Xun Yugen is a director of the China Chief Economist Forum, chief economist and director of the research institute of Haitong Securities
Core conclusions: (1) At present, China is in a period of transition between old and new kinetic energy, and the manifestations of weak growth and weak demand are similar to those in 98-00 years. (2) In the past 21 years, the mainland real estate market has adjusted significantly. To stabilize the old economic momentum, it is necessary to implement a new real estate development model, such as policy support to release the housing demand of new citizens. (3) To activate new economic momentum and develop new quality productivity, it is necessary to rely on local resource endowments to promote photovoltaic going overseas and accelerate the development of intelligent automobiles.
Reflections on the Transformation of China's Old and New Kinetic Energy: Drawing on 98-00 Years
Since mid-2023, the domestic price level has been running at a low level, which has raised market fears that the economy will fall into deflation. Looking back at history, it can be seen that from 1998 to 2000, China also had a similar macro environment, the economy was in the stage of transformation of old and new kinetic energy, economic growth was sluggish, and demand was weak. Drawing on the history of that year, this paper puts forward some thoughts on the current smooth transformation of China's economy from the old to the new.
1. The current challenge in China is similar to that of '98-00: the transition from old to new
The current Chinese economy is similar to the 1998-2000 period. There are usually two definitions of deflation in the economics community: the single-factor view that deflation is the continuous decline in the general price level over a period of time, and the multi-factor view that deflation is manifested in the decline of the money supply and the continuous decline in prices, usually accompanied by economic recession. Although there is still debate in the academic community about whether China's economy is currently in deflation, it is an indisputable fact that the domestic price level has been running at a low level since mid-2023. Domestic CPI fell to 0% YoY in June '23 and has been hovering around 0% since then, while PPI YoY has been negative since Oct '22 and remains at -2.7% at 24/02. In 23 years, the mainland's real GDP grew by 5.2%, but the nominal GDP growth rate was only 4.2%, and the GDP deflator turned negative to -0.54%, the lowest value since 1999. The current situation of low prices is a reflection of weak aggregate demand, and the real GDP growth rate of 5.2% in 23 is significantly lower than the average GDP growth rate of 6.7% in 2015-2019.
The current economic representation of low prices in China is similar to that of 1998-2000, when the domestic PPI was negative year-on-year for 31 consecutive months since June 1997, and the CPI was negative year-on-year for 22 consecutive months since April 1998. In 2000, the downward pressure on domestic prices eased somewhat, but in 2001 the year-on-year growth of the PPI and the year-on-year growth of the CPI turned negative again. The persistent decline in the price level made nominal GDP growth lower than real GDP growth in 1998 and 1999. In '98, the mainland's real GDP growth rate was 7.9% and the nominal GDP growth rate was only 6.3%; in '99, the mainland's real GDP growth rate was 7.7% and the nominal GDP growth rate was only 6.9%, and the GDP deflator was negative for two consecutive years, -0.86% and -1.3% respectively. Han Wenxiu, deputy director of the Office of the Central Financial and Economic Commission, said that during this period, China experienced a deflationary trend, and the real GDP growth rate in 98 and 99 was significantly lower than the average GDP growth rate of 11.4% in 93-97.
Behind the deflation of 1998-2000 was the fact that the mainland was undergoing a transformation from labor-intensive industries to capital-intensive industries, and the aggregate social demand was sluggish. After the reform and opening up in 1978, the mainland's agricultural and rural economy developed rapidly and released a large number of rural surplus labor, and the proportion of the working-age population aged 15-64 in the total population rose from 57.8% in 1978 to 67.6% in 1997, which strongly supported the development of labor-intensive industries represented by light industries such as food, textiles, and household appliances, and the proportion of labor-intensive light industry output value in the total industrial output value rose from 43% to 49% from 1978 to 1997. With the gradual accumulation of capital and the increase of labor costs, the apparent comparative advantage (RCA) of traditional labor-intensive industries such as food, textiles and clothing, and footwear has dropped significantly since 1995. In the late 1990s, there was a marked overcapacity of light industrial products. According to the data of the third national industrial census, in 1995, half of the industrial products had a capacity utilization rate of less than 60 percent, and the overcapacity of durable consumer goods such as household appliances was particularly prominent, with the capacity utilization rate of washing machines being 43.4 percent and color televisions being 46.1 percent. In addition, the outbreak of the Asian financial crisis in 1997 hit the global economy, and the mainland's external demand was significantly affected, and the export growth rate fell from 21 percent in 1997 to 0.5 percent in 1998. On the whole, the weak aggregate demand and overcapacity of industrial consumer goods during this period were reflected in the economy, which was characterized by deflation and a decline in the economic growth center, which fell from 11.9% in 1992-1997 to 8.0% in 1998-2000.
The development of the leading industry. First of all, in 1998, the State Council promulgated the "Notice on Further Deepening the Reform of the Urban Housing System and Accelerating Housing Construction", which comprehensively ended the distribution of housing in kind, and in 2003, the State Council issued the "Notice of the State Council on Promoting the Sustained and Healthy Development of the Real Estate Market", which started the process of real estate marketization. Under the background of the market-oriented reform of the urban housing system, the housing demand of domestic residents has been rapidly released, and the mainland real estate market has entered a golden period of development, driving the rapid development of raw material industries such as steel, aluminum, and cement. Second, China's accession to the WTO in 2001 accelerated the process of economic globalization on the mainland, and the integration of mainland industries into the global supply chain eased the problems of technology, talent, capital, and market that restrict the development of the mainland's industries, and the rapid development of industries, including heavy chemical industry, became a new driving force for economic development. The share of heavy industry in total industrial output rose from 60% in 2000 to 72% in 2011, and China's real GDP growth center also rose from 8.0% in 1998-2000 to 10.6% in 2001-2010.
Similar to 98-00 years, China is currently at an important juncture in the transformation of old and new kinetic energy. When economic development reaches a certain stage, it is difficult for the capital-driven model to continue to support rapid economic growth. A large amount of capital investment will inevitably face problems such as a decline in the rate of return on capital, a decline in marginal output, and overcapacity, which will gradually weaken the role of capital investment of the same scale in driving economic growth. Since 2010, the center of China's economic growth has gradually declined. GDP growth slowed from 10.5% in 2000-08 to 7.8% in 2009-2019 and further to 4.8% in 2020-2023. In "New Quality Productivity: Building New Drivers of Economic Growth-20231215", we argue that the slowdown in economic growth reflects that the extensive development model driven by capital investment may be unable to meet the requirements of high-quality economic development in the new era.
In this context, on September 7, 23, General Secretary Xi Jinping first put forward the concept of "new quality productivity" at the symposium on promoting the comprehensive revitalization of Northeast China in the new era, and on January 31, 24, at the 11th collective study of the Political Bureau of the CPC Central Committee, he systematically elaborated on the new quality productivity, providing scientific guidance for the mainland to shape and develop new momentum and new advantages. The new quality productivity is different from the traditional productivity, which gets rid of the input of a large number of resources, takes scientific and technological innovation as the core driving force, and takes the substantial improvement of total factor productivity as the core symbol, characterized by innovation, the key is high quality, and the essence is advanced productivity. Strategic emerging industries include six major industries: new-generation information technology, high-end equipment manufacturing, new materials, biology, new energy vehicles, and new energy, while future industries include 6G networks, controllable nuclear fusion, brain-like intelligence, quantum information, gene technology, and deep-sea aerospace development. By actively cultivating high-tech strategic emerging industries to accelerate the formation of new quality productive forces, we can not only realize the transformation and upgrading of the industrial structure in the stage of high-quality development, but also continue to provide impetus for the mainland's economic growth.
In the economic transformation from labor-intensive light industry to capital-intensive heavy industry in 98-00, the proportion of new and old industries in the economy was relatively balanced. For example, in 97 years, the output value of light industry in the mainland accounted for 49% of the total industrial output value, and the proportion of heavy industry was 51%, with the continuous improvement of the comparative advantages of heavy industry represented by machinery and electronics, superimposed on China's accession to the WTO and the promotion of real estate marketization, heavy industry has gradually become a pillar industry of the economy. In the current process of industrial transformation and upgrading, the "new economy" represented by new quality productivity has been developing rapidly, and the proportion of strategic emerging industries in GDP has increased from 7.6% in 2014 to more than 13% in 2022, but the proportion in the overall economy is still low. Over the past 21 years, the "old economy" represented by real estate has continued to decline, but in 23 years, real estate and related industries still accounted for 25.9% of GDP. It can be seen that there is a big difference between the old and new economies, and the growth rate of the new economy has not been able to fully compensate for the impact of the slowdown of traditional industries. The 24-year government work report requires seeking progress while maintaining stability and promoting stability through progress, which means that while the mainland pursues the "advancement" of new quality productivity, it also needs to take into account the "stability" of traditional industries such as real estate, and work together to meet the challenges of the transition period between old and new kinetic energy.
2. To stabilize the old momentum, we need to release new housing demand
According to the above estimates, mainland real estate and its related industrial chains account for a high proportion of GDP, and the current new momentum has not yet been fully developed, so stable growth requires that the old momentum will not decline too quickly. Since 2021, the real estate industry has entered a period of adjustment, in which the area of real estate sales and investment have dropped significantly. The stabilization of the real estate industry is very important to stabilize the old momentum. Judging from the current situation, the adjustment of China's real estate industry has been obvious, and the stabilization of the industry depends on the leading indicator, that is, the sales area, which needs policy support to release new housing demand.
The mainland real estate market has sufficient room for adjustment, and the duration is still uncertain. In the report "Real Estate: Drawing on Overseas Experience to See the Adjustment Range: Six Major Aggregate Topics in 24 Years 3", we refer to 48 rounds of real estate downward cycles in 35 overseas economies, and find that the median length of the decline cycle of overseas real estate sales area and investment volume is 4 years and 6 years, respectively, and the median decline depth is 33% and 27%, respectively. If we look at the annual value, in 2023, mainland property sales and investment will fall by 38% and 25% respectively from the peak point (2021). If we look at the 12-month moving average of the area of commercial housing sales and the amount of real estate development investment, as of February 2024, real estate sales and investment fell by 45% and 28% respectively from their peaks (June and August 2021). In terms of time, the current decline in mainland real estate sales and investment has lasted for nearly three years (30 and 32 months, respectively). In addition, from the perspective of price adjustment, referring to the second-hand residential price leading index of the four first-tier cities in the mainland, it can be found that the current real estate market has been adjusted to the level of 2019-2020, and the second-hand housing prices in Beijing, Shanghai, Guangzhou and Shenzhen have fallen by 20%, 22%, 21% and 35% respectively from the highest point, which reflects that part of the bubble has been squeezed out. On the whole, although the decline in the current real estate market has slowed down slightly, the uncertainty of the next stage is still strong.
There is still room for the demand side of the old kinetic energy, and the number of new citizens in the mainland who have the demand to buy houses is large and increasing. The Politburo meeting of the Central Committee of the Communist Party of China (CPC) held in December 2015 proposed for the first time to "dissolve the real estate inventory, promote the reform of the housing system to meet the needs of new citizens by accelerating the urbanization of migrant workers, expand effective demand, and stabilize the real estate market." The 2022 Central Economic Work Conference and the 2023 Government Work Report once again clearly pointed out that "solve the housing problems of new citizens and young people". According to the Notice on Strengthening Financial Services for New Citizens jointly issued by the former China Banking and Insurance Regulatory Commission and the People's Bank of China on March 4, 2022, new citizens "refer to various groups who have come to live in cities and towns for reasons such as starting a business and finding employment, children going to school, or taking refuge with their children, and have not obtained local household registration or have obtained local household registration for less than three years, including but not limited to migrant workers in urban areas, newly employed college and secondary school graduates, etc., with about 300 million people at present". According to the data of the 2022 China College Student Employment Trend Survey Report of the Information Center of the Ministry of Human Resources and Social Security, the proportion of non-local employment is about 69%, that is, about 6.67 million college graduates are employed in other places. Combined, there were 7.45 million new citizens each year over the past five years.
Under the policy incentive, the demand for new citizens to buy houses has been released, which may stabilize the sales area of commercial housing in the mainland. According to Tsinghua University's "Survey Report on the Housing Situation and Financial Needs of New Citizens (Q2 2023)", we found that about 19.4% of the new citizens in the current long-term development of the city have already purchased a house or have plans to buy a house in the near future, and 15.3% have a plan to buy a house within 3-5 years If there is a demand for housing in the place of residence, then the annual new rigid housing demand is about 745,000 units, and if you refer to the current 70 square meters/set area of small affordable rental housing, the annual new rigid housing purchase area is about 50 million square meters. According to the "Chinese Population Census Yearbook 2020" cited by Xinhuanet, the average living area of mainland households reached 111.18 square meters. According to Tsinghua University's "Survey Report on the Housing Situation and Financial Needs of New Citizens (Q2 2023)", only 31.6% of new citizens have a residential housing construction area of more than 90 square meters. This shows that there is still a lot of room for improvement in the living conditions of new citizens, if the policy can be supported, so that the average living area of the new rigid housing demand reaches an average of 111 square meters, then the annual new housing area will increase from 50 million square meters to 82.7 million square meters. In 2023, the residential sales area of commercial housing in mainland China will decrease by 17.3% compared with 2022, and if the decline in sales area this year is the same as last year, then the residential sales area this year may decrease by 160 million square meters compared with last year. If the policy is forced, the new housing demand brought by new citizens will reach more than 80 million square meters, or it will hedge the impact of the real estate downturn to a certain extent.
To meet the rigid and improved housing needs of new citizens, it is necessary to build and promote a new real estate development model of "market + security". In 2021, the Central Economic Work Conference proposed for the first time that the real estate industry should "explore a new development model, adhere to the simultaneous development of rental and purchase, accelerate the development of the long-term rental housing market, promote the construction of affordable housing, support the commercial housing market to better meet the reasonable housing needs of buyers, and promote the virtuous cycle and healthy development of the real estate industry due to the city's policies". In August 2023, the "Guiding Opinions of the State Council on Planning and Construction of Affordable Housing" pointed out that "to promote the construction of affordable housing...... It is an important measure to promote the steady and healthy development of the real estate market and promote the establishment of a new model for the development of the real estate industry", and it is necessary to "make up for the shortcomings of affordable housing construction as soon as possible, increase the proportion of affordable housing in the total housing supply, and continuously meet the basic housing needs of wage and salary groups". In December 2023, the Central Economic Work Conference emphasized that "we will accelerate the construction of affordable housing, the construction of public infrastructure for both ordinary and emergency purposes, and the transformation of urban villages." Improve the relevant basic systems and accelerate the construction of a new model of real estate development". The Information Office of the State Council proposed at a press conference on the "14th Five-Year Plan" that during the 14th Five-Year Plan period, 40 key cities plan to add 6.5 million units (rooms) of affordable rental housing, which is expected to help 13 million new citizens and young people solve the housing problem. According to our calculations in the report "Real Estate: Drawing on Overseas Experience to See the Adjustment Range", the area of urban villages to be renovated may exceed 1.25 billion square meters, and the "three major projects" may drive an average annual investment of more than one trillion yuan, providing cities with more appropriately priced incremental saleable housing to meet the needs of new citizens for buying and renting houses. Based on the above analysis, the following policy recommendations are proposed:
In February 2023, the People's Bank of China issued the Notice on Matters Related to the Pilot of the Rental Housing Loan Support Program, setting up the "Rental Housing Loan Support Program" with a quota of 100 billion yuan to issue rental housing purchase loans to eight pilot cities including Chongqing, Jinan, Zhengzhou, Changchun, Chengdu, Fuzhou, Qingdao and Tianjin. As of March this year, the government has invested a total of 4.716 billion yuan in five of these cities to purchase 8,352 units of commercial housing stock, with a unit price of 80-1 million yuan per unit. If all the 100 billion yuan can be implemented, then we expect the government to buy 88,000 units of commercial housing and put them on the market, which can solve the housing needs of new citizens to a certain extent. This model can not only help local governments to destock, stabilize housing prices, raise affordable housing resources to avoid duplicate construction, but also meet the rigid needs of current residents, and help cultivate residents' housing gradient consumption concept of "renting before buying and then improving", and promote the stable and healthy development of the real estate market.
For example, Xuancheng City, Anhui Province, in order to support the reasonable housing needs of foreign residents and basic talents. Persons with household registration in other places (non-Xuancheng household registration), part-time undergraduates, junior college students, technical secondary school students, and local household registration personnel who have obtained vocational skill level certificates (junior workers or above) who purchase the only and second sets of improved newly-built commercial housing in the urban area will be given a certain housing purchase subsidy according to the area of the house purchased.
3. To stimulate new momentum, more effective policy measures are needed
In 2000, during the transition period of the mainland's economic momentum, the rapid development of heavy industry and a large amount of capital investment became an important driving force for the rapid growth of the mainland's economy. In the current stage of transformation of old and new kinetic energy, accelerating the development of the "new economy" represented by new quality productivity will be the key to the mainland's pursuit of progress while maintaining stability, promoting stability through progress, and promoting high-quality development and industrial transformation and upgrading.
At present, the mainland may learn from the experience of industrial transformation and upgrading in the United States from 1980 to 2000. In the 1970s, the United States was affected by the food crisis and the oil crisis, and the economic growth rate of the United States declined significantly, and the center of real GDP growth in the United States fell from 4.5% in 1960-1969 to 2.9% in 1970-1980. From 1980 to 2000, the United States successfully achieved industrial transformation and upgrading through the development of science and technology, reshaping the momentum of economic growth.
In the early 1980s, the United States implemented a shift from a demand-management policy to a supply-management policy. The Reagan administration has adopted a series of structural adjustment policies aimed at improving efficiency and competitiveness, including tax cuts, cutting social welfare spending, increasing investment in research and development to encourage technological innovation, relaxing government restrictions on enterprise rules and regulations, and reducing government intervention in enterprises. Through this series of supply management measures, the production efficiency of the United States was improved, and the foundation for the overall competitive advantage of the United States in the 90s was laid.
The United States mainly supports enterprise technological innovation by providing innovation funds, tax incentives and service innovation, and encourages industry-university-research cooperation between universities and enterprises to promote the industrialization of scientific and technological innovation achievements. During this period, U.S. companies became the main body of scientific research investment and the leading force in technological innovation and industrialization, and their share of U.S. R&D expenditure rose from 49% in 1981 to 69% in 2000.
The United States gives full play to the financing function of the capital market to ensure that scientific and technological innovation and industrial development can be supported by sufficient capital. After 1978, the United States introduced a series of policies to encourage equity investment, such as tax exemption and relaxation of business registration restrictions, which played a huge role in promoting the development of the high-tech industry in the United States. During the period from 1980 to 2000, the proportion of direct financing represented by equity financing in the social financing structure continued to increase, and the number of IPOs of science and technology enterprises accounted for 37.6%, which effectively solved the financing problem of science and technology enterprises.
Eventually, the U.S. information technology industry achieved a breakthrough in key technologies, and labor productivity increased significantly. From 1995 to 1999, the average annual compound growth rate of labor productivity in the manufacturing industry in the United States was 9.7%, of which the computer and electronic products industry increased the most. With the development of high-tech industries, U.S. economic growth has gradually shifted to technology-driven. From 1988 to 1990, the contribution rate of total factor productivity to economic growth was only about 16%, but by 2001-2005 it had increased significantly to 64%, and the GDP growth center of the United States gradually rebounded after 1980, rising from 2.9% in 70-80 to 3.35% in 81-90 and 3.44% in 91-00.
At present, China's economy is stimulating new momentum, and it is necessary to proceed from reality and develop new quality productive forces according to local conditions. On March 5, when participating in the deliberations of the Jiangsu delegation, General Secretary Xi Jinping proposed that the development of new quality productive forces "must prevent a rush and bubble", "we must insist on proceeding from reality, first establish and then break, and adapt measures to local conditions", "according to the local resource endowment, industrial base, scientific research conditions, etc., selectively promote the development of new industries, new models, and new kinetic energy". We believe that this not only points out the problems of overinvestment, industrial convergence and overcapacity in the development of the mainland's new productive forces, but also points out the direction and path of progress.
In November 23, the Ministry of Industry and Information Technology said that there is a certain risk of stage and structural excess in China's photovoltaic industry. According to TrendForce, there is overcapacity in all PV industry chains, and wafer prices have fallen by more than 70% from the 22/08 high. In addition, we use the boundary production function method to measure the capacity utilization rate of listed companies in strategic emerging industries, and we can also find that the capacity utilization rate of listed photovoltaic companies has declined rapidly, from 96% in 22Q4 to 76% in 23Q3. According to the data of CPIA quoted by Century New Energy Network, China's new photovoltaic capacity will decline by 12% in 24 years under conservative expectations, and only 1.4% growth under optimistic expectations. Looking ahead, we believe that the demand side needs to continue to develop photovoltaic application scenarios, and the supply side needs to accelerate technology iteration and capacity upgrading. In addition, at present, China's photovoltaic industry has obvious cost advantages and technical advantages, and in the context of global energy transition, the sailing of photovoltaic products and production capacity will also become a solution to cope with the severe domestic supply and demand situation. According to the data of CPIA quoted by Century New Energy, the CAGR of global new photovoltaic installations in 23-30 years is conservatively expected to be 4%, higher than China's 2.1%, and the global new photovoltaic installed capacity CAGR is 6%, higher than China's 5.6% under optimistic expectations. Among them, with the help of the "Belt and Road" and the "east wind" of the Middle East's energy transition, the Middle East can become an important market for PV to go overseas to digest excess capacity. According to the data of CPIA and SPE cited by Century New Energy Network, the new photovoltaic "GW-level market" in 22 years is dominated by European countries such as Greece and the United Kingdom, while the new photovoltaic "GW-level market" in 23 years is dominated by Middle Eastern countries such as the United Arab Emirates and Saudi Arabia. According to SPE's forecast, the compound annual growth rate of cumulative installed PV capacity in Saudi Arabia will reach 61% in 23-27 years, and the UAE will reach 38%, ranking in the first echelon of the world's top 20 PV markets.
In the electrification of automobiles, Continental has gradually gained a first-mover advantage. In 23 years, the sales of new energy vehicles in the mainland increased by 38% year-on-year, and it is the world's largest new energy vehicle market, and the core components of the industrial chain such as power batteries, motors, and electronic controls have gradually occupied a dominant position, according to 199IT citing SNE research data, 23 years Chinese companies in the power battery market share of more than 6 percent. According to CleanTechnica, BYD has occupied 21% of the market share in the global new energy passenger car market in 23 years, surpassing Tesla to rank first in the world, and the market share of domestic brands such as GAC and Ideal has also increased year by year. At present, intelligent network technology is developing rapidly, and the interpretation of intelligent vehicles is accelerating, and intelligent vehicles have become the strategic direction of the development of the global automobile industry. Continental should give full play to the advantages accumulated in the process of electrification of the automotive industry, accelerate the intelligent transformation, and promote the overall automotive industry chain to move towards the high-end. According to our estimates based on data from AZO and Chinamobli, the size of China's auto industry/GDP in 22 years was only 1.9% (the size of the auto industry was US$0.5 trillion), far lower than Germany's 12.3% (US$0.5 trillion) and Japan's 22.6% (US$0.96 trillion). With the increase in the penetration rate of new energy vehicles in the mainland and the growth of value, the proportion of the mainland automobile industry in the economy will gradually increase, and if the scale of the automobile industry is raised to the level of Japan in the future, the scale of the automobile industry/GDP is expected to increase by about 4%.
In the long run, in the process of developing new productive forces in the future, we should give full play to the advantages of the mainland's super-large-scale market and complete industrial system, rely on the resource endowments and industrial bases of various localities, realize the efficient and orderly distribution of various production factors, avoid falling into inefficient competition in homogeneous development and duplicate construction, and form a scale effect and cluster effect in the development of new quality productive forces.
(1) Beijing-Tianjin-Hebei, Yangtze River Delta, Guangdong, Hong Kong and Macao have outstanding innovation advantages, Jiangsu, Beijing, Shanghai, Guangdong and other provinces and cities have the highest comprehensive score of science and technology innovation, and the added value of Shanghai's strategic emerging industries accounted for 23.8% of GDP in 22 years, much higher than the national 13%. In the future, we should strengthen the ability to curate innovation, promote industrial innovation with scientific and technological innovation, accelerate the development of emerging industries, actively lay out future industries, and lead the development of new productive forces across the country.
(2) The central region should strengthen industrial coordination and supporting capabilities, actively undertake the transfer of emerging industries in the eastern region, focus on undertaking key links in the industrial chain, and cultivate and build industrial chain clusters with their own characteristics and global competitiveness. For example, Hubei focuses on the development of the electronic information industry featuring optoelectronic information, and strives to build an optoelectronic information industry cluster with global influence, and strives to exceed one trillion yuan in 24 years.
(3) Northeast China has a strong foundation for heavy industry, for example, Heilongjiang Energy (accounting for 31.2% of the total industrial output value in 22 years, the same below), petrochemical (17.9%), and equipment industry (13.1%) are its leading industries. In the future, we should rely on the unique heavy industry foundation, promote the combination of high and new technology with traditional manufacturing industry, and accelerate the transformation and upgrading of traditional advantageous industries.
(4) The western and southern regions should give full play to the advantages of abundant resources and develop differentiated key industries in combination with regional characteristics. For example, Qinghai in the west has given full play to its resource advantages and focused on the preparation and research and development of new materials, and in 22 years, Qinghai's new materials accounted for more than 30% of the output value of strategic emerging industries. Hainan in the south is rich in tourism and marine resources, the proportion of marine economy in GDP has risen to 33.9% in 23 years, and the added value of tourism and related industries and high-efficiency agriculture with tropical characteristics accounts for 9.2% and 15.4% of GDP respectively.
Risk warning: the progress of the implementation of real estate policies is less than expected, the real estate calculation is too optimistic, and the technological breakthrough and application speed are lower than expected.