There are reports that foreign businesses are leaving China and heading to lower-cost locations. They suggest China is losing its manufacturing competitiveness. What is the future of China’s manufacturing industry?
With the rapid development of China’s manufacturing industry, China has become the biggest manufacturer in the world and it has also brought about tremendous development momentum for its economy. The standard of living of the people has been increasing with the increase of income. With the continuous development of the Chinese economy, the labor cost is also rapidly increasing. In the early stages of its vigorous development of its manufacturing industry, China’s advantage of using its low labor costs to attract large investments and become the largest manufacturing base has ceased to exist. The successful case of China’s rapid economic development through the attraction of foreign investment through low labor costs has been seen by the world. There is no doubt that every developing country in world wants to copy this pattern to be the next successful China. Therefore, it certainly would be some loss of foreign investments primarily seek lower-cost manufacturing for their own products.
This is an unavoidable stage that a strong manufacturer much pass through. If China’s only manufacturing competitiveness is low labor cost, China would always be the “big” manufacturer who does “out-sourcing” service for big foreign enterprises. If any other developing countries give out an offer with an even lower price, China should be worried for losing foreign investments, for losing competitiveness, for the future of its manufacturing industry.
However, China’s advantages have long been more than labor costs. China’s manufacturing industry has begun to focus on independent research and development, independent innovation, and creation of its own products and brands, in addition to its foundry. China’s goal is not just to be “the biggest”, just doing production for others. While China’s processing industry is developing, China’s manufacturing industry is also constantly becoming stronger. “Big” has become a limitation. “Strong” is China’s current goal, now. On the road to becoming stronger, it will inevitably lose some investors who are only seeking for factories with lower labor cost. On the road to becoming stronger, China no longer needs such one purpose “outsourced” investors. It is time for China to give up on some lower-cost benefits. That model no longer fits the development of Chinese economy and will not enable future progress. This is also the way for China to begin to choose types of higher-quality investors.
Now, investors that China needs more, and hopes to attract more are the investors with higher technology and a willingness to cooperate with China and Chinese companies. To attract higher level investors who believe that China can be a partner instead of a worker, China also needs to move forward and needs to demonstrate its ability to these investors and prove itself. This is also a driving force for making changes and focusing on, for example, independent research and development, not just production of foreign designs. Promoting China’s economic transformation and realizing the simultaneous development of innovation and development in traditional fields and emerging science and technology industries are both pressure and opportunities for development. They are also an important step in attracting cooperative investments.
China should be focused on transformation of traditional key industries and construction of new industries, such as, new generation of information technology, intelligent manufacturing, additive manufacturing, new materials, biological medicine industries to form a batch of manufacture innovation centers, industrial technology research bases, which mainly focus on research and development of common key technologies, industrialization of achievements, and talent training.
To find a way of development on its own, is the best option for China, and it has to be going its own way, not be a follower of others. There is nothing to be worried about the future of China’s manufacturing industry. It is moving at high speed on the right track.