One of the great achievements of China's 40 years of reform and opening up has been the development of the world's most complete manufacturing system. China's comprehensive national strength has therefore been greatly enhanced. As a result, the whole people have entered the "new era" that the majority of people achieve a well-off and a small number of people are wealthy or poor compared with the lack of food and clothing 40 years ago. "Economic Reform, opening up and getting rich" depends on the industry. In the future, China must rely on industry for its "stronger economics", too. We must always be soberly aware that for us, the world's most populous country, whether it is the past, the present or the future, manufacturing is the root of the country, and its importance cannot be overemphasized.
One of China's biggest national conditions is that there are many people and it is difficult to find employment. Luxembourg can rely on the financial industry, Thailand can rely on tourism, and even Russia can live well by selling oil and gas, and China is impossible. Then, with less than 100 central enterprises and some Internet leaders, it is impossible to solve China's biggest employment problem. Undoubtedly, the focus of national policies and public opinion is still on SMEs. SMEs account for more than 99% of all registered enterprises and solve 80% of the employed population. It is the "main contradiction" of the Chinese economy, and manufacturing is also the "main aspect of contradiction". Only by fully activating the potential of small and medium-sized enterprises, especially the vast manufacturing industry, will they be able to operate normally, and then they will be able to support the government's finances, provide support to employees and families, and the whole society will be truly lively and benign.
A well-established manufacturing industry is becoming an important bargaining chip in the world's national power competition. Take the lighting industry as an example, the world's production capacity is basically concentrated in China. European and American companies suspect that the lighting industry's profits are too low, and they have gradually withdrawn from the industry. However, enterprises in Africa, Southeast Asia, the Middle East, Latin America and other regions have no supporting supply chain. At this stage, there is no cost-effective lighting product. Therefore, Chinese companies have an unparalleled voice in this trillion-dollar rigid demand market. Other manufacturing sectors in China have a similar status in the international arena. China's manufacturing industry can gain today's international status due to the hard work of the Chinese people for decades. It has been exchanged for the pains and sweats of generations. It is hard to come by, so we must cherish it!
But the current situation of China's manufacturing industry is not optimistic. China's manufacturing industry basically begins with OEM production. It is at the bottom of the "smiling curve", the dirtiest and most tiring, and the profits are few. When the price of elements in the early years was low, there was still a profit margin. However, in these years, raw material prices are rising, labor costs are rising, and office costs are rising. Only product prices can't rise. Enterprises specializing in export OEMs reflect that foreigners put our profits to a minimum and can count to double digits after the decimal point; domestic sales are also not able to survive because of the low price of various e-commerce platforms, in addition, offline counterfeit and unscrupulous small workshop enterprises are common place, and real companies are simply unprofitable. The pain of the bosses is not only from the market. The company's profits have been very small, but it is often necessary to deal with all aspects of the power department, these departments are not offended, any department is neglected, the company may collapse. In addition, smart people have long since begun to withdraw funds from manufacturing on a large scale. According to industry insiders, 22 alumni came in a small gathering, of which 20 were in the pan-financial industry, banking, insurance, brokerage, public fundraising, PE, P2P, microfinance, only two were related to the industry. Such gatherings, on the one hand, make us feel sad about the situation of the manufacturing industry. On the other hand, we are deeply worried because the whole environment is being diverted away from the real economy to the virtual economy.
At the same time, a large number of foreign-invested manufacturing companies have also begun to withdraw from China. Foreign-funded enterprises have played an important role in China's economic development. In fact, foreign-funded enterprises have accompanied the historical process of China's reform and opening up and are an inseparable and important part of China's development. But more and more foreign-invested manufacturing companies are closing factories in China. At the beginning of 2018, Japan's Nitto Denko Co., Ltd., one of the world's top 500 companies, announced the closure of its Suzhou plant and its withdrawal from China. On March 10, 2018, Panasonic was considering selling a production plant which produces security cameras in Suzhou. On April 18, Shenzhen Samsung Electronics Co., Ltd. would be revoked. Except for 6 Korean high-level executives, all employees would be dismissed at the end of April, and the number of severance would be about 320. On May 7, Japanese electronics giant Olympus announced its withdrawal from Shenzhen. Xiao Songxiang, the highest person in charge of Shenzhen Olympus, officially announced to all employees through broadcasting that the Shenzhen factory would stop production on May 7. According to public information, companies that have moved out of Beijing CBD in recent years include Intel, Yahoo, and Mercedes-Benz, to Hewlett-Packard, Motorola, Merck, Alstom... From the perspective of industry, from IT, manufacturing to medical. It is found that high operating costs are a reason why foreign-invested enterprises are forced to evacuate. Other reasons are mainly the adjustment of the internal industrial layout of the company, or the market environment may have changed.
The various manufacturing problems that are emerging in China should cause enough vigilance. Researchers at ANBOUND believe that if China leaves the manufacturing industry, it may be shrouded in the shadow of "Latin Americanization"! Many people have heard of the term "Latin Americanization ", but the true meaning of it is not necessarily well understood. And because Latin America is far away from China, everyone thinks that the development crisis in Latin America will not appear in China. But in our opinion, this is actually not the case. The phenomenon of "Latin Americanization" is characterized by political turmoil, political tendency to waver, unemployment is serious, urbanization rate is high, but economic turmoil and a large gap between rich and poor, capital activities are very rampant, but these phenomena are actually starting from the collapse of manufacturing. In comparison, it is also urbanization. The urbanization rate of Latin American countries is very high, and urbanization is still very early. Lack of manufacturing, in fact, the urbanization brought disaster to Latin American countries.
We have to warn that China has now reached such an important period. China is currently facing pressure from trade disputes from the United States, facing the impact of RMB depreciation and capital outflows, facing the opening of financial markets and RMB internationalization. But we must not forget that China cannot lose its comparative advantage in manufacturing as a "world factory" based on manufacturing capabilities. Regardless of how globalization develops, it will manifest itself as a division of industry on a global scale, and the resource elements of countries around the world vary widely. As a big country economy, China cannot lose the comparative advantage of manufacturing in any way. Germany and Japan, which have seized manufacturing and technological innovation, are China's benchmarks, and even the United States has maintained strong manufacturing capabilities in key areas. The situation is already very urgent, but if China is stepping up reforms and developing a large number of internationally competitive manufacturing and technology-based enterprises, it will be extremely important for China's future development.
Final Analysis Conclusion:
China's policy attention and resources in recent years have been concentrated in urbanization, real estate and various financial innovations, but it is necessary to be alert that neglecting manufacturing is fatal to China. China must grasp the core of manufacturing development, accelerate Economic Reform and open up, and avoid the phenomenon of "Latin Americanization" being staged in China.
