Path to innovation won't be smooth
China's goal of becoming the world's leader in the manufacture of innovative technologies in just over three decades is ambitious. Factories producing low-cost goods have to be replaced, a markedly different mindset towards intellectual property has to take hold and people given every chance to be creative and see ideas realised. It is a far-reaching plan backed with bold thinking, but a necessity if there is to be substantially greater development. That can happen only if all in government, finance and industry get behind it.
The plan, Made in China 2025, is a three-step strategy that aims to first make the nation a hi-tech manufacturing power within a decade. There will be a focus on 10 areas: New information technology, numerical control tools and robotics; aerospace equipment; ocean-engineering equipment and ships; railway equipment; energy-saving and new-energy vehicles; power equipment; new materials; biological medicine and medical devices; and agricultural machinery. Unveiled by the State Council last week, Premier Li Keqiang has described it as an upgraded version of "Made in China", with "Created in China" being the objective. The extraordinary achievements in domestic railway construction and growing international presence is proof of abilities and potential.
Long before China became the top global manufacturing base in 2010, it was known as the "world's factory". But the "Made in China" tag has been associated with cheap products, made possible by low labour costs. Three decades of economic growth have dramatically improved lives, but with it has come higher wages and multinational companies are increasingly moving production to less expensive countries like Bangladesh and Sri Lanka. The slowing Chinese economy has deepened concern about a middle-income trap and boosting salaries and spending power is perceived as the most reliable way towards ensuring even and sustained growth.
It is a good strategy, but the upgrade to a new level of manufacturing is not going to be smooth. The bureaucracy, one of Li's main peeves, has to change its ways through cutting red tape and streamlining policies. Intellectual property rights of others have to be respected. The higher education system has to evolve to produce a workforce with the necessary technical skills. Financial institutions have to be more willing to give loans to startups with innovative ideas. The aims are achievable only if the right environment is first put in place.