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China's Digital Upgrade for Manufacturing - China 2025

Posted by Sabine Kempe on Mar 5, 2018 9:30:00 AM
Sabine Kempe
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Surpassing the United States in 2010, China’s manufacturing sector is now the largest in the world, with a total global Manufacturing Value Added (MVA) of USD 3.25 trillion in 2016, according to the World Bank.

China's government has committed to convert from a "high growth" to a "high quality growth" nation cemented in the 13th Five-Year-Plan. So how does this ambitious goal translate into the transformation of China's diverse manufacturing industry? Following our previous article on China's digitalization, let's have a look at the nation's digital upgrade plan for manufacturing - the "Made in China 2025" initiative.

The origins of China's New Manufacturing Era

For over 2 years, more than 150 experts from the China Academy of Engineering worked on 'Made in China 2025" to make it the blueprint for upgrading the nation's manufacturing sector.

The strategic plan is heavily backed by central-level funding in the range of more than 10 billion yuan (USD 1.5 billion). The same amount will be contributed by local goverments, plus financial services, such as loans, bonds and leasing will be provided by China Development Bank, which are estimated to be as high as 300 billion yuan, according to China Daily.

Let's step back and look at the origins of this plan.

The initiative drew direct inspiration from Germany's "Industry 4.0" plan which describes the trend of automation and data exchange in manufacturing technologies. Germany's high-tech strategy from 2011 sets its focus on creating "smart factories", wherein cyber-physically connected machines, work pieces and systems form intelligent networks along the entire value chain control each other autonomously.

What is more, networks and processes that have been limited before to one factory can be lifted to interconnect multiple factories or regions in an Industry 4.0 scenario. By the use of Big Data this newly gained information transparency creates the ability to decentralize learnings and efficiencies beyond the physical borders. This can be usable not only for production operations but also for business processes like sales. 

China's Digital Upgrade for Manufacturing - China 2025 | In Mind Cloud

"Made in China 2025" vs. Germany's "Industry 4.0"

Between Germany and China are not only 7362 km in distance (measured between Beijing and Berlin), but scaling a strategic approach from one economy to another. This is not just a localization matter.

Significant differences and transformation readiness factors need to be taken into account, such as:

  • The structure and complexity of the manufacturing industry (traditional vs. advanced, sectoral mix and development, plus the  mix and uniqueness of products a country can make),
  • technology and innovation, such as the ICT infrastructure to support the adoption of new technolgoes as well as the abilty to foster commercialize innovation in production,
  • human capital with labour force capabilities, namely skills, mind-sets and talents being able to respond to shifts in the industry
  • but also global trade and investment factors, beneficial institutional frameworks, the country's natural resources as well as the foreign and local demand for manufacturing products play a role in building a strategy roadmap of this extent.

Over the last 20 years, China's manufacturing sector has evolved from producing mainly low-cost goods to more advanced products. However, due to its size, the levels of modernization within the industry vary greatly. 

The efficiency, quality and basic conditions of Chinese producers are highly uneven, so China has to build the foundation of lean manufacturing, whilst developing a solid management infrastructure. On top, it needs to foster and build new mind-sets and skills to harness the power of innovations and new technologies on company level.

China's Digital Upgrade for Manufacturing - China 2025 | In Mind Cloud"More scientific and technological leaders, young scientists, engineers, and high-performing innovation teams are needed," approves President Xi.


"Made in China 2025" key contents

China's masterplan to transform manufacturing is adressing all of the above-mentioned challenges. "Made in China 2025" - its guiding principle is for manufacturing to be innovation-driven, with a new focus on quality and green production, and the initiation of structural upgrades as well as the nurturing of human capital.

The government will take responsibilty in providing an overall framework plus financial and fiscal support. Furthermore, it will create manufacturing innovation centres (15 by 2020 and 40 by 2025), support IP rights protection and allow firms to set their own technology standards. 

China's Digital Upgrade for Manufacturing - China 2025 | In Mind Cloud

The 10 priority sectors of the plan are:

  1. New advanced information technology
  2. Automated machine tools & robotics
  3. Aerospace and aeronautical equipment
  4. Maritime equipment and high-tech shipping
  5. Modern rail transport equipment
  6. New-energy vehicles and equipment
  7. Power equipment
  8. Agricultural equipment
  9. New materials
  10. Biopharma and advanced medical products

Since released in 2015 by the State Council, the roadmap to transform China's advanced industrial manufacturing has seen some success. For the first 109 pilot projects in smart manufacturing, productivity has gone up by 38%, whilst operating costs dropped by 21%, according to the Ministry of Industry and Information Technology (MIIT).

But this is just the beginning of a journey that is mapped to 2025 so far. With the massive competitive pressure from both sides - newly emerging low-cost producers and more advanced industrialized economies - "Made in China 2025" needs to be set on rocket speed and extended gradually.

China's Digital Upgrade for Manufacturing - China 2025 | In Mind Cloud

Please stay tuned for the next article of this series, where we will be looking at the current state of the initiative and some in-depth challenges for manufacturers in China.


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Sabine Kempe

Written by Sabine Kempe

Sabine is responsible for In Mind Cloud´s marketing. A cloud solution enthusiast at heart, she is dedicated to finding answers to customers' questions before they have even been asked.

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