Roland Berger says innovation key to efficiency

China must develop new services and products that address the latest trends in domestic consumer needs, and foster innovation to make manufacturing more efficient to compete with global rivals, the head of a global consulting firm said on Monday.

Even though China's GDP has surged faster than the world's average in the past three decades, the two main forces that have helped to drive this growth are declining－the constant flow of new workers into the labor force and the massive investments in housing, infrastructure and industrial capacity.

Charles-Edouard Bouee, global chief executive officer of Munich-based consulting firm Roland Berger, said: "Now, not only must the country learn to cope with its aging population as the labor force will soon peak－and as well as environmental risks－macroeconomic returns on fixed-asset investments have also fallen."

It takes 60 percent more capital today to produce the same amount of GDP in China than it did from 1990 to 2010, according to the company's research.

Bouee said China must therefore cut overcapacities in traditional industries through Made in China 2025 and supply-side structural reforms.

The supply-side reforms aim to improve the manufacturing and agricultural sectors, public services, environmental protection, the quality and scale of production, and the further opening-up of Chinese markets to foreign investors.

Bouee said: "China also needs to ensure that the current, massive investment in technologies, including the internet, robotics and virtual reality, will be leveraged to the benefit of its industries－by linking those industries to scientists, engineers and entrepreneurs, and by bringing top talent close to the factories."

Sun Fuquan, a researcher at the Beijing-based Chinese Academy of Science and Technology for Development, said: "Although China has become a big player in free trade and has 110 companies in the Fortune 500 list, including banks and insurance, real estate and energy companies, their influence mostly in in the home market."

However, only a number of them, such as Huawei Technologies Co Ltd, China Railway Rolling Stock Corp and China General Nuclear Power Group, are yet to be known in world markets.

Sun said: "Nowadays Chinese companies need to focus on their advantages, establish brand names, management practices, technologies abroad, or integrate assets and capabilities from foreign companies they have acquired."