[China]Should proactively lead the outward extension of Made in China
Author: Ding Gang, is a senior researcher at the Chongyang Institute of Finance of Renmin University of China and a senior editor of People's Daily
Translated from https://mp.weixin.qq.com/s/lXWMJKxxu0tkz6oBEEBT2A
Politicians in the United States, Europe, Japan and South Korea ......, some of the major exporters of "Made in China", are agitating to reduce their dependence on the Chinese supply chain. Made in China is at a critical juncture in consolidating its position in the global industrial chain.
One of the characteristics of Made in China is its large production capacity, which makes it all the more important to have a wide range of external markets and links. Some companies have been forced to adopt a contraction strategy as a result of the impediment to the expansion of Chinese manufacturing, but one of the possible negative effects of contraction is "involution". One company may be able to "survive" through contraction, but more companies have to continue to go global, fight for innovation and markets in order to "survive". For Made in China, going global, expanding markets, consolidating positions and extending chains is the key to strategy now.
The global economic downturn may be an opportunity for Made in China to go global. Clothing, lighters, umbrellas, fake flowers, selfie sticks, mobile phones, computers ...... It is these products, which may not seem to represent the world's top technology today, that maintain China's close connection to the global industrial chain. Without these products, and without the Chinese companies struggling behind them, the foray of Made in China into the mid-to-high end would lose its driving force. To continue to consolidate the position of these products in the global industrial chain is to provide the impetus for further upgrading.
Made in China's current position has been hard won and is the result of reform and opening up. To consolidate the gains and break the US siege and containment, we must be tenacious and hardworking. Innovation is an important way to forge ahead, and innovation and going global go hand in hand. The development of good products and advanced technologies needs to be recognised by the market, but markets are not easily accessible. There are times when it is a matter of competing for technology, quality or price, times when it must be acquired through more complex bargaining, and times when it must be supported at national level, so a more comprehensive strategic arrangement is required.
Ultimately, it will depend on how we connect and integrate more closely with global industry chains and markets. The increase in Chinese exports during the epidemic illustrates the resilience of Made in China. The issue now is not that the world does not need Made in China, but that it needs it more than ever and cannot be separated from it. This provides us with the opportunity to adapt our layout to this need.
A popular argument is that Chinese manufacturing is moving out. But the term 'extension' is a better one, and one that we should lead proactively. Extension requires more precise targeting and more accurate investment. This includes implementing a precise manufacturing export and relocation strategy through the foundation laid by the Belt and Road Initiative.
When companies move their factories to Vietnam, the labour force is transferred, but the production chain is extended. When you look at the factories that have moved to Vietnam, many of the technical managers, production equipment, raw materials and accessories still come from China, and many of the products are also ancillary to the Chinese manufacturing industry. Vietnam is unlikely to replace China, and no other country in the world will be able to fully replace Chinese manufacturing in the next one to two decades. But there is a need for a "latecomer" like Vietnam to integrate more closely with Chinese manufacturing and the Chinese market. There is competition between Made in Vietnam and Made in China, but more than that, there is potential for joint development. Many countries in South East Asia, Africa and Latin America have complementary and mutually beneficial relationships with China in terms of economic development.
Made in China has gone global in a peaceful way. This approach dictates that we both sell our products and extend the manufacturing chain out. We already have a large market and a complete industrial system, as well as an established trade network around the world, which we can use to build a more rational and equitable industrial chain, thus achieving a breakthrough in the US siege.