Chapter 15         The IT Industry

In the world economy today, the IT industry assumes a strategic importance. Its influence on the national economy does not only lie with the added value it contributes, but also with the changes that IT products and services bring on other industries in terms of production process, organization and management. Therefore, the development of the IT industry has come to be taken as an important symbol of the comprehensive strength of a nation. The accession to the WTO has a significant impact on the development of the IT industry in China. Take Shanghai for example. For the period from January to November 2004, the IT industry of the city has reported a total sales volume of RMB 302,632 million, accounting for a growth of 54.8% in the annual term. The total profits amount to RMB 7,458 million, marking a 160.5% annual growth.

I. The Implementation of Relevant WTO Commitments and the Effects

The tariff on imported electronic products has continued to fall, and anti-dumping charges have been made in foreign countries against imports from China. For example, in early 2004, after the USA applied anti-dumping measures on color TV sets imported from China, the supply of CRT color TV sets in the domestic market increased by four million units, pushing the prices of color TV sets down dramatically and creating a slump in the market. At the same time, such upstream sectors as color TV tubes and glass shell have been affected to some degree. Due to the dramatic fall in the prices of downstream products, the prices of various color TV tubes and glass shells have continued to decline. To make it even worse, the costs of major materials such as steel and copper, energy resources and transport have risen steadily. In consequence, the profitability of relevant enterprises has decreased apparently. As the size of the color TV sector in Shanghai is relatively small, the impact is not significant, though.

II. Development of the IT Industry in 2004

Powered by the strong growth of demand in the global and the domestic markets, the IT industry greeted a climax in development in the year 2004. For the period from January to November 2004, the IT industry in Shanghai has turned out a total production value of RMB 249,152 million which marks a 51.4% annual growth, delivered a total export value of RMB 177,994 million with a year-on-year increase of 63.1%. To be more specific, the computer manufacturing sector contributed an added industrial value of RMB 120,079 million, marking a 59.7% annual growth; the electronic device manufacturing sector produced a total value of RMB 40,964 million, representing an annual growth of 51.4%; the communication equipment manufacturing sector turned out an added industrial value of RMB 33,354 million, meaning a 20.6% year-on-year increase; the household audio-video equipment manufacturing sector contributed an added industrial value of RMB 33,267million, representing a 76.5% annual growth; the electronic component manufacturing sector turned out a total industrial value of RMB 19,718 million, marking an annual increase of 31.4; and other electronic sectors produced in total an industrial value of RMB 1,527 million, which marks a 79% annual growth.

Enterprises with foreign investment and those producing low added value products have remained the major players in the IT industry. From January to November this year, the value of exported IT products accounted for 71.4% of the total industrial production value of Shanghai, but the influence of export processing on the profitability of industrial enterprises has further declined. For example, industrial leaders, such as Dagong Computer, Inventec and HP in the computer manufacturing sector, Envanda, Sony SVA and Panasonic Plasma in the household audio-video equipment manufacturing sector, are mainly engaged in simple job processing which is characterized by low technology content, low added value and low profitability.