Competition from developing nationswith similarly competitive costs,coupled with technology-drivenefficiency gains in developed countries,means that China’s abundance ofcheap labour and the competitiveadvantage of its infrastructure mayno longer be sufficient for it to drivesustainable growth. The consultingfirm Alixpartners estimates that thelanded cost of outsourcing productionto China will be equal to the cost ofmanufacturing in the United Stateswithin a few years.The strategic question of how torespond to this situation has longbeen a concern of the ChineseGovernment, hence the overarchingobjective of Made in China 2025 tomove the country up the value chain.Alternative approaches, such as drivingdown labour costs or devaluing therenminbi to stimulate exports, woulddirectly conflict with some of China’sfundamental development goals and itscommitments to achieve a ‘moderatelyprosperous society’, an objective whichwas most recently presented as theChinese Dream.
In most industries, realising this dreamrequires a reformed economy drivenby domestic consumption rather thanexports and higher wages. Since itlooks certain that China will continueits reforms to achieve this, we areleft with the question of what exactly‘made in China’ will mean in future,and therefore what the implicationsare for UK companies doing businesswith China.Long-term vision and planA clue to this can be seen in the detailof the MIC 2025 plan. The plan is partlyinspired by Germany’s Industry 4.0initiative, but the comparisons do notrun deep. Whilst both projects focus inparticular on better use of technology,as well as the inclusion of SMEs in thevalue chain, the Chinese start froma very different base and there arebroader issues of quality, consistencyof output, safety and environmentalprotection.
MIC 2025 is certainly comprehensive,covering everything frommanufacturing operations and IT useto public and private finance and fiscalincentives. It references intellectualproperty and the need to adopt international standards to fit intoglobal manufacturing chains, and itstresses the importance of relyingmainly on market forces as the keydriver of change.
In most industries, realising this dreamrequires a reformed economy drivenby domestic consumption rather thanexports and higher wages. Since itlooks certain that China will continueits reforms to achieve this, we areleft with the question of what exactly‘made in China’ will mean in future,and therefore what the implicationsare for UK companies doing businesswith China.Long-term vision and planA clue to this can be seen in the detailof the MIC 2025 plan. The plan is partlyinspired by Germany’s Industry 4.0initiative, but the comparisons do notrun deep. Whilst both projects focus inparticular on better use of technology,as well as the inclusion of SMEs in thevalue chain, the Chinese start froma very different base and there arebroader issues of quality, consistencyof output, safety and environmentalprotection.
MIC 2025 is certainly comprehensive,covering everything frommanufacturing operations and IT useto public and private finance and fiscalincentives. It references intellectualproperty and the need to adopt international standards to fit intoglobal manufacturing chains, and itstresses the importance of relyingmainly on market forces as the keydriver of change.
