As a tech reporter, I am most impressed with one line in the resolution of the third plenary session of the 20th Central Committee of the Communist Party of China and that is: “to foster new quality productive forces in line with local conditions”.
The line reflects an acknowledgment of the complexities and diverse conditions across different regions in China and emphasizes the need to tailor these efforts to local conditions. A particularly illustrative case is the development of China’s semiconductor industry, as I have witnessed its ups and downs in the past decade, highlighting the necessity of this tailored approach.
The integrated circuit industry is a cornerstone of modern economies, serving as a strategic, foundational and leading sector. Recognizing its importance, China has implemented various policies to support and guide the healthy growth of its semiconductor industry. These policies have borne fruit, with the industry showing significant advancements in technology and an acceleration in the growth of domestic companies.
However, this rapid growth has not been without issues. Enthusiasm for investing in the semiconductor industry has soared, just as the National Development and Reform Commission said in October 2020 that a number of “three-no” companies — entities lacking experience, technology and talent — had got involved in the chip industry.
Some local governments, eager to capitalize on the semiconductor boom, had overlooked the industry’s inherent complexities, leading to hasty projects and wasteful investments, the NDRC said. This rush had resulted in several failures, with significant financial and resource losses.
A striking example is the Wuhan Hongxin Semiconductor Manufacturing project, which was slated to be a major player in the industry with an ambitious investment plan of 128 billion yuan ($17.9 billion), according to China Economic Weekly. The media reported that by the end of 2019, 15.3 billion yuan had already been invested in the project, and an investment of 8.7 billion yuan was planned for 2020.
However, by April 2020, the project was facing a significant funding gap, putting its future at risk. Despite the initial hype, the project stalled, exemplifying the pitfalls of excessive ambition and insufficient planning, China Economic Weekly reported. Similarly, other regions like Hebei province have experienced setbacks in their attempts to establish a foothold in the semiconductor industry.
These incidents underscore the broader lesson that developing new quality productive forces requires a nuanced approach. It is crucial to consider local conditions and avoid a one-size-fits-all strategy.
For regions with strong economic foundation, robust research capabilities and a favorable innovation environment, it is appropriate to accelerate efforts in developing new quality productive forces. Conversely, areas lacking these conditions should proceed more cautiously, ensuring a steady and realistic pace that aligns with their actual capabilities.
Hong Qunlian, a researcher at the Academy of Macroeconomic Research under the NDRC, said, “We must adhere to reality and must not follow the crowd blindly. While nurturing new quality productive forces is a universal goal, China’s diverse regional contexts require tailored approaches.”
Development strategies should reflect each area’s unique stage of growth, functional positioning, resource endowment and industrial base. A nuanced, region-specific approach helps prevent wasteful investments and unrealistic projects, he said.
Meanwhile, it takes time to cultivate new quality productive forces, and it is a gradual process that cannot be rushed. It is vital to respect the natural progression of technological innovation and industry development, ensuring that efforts are paced according to local capabilities.
Moreover, effective development requires both an active government and a dynamic market. The government can facilitate by setting policies, guiding investments and creating a supportive environment for innovation. Meanwhile, the market should drive technological and industrial innovation, allowing businesses to take the lead.
In conclusion, the experience of China’s semiconductor industry vividly illustrates the necessity of adapting the development of new quality productive forces to local conditions. The lesson is clear: success in this endeavor requires a balanced, thoughtful approach that recognizes the unique circumstances of each region. Only by doing so can China avoid the pitfalls of hasty development and build a robust, innovative economy that stands the test of time.