By Lai Youwei, General Office of DRC

Research Report No 8, 2009

The production service sector in Beijing started from a higher point and has become, with a good industrial foundation, an important force fueling the economic growth of Beijing over recent years. In order to make full use of the comparative advantages of Beijing in promoting its production service sector, address the conspicuous contradictions and problems hampering the development of the production service sector in Beijing and boost the realization of the steady and rapid economic development in Beijing, it is suggested that importance should be placed on the following issues.

I. Intensify the Policy Backing for the Production Service Sector

In 2008, the production service sector in Beijing maintained a good momentum of development and played an important supportive role in stabilizing the economic growth and employment and in avoiding the drastic economic fluctuation. It is suggested that Beijing should further intensify its policy backing for the production service sector and take the development of the production service sector as an important factor for promoting the stable and rapid economic development. The measures that can be adopted mainly include:

1. To formulate specific policy measures for boosting the development of the production service sector

In November 2007, the Beijing Municipal Party Committee and the Beijing Municipal Government jointly promulgated the Provisions on Further Promoting the Development of the Service Industry, for the future development of Beijing's production service sector. Under current economic circumstances, in order to carry out the Provisions on Further Promoting the Development of the Service Industry and conscientiously address the conspicuous contradictions and problems hampering the development of Beijing's production service sector, it is suggested that in light of the preferential policies toward new and hi-tech industries and the software industry, specific policies and measures should be formulated to boost the development of the production service sector in terms of market access, financial support, preferential taxation, guaranteed use of land, prices of the essential production factors, fiscal support, export rewards and personnel training and introduction, and the policies and measures should be geared to the promulgated policies and measures to provide still greater backing for the development of the production service sector and to enhance the staying power and vitality for the development of the production service enterprises.

2. To establish and improve the leading and coordinating mechanisms for the promotion of the service industry

In August 2007, in order to further facilitate the development of Beijing's banking industries, the Beijing Municipal Government set up the leading group to be in charge of the financial service work, which played a positive role in facilitating the development of Beijing's banking industries. It is suggested that Beijing Municipality, with reference to the organizational structure of the "Leading Group for Financial Service Work in Beijing", should set up leading groups for expanding the service industry in various districts and counties, to be in charge of the overall guidance and comprehensive coordination toward the expansion of the service industry in various districts and counties, to earnestly place the development of the service industry especially the production service sector on the important agendas of various districts and counties and to improve the working mechanisms. It is suggested that the joint conference system should be set up at the municipal government level for the promotion of the service industry to discover and tackle the serious problems that crop up in the development of the service industry and in the implementation of sector plans. All functional departments should form reasonable division of labor in accordance with the orientations and priority tasks in the development of Beijing's service industry especially the production service sector, step up communication and coordination, enhance service awareness and make joint efforts to advance the development of the production service sector in Beijing.

3. To set up the "directive fund for the service industry" and the "fund for the production service sector"

(1) To set up the "directive fund for the service industry"

In order to boost the development of Beijing's service industry, it is suggested that the "directive fund for the development of Beijing's service industry" should be set up as soon as possible. The directive funds can be gratuitous subsidies or discount loans, which are mainly used at the weak links and in key fields and rising trades and professions of the growing service industry, especially the production service sector. Apart from the earmarked funds, a certain amount of extra funds can be arranged from the financial budgets each year to be used as supporting directive funds for the development of the state service industry in various localities, for the construction of the public platforms, the general technical platforms and the infrastructure facilities in high-end priority industrial development zones and in zones with service industry clusters, for the encouragement of independent innovation and brand creation and for the opening up of overseas markets.

(2) To set up the "development fund for the production service sector"

In 1999, the former Ministry of Information Industry and the Ministry of Finance jointly started the Electronic Development Fund and invested for the very first time 10 million RMB yuan in Vimicro. The enterprising team of Vimicro bought shares with such intangible assets as the intellectual property rights and started the "Starlight China Wick Project". The former Ministry of Information Industry and the Ministry of Finance acted as the risk investors. By February 2007, the original investment of 10 million yuan had appreciated 20 times. The risk investment by the government not only served as the start-up funds for Vimicro and became the motive power for the development of the "Starlight China Wick Project", but also gave rise to more investments for business startups and created a new model for the marketization of the risk investment by the government.

In order to effectively facilitate the development of Beijing's production service sector, Beijing Municipal Government can set up the "development fund for the production service sector" with reference to the operating model of "electronic development fund" and intensify the financial support to the production service projects to be emphatically developed. However, such a support is different from the "directive fund for the service industry", which is characterized by the new practice of risk investment and marketized operation by the government that not only supports the production service enterprises to make breakthroughs in some key fields and at some crucial links and to grow steadily, but also gains rewards from the government investment so as to realize the maintenance of the value and the appreciation of the production service development fund.

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