Chinese manufacturing has always been \"large but not strong\" – what is the key issue?

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　　At the recently held Second China Manufacturing Summit Forum, industry experts from academia, industry, and research institutions offered suggestions on addressing the issue of China’s manufacturing sector being large in scale but not strong in performance. A research report by the Chinese Academy of Engineering identified the key factors for breaking through these bottlenecks. China’s manufacturing sector remains the largest in the world, but the issue of being \"large yet not strong\" persists. Over the past few decades, China’s manufacturing industry has seen rapid growth; its value added in this sector caught up with that of Germany at the beginning of the 21st century, surpassed Japan in 2006, and caught up with the United States in 2010. Now, it holds the first place in the world. China leads the world in terms of manufacturing output, imports and exports, as well as the number of workers in this sector, making it a veritable manufacturing powerhouse. Wang Ruixiang, president of the China National Machinery Industry Federation, was deeply moved. He cited a set of statistics on China’s machinery industry to illustrate the rapid development of \"from small to large\" of Chinese manufacturing. Wang Ruixiang: When our country was first established, the total output value of the machinery industry nationwide was only 559 million yuan; today it has reached 23 trillion yuan, with an average annual growth rate of 10.48%. The total profit amount increased from 1.17 trillion yuan at the end of the 11th Five-Year Plan period to 1.6 trillion yuan. The trade surplus rose from 3.136 billion US dollars to 111 billion US dollars in 2015, reaching a record high. The output of key products, such as automotive power generation equipment, CNC machine tools, large tractors, construction machinery, and so on, has ranked first in the world for many consecutive years. On the one hand, it has the largest scale in the world; on the other hand, high-tech manufacturing sectors such as high-speed railways and nuclear power have also made significant progress over the years. According to the latest data released by the Ministry of Commerce, in the first half of this year, foreign investment in high-tech manufacturing increased by 6.2% on a year-on-year basis. Overall, however, the issue of Chinese manufacturing being \"large but not strong\" has persisted. Szev, Chairman of Harbin Electric Group Corporation: The problems facing Chinese manufacturing at present are, firstly, the need to reduce overcapacity – is this also part of Chinese manufacturing? There’s also the issue of getting rid of \"zombie enterprises\"; still, it’s manufacturing that has worked hard to drive China’s economic development, and now it is again manufacturing that causes problems. What’s the problem? Many of them are large but not strong ； The second issue is the low efficiency in the allocation of social resources; many of our social resources are wasted repeatedly ； The third is the brand; our enterprises often focus on improving their capabilities, and they fall far short in terms of brand and quality – this is the reality in China. “\"Large but not strong\" has four major problems. What is the key to being large but not strong? Liu Baicheng, an academician of the Chinese Academy of Engineering, said that in June this year, the academy launched research on the strategy for strengthening industrial foundations. The research report suggests that four fundamental issues are the key problems. Liu Baicheng: Proposed the “four foundations”: the first is key basic components ； The second is key technical materials ； The third is advanced basic processes ； The last one is the corresponding technical support, which includes technical standards. According to the strategic research report by the Academy of Engineering, these “four fundamentals” have become the key factors restricting China’s industrial sector from developing from a large scale to a high-quality one, and they constitute bottlenecks that hinder the country’s ability to enhance its innovation capabilities and global competitiveness. Taking the key basic materials for high-end equipment as an example, many of the key basic components still rely on imports. Liu Baicheng: The first is CNC machine tools; for our high-end CNC machine tools, we still rely mainly on imports to this day. From what I know, perhaps 70% to 80% relies on imports. Secondly, 90% of the CNC systems used in our high-end CNC machines are imported, and there is still a significant gap in terms of the precision, stability, and reliability of these high-end CNC machines. High-end robots rely on imports; for domestic robots, core components such as precision reducers, servo motors, and controllers are mostly purchased directly from abroad. “The transformation from large to strong is not simply a matter of processing – how can China’s manufacturing industry overcome such bottlenecks? In 2015, the State Council issued the \"Made in China 2025\" strategy, which serves as the action plan for the first decade of China’s efforts to build itself into a manufacturing powerhouse. Improving innovation capabilities and breaking through in smart manufacturing have become of top priority. As an entrepreneur, Dong Mingzhu, the chairman of Gree Electric Appliance, attaches great importance to the transformation of the company’s own mindset. Dong Mingzhu: We need to invest heavily in research and development. I believe that if we put in the effort to study it, there’s no reason why we can’t succeed. If thinking does not change, if one relies on imitating others, or even if the focus is solely on corporate profit, it simply won’t work. Our transformation from large to strong is not merely about processing; it is only through creation that we can ensure our survival. It is creation that enables us to reach the world, and it is only through creation that we can make the world fall in love with Chinese-made products. Expert commentary: Promote the upgrading of the manufacturing sector through quality innovation. As envisioned in \"Made in China 2025,\" for China to transform from a major manufacturing country into a strong one, it must undergo challenges and accelerate the implementation of four key transformations: innovation-driven development, competition based on quality and efficiency, green manufacturing, and service-oriented manufacturing. Among these, how to improve the quality of \"Made in China\" products is a major issue that needs to be addressed urgently as part of the current supply-side structural reforms. Zhang Gang, counselor to the State Council: China’s manufacturing industry lacks high quality and efficiency; its export products compete mainly on price advantages. Taking 2013 as an example, nearly 80% of Chinese goods won competition through price advantages, while in developed countries such as Germany and Japan, the proportion of those that won competition based on quality advantages was as high as 56%, or even 65%. In May 2015, the State Council issued the \"Made in China 2025\" strategy, emphasizing quality as a key aspect; this has at least three implications: first, it is necessary to address the prominent issue of low quality-efficiency ratios in our country at the current stage ； Second, it highlights the key to the upgrading of the manufacturing sector: innovation is the soul, and quality is life ； Third, it reflects the requirements of the quality era in economic and social development. To implement a quality-first approach, it is necessary to promote the upgrading of the manufacturing industry through quality innovation. For manufacturing enterprises, quality innovation in four areas is of the utmost importance: the first is innovation in quality technologies ； The second is innovation in quality management ； Third is innovation in quality infrastructure construction ； Fourth is the innovation of quality culture and the cultivation of craftsmanship.