Daily Management Review

Make vs Made: China against India


China and India are the giants among the emerging markets. They account for over one-third of the world population, and the two countries would have a strong influence on global trends, even if their growth rates were not high. It should be also noted, that, in the last 10 years, China and India are also among the fastest growing economies in the world.

At the same time, both China and India had very different paths of development. In the center of China's economic model was its manufacturing industry orientation to export to the rest of the world. Indian integration to the world is also increasingly enhanced, although the more significant role in its model was played by domestic demand and services.

These countries are moving to the stage of development at which the mutual competition is an important factor in the economic life of China and India. Now these countries almost simultaneously run large-scale programs aimed at developing the technologies and innovative solutions which, according to these governments’ plans, must accelerate the pace of growth and help ensure that the country will occupy a leading position in the world in these areas.

Make in India

Last year, Indian Prime Minister Narendra Modi has opened a new chapter in the manufacturing sector of India.

Make In India Campaign, launched by the prime minister Modi, opens a new era of openness and optimism in the economy.

- Come and produce in India. Sell anywhere but make in India - said Modi - everything from appliances to paper and plastic, from satellites to submarines.

 In April this year, Modi appeared at the Hannover Fair - the largest industrial fair in the world - in the pavilion dedicated to Make in India campaign, where he presented India as technological and industrial center.

To launch the campaign, the government has eased control in the high income sector, announced the creation of ‘smart’ cities and industrial clusters, as well as launched a program to train human resources.

India encourages entrepreneurs with new ideas to create jobs in their own country. The country realizes that it needs a strong industrial base to stimulate economic growth.

In addition, the country encourages the implementation of software solutions in the manufacturing sector.

‘Smart’ plants, at which machines and computers do the work, are part of this project. The government wants to achieve high product quality, high efficiency and productivity so that it would become an integral part of the productive sector of the country.

Modi’s goal is to increase the share of production sector in GDP from 16% to 25% by 2022 and create 100 million jobs. Also, India is planning to increase the rate of growth in industries such as manufacturing equipment.

To become a world industrial power, they need to take a leading position in the field of innovation. And the proposal to establish industrial clusters is directed precisely to achieve this objective.

According to analysts, India is trying to create a second Silicon Valley on its territory.

Companies and entrepreneurs have understood and appreciated the efforts made by the government, so they tend to take advantage of opportunities by providing new ideas, optimize resources and offer creative solutions in the field of software.

For example, the company Ecolibrium Energy reduces costs for customers by developing a platform for energy management that allows companies to track and analyze energy consumption to finally optimize it.

This platform, called SmartSense, provides the ability to centrally monitor and control energy consumption in different locations.

In addition, the company Entrib developed an internet solution for industrial companies. It uses sensors and a common software platform that helps manufacturers to obtain data on energy consumption in real time.

GE has also developed a solution concept that allows optimizing industrial production. In their latest study, GE economists predicts that the trend of combining physical and digital worlds will reign over the world, developing new production processes and materials, as well as innovative supply chain and distribution.

GE has implemented its ideas in a newly built plant worth $ 200 million. This enterprise, which corresponds to the government's view on the prospects of the ‘New India’ is a flexible factory, which can produce different products and develop different business lines using a single infrastructure and manpower.

This company is considered a brilliant solution: equipment and computers communicate with each other via the Internet in real time, which improves product quality and helps avoid breakage.

However, while India is optimistic about the future in an effort to develop industrial production and to attract foreign investors and entrepreneurs, its neighbor and regional rival - China - is not dormant.

Made in China

China plans to provide support for 10 key manufacturing industries in the new 10-year plan to strengthen the sector. The country will focus on the development of technology, as the old strategy based on the use of cheap labor has become outdated.

The plan called Made in China in 2025 was made public in May this year and became the first stage of a larger three-phase project, planned up to 2049.

During the first phase, which will last until 2025, China will use the technology for the development of the manufacturing sector as a whole and improve its efficiency. Then it plans to stand on a par with countries such as the US, Germany and Japan, and become one of the industrial nations by 2035, with hitting the top by 2049.

During the National People's Congress in March this year, Prime Minister Li Keqiang has called for China's modernization and the transition "from production quantity to production quality."

Payroll costs in Chinese factories over the past 5 years have doubled. And with the growth of other developing countries, China will need a lot of effort to maintain its leading position in terms of the labor-intensive production.

Beijing plans to use the program ‘Made in China 2025’ as the basis for an effective industry which is capable of manufacturing products with high added value on a par with goods produced in developed countries.

The plan aims to develop domestic technological innovation and create local brands. Under this plan, the government encourages major companies to increase R & D spending to 1.7% in 2025, compared to less than 1% at the moment.

Ten sectors were selected as priority areas for development. China will develop domestic technology for the production of chips and shipbuilding, including technologies for deep exploration of resources.

It also includes machinery and robotics, which are very important to improve the efficiency, as well as rail links and power equipment, which are also part of the strategy of China's exports.

In China, local companies occupy the leading position in the country. However, if we talk about the global level, many note that Chinese businesses lack the technical progress, in particular energy-saving technologies.

The plan was launched with the full knowledge that the Chinese companies require a tough competition with foreign companies to achieve dominance on the world market.

Cars using energy-saving technologies and new sources of energy is also a key sector.

In the health sector, where demand is increasing every year as the population is aging, the government there plans to support areas that are related to regenerative medicine, including biotechnology and medical equipment.

Beijing will use government financial institutions to raise funds to support these industries, as well as considering the possibility of tax breaks.

The government also announced that it is considering easing regulations to open the manufacturing sector to foreign players.

However, despite this statement, there are repeatedly expressed concerns that the government will provide excessive support to local businesses.

Of course, today it is impossible to accurately predict which country will be the winner of this race of innovations, as both potential competitors have already meet many goals.

Nevertheless, one can say with certainty that, whatever the result of the competition is, the two countries, their economies and their populations, will benefit in any case, since the implementation of these programs will contribute to economic growth, create new jobs and, as a result , improve the quality of people’s life.

source: financialexpress.com