Insights

Manufacturing for Growth: China

Evolving to advanced manufacturing

China is today the world's largest manufacturing economy and considered to be one of the most competitive nations in the world. Driven initially by its ability to deliver low-cost labour and materials, China quickly advanced across a number of other competitive drivers – including infrastructure, favourable policies, a large consumer base, and established supplier network – over the past 10-15 years and evolved its manufacturing capabilities from low-cost goods to more advanced products.

Manufacturing for growth volume 1

Manufacturing for growth volume 2

Manufacturing for growth volume 3

Manufacturing growth summary

CEO Policy Recommendations

Executives believed that the following set of recommendations would enable China's pursuit of more advanced manufacturing capabilities.

  1. Develop an industry-led strategic transformation plan that is focused on the industrial development of technological innovation and differentiation
  2. Enact policies and strategies that bring in capital and technology-intensive industries from developed countries
  3. Promote indigenous innovations and improve on innovations imported from other countries by encouraging local governments to set up venture funds, innovation awards and stock exchanges for innovation companies
  4. Develop programmes that support and fund entrepreneurship
  5. Shift from large-scale manufacturing to mass customization, which includes end-to-end modularization
  6. Promote the system integration and application of intelligent manufacturing as well as support the R&D and innovation of core intelligent measurement and control device
  • Develop a basis of differentiation beyond low cost by transforming to high-end manufacturing
  1. Create specially designated funds that support energy consumption optimization and sustainability
  2. Enhance the policy efforts in promoting energy conservation, emission reduction, environmental protection, and clean production
  3. Accelerate the R&D in alternative supplies of green energy
  • Develop an energy efficient, sustainable manufacturing environment
  1. Expand and continue programs similar to 10,000 Talents which help recruit and cultivate innovative, talented employees
  2. Improve incentive mechanisms in order to cultivate technical leaders
  3. Promote and deepen the cooperation between enterprises and academic schools
  • Improve intellectual property protection policies for both domestic and foreign manufacturers doing business in China
  1. Develop incentives such as pre-tax deductions, 150 percent deduction rates, and depreciation for R&D equipment that work to attract multinational corporation investments to establish global research and development centers in China
  2. Increase investments in technology, build up the public platform for the R&D of generic technologies, and build on the strengths of existing programs, like the National High-Tech Research and Development Program and the National Basic Research Program
  3. Enact and consummate laws and regulations that are advanced in terms of promoting technology innovation
  4. Provide greater support to key enterprises, leading enterprises, and backbone enterprises
  • Develop incentives that attract and improve the application of research and development investments in China
  1. Develop tax incentives for sectors deemed strategic (e.g., high-tech firms). Example incentives might include a tax free window for the first two years after becoming profitable and 15 percent thereafter, duty-free import of equipment for national key projects, or accelerated depreciation for R&D instruments and equipment
  2. Attract businesses to set up advanced manufacturing operations and provide various incentives for land, building, facilities, etc
  3. Develop stable tax policies that favor the long-term development of enterprises
  • Develop more favourable corporate tax policies
  • Create policies and programmes to improve innovation capabilities and operational excellence
  • Use the scale of the Chinese market to promote the adoption of advanced technologies
  • Leverage fiscal policy to encourage the development of the Chinese manufacturing industry
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