Recently, the National Development and Reform Commission of China released the "Catalogue of Encouraged Industries in the Western Region" (hereinafter referred to as the "Catalogue"), and multiple industries related to electricity, energy, energy conservation, and environmental protection have been added to the list of newly encouraged industries. In the 12 provinces (regions, cities) within the scope of western development, new energy industries such as photovoltaics and wind power generation have become the focus.

It is reported that after four years of deliberation, the Catalogue was finally released with the aim of deepening the implementation of the Western Development Strategy, promoting the adjustment of industrial structure and the development of characteristic advantageous industries in the western region. The Catalogue will come into effect on October 1, 2014 and is generally applicable to various enterprises engaged in production and operation in the western region.

Profit from the new energy industry

It is reported that the Catalogue includes two parts: one is the encouraged industries in the existing national industrial catalogue, and the other is the newly added encouraged industries in the western region. The Western Development covers Chongqing, Sichuan, Guizhou, Yunnan, Xizang, Shaanxi, Gansu, Qinghai, Ningxia, Xinjiang, Inner Mongolia and 12 provinces (districts and cities) in Guangxi.

Among them, new energy industries such as solar power generation and wind power generation have become the focus of the encouraged industries in the Catalogue, covering the construction and operation of backpressure cogeneration units, the development and production of high-efficiency solar cell module technology, the construction and operation of wind power plants, the construction and operation of solar power generation systems, and the development and application of intelligent microgrid technology relying on distributed energy. The newly encouraged industries in 12 western provinces (regions, cities) all involve energy equipment related industries, with 9 regions involving solar, wind, and nuclear energy equipment.

Among them, Sichuan and Yunnan encourage the development and production of high-efficiency solar cell module technology, as well as material research and manufacturing; Represented by Gansu, Qinghai, Xinjiang, Inner Mongolia, and Ningxia, advocating the encouragement of the construction and operation of solar power generation systems, as well as the construction and operation of wind power plants; Yunnan, Ningxia, Inner Mongolia, and Xinjiang also encourage the development and application of intelligent microgrid technology relying on distributed power sources. The intention of the country to encourage the construction of distributed energy and promote the on-site consumption of new energy such as solar energy is clear at a glance.

In fact, in the tenth year of the implementation of the Western Development Strategy, in June 2010, the Central Committee of the Communist Party of China and the State Council issued several opinions on deepening the implementation of the Western Development Strategy, marking the beginning of a new round of Western Development. The Opinion clarifies multiple preferential financial and tax policies for the western region.

However, in order to enjoy the above-mentioned preferential policies, one must become a relevant industry involved in the Catalogue. Nowadays, new energy industries such as solar energy and wind power are prominent, which is undoubtedly a significant benefit for various new energy enterprises in the western region.

In addition, according to Announcement No. 12 of 2012 of the State Administration of Taxation on Enterprise Income Tax Issues Related to Deepening the Implementation of the Western Development Strategy, from January 1, 2011 to December 31, 2020, for enterprises located in the western region with the main business of industrial projects specified in the Catalogue of Encouraged Industries in the Western Region, and whose main business income accounts for more than 70% of the total enterprise income for the current year, after application by the enterprise and confirmation by the competent tax authority, the enterprise can pay enterprise income tax at a reduced rate of 15%. That is to say, industries that enter the directory will be subject to corporate income tax at a rate of 15%, while the current statutory corporate income tax rate is 25%.

Industry insiders estimate that if the income tax for photovoltaic power generation projects is paid at 15%, the internal rate of return on project capital can increase by approximately 1%.

Lin Boqiang, Director of the Energy Research Center at Xiamen University, stated that in addition to preferential income tax policies, industries listed in the Catalogue also have significant advantages in project initiation, approval, and other aspects.

Adjusting industrial structure

The reporter noticed that in the final "Catalogue" released by the National Development and Reform Commission, only Shaanxi and Ningxia, among the newly encouraged industries in 12 provinces and cities, are also included in major coal chemical and petrochemical industries such as large-scale ethylene with a capacity of one million tons and large-scale oil refining with a capacity of ten million tons. However, regions such as Xinjiang and Inner Mongolia, where coal chemical investment is hot, encourage industries that are difficult to find traces of coal chemical industry.

In fact, in the draft of the Catalog for comments, the "cluster" of coal chemical projects has been controversial. In April of this year, the National Development and Reform Commission, together with relevant departments and local governments, released a draft of the "Catalogue" for soliciting opinions. Among the newly encouraged industries, several western provinces and regions such as Xinjiang, Yunnan, Shaanxi, and Gansu have included coal to olefins, coal to methanol, and other coal chemical projects.

Wang Fengchun, Deputy Director of the Law Office of the National People's Congress Environmental and Resources Commission, previously told the media that it is reasonable for the country to develop coal chemical and other projects in the western region, but encouraging development may not be appropriate.

Meanwhile, Wang Ning, a researcher at the Economic Research Institute of the Xinjiang Academy of Social Sciences, once told local media that not being included in the Catalogue does not mean that Xinjiang will not develop coal chemical projects, but rather that coal chemical and petrochemical industries have a large proportion in Xinjiang. The Catalogue aims to adjust the industrial structure of Xinjiang.

It is reported that there are currently 26 coal to oil projects, 58 coal methanol to olefin projects, and 67 coal to natural gas projects in China that are in the stages of operation, testing, construction, and preliminary work. If all of them are put into operation, it is expected to form a coal to oil production capacity of 40 million tons per year, an olefin production capacity of 41 million tons per year, and a coal to natural gas production capacity of 280 billion cubic meters per year by 2020.

"The blind and repetitive construction of coal chemical projects has wasted a lot of social capital. The terminal products of coal to olefin projects in the western region are mostly polyethylene and polypropylene, with a single product structure and high risks." Guo Weidong, a chemical expert and director of the Shaanxi Provincial Decision Advisory Committee Office, told reporters that in recent years, the problem of overcapacity and product structure homogenization in coal chemical industry in the western region has become prominent, and the "Catalogue" has released signals of industrial adjustment. Policy adjustments can also be said to be feedback made in response to the call for rational development of coal chemical industry in the market.

At the same time, Guo Weidong also pointed out that the development space and prospects of coal chemical industry in the western region are still great, especially under the trend of energy conservation and environmental protection, the clean and efficient utilization of coal and the comprehensive utilization of other energy efficiency are very prominent. The development and application of comprehensive utilization technologies for industrial waste heat, residual pressure, pressure difference, and gas generation have been included in the encouraged industrial catalogs in Chongqing, Yunnan, Guangxi, Qinghai, and other regions. The manufacturing of complete sets of equipment for the storage, transportation, and utilization of fly ash in Chongqing, the development and equipment manufacturing of clean coal technologies such as coal gasification and liquefaction in Ningxia, and the manufacturing of high-efficiency micro emission coal-fired boilers in Shaanxi will be conducive to promoting the clean and efficient utilization of coal.

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