of China’s economic growth, China’s manufacturing industry has moved into the new norm of in-depth resource integration and structural rebalance. Challenged by the tapering cost advantages and the diminishing competitiveness of labor-intensive manufacturing industry, China’s manufacturing industry sets the priority strategy as industrial restructuring, transformation and upgrading to move up on the ladder of value chain. In the context of renewed economic globalization spearheaded by the ongoing new industrial revolution, how to leverage the advantages of being a great manufacturing power to secure the in-depth integration of industrialization and informationization, boost the companies’ technological innovation capabilities, and drive the transformation and upgrade of economic structure become a pressing question for China’s manufacturing industry. It is also the main topic on which this book intends to elaborate.
1.1 New trend of globalization
More than 500 years have passed since Europe’s great maritime navigation era, and the world has gone through three major waves of globalization. The first wave of globalization started in the maritime navigation era, at the end of 15th century, and lasted about 300 years; the second started in the 18th century’s industrial revolution in the UK and came to an end at the beginning of the World War I; and the third started at the end of “Cold War” in the 1980s and continues till today.
Being the core of globalization, economic globalization is a market-driven free flow and the reasonable allocation of production factors like capital, technology, goods, information and labor around the world. It’s the result of the advancement of the world’s productive force, the progressing of science and technology, and the institutional arrangements of the countries concerned. Global trade activities, advanced science and technology, and improved communication transcend national economic barriers, and enable the unprecedented fast and wide free flow of production factors, including capital, technology, information, management and labor force. As a result, it also expands the international market and intensifies the international division of labor to make economies more open and integrated, forming an interdependent yet jointly developing globalized economic entity.
Compared with the two historical predecessors, this on-going economic globalization has two distinct features. First, emerging economies are exerting powerful influence. Contrary to the previous globalization patterns characterized by domination only by the developed countries, the present mode is featured with the influence of the emerging economies represented by Brazil, Russia, India and China, which are playing important roles in the world’s economic arena. In the post-financial-crisis era, developed countries are plagued with sluggish economic development and social well-being advancement, giving developing countries the opportunities to surpass and catch up. The momentum of globalization is now gradually shifting from the developed countries to the developing countries. Second, for a country aiming to obtain and maintain its global competitiveness, innovation would play a decisive role. The past two globalization trends centered on trade and circulation. Thanks to the macro trend of globalization, the economies driven by the factors and investments were very successful, underplaying the role of innovation. With the constant advancing of globalization, factor and capital are now circulating at a faster speed. As a result, economic and social returns driven by the factors and investments are gradually tapering down. At the same time, due to the limited total market resources and utilization efficiency, countries are being urged to adopt innovation as the fundamental driving force to power their economic growth, grasping and influencing global market’s demands so as to acquire and maintain the long term competitiveness.
In 2015, Premier Li Keqiang advocated to make the industrial innovation driven by the “Internet+Entrepreneurship and Innovation+Made in China 2025” an industrial revolution driven by China in the true sense. This revolution is the so-called “New Industry Revolution”. The novel economic globalization thereafter spawned will not only give tectonic quake to the global supply chain, industrial value chain and merchandise chain, but also bring everlasting influences to international trade, cross-border investment and global economic and trade governance. In the increasingly globalized world economy, China has advantages, conditions and opportunities. Firstly, via the regulation guidance from G20 Summit and other international events, China aims to build a world economy that is innovative, dynamic, coordinated and inclusive; secondly, under the strategic instructions of the Belt and Road Initiative, China is committed to the common discussion, construction, sharing and win-win; thirdly, with the powerful stewardship from the science and technological innovation and international investment, healthy and all-around economic interactions are being facilitated between countries. This also heralds a new round of economic globalization that is innovative, coordinated, inclusive and sustainable. China is becoming the shaper of new economic globalization.
1.2 China’s manufacturing industry’s participation in globalization
Since the Reform and Opening-up, particularly after joining the WTO, China has been actively integrating itself into the world economy, and fully leveraging its domestic and international market resources, to secure its lasting developments and achievements. Over the past three decades, China’s manufacturing industry has been constantly expanding its scale. According to the statistics of China’s National Bureau of Statistics and the World Bank, ever since 1990, the annual gross value added（GVA）of China’s manufacturing industry has been remaining at over 30% to China’s GDP (see Diagram 1-1), which is higher than the world average. Being one of the fastest growing economic sectors, the manufacturing industry has been serving as the engine of China’s high-speed economic growth, and the pillar of China’s national economy and national competitive strengths. For this reason, great efforts in developing the manufacturing industry are significant to the sustainable and steady development of China’s economy.
Now, as China’s economy enters into the “new normal” of economic development, which means a steady growth of moderate-to-high speed, China’s manufacturing industry is facing new challenges. The extensive mode of growth mainly relying on resource and investment expansion would no longer be a viable option. China’s need for restructuring, transition and upgrading of its economy is pressing. Given the chronically gloomy and sluggish world economy, it’s critical for China’s manufacturing industry to actively explore and find ways to revitalize the flaccid international market, materialize the industrial restructuring, improve the international competitiveness, and secure a healthy and stable development. This chapter will start with analyzing the status quo of China’s manufacturing industry participating in globalization.
Diagram 1-1 GVA of China’s manufacturing industry (% of GDP), 1990–2015
Data Source: China’s Statistical Yearbook issued by China’s National Bureau of Statistics in 1990–2015, and data from the World Bank’s website.
1.2.1 Growth of inbound foreign investments fluctuates and its proportion gradually decreases
Since the Reform and Opening-up, China’s foreign direct investment (FDI) has gone through a qualitative and quantitative growth. It greatly boosts the fast developments of China’s national economy. The fast growing economy, together with a huge labor market with cheap labor, an enormous market potential, the widened and deepened opening-up, plus the constantly improving investment environment, make China the most attractive investment destination. In the late 20th century, after the ramping-up stage between 1979 and 1986, the sustained growth from 1987 to 1991 and the high-speed development after 1992, foreign investment had gradually become the key ingredient of China’s economic development. After accession to the WTO in the 21st century, China’s foreign capital utilization has entered into the stage of innovative developments. Through constantly innovated foreign investment policies and utilization, institutional reform is undertaken to optimize the foreign investment environment. Robust and steady growth has been achieved in attracting foreign
