China's high end manufacturing on the rise

BEIJING - China is on a rise from a world factory of cheap products with low technological content to a manufacturing powerhouse amid its economic restructuring.

As the country growth slows and its labor costs keep rising, only those enterprises that are quick in taking measures to move up the value chains are better positioned to achieve manufacturing excellence.

In 2012, a government plan listed seven industries including energy conservation and environmental protection, high end equipment manufacturing, bio-tech and new energy as "strategic emerging industries." China aims to make these industries account for 15 percent of the GDP by 2020.

These ambitions are coming to fruition. Statistics showed that last year 18 industries, including the aforementioned seven emerging industries, reported a yearly revenue of 15.9 trillion yuan ($2.5 trillion) and a profit of 1.2 trillion yuan, up 13.5 percent and 17.6 percent respectively.

As the Chinese economy is in the midst of a painful transformation from investment-led growth model to one that is driven by innovation and consumption, a growing emphasis on technological edges becomes sensible.

Many domestic enterprises make little money because they don't have independent brands, independent design or independent core technology, said Wang Haizhong, head of China Brand Strategy Research Center.

Wang expects that upgrading low value-added products will become even more important as the manufacturing sector weakens.

September's manufacturing activity data plunged to a 78-month low. The country's value-added industrial output expanded 5.7 percent year on year in September, down from 6.1 percent in August, according to the data released on Monday.

If China wants to move up the global industry chain, it has to change. A manufacturing base that merely processes goods will no longer suffice. This means developing emerging industries with their own, independent technological edges, said Li Beiguang of the Ministry of Industry and Information Technology.

Intelligent manufacturing, according to Li Beiguang, will require new core technology, improved use of human resources and better funding. It is down to the government to create the right environment for innovation, provide more financial and fiscal support, train more talent and strengthen information security, he said.

Changes are already happening. While high end equipment manufacturing accounted for a mere eight percent in China's manufacturing sector during 2006 and 2010, the figure is expected to have risen to 20 percent during 2011 and 2015.

In the next five years, high end equipment manufacturing in some key industries is expected to even rise to 50 percent, according to Li Dong, director of Office of Major Technological Equipment.