The transformation of China's manufacturing industry has reached a critical point

This concern may not be sufficient, but after years of transformation and upgrading, the government must take breakthrough actions now.

So, what challenges will Chinese manufacturing face in 2015? First and foremost, there has been an increase in the withdrawal of foreign investment. On February 5th, West Rail Precision Guangzhou Company suddenly announced its dissolution, and 1042 employees immediately lost their jobs (see "West Rail Withdrawal: Pearl River Delta Manufacturing Industry bids farewell to adolescence" in the 25th edition of this newspaper on March 9th for details); On February 7th, Daikin Corporation of Japan announced that it will relocate the production of household air conditioners from China back to its factory located in Shiga Prefecture;   TDK、 World renowned companies such as Nike, Foxconn, and Samsung have opened new factories in Southeast Asia and India.

In fact, this evacuation did not begin in 2015. According to the investigation case of West Rail Guangzhou Company, this transfer has been brewing since 2014. Since 2012, when 25 cities in the Yangtze River Delta, Pearl River Delta, and other regions significantly raised their minimum wage standards, some textile companies began to withdraw from China.  

If only affected by the overall trend, it may not be a cause for fear, but we have seen that many mid to high end manufacturing companies from the United States, Japan, and South Korea have begun to withdraw from China and return to their own countries. For example, in 2013, Apple withdrew its $100 million computer production line from the United States, while Japan was influenced by factors such as the significant depreciation of the yen, which was beneficial for domestic enterprise product exports. Companies began to flow back to the domestic market, such as the aforementioned examples of Nishitetsu and Daikin. This is the result of some developed countries attracting manufacturing to return to the new policy orientation after the 2008 financial crisis.    

It needs to be reflected that the support received by the real economy in the past few years has not been sufficient. After the 2008 financial crisis, Tianliang Credit invested more in the infrastructure sector, and some industrial capital turned to real estate to seek short-term benefits, which invisibly formed a reverse effect. In such a situation, manufacturing enterprises facing the pressure of transformation and upgrading may find it difficult to focus on their main business.

  For over a decade, we have vigorously introduced foreign investment and heavily concentrated and tilted resources such as land taxes towards foreign investment. However, the current policy of "ice and fire" has made some foreign investors feel uncomfortable. On the one hand, this requires leaving time for foreign investment to adapt to this' new normal '; On the other hand, foreign investment should also adapt to the changing times and seize new opportunities in the Chinese market. In this regard, there is still a lot of room in the Chinese market, but foreign investment also needs to transform and upgrade. Government policies must strike a balance between efficiency, innovation, and fairness and justice.

Even in times of danger, there are still opportunities.   The withdrawal of low-end manufacturing industries that the government wants to eliminate also leaves room for transformation and upgrading.