Made in China 2025

Tracy Luo August 4, 2016 4 mins read

As to the discussion on Made in China 2025, it is all the rage at the time in China. However, it is always accompanied by the turmoil and controversy for China’s manufacturing industries. So what is the future for “made in china”?

For the time being, there exist 2 problems on China’s industry selection. One is the choice between traditional industry and emerging industry, and the other is the choice between manufacturing industry and the tertiary industry. The whole country shows the tendency towards “off-manufacturing”. Since the 12th Five-Year Plan, various regions competed for the use of emerging and high-tech industries’ development as the successful way while ignored “made in China”; what’s more, some regions even took traditional industries as inefficient capacities and even set their minds to get it rid of.

At present, the strategic emerging industry is accounted for only 10%, though with an enormous potential, it still has a long way to go from potential to reality. However, regions around the world are rushing for emerging industries. Set solar energy industry as an example, there are 46 countries around the world setting it as backbone of the emerging industry in the future while nearly all the provinces and cities in China taking it as heavily-promoted industry in the future. In fact, as far as the position of China in the global industrial chain is concerned, it is still located at the bottom. The gap between China and the world is large in the high- tech industry. In China's most competitive household appliance industry, the core technology exists in the United States, Japan and South Korea; and even in LED region, Chinese enterprise is subjected to Japan and South Korea in an all-round way; in automobile industry, core technology in controlled by the United States, Germany and Japan. In the field of high-end industry and mainstream industry, Chinese enterprises’ industrial upgrading is restricted by the core technology, which is difficult to implement in the short run.

For the wider inland area, the toughest task in the future may not be the development of emerging industries and high-tech industries but the transfer and breaking through of the traditional industries. As a powerful country with low per capital income, the large domestic demand still requires being satisfied through traditional industries and manufacturing shall still be the foundation of China.

The present plight of manufacturing industry in China is the problem of social structure instead of manufacturing itself. As the serious polarization between the rich and the poor, the high income stratum is much popular with luxury consumption, and as one of the developing countries; China has become the world’s second largest luxury consumption. While the other side is the lower end market constituted by vast low-income groups. Between them is the mass or moderate consumption which seems rather scarce.

Made in China 2025 summarized the manufacture industry in china as large but not strong. Now the service industry of developed countries holds the dominant position but all the major world powers built the country manufacturing industry in the earliest days. Britain, at its most powerful time as in the middle of the 19th century, the industry accounts for 60% of Europe while 45% of the world; America, at its most powerful time as beginning of the end of the second world war, the industry accounts for 53.4% of the world. Today though China is the known as the “world factory” by the US, the industry proportion could only reach 20% of the world, which is far from strong.       

China still belongs to the category of “developing countries”, and sufficient industrialization process is not yet completed. Manufacturing industry still has decisive strategic significance among all industries. So far as that is concerned, in addition to the central city, most of the general cities in China still need casting industry as the subject and services industry as the auxiliary, which achieves the balance between the manufacturing and service industry in the end.

At present, the only hope for breaking the current situation lies in the revitalization of the domestic demand. Mid-class, mass industry and consumption by the general public could be China's long-term development method. The main task for China’s promoting of “Made in China 2025” is to quickly implement manufacturing industry’s upgrading and thus enter into the 2nd matrix of global manufacturing power as early as possible. As well as form the complementation for backward countries and build a real powerful manufacturing country through breaking away from homogeneous competition. 

Tracy Luo's picture
Associate Director | Finance & Strategy Recruitment
tluo@morganmckinley.com

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