Forget about Donald Trump’s trade war – China’s manufacturers face bigger threats, says drafter of ‘Made in China 2025’
- Gu Qiang, who helped craft the industrial modernisation plan, says structural issues at firms could hamper China’s pursuit of hi-tech manufacturing dominance
- Companies also face major challenges over surging labour and financing costs, he says
China’s manufacturing industry faces major obstacles in its bid to narrow the gap with developed economies, according to a former official who helped draft a controversial blueprint for upgrading the manufacturing capabilities of Chinese industries.
Gu Qiang, a former deputy division director of planning with the Ministry of Industry and Information Technology, told a Beijing think tank event that he endorsed the view that structural problems within Chinese firms could hamper the country’s pursuit of dominance in global hi-tech manufacturing, notwithstanding the goals spelt out in “Made in China 2025” (MIC2025), a state-led policy.
“A businessman once said to me: ‘You want to push forward Made in China 2025, but most Chinese companies won’t live beyond 2025,’” said Gu, who now heads the industry research institute of China Fortune Land Development, a Shanghai-listed developer of industrial estates.
“I was in cold sweat [after hearing that], but we did see that happen,” he said. “Many companies were shut down [because of] pollution curbs” on hundreds of manufacturers by 2020 to reduce air pollution.
Gu made his remarks on Saturday as he took part in a panel discussion organised by the Hongfan Institute of Legal and Economic Studies, a liberal private think tank of former economic and policy advisers and academics.
Gu said Chinese companies faced major challenges over “drastically” rising labour costs and unusually high financing costs.
Surging costs at labour-intensive factories have prompted numerous companies to shift their operations to neighbouring countries – a trend that has been accelerated by the US-China trade war.
A poll last October by the American Chamber of Commerce in South China found that more than 70 per cent of US firms operating in southern China were considering delaying further investment there and moving some or all of their manufacturing to other countries as the tit-for-tat tariff battle bit into profits.
Gu said more companies had expressed interest in setting up factories in industrial estates outside of China but the trade war was only one factor – rising costs were the main driving force for relocation.
“Where is China’s manufacturing now, where is it heading? As a businessman now, I’m very confused,” the former official said.
Gu was a member of the team that drafted MIC2025, a blueprint for lifting the country’s industries – from robotics, aerospace and new materials to new energy vehicles – up the value chain.
Its mandate was to replace imports with local products and build global champions that could take on giant Western firms in developing cutting-edge technology.
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But MIC2025, first unveiled in 2015, became a central issue in the US-China rivalry.
In November, US President Donald Trump, who launched a tit-for-tat tariff war against Beijing in July, called the policy “very insulting” and a major weapon in what he claimed was a Chinese effort to take over the world economically.
Amid Trump’s tough China policy, Beijing dropped all mentions of the then-three-year-old MIC2025 programme in its annual work report delivered last month.
But Gu, who helped draft the strategy, dismissed the Trump administration’s claim that MIC2025 constituted a heavyweight Chinese industrial plan.
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“Looking at the document itself, it doesn’t have a high level of policy endorsement,” he said. “I had drafted dozens of industrial plans before. “I never expected it to become that big a deal.
“There was a debate what the document shall be called … [Vice-Premier] Ma Kai decided it should be ‘Made in China 2025’.
“Others said it should be called the Chinese Manufacturing Development Strategy … if we had chosen that name, it might not have received so much criticism.”
Despite Beijing’s effort to help manufacturers with cuts in the value-added tax and other fees, another stumbling block was an inability to produce top-quality products, he said.
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“I once visited Shaanxi Qinchuan Machinery Development and asked their boss when they would become the world’s largest machine tool producer, since they are already the third,” he said of the Shenzhen-listed company.
“The boss told me he could never achieve it in his life, because the products’ quality isn’t there.”
