By Belunn Se, senior industry observer based in Shenzhen, China
The annual three-day Summer Davos 2016 is underway in Tianjin on June 26-28, focusing on "The Fourth Industry Revolution and its Transformational Impact."
The Chinese State Council (China’s cabinet) officially published, "Made in China 2025"on May 19, 2015 to highlight the Key Field Technology Roadmap for China to catch up on this round of industry revolution.
The Chinese domestic industry has faced numerous challenges such as economy growth momentum slowing down and exports shrinking, which are pressing them to transform and upgrade.
A comprehensive social-economic mechanism to motivate industry restructuring should be set up, for which innovation is a catalyst. Chinese Premier Li gave a keynote speech at the Davos Summer Forum in Tianjin on Monday.
"We will take innovation leading the economy transformation and upgrading, innovation is the first drive of development, we will implement innovation- driven development strategy, speeding up the construction of innovation type country," he said.
Chinese Premier Li Keqiang delivers a speech at the opening ceremony of the 2016 Summer Davos Forum
He added that China will promote "encouraging people to start their own business and to make innovation, and enhance the 'internet+' program."
Policy innovation
One of the toughest difficulties for industry upgrades involves financing budgets. The central government, provinces as well as cities all support enterprises' technology innovation and equipment upgrades by providing several thousand companies with capital.
To promote digitization, earlier before "Made in China 2025", in 2013 and 2014, MIIT (Ministry of industry and information Technology) supported approximate 720 pilot companies by the 3i's (Integration of Industrialization and Informatisation) Funding experiments on a local level.
After "made in China 2025"was issued in 2015, central and local governments set up a special fund.
As an expert in "National manufacturing Power Construction Strategy Advisory Committee" stated, industry funding that deployed for "made in China 2025" would reach 5 trillion CNY in the next 10 years, besides over 100 billion CNY of science research fund would be placed into an intelligent manufacturing study.
The nationwide "supply-side structural reform," and "encouraging of people to start their own business and to make innovation" that were first proposed by Li at Summer Davos 2014 will create jobs and increase civil income to boost domestic market energy & dynamics, and improve upwards social mobility along with social equity and justice.
Value chain rebalancing innovation
Taking a typical city in the Pearl River Delta area, "traffic jams in Dongguan,Guangdong Province, South China, cause global merchandise shortages."
Local companies - "processing and compensation trades," which are Labor Intensive and Exporting Oriented stood at 2500 in 1998, only 600 Dongguan firms remained in 2015, but they have been updated with plant robotics, advanced equipment, as well as automation facilities for its industry transformation and upgrades.
More manufacturing companies in Dongguan created their own brands, and have made tremendous efforts to break their reliance on the overseas markets.
According to Dongguan authority's data early this year, over 5000 of 7000 "processing with materials or given samples, assembling supplied components" companies transferred into legal person company, 65% of which with domestic business, 18.5% of them acquired or created their own brand.
Yet at the bottom of the value chain of OEM (original equipment manufacturing) to channel, even to top of Branding, besides marketing and operations skill to be enhanced, critical homework for China domestic enterprises is the "spirit of craftsmanship" that must take "made in China" as a philosophy from heart, rather than just a slogan; compared with machines that are "Made in Germany", fashion "Made in France", "Made in Italy", the processing of branding "Made in China" should be a long journey for Chinese SMEs.
Technology innovation
Technology innovations offer people more convenience, if it would benefit most people or parties, since companies are bringing new technologies to citizens.
The "Internet + Trading" of e-commerce and "Internet + Car" of sharing economy have made a significant impact on our lives and forced traditional industries to restructure. They also lowered logistics costs, optimized efficiency of social resources usage.
In the manufacturing industry, Robotics and Smart Factory related "machine replacing human" have aided enterprises. In 2015, 43,684 workers were replaced by robots in Dongguan, as the local government claimed, which have brought costs down 10% down.
Maijiaomeng, Huizhou Mayor said, "As far as society is concerned, some workers were laid off, but it is helpful for enterprises to improve their competitiveness".
Comprehensive interactive
For enterprises, adapting to industry upgrading requires much attention to innovation factors in a large social scale such as Policy innovation & Value chain rebalancing, as well as other factors in detailed industry and company scale likely innovation in supply chain, organization, management, including strategy etc., which would be interacting with each other.
Leading by innovation and taking advantage of China’s huge Domestic Market, which still has rising vacancy, place China on its expressway to allocate resources efficiently, shaping an industry at an upgraded paradigm with Chinese characteristics.
( The opinions expressed here do not necessarily reflect the opinions of Panview or CCTV.com. )
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