China’s Manufacturing Sector Battles Adversity to Maintain Competitiveness

In the face of global geopolitical challenges and intensified competition, China’s manufacturing sector stands resilient, buoyed by a robust supply chain framework and strategic industrial policies.

In recent times, the impact of geopolitics on global supply chains has become increasingly apparent. The relocation of manufacturing to developed nations and the rapid economic growth in regions like Mexico and Southeast Asia have heightened competition among countries vying to attract manufacturing operations.

While it’s true that the production of certain labor-intensive goods has migrated from China to other locales, China’s deep integration into the global value chain means that many companies eventually return or continue to rely heavily on imported intermediate products from China.

China's Manufacturing Sector Battles Adversity to Maintain Competitiveness
Shifts in industrial chain dynamics reflect ongoing transformation, enhancing China’s competitiveness. (Credits: China Daily)

Chairman of Yantai Tayho Advanced Materials Co Ltd., Song Xiquan, stresses against interpreting the partial shifts in the industrial chain as indicative of an overarching trend. He notes that China’s industries are currently undergoing transformation and upgrading, reshaping their competitive landscape.

Song highlights the textile industry as an example. Despite the departure of certain processing enterprises, the industry’s overall value has been on the rise. In 2023, China’s high-performance fiber production capacity comprised over a third of the world’s total, marking a 14.4 percent year-on-year increase in export volume.

Tesla’s Shanghai gigafactory serves as a notable example, achieving a component localization rate exceeding 95 percent. Tesla Inc.’s Manufacturing Vice-President, Song Gang, lauds this achievement as a “win-win” situation for both Tesla and its Chinese suppliers.

China boasts all industrial categories in the United Nations industrial classification and has nurtured 12,000 “little giant” firms, over 90 percent of which are suppliers to prominent large enterprises domestically and internationally.

These “little giant” firms represent the emerging elites among small and medium-sized enterprises, specializing in niche markets, pioneering cutting-edge technologies, and demonstrating significant potential.

Official statistics reveal China’s dominance in the output of over 40 percent of 500 major industrial products globally. Notably, China’s production of personal computers, smartphones, and solar panels accounts for over half of global production.

In 2023, China’s total value-added industrial production approached 40 trillion yuan ($5.57 trillion), constituting 31.7 percent of its GDP.

The scale of China’s manufacturing industry has maintained its global leadership position for 14 consecutive years, according to the Ministry of Industry and Information Technology (MIIT).

The Business Confidence Survey 2023/24 conducted by the German Chambers of Commerce Abroad Greater China indicates that over half of the surveyed companies plan to increase investment in China over the next two years, citing reasons such as a well-established supply chain and enhanced innovation.

China's Manufacturing Sector Battles Adversity to Maintain Competitiveness
A robust supply chain framework and strategic policies bolster China’s industrial resilience. (Credits: China Daily)

The recent government work report, presented at the national legislative session for deliberation, underscores Chinese policymakers’ commitment to preserving the country’s competitive advantage in its robust industrial chain system and advancing toward mid-to-high-end development.

Emphasis is placed on modernizing the industrial system and accelerating the development of new quality productive forces.

China aims to fully leverage the strengths of its new system to mobilize resources nationwide, enhancing innovation capabilities across various sectors.

The government’s report outlines measures such as systematic planning of basic research and support for enterprises excelling in leading R&D projects to expedite progress towards self-reliance and technological prowess.

A senior official from MIIT pledges accelerated efforts to supply cutting-edge and widely used technologies, foster leading enterprises, and strengthen the industrial ecosystem. Future industries will prioritize key areas such as general artificial intelligence, humanoid robots, and brain-computer interfaces.

Sajda Parveen
Sajda Parveen
Sajda Praveen is a market expert. She has over 6 years of experience in the field and she shares her expertise with readers. You can reach out to her at [email protected]
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