MNI INTERVIEW2: China Green Transition To Boost Manufacturing

China’s high-tech and green-transition ambitions will boost manufacturing’s role as an economic driver, while clearer industrial standards and deepened international connections represent crucial factors that will help Chinese companies increase their global market share, a policy advisor told MNI in an interview.

Manufacturing investment and manufacturing value added (MVA) developmentwill continue to remain robust in 2024, illustrating China’s commitment to “high-quality growth,” said Chen Chen, department director of Advanced Manufacturing Development at the Machinery Industry Information Research Institute, a well-known think tank advising authorities on industrial policies.

Some doubt manufacturing can fill the gap left by the de-prioritisation of real estate and infrastructure, but Chen insisted upgraded fabrication can drive healthier and more sustainable economic expansion even though the sector may struggle to maintain rapid future growth.

Chen also noted China's green exports will continue to hold strong. (See MNI INTERVIEW: China Green Exports To Maintain Strong Growth)

RAPID GROWTH

MVA grew 6% y/y in 2023, outpacing the 5.6% rise of overall industrial value added. The latest data from Ministry of Industry and Information Technology (MIIT) showed MVA contributed 27.7% to China’s GDP and accounted for 30% of the world’s total in 2022. Meanwhile, manufacturing investment jumped by 9.6% in the first five months in 2024, higher than the 6% noted over the same period in 2023, and taking 34% of the fixed-asset investment as property and infrastructure investments weakened.

“The focus for high-quality manufacturing will be continuously upgrading methods and techniques, making the process greener and smarter, meanwhile significantly improving the quality of the products,” Chen explained.

The systematic improvement of manufacturing capabilities that involved management, operational abilities, production capabilities and the comprehensive integration of the entire value chain will represent a significant challenge for manufacturers aiming to build a research, production and services framework alongside effective risk control, Chen added.

POLICY RESPONSE

Policymakers could help set standards, guide directions and create a favourable macro environment, he suggested.(see:MNI INTERVIEW: China Eyes Significant Special Treasury Issuance)

The Ministry of Finance announced in March a CNY10.4 billion to package to “rebuild industrial foundations and promote high-quality development of the manufacturing sector” this year, down from 2023’s CNY13.3 billion. The People’s Bank of China established a new credit market department to boost loans for green, short-term technology and long-term manufacturing.

After visiting manufacturers across the country, Chen noted one difficulty of the green transition lies in the adoption of new technologies and tools. In addition, policy requirements and standards in some economies, such as the EU carbon tax, are still unclear to Chinese firms, especially small and medium-sized companies, he noted.

As Chinese manufacturing’s global share increases, more international cooperation is necessary, Chen added. China would like to create chances for enabling its enterprises to collaborate with global leading brands, such as Apple and Tesla, to explore international markets, create higher value and improve production efficiency, he said.