The commission released a specific catalogue of different industrial categories that are encouraged, prohibited or restricted. The package is designed to serve as a guideline for the future development of manufacturing, officials said.

Sun Huanbao, the commission's secretary-general, said: "The catalogue's launch echoes the urgent need to upgrade the industrial structure to sharpen the sector's overall competitive edge."

According to the city's plan, Shanghai will focus on the development of six pillar industries - electronics and information technology, cars, power and large-scale electromechanical equipment, petrochemicals, high-grade steel and biopharmaceutical products.

Four major industrial bases - for information technology, cars, petrochemicals and high-grade steel - are expected to take shape in the city's suburbs during the period up to 2005.

These pillar industries are expected to largely power the future growth of local industry, which saw overall profits of nearly 22.8 billion yuan (US$2.75 billion) from January to June, a 5.2 percent year-on-year increase.

Some industries, technologies and products are prohibited or restricted mainly because of their threat to the local environment, their high consumption of resources or low market competitiveness.

Prohibited and restricted sectors include paper pulp making, chemical fertilizer production, and electronic or light industrial goods with low added value. The expansion of these sectors is banned within the Inner and Outer Ring areas.

Officials said existing enterprises that fall under the banned or restricted categories will be phased out or have their output volume limited.

Despite the city government's high expectations for local industry, tough challenges remain.

The lingering global economic depression will bring market uncertainties for Shanghai's industries as well as the overall economy of the city, which is China's most highly export-dependent city, analysts said.

Zhou Minjie, a senior official at the commission, said: "That's why we have to adjust the structure of our export-orientated industrial products and our marketing strategies to better tackle the global market situation."

A more skilful grasp and use of World Trade Organization rules is another urgent need, given Shanghai's increasing integration with the global economic community, officials said.

(China Daily July 20, 2002)