Service Science, Vol. 3, No. 1, June 2012 7

Informatization and the Industrial Upgrading in China

Hongbing You School of Economics & Management, Nanjing University of Science & Technology, P.R. China & College of Business Administration, California State University, Long Beach, CA, USA [email protected]

Robert Chi College of Business Administration, California State University, Long Beach, CA, USA [email protected]

Abstract The essence of modern economic growth is the optimization and upgrading of industrial structure. The main driving force for the upgrading of industrial structure comes from technological progress and its applications. The informatization began in the end of last century and has changed the entire economic and social outlook from the industrial structure, morphology, and other aspects. The recent financial crisis warned that China must accelerate the pace of industrial upgrading. The most realistic path to it is to advance the informatization. Based on the reviews of the results related to the informatization and its function on the promotion of the industrial upgrading, the paper analyzes the correlation between the informatization and the industrial structure in China. The paper describes China's informatization construction process and puts forward a series of measures to promote the informatization so as to speed up China's industrial upgrading. It concludes that the joint effort from the government, enterprises, and human resources is necessary.

Keywords: Informatization, Industrial upgrading, Informatization development index

1. Introduction

Significant achievements have been attained in the adjustment of the industrial structure in China since the implementation of reform and opening to the outside world, especially since China’s entrance into the WTO. The industrial structure is becoming become more and more rational. The primary industry accounted for 10.2 percent of the GDP in 2010, as 99 percent 50 years ago, and the proportions of the secondary and tertiary industries rose to 46.8 percent and 43.0 percent respectively. However, there still exist a lot of problems in the industrial structure. Moreover, China is facing complicated development environment. The impact of the global financial crisis is becoming more severe. Fukushima nuclear leak in Japan highlights the vulnerability of the global industrial chain. The high prices on oil, mining, and other non-renewable resources have brought the rising of the production costs. Low carbon and sustainable development have brought increasingly powerful impact on backward industry. The products’ life cycles are getting shorter and shorter. The development of world economy and Dow Jones Industrial Index (DJII) constituent changes reminds China that the informatization has great significance on the industrial upgrading, though China has devoted 8 Hongbing You and Robert Chi considerable resources to developing its informatization strategy since the Mid-1990s. Among those companies who were removed from the constituent stocks of the DJII, Union Carbide led to his ruin because of the leakage in Bhopal Pesticide Plant in India, Citigroup shares fell 90% because of the global financial crisis, and General Motors lost its dominance because the automobile industry has been replaced by the information one. At the same time, some enterprises successfully entered the DJII by seizing the opportunity of industrial revolution, especially of the Information Technology (IT hereafter). Seven companies in the field of IT, which include AT&T, IBM, HP, Intel, Microsoft, Verizon and Cisco, were selected and accounted for 23.3% of the totally thirty constituent stocks. Facing with such a complex situation, it is time for China to speed up the transformation and upgrading of her industrial structure.

2. Literature Review

2.1 The Connotation and Roles of Informatization The concept of informatization originated in Japan [He Wei and Xia Xindong 2006]. In early 1967, a scientific, technical and economic research team in Japan put forward that the informatization was a dynamic process from the industrial society to the information one, which reflects the evolution or transformation from the society where the tangible product played a leading role to the society where the intangible information products are dominating. Since 1970s, the concept of informatization has been gained acceptance widely. At the same time, a series of works have been published, among which the most influential one is The Coming of Post-Industrial Society: A Venture in Social Forecasting written by Daniel Bell in 1973. In the book, he outlined a new kind of society - the post-industrial society. He argued that post-industrialism would be information-led and service-oriented. Bell also argued that the post-industrial society would replace the industrial society as the dominant system. The United States published her NII (National Information Infrastructure: agenda of actions), i.e. the information super highway (ISHW) in September, 1993, ISHW has become one of the focuses in the world. After that, the concept of informatization was popularized. The informatization has greatly improved the social productivity, enhanced the comprehensive national strength and international competence. The information industry bears the character of the leading industry [Jiangguang 1998]. The information industry not only comes on strong, develops rapidly, but also is of high value, large market, strong permeability, and connects with many industries. He also said that the informatization is the booster for the industrial upgrading. The industrial informatization is based on the business and management information, while the business informatization is ultimately based on the informatization of the products or services. The industrial information refers to the transform and upgrade the industry which centers on the “Four-stream three-cycle” (i.e., logistics, capital flow, business flow, value stream and the product life cycle, business life cycle, and industry cycle). Of course, the informatization’s operation core is the enterprise informatization, which aims to reduce the industrial costs, and to prevent and reduce uncertainty. There are three ways for the industrial informatization to play its role; they are products, companies, and industries. Informatization and the Industrial Upgrading in China 9

Based on the value-added method, U.S. economist Marc Uri Porat drew a conclusion that 25.1% of added value generated from the first information sector and 21.1% from the secondary information sector in American national economy in 1967. Thus, 46.2% of U.S. GDP in 1967 was from the information sector. Since 1955, the U.S. employment share in the information sector increased rapidly and about half of the labor force was concerned with some kind of information post, which reached 55% in 1970s. This fully explains that the information industry and informatization had enormous influence both on the national economy and its employment. 2.2 The Informatization Development Index The Informatization Development Index (IDI) which was designed for the measurement of the informatization development. It was complied in China for the “Eleventh Five-year Plan” IT planning in China. It reflects the overall level of IT development in a country or region from several aspects such as the informatization technology infrastructure, information application level and its constrained environment, the residents’ consumption information, and so on. It can be divided into IT development index Ⅰ and Ⅱ. The former is composed of five sub-indices and ten specific indicators. The five sub-indices are infrastructure index, utilization index, knowledge index, environment and effect index, and the information consumption index. The latter is the optimization of the former. It is also divided into five sub-indices, but the name have been adjusted to some extent, namely infrastructure index, utilization index, consumption index, knowledge support index, and the development effectiveness index. The latter is used for the "Twelve-five" national IT plan. At present, China has just announced the IT development index Ⅰ, which will be used to in this paper.

2.3 The Relations between Informatization and Industrialization Industrial upgrading: the continuing modernization and upgrading of technology, equipment, and organization [Lüthje 2004]. The telecommunication has a dual function, it is both an important infrastructure for the overall economy and the process of digitalization that led to the convergence of the different types of media [Moddock 1995]. Through analyzing 30 leading journals in information systems and economics, as well as discussions with leading researchers in the field, Erik Brynjolfsson concluded that the productivity paradox of IT still existed [Brynjolfsson 1998]. The reasons are as follows: the exacerbated apprehension about the ultimate value of the billions of dollars of IT investment and the frustrating concerns with the measures and methods commonly used for productivity assessment. The IT investment structure was different between developed and developing countries by performing the panel data from 1985 to 1993 for thirty-six countries [Dewan and Kraemer 2004]. Information technology, especially the Internet, are exerting an increasingly large and broad influence on the measurement and evaluation of the industrial structures [Carayannis, Alexander and Geraghty 2001]. While IT was credited with the recent acceleration in productivity in the United States, many other industrial countries have not experienced a pickup in productivity growth [Gust and Marquez 2004]. The adoption of e-commerce can increase productivity and trade dependency [Wen 2004]. 10 Hongbing You and Robert Chi

Because the information system has fundamentally taken shape and the industrial base was weak in 1990s in China, Chinese scholars focused on how to deal with and understand the relationship between IT and industrialization. The information should be promoted simultaneously with the advance of industrialization, which means to cultivate the IT by the industrialization and promote the industrialization with IT [Wu 1993]. The information has made the maximum contribution to national economic growth (coefficient of 0.841597), followed by labor factor (coefficient of 0.697838), and finally the capital element (coefficient of 0.255566) with Cobb-Douglas productive function and the data of the real GDP and information, capital and labor in China from 1980 to 1992 [Zhu 1996]. We must take the route by developing industrialization and informatization at the same time [Qu 1998]. Besides we must regard the informatization as a higher goal and make it the new economic growth point and the main path to optimize the industrial structure. In 2001, the 10th Five-Year Plan for National Economic and Social Development (2001-2005) proposed: “We should use IT to upgrade industrial sector and to promote the advancement of productive forces by making better use of our advantages as late starters.” This is the first time that the Chinese government pointed out to use IT to stimulate industrialization and it has triggered the scholars’ research interest on this topic. It is a kind of relationship of the source and the carrier. The informatization has made greater contributions to the industrial growth by utilizing the informatization comprehensive index model [Jun 2004]. In 2007, the report to the 17th National Party Congress put forward the concept of the integration of both informatization and industrialization so as to take a new road to industrialization and let it be the first power for the promotion of the development of new industrialization. It pointed out the development direction for Chinese enterprises in the future.

2.4 Theory on the Industrial Upgrading by Informatization The industrial upgrading consists of two aspects. On one hand, it refers to the evolution and optimization process of the industrial structure, which means the proportion and pattern of the three industries change from low to high-level; on the other hand, it refers to the modernization and advancement of the industry itself from the products’ technological content, management to productivity, and overall efficiency [Tang 1998]. The upgrading of traditional industries means the transfer of primary, second, and tertiary industries in turn and the improvement of the proportion of the added-value. The important manifestation of the industrial upgrading lies on the improvement of the whole added-value the industry and the enhancement of the industry competence. As to the informatization’s impact on the industrial development, foreign scholars have focused on the measurement of the influence of information economy on the economic growth. The knowledge industry represented 29% of the US gross national produce as the beginning of the Information Age [Machlup 1976]. Because of the limitation both of the existing statistical system and the incomplete data, he had to select the knowledge industry one by one from the statistical system and then measured individually and balanced it. This Informatization and the Industrial Upgrading in China 11

way of thinking determines that he has to choose the final demand method to measure the production and distribution process of the knowledge industry in the states. According to the information economy productivity theory[Porat 1976], the information economy productivity (Hi) is the ratio of material output and information input, namely: N s N n  [N p  N p ( )  d] GNP N t Hi= = N s N s N s  N p ( ) N t Nn stands for the national income of the non-information sector, that is, the income, profits, interest, and rent of workers at the non-information sector; Np stands for the national income of the first information sector of the national income; Ns stands for the national income of the sub-information sector; Nt stands for the total national income; d stands for the depreciation.

Based on the theory of information economic growth, Charles J. established the model on the measurement of relationship between the information resources and economic productivity and discussed the relationship of the two factors in detail[Charles J. 1983]. The mechanism and the route of promotion of the traditional industries has been upgraded by the IT. The promotion process of the traditional industries can be divided into three levels as follows, product informatization, company informatization, and industrial information. The informatization promoted the upgrading of the traditional industries through the industrial advancement, Improvement of the productivity, transfer of the production methods, restructuring of the industries, and the transfer of production factors, etc.[Liu and Wu 2003]. The process of upgrading the industrial structure can be summarized to the following aspects: First, the transfer from primary industry to secondary industry, then to tertiary industry. Second, the evolvement of the traditional industries to emerging ones and to the combination of the traditional and the emerging ones. Third, the evolvement of the composition of production factors from labor-intensive to capital-intensive to capital-and-technology-intensive and knowledge-intensive. Fourth, the constant evolvement of the output value-added from low value-added to high value-added, to higher value-added. Fifth, the deepening of the industry associations.

3. The Impact on China’s Industry Development of Informatization

3.1 The Informatization Improved China’s Economic Development Table 3.1 reflects the relationship between the informatization development index and China’s GDP from 1998 to 2010. According to table 3.1 we draw the scatter diagram between the IDI and the GDP (Figure 3.1). From it we can 12 Hongbing You and Robert Chi easily find that there is a linear correlation between the IDI and the GPD. In order to know the relations between these two factors, we try to use the SPSS software to describe it. As there is quite a large magnitude between the IDI and GDP, we first take the natural logarithm of the GDP as shown in Table 3.1. Table 3.1 Informatization Development Index & GDP

GDP (100 million Chinese Year Informatization Development Index (X) Ln(GDP) yuan) 1998 0.365 84402.28 11.34334969

1999 0.419 89677.05 11.40397016

2000 0.478 99214.55 11.50503996

2001 0.501 109655.2 11.60509618

2002 0.534 120332.7 11.69801569

2003 0.56 135822.8 11.81910637

2004 0.576 159878.3 11.98216818

2005 0.591 184937.4 12.12777267

2006 0.609 216314.4 12.28448818

2007 0.63 265810.3 12.49053818

2008 0.645 314045.4 12.65729284

2009 0.681 340506.9 12.73819067

2010 0.700 397983.0 12.89416457

Source: http://www.stats.gov.cn/

The Correlation Graph between Informatization Index & GDP

Ln(GDP)/100 million yuan 13.5

13

12.5

12

11.5

11

10.5

0.56 0.63 0.7 0.3650.4190.4780.501 0.534 0.5760.5910.609 0.6450.681 Informatization Index Figure 3.1 The Scatter Diagram between the IDI and the GDP in China from 1998 to 2003

Then, we use SPSS 13.0 for windows software to calculate the correlation coefficient between the IDI and the GDP and get the following relation:

LN (GDP) = 5.101X +9.182 R2=0.908 F=108.592 Sig=0

Informatization and the Industrial Upgrading in China 13

It shows that the informatization development has a significant impact on the GDP, in which when the IDI increases by 1%, there will be 5.101% growth in the GDP. While the increased GDP will bring more chances to increase the accumulation of capital for the imformatization.

3.2 The Informatization Promoted the Adjustment and Optimization of China’s Industrial Structure Under the condition of informatization, both the huge demand promotion and the strong permeability for IT led to the acceleration of the differentiation and reorganization of the industry. On one hand, it will make great impact on these sectors of the traditional industries with low technology and let them to fail gradually and be replaced by the emerging industrial sectors. On the other hand, the information industry will promote the traditional industries to mature and bring about new industries by the interaction and mergence with the traditional industries. Since 1998, the informatization has had a profound effect on China's industrial structure. Table 3.2 shows the IDI & the proportion of the three industries on China’s GDP from 1998 to 2010. It shows that the proportion of the primary industry decreased a lot, from 17.56% in 1998 to 10.2%, while the tertiary industry increased from 36.23% to 43% in the corresponding period of time.

Table 3.2 IDI & the Proportion of the Three Industries on China’s GDP

Informatization Development Primary Industry Year Second Industry (Y2) Tertiary Industry(Y3) Index (X) (Y1) 1998 0.365 17.56 46.21 36.23

1999 0.419 16.47 45.76 37.67

2000 0.478 15.06 45.92 39.02 2001 0.501 14.39 45.05 40.46

2002 0.534 13.74 44.79 41.47

2003 0.56 12.8 45.97 41.23 2004 0.576 13.39 46.23 40.38

2005 0.591 12.12 47.37 40.51

2006 0.609 11.11 47.95 40.94 2007 0.63 10.77 47.34 41.89

2008 0.645 10.73 47.45 41.82

2009 0.681 10.35 46.30 43.36 2010 0.700 10.20 46.80 43.00

Source: http://www.stats.gov.cn/

Figure 3.2 is the scatter diagram between the IDI and the proportion of the three industries on the GDP respectively, from which we can find that there is a linear correlation between the IDI and the three industries on 14 Hongbing You and Robert Chi the GDP. In order to make a comparison, we again use SPSS 13.0 for windows to perform regression analysis and the results are as follows:

2 Y1=-0.238X+0.263 R =0.972 F=380.949 Sig=0，highest significant

2 Y2=0.05X+0.436 R =0.272 F=4.104 Sig=0.068，high significant

2 Y3=0.19X+0.3 R =0.891 F=89.716 Sig=0，highest significant

The Correlation Graph between Informatization Index & Proportion between Three Industries

R atio 0.6 0.5 P rimary industry 0.4 0.3 S econd industry 0.2 T ertiary industry 0.1 0

0.7 0.56 0.63 0.3650.4190.4780.5010.534 0.5760.5910.609 0.6450.681 Informatization Index

Figure 3.2 The Scatter Diagram between the IDI and the Proportion of the Three Industries on China’s GDP

The results show that informatization has great impact on the change of the proportion of the three industries in China. When the informatization increases by 1%, the primary industry will decline by 23.8%, while the second industry and the tertiary industry will increase by 5% and 19% respectively. In particular, the tertiary industry increases most quickly among the three industries with the improvement of the informatization, followed by the second industry, while the primary industry declines. This is in line with the basic law of the industrial development, thus rationalizes China's industrial structure. Finally, it advanced China’s industrial structure.

3.3 Informatization Promoted China’s Technological Advancement Technological progress is the basis for the industrial development. The development of informatization also contributed to China's technological advancement. We can observe it from the number of the three types of patent(patent of invention, patent of design and patent for utility model) granted in China. Table 3.3 reflects the relationship between the development of informatization in China and the number of patents granted. In Informatization and the Industrial Upgrading in China 15

table 3.3, we draw the scatter diagram between the IDI and three types of patents granted in China from 1998 to 2010 (see Figure 3.3).

Table 3.3 Informatization Development Index & the Three Types of Patent Granted

Year Informatization Development Index (X) Three kinds of Patents Granted (Y: piece) LnY

1998 0.365 67889 11.1256293

1999 0.419 100156 11.51448425

2000 0.478 105345 11.56499596

2001 0.501 114251 11.64615306

2002 0.534 132399 11.79357537

2003 0.56 182226 12.11300295

2004 0.576 190238 12.1560312

2005 0.591 214003 12.27374531

2006 0.609 268002 12.49874972

2007 0.63 351782 12.77076694

2008 0.645 411982 12.92873494

2009 0.681 581992 13.27421198

2010 0.7 815000 13.61094339

Source: http://www.stats.gov.cn/ From figure 3.3, it can be seen that there is strong linear correlation between the IDI and the number of the three types of patent granted. In order to make a comparison, we performed regression analysis and the results are as follows: LN (Y) = 7.129X +8.255 R2 = 0.919 F = 124.093 significance = 0 Highest significant

The Correlation Graph between Informatization Index & Three kinds of Patents Granted

Ln(Three kinds of Patents Granted) 16 14 12 10 8 6 4 2 0

0.7 0.56 0.63 0.365 0.419 0.478 0.501 0.534 0.576 0.591 0.609 0.645 0.681 Informatization Index

Figure 3.3 The Scatter Diagram of the IDI and the number of the three types of patents granted 16 Hongbing You and Robert Chi

It tells us that there will be 7.129% increase in the number of the three types of patent granted in China if there is 1% increase in the IDI.

4. The Status Quo of the Informatization in China

Since mid-1990s, China began to devote considerable resources to develop her informatization. Thanks to the shared belief among both the Chinese leaders and the entrepreneurs that IT can transform the economy and society, the IT industry has been developing quickly in the past two decades and is the key engine for economic growth. Nowadays, it has been applied in many fields such as government, business, and even in rural development. Meanwhile, China’s informatization is steadily improving.

4.1 The Informatization Process Since 1995, China's informatization has experienced a period of three Five-year plans. It can be divided into two stages from the IDI growth rate until now.

4.1.1 The Rapid Initial Stage (During the Ninth Five-Year Plan Period) The main feature of this stage was that the informatization has begun to be constructed on a large scale. The informatization has developed in all aspects. The computers have been popular and widely used. The Internet user groups emerged and the information industry developed. It is estimated that China's IDI has increased by 70.14% on average annually.

4.1.2 The Steady Growth Stage (During the Tenth and Eleventh Five-Year Plan Period) The main feature of this stage was that the informatization has flourished in all respects. The mobile phones have spread in urban and rural areas. By 2008 China had more than 1,277 million fixed and mobile telephones, making it the world’s largest telecommunications market in terms of the number of subscribers. The share on the GDP of the information industry has risen. Internet user community enlarged substantially and there are more than 200 million Internet users in China by the end of 2010, and the information consumption increased rapidly. It is approximated that China's average growth rate of the IDI were 16.61% and 12.45% respectively during the tenth and eleventh five-Year plan period.

4.2 The Characteristics of Informatization

4.2.1 The Initial Goal of IDI being Realized During the Eleventh Five-Year period, China has been steadily improving her informatization. From 2006-2009, the IDI is 0.612, 0.630, 0.645, and 0.666 respectively. Based on terms of the annual growth rate of informatization during the period from 2000 to 2009, the IDI would be 0.700 by 2010 which means that China Informatization and the Industrial Upgrading in China 17

would have realized the goal in the “Eleventh Five-Year Economic and Social Development Informatization” (see table 4.1). Table 4.1 China’s IDI and its Sub-indices from 2000 to 2010

Time The Tenth Five-year Plan The Eleventh Five-year Plan Indicators 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

IDI (Informatization 0.501 0.534 0.560 0.576 0.591 0.612 0.630 0.645 0.666 0.700 Development Index)

Fundamental 0.198 0.234 0.276 0.311 0.350 0.379 0.401 0.409 0.434 0.516 Infrastructure Index

Application Index 0.641 0.705 0.738 0.757 0.775 0.799 0.847 0.887 0.916 0.938

Knowledge Index 0.766 0.750 0.758 0.765 0.756 0.776 0.781 0.794 0.800 0.817

Environment and 0.474 0.491 0.499 0.508 0.517 0.528 0.536 0.555 0.588 0.594 Effect Index

Information 0.433 0.507 0.554 0.538 0.551 0.569 0.549 0.516 0.510 0.541 Consumption Index

Source: Informatization Statistical Evaluation Research Group, The Study on the IDI of China in the Eleventh Five-year Plan (in Chinese), China Information Field, 2010 (12): 89-95

4.2.2 The Inner Structure is Unbalanced During the Eleventh Five-Year period, except the information consumption index decreased slightly because of the structural change on consumption and the financial crisis, the other four sub-indices of the IDI went upward year by year.

4.2.3 The Regional Difference is large Based on the IDI in different regions of China, we can divide the thirty one provinces (autonomous regions and municipalities) into the following five regions:

 First, high-level areas. It includes two metropolises: Beijing and Shanghai. In 2009, the IDI of Beijing was 0.911, which was between the world’s No. 12 of Iceland (0.913) and No. 13 of Australia (0.908) in 2008. While the IDI of Shanghai was 0.852, which was between world No. 24 of South Korea (0.854) and No. 25 of Belgium (0.843) in 2008. Both were at a high level in the world.  Second, second-high-level areas. There were ten areas in this group which includes Tianjin, Zhejiang, Guangdong, Jiangsu, Fujian, Liaoning, Shaanxi, Shandong, Shanxi, and Chongqin. The average IDI of them was 0.699 in 2009 and were higher than the national average level. Besides, they had higher fundamental infrastructure index and application index.

 Third, middle-level areas. Fourteen areas were in this group. The average IDI was 0.62 which was the same as the national average level. 18 Hongbing You and Robert Chi

 Fourth, middle-low-level areas. It included Gansu, Qinghai, Guizhou and Yunnan. All sub-indices in these provinces were lower than the national average level, especially in both the fundamental infrastructure and knowledge indices.  Fifth, low-level area. Only Tibet belongs to this group. Its IDI was 0.536 which was only about 81% of the national average level. Almost all its sub-indices were the lowest in China.

5. The Countermeasure on Optimizing China’s Industrial Structure by Promoting Informatization

5.1 To Enhance the Development of IT In 1960, Rostow proposed the “Taking-off” theory in his work titled "Economic Growth Stage”. He emphasized that it should be its leading sector to develop firstly so as to bring the taking-off of the whole economy and its sustainable development. Rostow believed that the driving force was achieved by the rapid expansion of a few dominating sectors in all stages. The expansion of these sectors has huge external economic and other stimulatory effect. The development history of the developed countries has also confirmed the importance of the “Leading Sectors” and its role in economic development. Rostow put forth four conditions as to determine the leading sector: (1) The leading sector's product must have a strong demand; (2) It must introduce a new production function; (3) It must have a large sum of capital investment, especially a high rate of profits’ reinvestment; (4) The leading sector’s expansion and technological change can lead to the other sectors to enlarge the production capacity and introduce new production function. According to these four conditions, the information industry is no doubt the leading sector in China. We should take the information industry as an important back-up whether when we want to accomplish the industrialization or to develop informatization. We must strengthen the development of information industry. First, we should take the development of information industry as a strategic goal. Second, we should formulate and perfect the industrial policy on the information industry, increase capital investment and reinforce the development base. Third，we should consider the local conditions. As the leading sector, the Information industry does lead a large number of the development of other sectors. However, we must abide by the rule of do everything according to local conditions and act resolutely but prudently. We should refrain from rushing headlong into action. While we encourage the development of high-tech-oriented information industry, we should let the government to determine if the information industry should be the leading sector when there are absent of such conditions.

5.2 To Create a Secured Environment for the Industrial Restructuring by the Informatization Effective security system is critical. As informatization is a complicated project, both the government’s macro-regulation and guide are necessary. Firstly, to grease the institutional bottlenecks on the collaborative advancement of the informatization and industrialization. We should promote the capital construction such as to protect the intellectual property rights, to encourage competition, to relax control, and to establish credit system, etc. Secondly, to value the leading function of the informatization in the industrialization. We should implement industry development policy which is different from that of traditional industrial era. We should Informatization and the Industrial Upgrading in China 19

encourage to establish the innovation system centered on the enterprises, focus on the organic synergy among departments and areas, rationalize the distribution of resources, and share the information. Thirdly, to establish and enhance the policies and regulations related to the development of informatization and work out scientific development strategies both for the information industry and the IT. Finally, to speed up infrastructure construction and the public information service platform. We should encourage the opening of all kinds of test centers in the enterprises and universities and reduce the cost of informatization and the utilization threshold.

5.3 To Give Prominence to the Enterprises on the Process of the Informatization It is time to form a large sum of enterprises that have their own independent intellectual property rights and core technologies. The information industry is still relatively weak in China. The focus should be on quality rather than quantity. We should let the independent innovation be the key on optimizing the structure and transferring the growth method. First, the enterprises should establish their own innovation system and control their own core technology. Second, they should actively introduce foreign advanced technologies and fully digest and absorb them. Third, they should strengthen the awareness both the market and management, reform the production management model and speed up the establishment of the modern enterprise system.

5.4 To Strengthen the Training of the Informatization Professionals Sound talent market can help the informatization to promote the industrial upgrading and provide the ultimate consumer base. Firstly, we should take the measures of the combination of multi-channel training and introduction talents from the high starting point. On one hand, we should develop practical talents by establishing a linkage mechanism between the enterprises and universities. On the other hand, it is urgent to stabilize those existing talents. Secondly, we should emphasize the popularity of basic education so that the workers have the necessary information technology application skills

6. Conclusion

With the promotion and acceleration of informatization in China, the proportion of the three industries has began to show a trend of rationalization, the industrial structure become harmonious and upgrading and promote effectively the optimization and upgrading of the industrial structure in China. We found that the IDI has a linear relationship with the three industries in China and the informatization has a significant impact on the change of the proportion of the three industries in China. But with the economic development, it is urgent to promote the informatization so as to optimize the industrial structure in China. It requires joint effort from the government and the enterprises.

20 Hongbing You and Robert Chi

RFERENCES

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