side reform.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

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