In 2016, the total value of Chinese manufacturing output reached RMB 216.2 billion, accounting for more than 29% of GDP. This represents an increase of 34% from 2012. Over the last five years, the total value of domestic manufacturing output has grown at a compound rate of 6% per year. In addition, the Chinese manufacturing has gradually increased its influence abroad. In 2010, the value of China’s manufacturing output accounted for 19.8% of the world’s total manufacturing output, surpassing the United States (19.4%), and thus becoming the largest manufacturer in the world. In 2015, China’s manufacturing industry accounted for 22% of the world’s total output. As the strength of China’s global economic and scientific research grows, it is estimated that China’s manufacturing industry will increase in global importance.
However, the current situation of the Chinese manufacturing industry is that it is “big but not strong”. This is reflected by 1) the inability to master key technologies (more than 80% of high technologies rely on imports from abroad); 2) the low value-add of products; and 3) low labor productivity.
Informatization of the Industry
The value of manufacturing output in the United States was only 0.4% lower than that of China in 2010. Nonetheless, the Chinese manufacturing industry employed 114,445 million workers, while the US manufacturing industry employed 11.5 million workers – about one-tenth of China. The level of informatization of Chinese industrial enterprises remains low at all levels, resulting in over-reliance on labor and relatively inefficient use of financial resources.
Even compared with other industries, the overall informatization of manufacturing enterprises is lagging. Data shows that the Chinese industrial software market reached 124.73 billion yuan in 2016, accounting for about 5% of the global value of industrial software, well below that of the Chinese manufacturing industry (19.8%). Chinese industrial informatization is in its infancy and the potential for future development is enormous.
The increase in the total value of the output of the Chinese manufacturing industry is accompanied by the rapid increase in the cost of labor in the manufacturing industry. Between 2011 and 2015, the average wage of manufacturing firms increased from RMB 36,665 per annum to RMB 53,524 per annum, with a compound average annual growth rate of 8.58 percent. It is slightly higher than the growth rate of average wage (8.21%), but well above the compound annual growth rate of the total value of output in the manufacturing industry (5.96%). The rapid rise in manufacturing costs has forced the industry to modernize, adopting both more advanced production management methods and implementing technology-based manufacturing solutions.
Small and Medium Enterprises
An important feature of the Chinese manufacturing industry is that small and medium enterprises, especially small businesses are very numerous. By the end of 2015, there were 365,000 small and medium-sized manufacturing companies in China, an increase of 13,000 from the end of 2014. Of these, 55,000 were medium-sized enterprises (15.2%) and 309,000 small businesses (84.8%). In terms of quantity and size, Chinese small and medium-sized enterprises constitute an important part of the Chinese manufacturing industry.
With the growth of China’s national strength and the implementation of the “Belt and Road” national strategy in recent years, more and more manufacturing companies are going abroad to build factories. This reflects differences in the cost of raw materials and labor between China and emerging and frontier markets. In 2015, the Chinese manufacturing industry invested USD 19.9 billion abroad, an increase of more than 100% compared to 2014.