recognition.
Table 1-9 High-tech exports as a percentage of manufactured exports in China and other countries in 2015 (%)
Data Source: World Bank.
The above comparison of the manufacturing technological innovation level in China and other countries produced a static analysis of China’s manufacturing technological innovation capabilities. Next, we will dynamically analyze the overall atmosphere of innovation in China and the changes in manufacturing technological innovation capabilities in perspectives of China’s total R&D investment, output of new products as a percentage of the total output value, and the export of new high-tech products. See Table 1-10 and Table 1-11.
Table 1-10 China’s R&D investment and new product output value in 2009–2014
Note: Due to the change of statistical indicators, new product output value data in 2012–2014 are replaced by new product sales revenue.
Data Source: Statistical Communiqués of the People’s Republic of China on the National Economic and Social Development, issued by China’s National Bureau of Statistics in 2009–2014; Statistics Yearbook on Science and Technology Activities of Industrial Enterprises, 2009–2014.
From the data in Table 1-10, it can be seen that in recent years, China’s R&D investment has been growing rapidly. In 2012, China’s R&D investment exceeded RMB 1 trillion yuan for the first time. R&D investment to GDP in 2013 reached an all-time high of 2.09%, indicating that China’s investment in R&D started to rank top in the world. This will certainly improve the technological innovation level of Chinese manufacturing enterprises by large margins. In addition, as companies paid more attention to product upgrades, the new product output value of Chinese manufacturing companies also stayed at a relatively high level. Despite a short-term decline in 2011, it still maintained a high-level development in the subsequent years. This also reflected that the product and process innovation capabilities of Chinese manufacturing enterprises maintained at a relatively high level.
After joining the WTO, with the improvement of technological capabilities, China’s manufacturing industry has made great progress in exporting technology-intensive products amid industrial manufactured goods. The structure of China’s industrial exports has switched to one oriented to fine machining, deep processing and high value added. The proportion of industrially manufactured goods with relatively high technological content and value added is growing. The changed structure of exported commodity has reflected the fundamental improvement in the international competitiveness of China’s industry. See Table 1-11.
Table 1-11 Export of China’s industrially manufactured goods, 2006–2015
Note: High-tech products include the products of the pharmaceutical manufacturing, aviation, spacecraft and equipment manufacturing, electronics and communications equipment manufacturing, computer and office equipment manufacturing, medical equipment and instrumentation manufacturing and information chemicals manufacturing.
Data Source: the website of China’s National Bureau of Statistics.
The above research on the competitiveness of China’s manufacturing industry shows that after a decade of rapid development, China’s manufacturing industry has made a great progress in terms of production efficiency and technological innovation capabilities. Nevertheless, there is still a big gap between China’s manufacturing industry’s development level and the international level, which is mainly reflected in the gap of the technology level of manufacturing industry. To narrow this gap, it’s necessary to fundamentally rely on the technological progress and industrial upgrading of the manufacturing industry. In the current situation, technological innovations can help improve the competitiveness of “Made in China”, gradually shifting from comparative advantage to overall competitive advantage. It can make China a real “Manufacturing Power” and is an essential condition for achieving leapfrog development of China’s economy.
1.4 Opportunities and challenges faced by China’s manufacturing industry
1.4.1 Opportunities
With the accelerated modern science and technology revolution, economies of all countries in the world are becoming more and more internationalized. Countries with different social systems and of development levels have gradually been incorporated into a unified global economy. The era of economic globalization has come. As Peter F. Drucker said in his book Managing for the Future: “In order to maintain a leadership position in any developed country, a company—however big or small—increasingly has to obtain and hold its leadership positions in all developed markets worldwide. It has to be capable of researching, designing, developing, engineering and manufacturing in every part of the developed world, while having the means to import and export from any developed country. Firms have to go transnational.”(1993: 27-28) Similarly, when global competition inevitably takes place in China’s domestic market, backward companies also have to conduct global operations and integrate global resources. While globalization brings challenges to Chinese companies, it also brings them opportunities. So, what are the opportunities that globalization of production, capital and trade has brought to Chinese companies?
Opportunities brought by globalization:
● Tremendous changes have taken place in the international manufacturing landscape. Global resources are facing a restructuring of reallocation and integration.
● An evolving new global market and a potential overseas market are developing and to be developed with the implementation of the Belt and Road Initiative.
● Opportunities for technological catch-up are enabled by the deep integration of information and manufacturing technology.
● The huge consumption demand brought by the sustained growth of domestic market and urbanization process will be the internal growth driver and strong support for the overseas expansion of China’s manufacturing industry.
● Governments actively participate to issue supporting policies to incentivize companies’ independent R&D and overseas expansion.
Specifically, the new globalization that is sweeping the world now brings about two major opportunities to China’s latecomer companies to accelerate technological innovation.
Firstly, the urbanization and consumption upgrading have brought the rapidly growing domestic market demand. In 2015, the urbanization rate in China reached 56.1%, and the urban population increased by 20 million people①. By estimation, consumer demand will increase by more than RMB 10,000 yuan when a rural resident is converted to urban resident. Hence, 20 million of rural residents entering the cities would create a consumption demand of RMB 200 billion yuan. On the other hand, with the increase of residents’ income, the consumption structure has been upgraded with an orientation to advanced consumption of food, use, housing and transportation, increasing from RMB 100 yuan level, RMB 1000 yuan level, to RMB 10,000 yuan level and even RMB 100,000 yuan level. The consumption policy in China is also steered to encourage greater consumption. Therefore, China’s manufacturing industry can tap into this massive and growing billion-level market. It’s
