Factbox: China plans to boost seven strategic sectors

BEIJING Thu Dec 2, 2010 9:16am EST

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BEIJING (Reuters) - China is considering investments of up to $1.5 trillion over five years in seven strategic industries, sources said, a plan aimed at accelerating the country's transition from the world's supplier of cheap goods to a leading purveyor of high-value technologies.

Here is a look at what China is doing in the seven sectors.

ALTERNATIVE FUEL CARS

China is fast reaching the point of economic development where millions of its citizens can afford their own car. That is a headache for the government because of pollution and carbon emissions and because China's refineries are already dependent on foreign suppliers for more than half their crude oil.

One alternative fuel source, ethanol made from crops, is deliberately restricted because China's government is keen to ensure supplies of corn and other grains reach the food market, which is already stretched by fast growing demand.

China's vehicle fleet has turned to many other power sources, including fuel cells, compressed natural gas, liquefied petroleum gas and even liquefied natural gas, which is most commonly associated with huge storage tanks aboard ocean-going tankers.

In June the government launched a pilot program in five cities to subsidize electric and hybrid cars. Among the beneficiaries was Warren Buffett-backed BYD Co Ltd (1211.HK).

BIOTECHNOLOGY

China is slowly turning to biotechnology to improve crop yields, since demand is rising quickly but supply is constrained by a lack of available water resources and land area.

The chairman of state grains trading firm COFCO Ltd, Frank Ning, told Reuters in an interview earlier this week that technology was the key to keeping supply and demand in balance in the future.

"Using technology to produce more on the same land and maybe agricultural policy to give more incentive to the farmers to grow more to increase their productivity. The government is doing so, but I think the room to improve is still big," he said.

While the United States and other rich countries have embraced genetically modified crops, China approved the safety of its first GMO strains of corn and rice last year, paving the way for commercial production to begin in 2-3 years.

More than 20 GMO crops have been approved for field trials.

China's rapidly expanding demand has forced the government to accept imports of GMO soybeans and, since earlier in 2010, corn.

ENERGY-SAVING AND ENVIRONMENTALLY FRIENDLY TECHNOLOGIES

China is investing heavily to upgrade its infrastructure and leapfrog the developed world in areas such as electricity transmission and power metering.

With total power capacity set to reach 1,430 gigawatt by 2015 from 874 gigawatt at the start of 2010, China has to figure out how to bring trillions of kilowatt hours of power to more than a billion customers, sometimes over very long distances.

Premier Wen Jiabao called for "pushing forward with building a smart grid" in the annual report to the National People's Congress in March.

State Grid Corp of China, which operates the bulk of the country's power transmission networks, envisages building an "informationised, automatic and interactive" grid with ultra high voltage (UHV) power lines over the next five years.

ALTERNATIVE ENERGY

China already relies on foreign oil for more than half its oil consumption and is also determined to cut back on coal, the cheapest but dirtiest fossil fuel, so the government needs to find energy-efficient technology to keep China's economy growing without driving up demand for either of those staple fuels.

It has already launched a major drive into hydropower and, to a lesser extent, wind, gas and nuclear, to supplement the coal sector that provides about 70 percent of its electricity.

The government is expected to unveil a new alternative energy plan within months to raise its targets for power generating capacity from such sources by 2020, since the country has already surpassed many of the targets it set out in 2007.

China has an abundance of coal but has promised to cut carbon emissions per unit of GDP in 2020 by 40-45 percent from 2005 levels, so it is also actively pursuing technologies that may allow it to exploit its coal resources while keeping emissions to a minimum.

HIGH-END MANUFACTURING

China is leading the world in manufacturing high-speed trains, wind turbines and solar panels, both for its own use and for export.

China plans to build 13,000 km (8,078 miles) of high-speed rail lines by 2012, more than the rest of the world combined, and to invest 2 trillion yuan in railways by 2020, while building a fleet of state-of-the-art trains with the help of foreign firms including Bombardier Inc (BBDb.TO), Siemens (SIEGn.DE), Kawasaki Heavy Industries Ltd (7012.T) and Alstom SA (ALSO.PA).

ADVANCED MATERIALS

China irked the world earlier this year by tightening its grip on the supply of rare earth metals, an obscure group of elements with many uses in hi-tech from Apple's APPL.O iPhone to flat screen TVs.

Critics say China's dominant position, supplying 97 percent of the world's rare earths, gives it a stranglehold on new technologies and puts huge costs on foreign competitors.

China is the world's largest producer of indium, a small but vital component for the flat-panel screens used in televisions and computer monitors.

China is also one of the world's top miners of lithium, a metal used in batteries, metal alloys, ceramics and nuclear weapons, which is expected to dominate the electric car industry in the next decade.

NEW-GENERATION INFORMATION TECHNOLOGY

A Chinese-built supercomputer, the Tianhe-1, was ranked the world's fastest in October, with a theoretical speed of 4.7 petaflops per second.

China is also investing heavily in cutting-edge science, from nanotechnology to an array of 35 satellites that will provide a navigation alternative to the U.S. Global Positioning System by 2020.

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