China's driving force behind becoming the largest manufacturing country

Li Xunlei recently reported that China’s manufacturing output surpassed that of the United States and became the world's largest manufacturing country.

Actually, as far back as the article “Behind Reaccelerating Heavy Industrialization,” published in the second issue of New Fortune 2010, I thought that “China’s industrial added value in 2009 is estimated to exceed US$2 trillion, not far from the United States. In 2010, it must have surpassed the United States to truly become the world’s largest manufacturing country.” In addition to the rapid growth of China’s manufacturing industry, apart from the government’s dominant investment promotion model, there is yet another promoter that cannot be ignored: foreign-invested enterprises Contributions.

China has become a major contributor to foreign capital in manufacturing. In 1976, China was described by the authorities as "the national economy is on the verge of collapse." How to make China realize "four modernizations" at an early date and make up for the investment gap in China's economic growth by introducing foreign capital. Nature has become the consensus of the entire nation. For this reason, adopting preferential policies to attract foreign capital as a long-term national policy has been followed for more than 30 years. From 1979 to 2010, the actual amount of foreign investment in China reached US$ 1,104.3 billion (excluding the investment and financial sector). In 2008 and 2009, China became the world's first largest foreign direct investment (FDI) inflow.

In the process of transition from a planned economy to a market economy, what China lacks is not only a funding gap, but also various technological and managerial gaps. Therefore, the success of foreign capital utilization is not only reflected in the contribution of foreign-funded enterprises to industrial added value, but also includes the ability of Chinese-funded enterprises to learn and imitate the management systems and methods of foreign-funded enterprises so as to enhance their own competitiveness. We can see from the establishment of home appliance joint ventures to the rise of home appliance companies in China; from the dependence of large quantities of goods on imports to the gradual import substitution, to becoming the world's largest exporter of such products, such as a large number of electromechanical products, etc. All are.

Since 2009, China has become the world’s largest exporter. In 2010, China’s export share in total global exports has increased from 9.8% in 2009 to more than 11%. However, nearly half of China's exports are processing trades, and in the past more than half were processing trades. The proportion of processing trade is so large that it has a lot to do with foreign transnational business strategies, because a large number of labor resources, cheap compensation costs and environmental protection costs, and good industrial support make China's development and processing industry uniquely advantageous. According to the data of the General Administration of Customs, in January of this year, China exported a total of 150.7 billion U.S. dollars worth of goods, of which exports from foreign countries accounted for 77.5 billion U.S. dollars, more than half. Even if it is imported, the share of foreign investors is also close to half.

For a long time, foreign businessmen have occupied half of China’s import and export trade. China’s export-oriented economy is inextricably linked to the strategy of attracting foreign investment. It is the use of China’s low-cost production factors by foreign capital to bring China into the ranks of globalization, making China a veritable “world.” Processing plant." For example, China’s auto sales have been the world’s first since 2009. However, China’s auto industry is more of an assembly industry. Almost all major brands of automakers have established joint ventures in China, while Chinese automakers have independent brands. Rarely, the market share ranks behind and the sales volume is larger than the latter's rising private automobile manufacturers, such as Chery and Geely. But no matter what, the Chinese auto industry dominated by foreign brands, along with the continuous expansion of output, has driven the development of China's auto parts processing industry, and has also made China's steel, chemical, and machinery manufacturing industries develop rapidly.

Therefore, in the process of China becoming a major manufacturing country, the role of foreign capital is indispensable. If it is not open to the outside world and foreign investment is not introduced, then China cannot become a manufacturing power. Even domestic domestic companies expand their business scale by mimicking and competing with foreign companies. For example, in home appliance companies, through the introduction of foreign production lines, the upgrading of localization, there have been the rise of Changhong, Haier, Gree and other local companies, so that China has become the country's largest producer of home appliances.

The largest thrust of FDI in East Asia to China's manufacturing industry has been the largest since the reform and opening up, with more than US$1 trillion of FDI accrued from sources of investment. The scale of direct investment by East Asian countries and regions in mainland China is the largest in all regions of the world. For example, in 2007 and 2008, Asian countries and regions accounted for 59% of the world's investment in mainland China, while Japan, South Korea, and Hong Kong and Taiwan in two areas of China's FDI accounted for 87.8% of the entire Asia. The reason why East Asian countries and regions invest more in China is mainly because their geographical advantages and traditional cultural practices are closer to those in mainland China. Both of them are influenced by Confucianism and Buddhist culture. Among them, cultural customs have a greater impact on the choice of investment locations. For example, Singapore is a Southeast Asian country. It is far from the mainland of China than East Asian countries and regions, but its scale of investment in mainland China is relatively large. If Singapore is added, these five countries and regions will account for 95.5% of Asia's FDI in mainland China.

Of course, these investments from East Asia are not for aid purposes, but because they all belong to island areas or island areas with small land areas and high population density. These countries and regions have all created miracles of high-speed economic growth. However, when the economy develops to a certain extent, its growth rate is bound to fall, capital surplus, and investment return rate decline. Therefore, only through overseas investment to seek higher return on capital. . Take Japan as an example. After the economic bubble burst in the 1990s, Japan further expanded the pace of overseas investment, and industrial hollowing became more obvious, such as the production of automobiles by Toyota, Honda, and Nissan, the three major Japanese automobile manufacturers. The amount is far more than the local production, and Nissan and Honda's overseas automobile production will account for about 72% of the total production. Japan’s overseas investment scale far exceeds that of Europe and the United States, reaching 5.9 trillion US dollars in 2009, ranking first in the world, and the overseas investment income of the same year also reached more than 130 billion US dollars.

Therefore, the continuous expansion of the scale of China's manufacturing industry is, on the one hand, an inevitable trend of rapid economic growth and urbanization in China. On the other hand, it is the inevitable result of the transfer of capital from developed countries and regions to the rest of the industry. China's opening to the outside world and its integration into the industrial chain of global manufacturing have made it destined to become a global manufacturing powerhouse while hollowing out manufacturing industries in developed countries.

Improving to a manufacturing powerhouse requires relying on private enterprises to promote China. Although it is a manufacturing country, it will take a long and arduous effort to become a manufacturing powerhouse. Although the 12th Five-Year Plan has clearly focused on cultivating and developing seven industries including energy conservation and environmental protection, a new generation of information technology, biology, high-end equipment manufacturing, new energy, new materials, and new energy vehicles, whether it is a new or traditional industry, To reach the international advanced level requires a lot of investment in research and development. China’s total investment in this area is still relatively low. In 2010, it accounted for about 1.75% of GDP, and about 2% of developed countries. However, the key issue is not the total scale of R&D investment, but rather the R&D system. Over the past 10 years, the growth of China’s R&D investment has been very fast. In a few years, it will exceed the level of developed countries, but it will be caused by institutional problems. A large number of ineffective R&D results cannot be solved without additional funding.

For example, the current layout of scientific research forces has basically followed the pattern of the planned economy era. Although scientific research institutes have been established step by step from the central government to provinces and cities, their personnel structure is ageing, and the cost of redundant personnel and retired personnel squeezes out research funding; A large number of enrollments have brought about a decline in the quality of teaching and research. Although the financial investment in scientific research has increased year by year, the proportion is not small, but due to the fact that the method of fund allocation has too many administrative features, it leads to inefficiency and waste. The R&D investment of enterprises is seriously insufficient. In developed countries, R&D expenditures of enterprises exceed those of scientific research institutes, while in China, the reverse is true.

Taking the automotive industry as an example, the R&D input of Chinese auto companies with state-owned enterprises as their leader accounted for less than 2% of their sales revenue, while foreign companies generally accounted for 5%-10%. Even if the Ministry of Finance allocates three scientific and technological expenses for enterprises, it will also be a big discount if it really turns into R&D expenses for enterprises. This is why China's large state-owned auto companies began to develop and produce automobiles from the 1950s, but the final outcome was a joint venture with foreign auto companies, relying on the production of foreign brands of cars to maintain the leading position in national sales. However, private auto companies such as Chery, BYD, etc., have been able to develop their own brand cars in a short period of time, not only leading domestic sales, but also exporting large quantities.

Looking back at those companies that have become bigger and stronger in recent years, those companies that have quickly become leaders in the industry are mostly private enterprises, such as Huawei and ZTE in the telecom equipment industry, Gree and Midea in the household appliance industry, and Sany in the construction machinery industry. , China United, Lenovo of the computer industry, Yurun, Mengniu, etc. in the food processing industry. The reason why these enterprises can rise rapidly is that the institutional and institutional advantages are important factors. Only if the system and mechanism have the advantage of strengthening R&D investment, can the product input ratio be maximized.

The large-scale aircraft development project currently under way in China has actually begun since the 1970s. Due to blind psychology and immature R & D model, it has encountered two failures. Although success or failure is still difficult to determine, but how many historical lessons have forced us to reflect on the system - what kind of system is more suitable for China's technological progress and industrial upgrading of the manufacturing industry? Last year, the State Council promulgated 36 new private-equity encouragement projects. Although it once again clarified that state-owned capital should withdraw from the general competition field, its details have not yet been introduced. Even if it is introduced, how to promote it will be a difficult problem. If China wants to become a manufacturing power, it must inject vitality into the people. This is a long way to go.

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