China's manufacturing industry faces three major problems

Dr. Wang Xiwen, director of the Institute of Electronic Commerce of the Center for International Economic and Technical Cooperation of the Ministry of Industry and Information Technology, has worked in the industrial and informatization field for more than 10 years. He thus dissects the disadvantages of Chinese manufacturing:

Although China is already a big manufacturing country, the manufacturing industry is “big but not strong” and still has a big gap with manufacturing power. There are many problems, some of which are still fundamental, and the most important are three major issues:

First, the industrial structure is irrational.

From the perspective of production, the unreasonable performance of China's manufacturing industry is characterized by structural and regional overproduction at low levels, and high consumption and high costs for production. Specifically, many important industries rely heavily on external technology and have weak independent development capabilities, which are difficult to adapt to fierce international competition. In many industries, there is a serious overcapacity. In 2013, the national industrial capacity utilization rate was 79%, and backward production capacity accounted for 15% to 20%. .

With the rapid expansion of China’s foreign trade scale, the binding force of external market demand has increased significantly. The trade conditions of low-grade products and primary products have been deteriorating from a long-term perspective. Export patterns based on labor-intensive products will not be in the future. There is a lot of room for growth.

Second, the added value of products is not high.

All along, Chinese companies mostly use OEM methods and are at the mid-to-low end of the global value chain. Product design, key components, and process equipment rely mainly on imports. Even if it is a product with a certain share in the international market, Chinese manufacturers are more involved in assembly and manufacturing. They generally do not possess core technologies, and key components and key technologies rely mainly on imports.

Due to low added value, Chinese products have made little profit. At the end of 2011, American scholars released a report titled "Capturing Apple's Global Supply Network Profits". A study of profit distribution for iPhones shows that in 2010, Apple sold 58.5% of its iPhones for every iPhone sold. Profits, while the profits earned by workers in mainland China accounted for only 1.8%. It is precisely because there is no technological advantage in the value chain. In spite of the hard work, it is the lowest and few meager profits.

Third, energy consumption is large and pollution is serious.

China is the world’s largest manufacturing country. In 2013, China’s primary energy consumption was nearly 3.75 billion tons of standard coal, which accounted for 21.3% of the world’s energy consumption and created 11.6% of the world’s GDP. At present, China's chemical oxygen demand, nitrogen oxides, sulfur dioxide, ammonia nitrogen, and carbon dioxide emissions are among the highest in the world, and haze, water pollution, and excessive heavy metals in soil have become social hazards.

In the division of labor of the world's industries, the link that belongs to China is the manufacturing industry, which itself is an industry that has a great demand for natural resources. In addition, the utilization efficiency is low, resulting in the excessive consumption of natural resources in the economic development process. The rising price of the international primary product market has brought increasing pressure on China's manufacturing market with low cost to win.