THE label “processing materi- als supplied by clients” was for some time synonymous with “Made in China.” It is a painful reminder to China’s manufacturing industry of having to export 800 million shirts so made to import one aircraft. Thanks to implementation of the economic transformation and innovation strategy， however， China’s construction abroad of highspeed trains， the going global of its nuclear power projects， and its smart phone exports have altered the “Made in China” connotation to that of “Intelligent Manufacturing in China.” But in light of the pressure exerted by the economic downturn， how can the industry maintain its focus on the high end of the value chain？ And how may it create more star brands and quality goods？ The recently published draft outline of the 13th Five-Year Plan formulated a specific path for China’s industrial development and transformation， including the upgrade of its manufacturing.
　　 Innovation-Driven
　　Chinese cellphone manufacturer Lenovo， owner of the Motorola brand， plans to increase its smart phone output in India to 10 million in 2016， its goal to become the second-largest smart phone producer on the subcontinent. The smart phone shipments of another Chinese company， Huawei， exceeded 100 million in 2015， giving the company a market share ranking among the global top three， along with Samsung and Apple.
　　“Promoting production by lowering costs is no longer viable，” Lenovo CEO Yang Yuanqing said. “In the past， we worked mainly as an equipment manu- facturer for others， and had no control over the product or manufacturing technique.”
　　Lenovo now invests RMB 10 billion annually in research and development. The company invested US $2.5 billion in India last year， making it one of the top 40 companies there. The transformation from low-cost to innovation- and branddriven manufacturing is the inevitable course for Chinese enterprises to create competitive products.
　　The old， investment-driven mode of developing the Chinese economy no longer works. Therefore the country intends to devote more resources to innovation.


　　Innovation was indeed foremost among China’s five development concepts put forward in 2015， Premier Li Keqiang having specified mass innovation and entrepreneurship in his government work report that year. The country has since adopted a number of measures to boost innovation-driven growth.
　　During the 12th Five-Year Plan period （2011-2015）， high-speed railway and broadband wireless technologies surpassed all expectations. But China still lags behind in the fields of high-end CNC machine tools， general purpose chips， core electronic devices， and genetic engineering technologies. 　　“As core technologies can neither be purchased nor exchanged on the market， independent innovation is the sole option，” former minister of Industry and Information Technology Li Yizhong said.
　　Although 80 percent of air conditioners， 70 percent of cellphones， and 60 percent of shoes are made in China， the country’s manufacturing still lacks core technology， according to Miao Wei， minister of Industry and Information Technology. “High-end chips constitute a bottleneck in the development of China’s electronic information industry. And China has still to master core aircraft engine and combustion gas turbine technologies，” Miao said.
　　However， China has set up a number of major scientific and technological projects. The Plan specifies that China will carry out 100 major projects within the next five years， most of them involving technological innovation and core technologies in almost all the country’s strategic and emerging industries.
　　According to Yang Yuanqing， the Plan gives precedence to information industry over infrastructure construction， so underlining its importance. “No matter network upgrading， smart terminals， big data， or application platforms， we can all participate，” Yang said.
　　Talking about market potential for informatization， Yang said that the market in the PC age consisted of 300 million units of PCs， while that for today’s smart phones is around two billion. In the coming Internet of Things era， the scale of smart devices could reach more than 10 billion. “In the age of smart devices， we should broaden our vision and seek out new business opportunities，” Yang said.
　　 Goals for 2025
　　“Made in China” commands a formidable international order. But Li Yizhong still worries about the status quo.“We have excess low-end manufacturing production capacity， and cannot compete with Southeast Asian countries in this area. Although our high-end manufacturing has rapidly developed， there is nonetheless a considerable gap between us and developed countries. China’s industry is hence in a dilemma，” Li said.
　　Germany’s Industry 4.0 project was the template for comprehensive upgrade of the manufacturing industry. “When planning China’s Industry 4.0， we should do our utmost to build Industry 3.0 first， and also offset debts from Industry 2.0. This is the reality of China’s manufacturing industry，” Li said.
　　It is clear that the socio-economic goals China has set for itself， including the “two centennial goals” and building a moderately prosperous society in all respects， cannot be achieved through the country’s present low-end manufacturing. Last year， China unveiled a roadmap for the future of manufacturing – the Made in China 2025 strategy. Taking“intelligent manufacturing” as its entry point， the strategy’s ultimate aim is to make China a manufacturing powerhouse through innovation and “intelligence.” 　　“This means that， by the year 2025， China’s comprehensive index will be close to that of Germany and Japan when they became manufacturing powers. Industrialization will thus enable China to join the second echelon of manufacturing powers worldwide，” Minister Miao said.
　　“Made-in-China 2025， Internet plus， informatization， and intelligent manufacturing are what enterprises should focus on during the 13th Five-Year Plan period，” former Sinopec Chairman Fu Chengyu said. “We’re used to the old production model， but must now change our concepts by integrating the five principle of ‘innovation， coordination， green developing， openness and sharing’ into the manufacturing industry，” he added.


　　The Internet Plus action plan， raised in the 2015 government work report， had profound impact on many of China’s industries. Insiders believe that China may well have surpassed the U.S. in some areas of Internet development， especially taking into account leading enterprises like Alibaba， which combines the Internet with consumption and retail， and Tencent with its WeChat， which combines the Internet with communications and social networking. However，China still needs to learn more from the U.S. and Germany about combining Internet development with industry and manufacturing.
　　“The information network has developed well in China， and the Internet has been successfully applied to marketing and services. If we can also apply it to industry， China is bound to reach a higher level of industrialization，” Fu Chengyu said.
　　 Supply-side Structural Reform
　　How is it possible to create an inexpensive， quality， brand product？ Yang Yuanqing believes that the government and enterprises should come up with the answer.
　　“Enterprises should shoulder the bulk of responsibility for upgrading products and services，” Yang said. He believes that expanding domestic demand calls for the production of high-end， high-value， quality products， or， in government terminology， by conducting supply-side reform.
　　Current supply-side structural reforms are improving the quality and efficiency of China’s manufacturing industry. They enhance product competitiveness and so promote the transformation from “Made in China” to “Intelligent manufacturing in China.”
　　“Industrial overcapacity has become a major obstacle to the transformation and upgrade of manufacturing，” Fu Chengyu said. “China should produce more highend products， and we therefore need to cut overcapacity and upgrade our overall system， so substantially heightening our competitiveness.” 　　When reflecting on the phenomenon of long lines of keen Chinese shoppers outside foreign stores， Li Yizhong said that Chinese consumers are now more sophisticated， and have higher demands as regards quality， brands， and reputation. Enterprises must hence advance from simply selling a product to selling both products and services. Efforts must be made to improve quality， build domestic brands， and eliminate outdated capacity.
　　We must rely on supply-side reform to reduce excessive industrial capacity and achieve transformation and upgrade through improved technology. “In the past few years， the Chinese government’s investment in technology has accounted for about 40 percent of its total investment in industrial development. When excluding the amount earmarked for capacity expansion， this leaves a figure of 27 percent – way behind that of the U.S. and developed European countries， which exceeds 50 percent，” Li said.
　　Zhang Yin， chairman of Nine Dragons Paper Holdings Limited， told China Today： “In the past we emphasized ‘demand，’ and we now stress ‘supply，’ but we need a quality supply. If we can realize an effective supply sufficient to satisfy our 1.3 billion consumers， the potential for future development is huge. The key to a quality supply is achieving all-round informatization， automation， and intelligent manufacturing，” Zhang said.
　　When German Chancellor Angela Merkel visited China last October she inked an agreement linking the Industry 4.0 project and the Made in China 2025 strategy. Talking about the gap between the two， Fu Chengyu observed that Germany entered the informatization stage after achieving industrialization， urbanization and agricultural modernization.
　　“It seems we have yet to attain any of these goals，” Fu said. “Germany did so one by one， but we must achieve all four around the same time. This is the biggest difference， and imposes a huge challenge，” Fu said.
　　Fu calls for a focused effort towards achieving industrialization and informatization， and on launching large scale tech- nological advancement. In his view China can start with energy saving， emissions reduction， reducing its carbon footprint， and Made in China 2025.
　　 Spirit of Craftsmanship
　　While on visits to Germany and Japan， Zhang Yin， CEO of China’s biggest paper manufacturer， found that many commodities were locally made. China， in contrast， is the world’s largest manufacturer， but imported products such as autos， home appliances， and daily use articles are most popular among Chinese consumers. 　　Fu observed that in the past both producers and consumers were acceptant of poor quality goods. “The root of the problem is that we wanted to accomplish industrialization during the 30 or so years after the reform and openingup policy was implemented， but it took other developed countries about 300 years to achieve industrialization. That haste created many problems，” said Fu.
　　Since China’s economy entered the“new normal” phase it has shifted its emphasis from quantity to quality. Expounding on the major tasks of the 13th Five-Year Plan period， Premier Li Keqiang stressed that efforts should be made to transform China into a manufacturer of advanced， quality products， and that the country should foster the spirit of craftsmanship that strives for perfection to make more diverse， high quality， brand products.
　　“Now is the time for us to build our own brands and produce prestigious products and to promote growth through industrial upgrade，” Yang said.
　　“The spirit of craftsmanship has been fostered during the industrialization process. Its focus is on quality and the manufacturing process. Creating a premium product takes a great deal of time and energy，” Fu said， “especially the fine products we see on the market in Japan and Germany.”
　　“Western developed countries achieved industrialization after several rounds of development； therefore， China must follow a similar path. In five to 10 years， we will catch up to the world advanced level of industrialization，” Fu concluded.