Beijing Economy

A Brief Review

Beijing started working for industrialization in the 1950s. Four industrial zones, the cotton textile industry zone in the east suburbs, radio industry zone in the northeast, machinery and chemical industries zone in the southeast and heavy industrial zone in the west, took shape at the end of the decade. By then, the city's annual industrial output value had reached 4.6 billion yuan, suggesting that the city had built up an industry oriented economic structure. Over the following 20 years, Beijing's metallurgical, chemical and other industries received priority for development. In 1997, heavy industries accounted for 63.7 percent of the city's total industrial output value, and the figure was smaller than that for Liaoning Province only.

However, with the economic and social advancement, a conflict between developing heavy industry and the nature and functions Beijing should have as China's Capital loomed ahead. In the early 1980s, work began to develop the "kind of industries and economy" that would conform to the specific conditions of the national capital. At the eighth municipal congress of the Chinese Communist Party, the concept "capital economy" was officially advanced. Then in January 1998, the newly elected Municipal Government of Beijing officially decided the focal task during its term of office to devote major efforts to developing the economy that fits in with the status of the city as the national capital. The "Capital Economy" was defined as follows:

1) It should be based in the capital city, intended to serve the whole nation and meant to integrate with the world economy.

2) It should fully embody the nature and functions of Beijing, be able to give full play to the capital's relative advantages, and conform to the objective laws governing the development of the socialist market economy.

3) It should be capable of optimizing its structure, rationalizing the distribution of its different sectors, and it should be technology intensive, fully open to the outside world, economical in utilization of resources, and environmentally friendly.

4) In opening itself to the outside world, it should be capable of making a full, efficient use of both domestic and foreign resources as well as both the domestic and international markets to the best benefit of the economic reconstruction of the capital city.

5) It should be an export oriented economy, in which Beijing based Central Government institutions and the municipality can work in unison and complement each other in seeking market expansion and development.

6) It should be able to give full play to the capital's scientific and technological edge while allowing priority to development of high and new technologies in implementing the opening policy.

7) It should have developed tertiary industries that focus on foreign related services and foreign trade.

8) It should conform to international standards in operation.

Industrial Development in the Most Recent Years

Through development in the first 40 years after 1949, Beijing has completed the shift from a consumption oriented city to one of China's major industrial centers. In the ninth Five-year Plan period (1996-2000), the city's industrial establishment has constantly grown in strength, at rates that averaged 18.7% for the first four years, 5.5 percentage points higher than for the previous five years. In 1999, the total value of industrial output generated by industrial enterprises undertaking independent accounting reached 208.1 billion yuan, for the first time breaking the 200 billion yuan mark. This compared to 17.44 billion yuan for 1995, the last year of the eighth Five-year Plan period.

Development of a Foreign Market Oriented Economy

In recent years, Beijing's foreign trade and economic cooperation has been developing by leaps and bounds. Statistics from the Customs show that in 1999, the imports and exports of Beijing totaled US$8.44 billion, 3.9 times the figure for 1986. The figure included 3.26 billion yuan for exports, which was approximately five times the 1986 export volume. The annual increases averaged 13%, higher than the annual average growth of Beijing's GDP. In 1978, imports and exports furnished only 4.8% of the city's GDP. By 1999, the figure had grown to 26.8%. By the end of 1999, the municipal authorities had approved 14,729 foreign-funded enterprises. These would call for US$27.691 billion in contractual investment, of which US$18.6 billion had actually been realized. Foreign-funded enterprises broke into 14,729 Chinese foreign joint ventures, 1,167 Chinese foreign cooperative enterprises, 3,237 enterprises under sole foreign proprietorship, 9 joint stock enterprises and 17 foreign banks. Investors came from 96 countries or regions, breaking into 5,731 come from Hong Kong, 2,422 from the United States, 1,656 from Taiwan, 1,257 from apian, 752 from the European Union, 563 from the Republic of Korea and 513 from Singapore.

Of late. Many multinational groups have started investment companies in Beijing or moved their regional headquarters to the city. Of the world's 500 largest multinationals, 154 have invested in Beijing. Besides, 6,177 representative offices of foreign companies have registered in Beijing. Moreover, the city plays host to 20 R&D organizations and 105 investment companies. Some 5,351 foreign-funded enterprises are already in operation in the Chinese capital. These together have 424,200 local employees. A 1999 survey shows that their economic operations have been fairly good as testified by a constantly improving profitability.

Development of High_Tech Industries

Industries using new and high technologies are growing in scale and have become a new engine for Beijing's economic growths. In the current Five-year Plan period, such industries have been playing a most significant role in spurring the economic development of the Chinese capital. In 1999, they generated 16.49 billion yuan in industrial added value, twice as great as the figure for 1995, the last year of the eighth Five-year Plan period, which was computed at 7.9 billion yuan. During the same 1995-1999 period, the share of High_Tech industries in the city's total industrial added value grew from 17.2% to 25.4%. In the first seven months of 2000, Enterprises using high and new technologies yielded 11.66 billion yuan in industrial added value, accounting for 33.7% of the city's total industrial added value and up 40% over the same period of 1999. New and high technologies put to use were responsible for about 65% of the increase made by the city in its industrial added value during this seven month period. The sales incomes for the period came to 46.36 billion yuan for enterprises using high and new technologies, 50.1% over the corresponding figure for 1999. These enterprises generated 2.78 billion yuan in profits, a 2.1 fold increase over the first seven months of 1999; and turned over to the state 4.05 billion yuan in payment of taxes and fees, 2.2 times as much.

Venture Capital

Until now, 94 venture capital corporations under sole Chinese proprietorship have been established across China. Of these, 18 or 19.15% are registered in Beijing. Those registered in Beijing together have at their disposal more than 50% of the operational capital available to all the 94 venture capital corporations.