Daily Management Review

China Wants To Re-Impose Its Global Factory Dominance Using High-Tech


China hopes to bring in a set of new robots – such as an automated vehicle that can move heavy items around industrial spaces, within their manufacturing system to enhance the value chain.
There is government support for the sector as well. A Tianjin-based robot maker for example, has received tax breaks and government-guaranteed loans for building products that would modernise China's huge factory sector and advance its technological expertise.
Ren Zhiyong, (general manager, Tianjin Langyu Robot Co, told news agency Reuters: “The government is paying great consideration to the manufacturing sector as well as the real economy – we can feel it."
China supports R&D efforts of high-tech companies like Langyu because it wants to decrease reliance on imported technology, strengthen its position as a global factory force, and at the same time, crack down on other sectors.
Beijing's pivot focuses on advanced manufacturing and not the services sector to get the world's second largest economy out of the "middle-income trap", where countries fall into lower productivity and stagnate in lower-valued economic output.
Ren stated that pressure is the driving force and it is hard for companies to grow without it.
On the increased demand for high-tech products like Langyu's automated guided vehicle, he expects that revenues will more than double to 100 millions yuan ($15.52million) by 2020.
More generally, Tianjin intends to invest 2 trillion yuan (311 billion dollars) between 2021 and 2020, with 60% earmarked as strategic emerging industries. Yin Jihui is the head of Tianjin Industry and Information Technology Bureau.
Yin stated that the investment will include both corporate and government outlays. It will boost manufacturing to 25% in 2025, up from 21.8% in 2020.
Yin stated that the share of strategic industries in Tianjin’s factory output will increase to 40% from 26.1% last.
"It will prove very difficult and challenging to reach these goals," Yin stated.
China's March five-year plan for manufacturing promised to maintain a "basically stable" share of GDP. This contrasts with the 2016-2020 plan which focused on creating jobs and services.
The Sino-U.S. Trade War and the coronavirus have changed the perception of factories by policymakers. They are no longer seen as merely grimy relics from an older economy, but strategic assets.
China's factories produced everything needed to combat the pandemic. This helped propel the economy out of its slump in early 2020.
The trade war with the United States, and Washington's tech curbs, exposed China's low-tech knowhow. This has hampered Beijing's determination to accelerate innovation.
Qu Hongbin, chief China economist for HSBC, stated that "rising external pressures since the beginning of trade war have made policymakers more determined develop China's high- and middle-end manufacturing."
"The more they place emphasis on manufacturing, the higher the external pressure." This will translate into policy support.
Ringpu Biotech in Tianjin, which produces animal vaccines has experienced significant import delays due to U.S. equipment.
Fu Xubin, Ringpu Vice President, stated that "we have taken some steps, including increasing our R&D capability and cooperating with universities and other companies."
"We will strive to increase our ability to search for substitutes in areas that we face problems."