China is today the world’s largest manufacturing economy and considered to be one of the most competitive nations in the world. China not only overtook the United States in 2011 to become the world’s largest producer of manufactured goods but also used its huge manufacturing engine to boost living standards by doubling the country’s GDP per capita over the last decade.
In an article featured in The Economist, October 2012 it was mentioned that China was well positioned to pursue intelligent manufacturing, which involves the development and implementation of artificial intelligence in production processes. Executives said that the government should increase the planned support for intelligent manufacturing to promote China’s transition to make, use, and sell more intelligent manufacturing equipment.
It was also suggested that China move from low-cost, labor intensive manufacturing to high-end, technologically advanced manufacturing. Although it’s agreed that China cannot abandon its core competency in low-cost manufacturing, it is strongly advised that policy-makers find another basis of differentiation, such as technology and innovation. To facilitate the move to high-end manufacturing, executives believed there is an urgent need to redefine the role of state-owned enterprises.
With heightened market volatility, it’s difficult to predict the stability of the manufacturing industry in China. The uncertain global economic environment since 2008 has complicated life for manufacturers everywhere. Those in China have arguably been the most severely affected, given the country’s status as the workshop of the world.
Executives predicted that environmentally friendly and energy efficient manufacturing would be the requirement for all nations in the future. Current manufacturing conditions in China are seen as damaging to the environment, energy intensive, and not aligned with this vision. Executives also said that Chinese policy-makers must consider how the country would like to position itself with respect to energy costs, and make changes now to remain attractive for manufacturing sites in the future. Making current investments in the energy industry can help to reduce environmental pollution now and positively impact China’s future trajectory.
As of August 2015, China’s official measure of its manufacturing sector recorded its worst reading in three years today. In an article by Scott Cendrowski featured in Fortune, he mentioned that there’s no doubt China’s heavy industry and commodities sectors are in a recession. The country’s investment economy has slowed down to its weakest growth in a decade, according to Gavekal Economics, as residential construction remains weak and companies scale back capital investments. That filters down to manufacturing. But not all is bleak and gloom as the central government has undertaken efforts aimed at supporting manufacturing in the past week, likely in response to the weak data.
Executives had mixed perspectives about China’s progress in the transformation from a low-cost manufacturing destination to a hub for manufacturing innovation. However, executives broadly agreed that operational excellence and the ability to innovate are critical for China to advance beyond its current success. They also said that policy-makers play a key role in creating an environment that facilitates a variety of innovation: technology, product, process and management practices.
Nonetheless, in the past over 20 years, the comprehensive development and optimized upgrading of the manufacturing industry have enabled China to primarily establish the status as a “big country of manufacturing” and laid the sound foundation for China to transformed to be a “strong country of manufacturing”.
Still, China is viewed as having stronger intellectual property protection laws when compared to emerging low-cost countries such as Vietnam, Thailand and Indonesia. As a result, some executives said that China has the opportunity to make improvements in the enforcement of its laws and provide a strategic advantage for manufacturers operating in the region. Doing so, and given the other competitive drivers China delivers, would positively impact China’s journey to advanced manufacturing.