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China has not made enough hi-tech breakthroughs, according to Chen Xuedong, a member of the Chinese Academy of Engineering. Photo: Getty Images

China’s manufacturing advantage at risk as restrictions mount and competition intensifies, leading engineer warns

  • Adviser to Beijing suggests that China set up a vocational education system to train talent for advanced manufacturing as nation tries to stave off international competition
  • Pandemic has accelerated the push to reshore parts of the manufacturing process, and this poses a serious challenge as China strives to improve its supply chain

Years of imitating others’ innovations and relying on imports are among the reasons China is still a long way from becoming a hi-tech manufacturing powerhouse, according to a leading engineer who advises the Chinese government.

“The next 15 years will be a critical period for our nation’s manufacturing industry to grow stronger,” Chen Xuedong, a member of the Chinese Academy of Engineering, said at an event in Beijing on Saturday.

As China faces growing restrictions over its access to foreign technology, competition with other developing countries over low-end manufacturing is also intensifying, Chen warned.

Meanwhile, the coronavirus pandemic has accelerated the push to reshore parts of the manufacturing process, and this is a key challenge for China as a global producer seeking to gain control of its own supply chain, according to Chen.

We have been following and imitating scientific and technological innovation for a long time … There have not been many original major technological breakthroughs
Chen Xuedong, Chinese Academy of Engineering

“We are currently a major manufacturing country, and the added value of manufacturing has ranked first in the world for 11 consecutive years, reaching 26.6 trillion yuan (US$4.2 trillion) in 2020,” said Chen, who is also a member of an academic committee that advises Beijing on advanced manufacturing policies. “It is large, but it is not strong, and the overall value is at the low end of the global value chain.”

Chen also referred to a 2019 national assessment of the global competitiveness in 26 key industries in China, noting that 15 sectors were still lagging behind Western countries. The assessment concluded that China’s most advanced manufacturing industries included telecommunication equipment, advanced rail-transit equipment, textiles and home appliances, but it was still relying on imports in areas such as integrated circuits; operating systems and industrial software; and aircraft engines.

“We have been following and imitating scientific and technological innovation for a long time … In the field of natural sciences, we rarely raise any major questions,” Chen said. “There have not been many original major technological breakthroughs … the innovation ability of enterprises is weak, and the integration of industry, university and academic research has not been formed.”

Everything you need to know about China manufacturing

Chen added that many companies were unwilling to invest in high-risk research and development projects over the long term. Meanwhile, there are also concerns over poor intellectual property (IP) protection and low infringement penalties, while relatively low-paying hi-tech jobs and a lack of talent serve as additional hurdles to China’s quest of becoming more technologically self-reliant.

China can learn from the experiences of Japan and Germany when it comes to promoting the integration of academic research and product development, Chen said, pointing to the establishment of special laws to protect manufacturing industries, and to the establishment of institutions such as Germany’s Fraunhofer Society, which focuses on various fields of applied sciences.

China should also consider setting up a comprehensive vocational education system to train talent for advanced manufacturing, he added.

Chen also stressed the importance of developing small and medium-sized firms, getting the state to provide them with financial support or tax incentives, and encouraging enterprises to strengthen their applied and basic research.

04:01

Chinese manufacturing thrown into disarray as country's electricity crisis rolls on

Chinese manufacturing thrown into disarray as country's electricity crisis rolls on

China has vowed to spend big to upgrade its manufacturing industry amid a growing rift with the US over a wide range of issues, including trade and the status of Taiwan, which has led to restrictions on technology exports to Chinese companies.

Last week, the US commerce department added 12 Chinese firms to its export blacklist, known officially as the Entity List, to crack down on American business ties to China’s hi-tech defence sector.

Suppliers to companies on the Entity List must apply for a licence before they can sell to them, but permission is unlikely to be granted.

China’s 14th five-year plan for 2021-25 highlights artificial intelligence, quantum communications, integrated circuits, health, biological engineering, aerospace, deep-sea exploration and neuroscience research as key areas warranting state-sponsored research.
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