MADE IN CHINA 2025 China Manufacturing in the 21st Century - Opportunities for UK-China Partnership
www.cbbc.org www.ukti.gov.uk
Contents
Forewords 02
Executive Summary 04
Background to Made in China 2025 06
The State Council’s Plan 08
Ten Priority Sectors 09
Five Nationwide Initiatives 12
Specific Objectives 13
Opportunities by Sector 14
Opportunities by Location 15
Opportunities for UK Companies 17
Challenges for UK Companies 18
Conclusions & Next Steps 20
Appendix 22
Contacts 23
www.ukti.gov.uk www.cbbc.org | 01 Foreword Dr Mark Wareing Director Advanced Manufacturing & Transport UKTI China, British Embassy, Beijing
UK Trade & Investment Together we provide a comprehensive service for British (UKTI) is the part of companies who are looking at the incredible opportunities UK Government that is in China and we bring more Chinese companies to the UK responsible for growing to join the UK’s leading innovation landscape to create the the UK’s exports and products for the future, for China and the world. attracting investment into the UK. Made in China 2025 is a truly exciting strategy and it is fantastic to see how closely the skills, experience and In terms of UK exports, capability of the UK’s industrial base align with China’s China is already our ambitions. In all of the 10 priority sectors China has second largest single identified, the UK is a world leader with the expertise to export destination with help China reach its goals. exports of £18.7 billion, of which £15.5 billion (83%) We see the next stage of China’s emergence as an economic are manufactured goods superpower in its ambition to design and make the products which demonstrates the of the future required not only by the Chinese consumer, but importance of manufacturing to the UK economy. consumers around the world.
Chinese businesses and consumers are demanding the best Creating products with greater intrinsic value and quality, in design and quality and they recognise our long history of and incorporating our environmental responsibilities are producing the very best in products, services and brands. areas where our world leading academic institutions, our innovation and catapult centres, the rich open and UKTI China is the largest in the UKTI network - we collaborative new product development networks and have over 150 staff across our Beijing Embassy and our our open and supportive business climate can take a British Consulates in Shanghai, Guangzhou, Chongqing leading role. and Wuhan. We work closely with UKTI Hong Kong, the Embassy’s Outreach team and our service delivery partner CBBC. Mark Wareing Director Advanced Manufacturing & Transport
Made in China 2025 is a truly exciting strategy and it is fantastic to see how closely the skills, experience and capability of the UK’s industrial base align with China’s ambitions.
02 | www.ukti.gov.uk Foreword Stephen Phillips Chief Executive China-Britain Business Council
I am delighted to introduce Made in China 2025 is ambitious and wide-ranging. It the latest report from the focuses on 10 priority sectors and in each of these we China-Britain Business believe there are going to be new opportunities for British Council, prepared in business. Each sector is analysed in detail in the report, collaboration with UK Trade including identifying how UK companies can get involved. It & Investment, examining prioritises five nationwide initiatives with clear objectives to: the implications for UK business of the Chinese • establish new innovation centres Government’s Made in • establish new research bases China 2025 Initiative. This is • implement smart manufacturing projects a highly ambitious initiative • implement green manufacturing projects to comprehensively • prioritise high-end equipment manufacturing upgrade, consolidate and balance China’s Again it is clear that the UK has so very much to offer in manufacturing industry. these five areas, with our enviable R&D and innovation credentials both in industry and education. Recognising the world-leading strengths of the UK, this report sets out to help companies and institutions Opportunities will be across the whole country. Indeed understand both the opportunities and, indeed, challenges most provinces and cities have already published action that this initiative will present. The UK is already plans for local implementation. world leader in so many relevant fields and this report demonstrates that there will be a wide range of new Whilst we see tremendous opportunity, we also recognise opportunities including: that there will be challenges. These may include IP protection, over-supply and over-investment, pace of • Technical and management consultancy services change and favouring of indigenous innovation amongst • Standards, testing, compliance and certification others. It will be important to do comprehensive due • Joint R&D and joint bidding diligence and carefully select projects and partners. The • Financing and investment teams at CBBC and UKTI are here to help. • Outbound investment • Financial and professional services • Design Stephen Phillips • Education and skills training Chief Executive
This is a highly ambitious initiative to comprehensively upgrade, consolidate and balance China’s manufacturing industry.
www.cbbc.org | 03 Executive Summary
Overview There are also 10 designated priority • Standards, testing, compliance sectors: and certification to support Made in China 2025 (MIC 2025) is Chinese companies to comply a national strategy, announced by • Advanced marine equipment and with and influence international China’s State Council in May 2015, to high-tech vessels; standards and achieve international comprehensively upgrade, consolidate • Advanced rail and equipment; certifications; and balance China’s manufacturing • Agricultural machinery and industry, turning it into a global technology; • Joint R&D and joint bidding (in China manufacturing power able to influence • Aviation and aerospace equipment; and globally) as a channel for British global standards, supply chains and • Biopharmaceuticals and high-end companies to build early-stage drive global innovation. It has very medical equipment; partnerships with new and growing specific objectives to 2025 and also in • Integrated circuits and new IT Chinese enterprises; the longer term with general objectives technology; onwards to 2049 (the 100th anniversary • High-end electronic equipment; • Financing and investment where of the founding of the People’s Republic • High-end manufacturing control Chinese companies seek to grow of China). machinery and robotics; through private equity, venture • Low and new-energy vehicles; capital investments and listing The MIC 2025 initiative is to some • New and advanced materials on public technology exchange extent inspired by Germany’s Industry markets; 4.0 with reference to the inclusion New Opportunities of SMEs in the supply chain, and • Outbound investment to work with extensive use of new information Despite its overt theme of Chinese Chinese partners on third-country technologies. However, MIC 2025 technological independence, MIC projects and UK-based R&D centres; extends much more widely to address 2025 is in reality a source of great issues of quality, consistency of output, opportunity for UK companies that • Financial and professional services, safety, and environmental protection, can help China to implement the including accounting, auditing, which are all considered strategic changes required. The UK has extensive consulting and HR, where Chinese challenges to China’s development. expertise in all areas of manufacturing projects have an overseas element; The initiative is intimately connected and experience of moving up the value to the government’s long-term Chinese chain and transferring basic low-cost • Industrial and architectural Dream of a harmonious and moderately manufacturing to new locations. design, virtual reality modelling, prosperous society. It is the proposed Britain is a leader in process innovation, prototyping and testing to build answer to China’s declining competitive standardisation, efficiency, productivity, better infrastructure and to increase advantages in manufacturing, and and integration all of which will be output quality and efficiency; oversupply in some industries. of great value to Chinese companies during MIC2025 implementation. • Education services to build The MIC 2025 plan details nine vocational skills and expertise strategic tasks, including: to encourage There are many specific opportunities in standards, management and innovation and the use of digital for UK companies such as: software. technology in manufacturing; to improve the quality and efficiency • Technical and management of manufacturing; to enforce green consultancy services to improve manufacturing methods; to globalise productivity, quality and efficiency Chinese brands; and to improve and to minimise risks through service-oriented manufacturing and process design and optimisation, and manufacturing-service industries. operation and project management;
04 | www.ukti.gov.uk UK companies may also need to review their ability to react to the sheer pace of change in some industries to provide solutions for fast growing Chinese players.
MIC 2025 is a national strategy and as As China moves to achieve a level such there will be opportunities across of technological independence, we China. Furthermore, in conjunction firmly believe that UK companies with China’s Belt and Road Initiative, will actually find more opportunities opportunities may quickly spread from new high-value customers. This beyond China’s borders as its leading is provided that the Government manufacturers seek to develop global upholds one of the key commitments supply chains and to access new of the MIC 2025 plan, namely to rely markets. mainly on the market as the key driver of change after an initial stimulus.
Risks and Challenges This report is just the beginning of CBBC and UKTI’s work on MIC Such an ambitious project inevitably 2025 and in the coming period we incurs challenges, and the increased will continue to share insights and push for technological development analysis, organise seminars and will drive demand for foreign roadshows to showcase UK strengths intellectual property and potential in the 10 key sectors, identify links cases of infringement (although with potential Chinese partners, China’s IP environment has improved organise relevant visits to China, and considerably in recent years). Due work with government at all levels diligence remains as important as to track the progress of the initiative ever. UK companies may also need and how UK companies are taking to review their ability to react to advantage. the sheer pace of change in some industries to provide solutions for fast- growing Chinese players.
www.cbbc.org | 05 Background to Made in China 2025
Moving up the value chain In most industries, realising this dream international standards to fit into requires a reformed economy driven global manufacturing chains, and it Competition from developing nations by domestic consumption rather than stresses the importance of relying with similarly competitive costs, exports and higher wages. Since it mainly on market forces as the key coupled with technology-driven looks certain that China will continue driver of change. efficiency gains in developed countries, its reforms to achieve this, we are means that China’s abundance of left with the question of what exactly Eventual outcomes will depend on cheap labour and the competitive ‘made in China’ will mean in future, further government directives for advantage of its infrastructure may and therefore what the implications implementing the plan, which often no longer be sufficient for it to drive are for UK companies doing business vary considerably from the original sustainable growth. The consulting with China. blueprints, so staying up to date on the firm Alixpartners estimates that the process will be important. Also, China’s landed cost of outsourcing production Long-term vision and plan provinces are surprisingly independent to China will be equal to the cost of in their implementation of central manufacturing in the United States A clue to this can be seen in the detail plans, so local regulations, initiatives, within a few years. of the MIC 2025 plan. The plan is partly incentives and opportunities will vary inspired by Germany’s Industry 4.0 across the country (each provincial and The strategic question of how to initiative, but the comparisons do not city government is developing its own respond to this situation has long run deep. Whilst both projects focus in regional plan to implement MIC 2025). been a concern of the Chinese particular on better use of technology, Government, hence the overarching as well as the inclusion of SMEs in the Despite often downbeat coverage objective of Made in China 2025 to value chain, the Chinese start from of Chinese economic trends, it is move the country up the value chain. a very different base and there are important not to lose sight of the Alternative approaches, such as driving broader issues of quality, consistency overall size, continued absolute down labour costs or devaluing the of output, safety and environmental growth and regional diversity of the renminbi to stimulate exports, would protection. Chinese economy. MIC 2025, whilst directly conflict with some of China’s encompassing an overt desire for fundamental development goals and its MIC 2025 is certainly comprehensive, Chinese domestic technological commitments to achieve a ‘moderately covering everything from independence, will also provide many prosperous society’, an objective which manufacturing operations and IT use new and expanded opportunities for was most recently presented as the to public and private finance and fiscal UK companies in working with China to Chinese Dream. incentives. It references intellectual implement the changes it requires. property and the need to adopt
The overarching objective of Made in China 2025 is to move the country up the value chain.
06 | www.ukti.gov.uk The objectives of MIC 2025 will also drive Chinese companies to align themselves more closely with global standards and supply chains.
Innovation, productivity standards and supply chains, with a view to influencing those standards and efficiency in future and also to establish and protect their domestic IP. These MIC 2025 is designed to encourage upward moves are designed to Chinese manufacturers to be far support ever-increasing productivity less dependent on importing high- and efficiency. If successful they will end technology and equipment, also bring more willingness on the and to transform China into a part of Chinese companies to invest ‘manufacturing power’ rather than a in design-focused consultancy and volume manufacturing base. However, project management services to drive Chinese demand for high-technology this new-found productivity, quality solutions, high-end products and and efficiency. ultimately high-end customers is likely to mean more business for UK This will play to the strengths companies, particularly those that are of the UK – from management- already world leaders in technology, processing optimisation to lean R&D and innovation. China’s industrial and risk management services, the reform should broaden the overall implementation and monitoring of base and scale for UK companies to international industrial and production implement and test technology and standards, the management of processes and to compete properly information and quality control with global giants. systems, the control and monitoring of safety, emissions and efficiencies, and The objectives of MIC 2025 will also product testing. drive Chinese companies to align themselves more closely with global
www.cbbc.org | 07 The State Council’s Plan
China’s State Council announced Step Three: to be achieved by 2049 Ten Priority Sectors “Made in China 2025” in May 2015 • Become a global leader in key high- as a national initiative to improve end manufacturing sectors The priority sectors highlighted are: the manufacturing industry – initially • Drive innovation and hold • Advanced marine equipment and until 2025 and then on to 2035 competitive advantages high-tech vessels and 2049. The ultimate goal is to • Advanced rail and equipment transform China into a world-leading The implementation of the MIC • Agricultural machinery and manufacturing power. 2025 initiative is being led by the technology Ministry of Industry and Information • Aviation and aerospace equipment Step One: to be achieved by 2025 Technology (MIIT), focusing on nine • Biopharmaceuticals and high-end • Comprehensively upgrade China’s strategic tasks and five nationwide medical equipment manufacturing sectors initiatives across 10 priority sectors, as • Integrated circuits and new • Strengthen China’s position as a shown below. generation information technology major manufacturing nation • Power equipment and technology • Focus on quality manufacturing and The Nine Strategic Tasks • High-end manufacturing control smart manufacturing technologies machinery and robotics • Improve the efficiency of energy, • To encourage innovation • Low and new-energy vehicles labour and material consumption • To promote the use of integrated, • New materials • Make Chinese companies leaders in digital, technology-focused the manufacturing value chain manufacturing Pilot Projects • Master key technologies in key • To strengthen the overall industrial industries (as opposed to importing base In 2015, MIIT supported 46 pilot them) • To improve product quality and demonstration projects on various build global Chinese brand names intelligent manufacturing solutions Step Two: to be achieved by 2035 • To focus on enforcing green in relation to MIC 2025, and a full • Raise China to the level of a mid- manufacturing methods list is in the Appendix. Some of the ranking manufacturing nation • To make innovative technological pilot projects are still on-going and • Increase innovation breakthroughs in the 10 key sectors others have already finished, and all • Increase IP ownership • To restructure industries to improve were led by a Chinese company or • Achieve globally innovative efficiency and output institute with support from MIIT. As breakthroughs in key sectors • To improve service-oriented the MIC 2025 initiative is now being manufacturing and manufacturing- implemented, new pilot projects are service industries likely to listed and supported at both • To globalise Chinese manufacturing state level and by local provincial and industries municipal level governments.
08 | www.ukti.gov.uk Ten Priority Sectors
1. ADVANCED MARINE EQUIPMENT speed rail infrastructure and trains advanced technologies, is heavily AND HIGH-TECH VESSELS through international partnerships reliant on high-end imports, and the with the likes of Alstom, Siemens, process, speed and scale of farming Over the past five years, China has Bombardier, Hitachi and Kawasaki, mechanisation vary significantly across increased its global share of advanced and it now has 18,000km of high- the country. In many areas small-scale marine equipment and vessels – speed railways in operation. Through farming is still the norm, but China particularly oil and gas exploration domestic R&D investment, China now is now focused on consolidating and equipment, support vessels and owns IP in core technologies and has adopting new technologies – cost drilling platforms. However, it is still some world-leading high-speed train efficiencies are being sought through at the low-value end of the market, manufacturing technology. the major industrial-scale integration and the downturn in both shipbuilding of cultivation, breeding, processing and the oil and gas sector is creating China’s two large rail companies, and waste recycling, which will require substantial volume challenges. It China South Rail Group (CSR) and advanced farming techniques and the remains reliant on foreign designs China North Rail Group (CNR), recently use of high-end and multi-functional and has competitive disadvantages merged to form CRRC, and they are agricultural machinery. in management and technical now successfully winning international capabilities. projects. Domestically, China is now The MIC 2025 initiative aims to raise looking at Intelligent Transportation China’s capabilities in domestic China is now focusing on moving Systems (ITS) to make rail more safe, production and the manufacture up the value chain – enhancing its energy-efficient and environmentally of high-end farming equipment, so capability to build high-end LPG and friendly. In 2014, a UK-China rail that home-grown companies can LNG carrying ships and also luxury transport cooperation agreement was dominate the domestic market and cruisers, Arctic route vessels, and signed to foster projects in design, the country can develop its export new energy-saving and intelligent consultancy, engineering construction, potential. Although this may be vessels. In oil and gas exploration, it equipment and facilities maintenance, seen as a threat to UK exporters to is prioritising deep sea exploration, and there are opportunities for joint China, the new opportunities that offshore operation support equipment product development and R&D of will emerge and the overall market and testing and inspection equipment. certain types of advanced intelligent potential will be greater, for example, It aims to take steps to become a technology. in collaborative agricultural research, world shipbuilding powerhouse, where the UK is already recognised as with an integrated supply chain 3. AGRICULTURAL MACHINERY a global leader, and in the supply of incorporating design, construction, AND TECHNOLOGY specialist high-end equipment, new equipment supply and technical farming technologies and materials, services. China produces more tractors and consultation services and smart and combine-harvesters than any solutions on how to integrate and 2. ADVANCED RAIL AND EQUIPMENT other country, and its domestic improve farming efficiencies. production of agricultural machinery In the past 10 years, China has has grown dramatically over the invested heavily in its new high- past 10 years. Yet it still lacks many
www.cbbc.org | 09 The ultimate goal is transform China into a world-leading manufacturing power.
4. AVIATION AND AEROSPACE village clinics. Rural and remote million mobile broadband users EQUIPMENT healthcare will be especially reliant including 230 million on 4G networks. on technology, including remote China’s aviation industry has grown diagnosis, medical devices, and Despite the challenges, there are rapidly in the past 20 years across the biological medicine, and healthcare still significant opportunities. UK whole supply chain from research providers are being encouraged to companies such as ARM, who design to design, testing, manufacturing, adopt high-performance diagnostic integrated circuits but do not directly repair and maintenance. It has well- technology, to manufacture with compete with the manufacturing established manufacturing bases green technology, and to venture giants, have been successful. The in the cities of Harbin, Shenyang, overseas for R&D, manufacturing and development of indigenous capability Xi’an and Chengdu, and new bases market development. in integrated circuits, 5G and industrial in Shanghai, Tianjin and Zhuhai. software and operating systems, plus Many international companies, such The MIC 2025 initiative aims to new developments in the Internet as Airbus, Boeing, Rolls-Royce and develop domestic capability in many of Things, hyperconnectivity and Bombardier, all have longstanding areas including imaging equipment commercial secure communications partnerships in China for sub- and medical robots, wearable devices are all key MIC 2025 objectives and contracted production. and telemedicine, and biological 3D areas of UK expertise. printing and stem cell techniques. By 2020, China aims to have a globally The UK has a long and proud history 7. POWER EQUIPMENT competitive and relatively complete in the life sciences sector, with AND TECHNOLOGY aircraft manufacturing industry and companies commercialising major to be a leading regional base for research innovations from genomics China now has the largest installed aircraft retrofitting and repair. It aims and cell research to MRI, and it enjoys electricity generation capacity in the to compete through the delivery extensive government support and world (1505 GW generating 5583 of its own C-class large aircraft and infrastructure for R&D. This makes UK TWh in 2014) and the world’s largest engines, and to compete in medium- companies very well placed to work installed capacity for thermal power, sized helicopters, high-end business with large Chinese partners on global hydropower, wind power, and now, in jets, and special-use and emergency solutions. 2016, also in solar (with an installed aircraft. Opportunities exist in capacity of 43GW). Yet despite all R&D collaboration, design, jointly 6. INTEGRATED CIRCUITS AND the new capacity, the power industry developing new technologies and NEW GENERATION INFORMATION faces a major challenge in distribution. the supply of high-end technologies TECHNOLOGY Coal power generation is traditionally and sub-systems to its production in the north, hydropower is in the programmes. The ICT industry in China has seen west and much of the new wind incredible development over recent power is in the north and west, 5. BIOPHARMACEUTICALS AND years, and Chinese domestic giants whereas the greatest demand is still in HIGH-END MEDICAL EQUIPMENT such as Baidu, Alibaba, Tencent and the south and east. Huawei have grown into dominant China will spend around RMB 6.6 forces in their respective industries. MIC 2025 includes objectives aimed trillion (approx. £660 billion) on Foreign players have often struggled, at improving capability in power healthcare by 2020, and with ongoing due in part to Chinese Government generation equipment, transmission reforms to the healthcare system restrictions on many subsectors of ICT, and transformation equipment, and opportunities for UK companies are and in part to the difficulty of keeping key components including safety growing. There are plans to further pace with changes in demand from valves, circuit breakers and rectifiers. improve facilities in rural areas by consumers and companies. Mobile In some areas the intention is that up constructing or upgrading 3,700 is an area of particularly impressive to 95% of equipment be domestically community hospitals and 11,000 growth: China now has over 674 produced. Nuclear and wind power
10 | www.ukti.gov.uk are among the UK strengths that 9. LOW AND NEW ENERGY VEHICLES end polymers, inorganic non-metallic will be in demand as China increases materials and high-performance its focus on developing domestic China domestic sales of new energy composites. MIC 2025 seeks to build capability for export. vehicles began to grow in the past two on this and emphasises advanced years, with consumer subsidies for international standards, green 8. HIGH-END MANUFACTURING locally-produced new energy vehicles manufacturing processes, high- CONTROL EQUIPMENT AND until 2020, and other incentives such efficiency and performance, recycling ROBOTICS as reduced purchase tax and free and reuse, fine chemicals, materials license plate registration. Beijing, for extreme conditions, and ultra-thin There are over 5,000 enterprises Shanghai, Shenzhen and Guangzhou materials. engaged in China’s machine tools are implementing plans to construct industry with a combined production related charging and distribution Although there are some export value of RMB 800 billion (approx. infrastructure. The Government is also restrictions, there are many £80 billion). China has been the leading by example with a minimum opportunities to help Chinese largest machine tools manufacturer of 30% of all Government cars producers move up the value chain, in the world since 2002, but it still purchased each year must be electric and numerous UK companies and lacks many advanced manufacturing or hybrid vehicles. universities are working on joint technologies and advanced projects. Currently, China relies computer control systems - only MIC 2025 aims to boost the domestic heavily on imported new materials, 30% of China’s machines tools are manufacture of electric vehicles, but it is racing to develop more numerically controlled, with just and give objectives to encourage indigenous capability, and there are 10% being exported. Most of the the market for new energy vehicles opportunities across a wide range of core components are still imported and associated infrastructure. It industry sectors, such as aerospace, from developed countries such as highlights plug-in hybrid electric rail, automotive, speciality steel and Germany, the US, the UK, Italy, Japan vehicles (PHEV), hydrogen fuel cell plastics, and integrated circuits. or South Korea. electric vehicles (FCEV), public and commercial vehicles, and intelligent The MIC 2025 initiative outlines and connected vehicles. There will some ambitious objectives across the be opportunities for UK-Chinese range of control systems in addition collaboration and joint investment to advanced robotics, 3D printing in a broad range of new energy and machine tools to improve the infrastructure projects, developing situation. The UK has a strong R&D charging systems, and R&D projects background in the CNC tools and to improve vehicle efficiency and robotics industry with many of the performance, such as weight world’s leading related university reduction, low resistance tyres, research departments and so is well battery and energy conversion, placed to take advantage of the gearbox technology and brake-energy opportunities that will develop. recovery.
10. NEW AND ADVANCED MATERIALS
In 2010, the Government prioritised the development of certain new- materials sectors, such as high-end structural and functional performance metals, artificially synthesised high-
www.cbbc.org | 11 Five Nationwide Initiatives
The plan prioritises five nationwide initiatives with clear objectives:
• To establish 15 new innovation centres by 2020 and 40 centres by 2025 • To establish four new national research bases • To implement projects focusing on smart manufacturing • To implement projects focusing on green manufacturing • To prioritise high-end equipment manufacturing in key sectors
Initiative Details Objectives
1 R&D and Innovation Centres Boost technological breakthroughs Establish 15 ‘national and innovation in key fields such manufacturing innovation centres’ as next-generation ICT, smart by 2020; 40 by 2025. manufacturing, new materials, additives and pharmaceuticals.
2 Smart Manufacturing Projects Leading Chinese companies Decrease operating costs by 30%, involved in setting up and shorten production times by 30%, optimising smart manufacturing and lower defect rates by 30% by projects and techniques, 2020; and then 50% reduction in digitisation of factories and costs, time and defect rates by customising supply-chains. 2025.
3 Industrial Bases Establish four new research Be self-sufficient for 40% of core centres known as the ‘Four Bases’ components and materials in key to accelerate the development sectors – aerospace; telecoms; of core industrial components, power production and distribution; techniques, materials and transport and household production technology. appliances – by 2020; and then 70% by 2025.
4 Green Manufacturing Projects Undertake projects in energy Build 1,000 green factories and efficiency, environmental 100 green industrial parks by 2020. protection, resource usage, Reduce emissions intensity of re-manufacturing and low-carbon primary pollutants by 20%. Align technologies. energy consumption per unit with advanced world levels by 2025.
5 High-end Equipment Develop innovative, high-end Undertake independent R&D in Manufacturing Projects industry-focused projects in these sectors to achieve a huge aerospace, rail, new-energy growth in China’s market share vehicles, marine, smart grids, high- of IP for high-value equipment by end machine tools, nuclear and 2025. medical equipment.
12 | www.ukti.gov.uk Specific MIC 2025 Objectives
Indicator 2013 2015 2020 2025
Innovation Expenditure on R&D as % of revenue 0.88% 0.95% 1.26% 1.68%
Valid invention patents per RMB 100 million 0.36% 0.44% 0.70% 1.10% in revenue
Quality Manufacturing quality competitiveness index 83.1 83.5 83.5 85.5
Manufacturing value added ratio - - Up 2% from Up 4% from 2015 2015
Labour productivity growth rate in - - 7.5% 6.5% manufacturing (%) (2016-20) (2021-25)
Industrialisation Fixed broadband penetration rate (%) 37 50 70 82 & Informatisation Penetration rate of digital research tools (%) 52 58 72 84
Average level of digitisation of key production 27 33 50 64 and work processes (%)
Green Industrial value-added energy consumption - - Down 18% Down 34% Manufacturing from 2015 from 2015
Carbon dioxide emissions per unit of - - Down 22% Down 40% industrial value added from 2015 from 2015
Water consumption per unit of industrial - - Down 23% Down 41% value added from 2015 from 2015
Utilisation rate of industrial solid waste (%) 62% 65% 73% 79%
Source: MIIT
www.cbbc.org | 13 Opportunitiesby Sector
Part Two of this report looks at each of the 10 priority sectors in detail, and considers China’s aims and objectives of MIC 2025. It looks at China’s current and future needs and its ambitions, and matches them to UK industry strengths. It considers the opportunities and challenges for UK companies and highlights around 50 sub-sectors where there are likely to be opportunities for UK companies.
Marine equipment & hi-tech ships Advanced rail & equipment High-tech marine equipment Rail infrastructure equipment Marine materials High-end rolling stock components Ocean/deep-sea exploration Signal & operations control & testing Offshore renewable energy Luxury cruisers & yachts
Agricultural machinery & technology Aerospace High-end cultivating equipment Commercial passenger aircraft High-end food production & processing Helicopters & specialist aircraft Large-scale farming machinery Aircraft components & equipment Smart & integrated farming systems Private & luxury jets Specialist agricultural R&D & education Specialist airport equipment New farming materials
Biopharmaceuticals & med-tech Manufacturing control & robotics R&D and clinical trials Computer numerical control tools (CNC) Product testing & compliance Robotics Digital health 3D printing High-end medical devices High-end machine tools In vitro diagnostics
Integrated circuits & new IT Low & new-energy vehicles Core hardware & software components Electric vehicles New telecoms infrastructure Hybrid vehicles Operating systems & industrial software Fuel cell vehicles Cloud computing Intelligent & interconnected vehicles Data integration & advanced analytics High-end sports vehicles Smart grids
New & advanced materials Power equipment & technology Special metallic function materials Coal-fired power High-end structural metals Nuclear power High performance fibres & composite materials Offshore wind power Advanced glass & ceramics Transmissions & transformation sets Advanced polymers High-end safety & monitoring
14 | www.ukti.gov.uk Opportunities by Location
Most provinces and cities have already published their MIC 2025 action plans, and the table below highlights the major first and second tier Chinese cities and their key sector priorities.
This information below is based on published information from the Ministry of Industry and Information Technology (MIIT), National Development and Reform Commission (NDRC) and the various local municipal governments listed. Agricultural Agricultural machinery & Aviation Aerospace New-energy vehicles Medicine & med-tech ICT Advanced materials & Robotics tools control Marine & high ships tech Power equipment Rail Manufacturing Equipment Control
Beijing
Changchun
Changsha
Chengdu
Chongqing
Guangzhou
Nanjing
Ningbo
Shanghai
Shenyang
Shenzhen
Suzhou
Tianjin
Qingdao**
Wuhan
Xi’an ** Qingdao and other major manufacturing cities in Shandong cities major manufacturing ** Qingdao and other
In addition to the major cities listed above, we can see opportunities in a cluster of smaller cities across various provinces. Some examples include:
Jilin
Liaoning
Hunan
Shannxi
Shandong
Xinjiang
Guangdong
www.cbbc.org | 15 Example Local government implementing plans for industrial upgrading
Shanghai Lingang Industrial Area
Shanghai Lingang Industrial Area is being planned as • Smart manufacturing standards and inspection platform one of the major smart manufacturing parks under MIC 2025, and is developing policies and incentives to attract • Yangtze River Delta Smart Manufacturing Innovation advanced manufacturing companies to locate there and to Service Platform support technological upgrading projects. It is a vast area, including an Equipment Industry Park, Logistics Park, the • Smart Manufacturing Big Data Centre China (Shanghai) Pilot Free Trade Zone, Lingang Fengxian Industrial Park, Comprehensive Zone and Major Industrial • Professional services and cloud computing platform Zone, with good transport connections by air, sea, river, rail and road. • A fund of RMB 5 billion (approx. £500 million) and a commitment from commercial banks for a further RMB Lingang is supported by the Shanghai Municipal 20 billion (£2 billion) to support smart manufacturing Government, which is aiming to transform and upgrade projects and development of the Lingang Industrial local manufacturing and establish the city as a major Area - to provide up to 30% of investment for companies international financial and shipping centre. The local intending to transform their factories to smart government is focusing on six major sectors: new energy manufacturing. equipment, marine parts and components, offshore engineering equipment, high-end industrial machinery, civil • Subsidies of 10-30% for companies in key smart aviation equipment, and auto parts and components. manufacturing projects in industries such as robotics, new energy, marine equipment and aviation. Specific initiatives being implemented include: • Seed funding of up to RMB 500,000 (£50,000) for • Building new platforms for smart manufacturing and companies seeking to list/seek public funding. innovation Major companies investing in the area: Shanghai Electric • R&D support platform and state-level R&D centre Group, AVIC Commercial Aircraft Engines, Shanghai Automotive Industry Corporation, SANY, Shanghai • Makers’ Space, incubator laboratory, technology Waigaoqiao Shipbuilding Offshore, Siasun Automated exchange centre and commercialisation platform Guided Vehicles.
• Shanghai Smart Manufacturing Research Institute
16 | www.ukti.gov.uk Opportunities for UK Companies
There will be considerable opportunities for UK companies, which we explore in detail in the sector-related sections of this report. The following are the main general areas:
EXPOR TING MORE HI-TECH EQUIPMENT FINANCING AND INVESTMENT: As China strives to move up the manufacturing With the objective of reducing China’s reliance value chain, Chinese manufacturers will increasingly on technology imports will come a sharper focus aspire to international standards of quality, efficiency on technology transfer. In particular many cash- and productivity. This will provide growing market rich Chinese enterprises are looking at new ways opportunities for UK companies to export their to facilitate this which offer a better platform for world leading equipment across most of the sectors building their own global capability. Private equity, identified. venture capital and listing on public technology exchange markets will be channels for UK companies TE CHNICAL AND MANAGEMENT to realise the value of their intellectual property in CONSULTANCY SERVICES: the Chinese market, and to win strategic investment MIC 2025 has the clear objective of reducing from potential partners on the world stage. China’s reliance on imported tech solutions, but a considerable part of potential British exports OUTBOUND INVESTMENT: actually consists of supporting services which Going global is an integral part of MIC 2025, and could contribute greatly to China’s objectives. we expect to see a growth in development projects Expertise to improve productivity, quality and related to the initiative (such as SAIC Motor’s new efficiency, minimise risks through process design R&D centre in the UK). British companies should and optimisation, and operation and project be looking to partner with growing enterprises management will all be in demand. in China and the UK and to take joint solutions to third markets. S TANDARDS, TESTING, COMPLIANCE AND CERTIFICATION: FINANCIAL & PROFESSIONAL SERVICES: As Chinese companies move up the value chain, Banking, securities, insurance and other financial they will be more aware of the significance of services will be more sought-after by Chinese complying with, and influencing, international companies if their projects include an overseas standards and achieving international element. Accounting, auditing, consulting and HR certifications. This will present opportunities for are all UK strengths and will be more in demand UK companies. with the increase in projects worldwide.
JOINT R&D AND JOINT BIDDING: DESIGN: MIC 2025 will provide new opportunities for Industrial design, building design and UK companies to work with Chinese partners architecture, graphic design and virtual reality to develop (in China) the joint IP they require, (modelling, prototyping, testing) will all see more and to support Chinese companies in bids for opportunities as Chinese companies seek to use related major projects. This is also an important the latest supporting technology to build better channel for British companies to build early-stage infrastructure and to increase output quality and partnerships with new and growing Chinese efficiency. enterprises. EDUCATION AND SKILLS TRAINING: Opportunities in education will be generated by Chinese companies looking to quickly build vocational skills and expertise in standards, management and software.
www.cbbc.org | 17 Challenges for UK Companies
There will inevitably be challenges for UK companies looking to take advantage of such an ambitious initiative, which spans the whole of the Chinese manufacturing industry. They include:
IP PROTECTION: PACE OF CHANGE: A renewed push for technological development MIC 2025 contains ambitious, time-specific will drive demand for foreign intellectual property objectives that will drive short to medium-term and this may result in cases of infringement or investment. British companies may need to theft. However, China’s intellectual property rights review their ability to react to the fast-moving (IPR) environment is improving with changes to the opportunities and provide solutions to fast- laws and better enforcement. CBBC and the British growing Chinese players looking for global Embassy in Beijing works with Chinese counterparts expansion and cooperation. to encourage mutual understanding and the adoption of international processes and standards DUE DILIGENCE: for IP protection. MIC 2025 itself also contains In China, a new injection of government provisions for improving IPR enforcement, and if funds often prompts companies to flock to the Chinese companies successfully move up the value opportunity without due consideration of long- chain, their interest in creating and protecting global term strategy. British companies should look IPR will increase. In any case our advice remains carefully at potential partners’ existing business the same: companies need to take steps to protect interests and their strategic intentions for the their trademarks, patents and other IP at the earliest adoption of technology and development of new opportunity, and not wait for the decision to export joint IP in China. or license technology to China. INDIGENOUS INNOVATION: OVER-SUPPLY: It cannot be overlooked that the clearly stated Government policies have a very strong influence objective of MIC 2025 is to increase China’s on industrial structure and business behaviour in technological independence. Nevertheless, having China, and the Government is keen not to repeat considered the policies, the industrial impact of the mistakes made in the steel and cement sectors similar initiatives in the past and the fast pace which led to dramatic over-supply. We have of technological change, we believe that British identified robotics (RAS including drones and CNC) companies will actually find more opportunities, and Internet Plus (IoT) technologies as potential even as China improves its capabilities, provided areas to watch in this respect, where government they maintain or extend their technological lead. support has dramatically increased and companies We will however be keeping an eye on how have proliferated but commercial applications are things progress, in particular the Government’s still being established and Chinese technology still commitment to rely mainly on market forces as lags behind that of global leaders. the key driver of change after the initial stimulus of the MIC 2025 plan.
China’s IP environment is improving with changes to the laws and better enforcement.
18 | www.ukti.gov.uk Example UK company investing in R&D and innovation in China
GKN is a global engineering group which designs, For GKN, the answer to the increasing challenge from manufactures and services systems and components for Chinese competitors is to stay ahead, growing with them, the world’s manufacturers. It has four divisions including while continuing to invest in global R&D and innovation to GKN Aerospace, GKN Driveline, GKN Powder Metallurgy maintain its lead. In other high-end sectors it is investing and GKN Land Systems. GKN’s business units fit closely to leverage opportunities higher up the value chain. GKN with the 10 key sectors listed in the MIC 2025 plan, so they Aerospace acquired Fokker Technology in 2015 to enhance are paying close attention to the development in their own its position as a leading supplier to the aerospace sector. 10-year plans. Fokker has an aircraft electric-wiring business in Langfang, Hebei Province, and a contract with the Commercial GKN was the first Western company to invest in the Aircraft Corporation of China (COMAC) to convert a range automotive component industry in China, and now of its small jets for high-end business use. Additionally, employs around 8,000 people across multiple locations. GKN Powder Metallurgy will expand its production capacity Shanghai GKN Huayu Driveline Systems (SDS) was in China with new plants due to open in 2016. established as a joint venture with SAIC in 1988 and is the market leader in driveline products in China. In 2015, GKN MIC 2025 includes a specific goal to manage developments in Driveline announced it would invest around £500 million the aerospace sector to avoid the challenges that China has over the next five years to meet growing demand for the faced in the automotive industry, where foreign brands still company’s driveline systems, all-wheel drive (AWD) and dominate the market and domestic companies have struggled hybrid technologies. to compete fully. GKN is responding by both working more closely with Chinese partners who want to move up the value Whilst the automotive sector has seen a challenging year in chain, and also making sure that it stays ahead of the fast- 2015, affecting investments by all the major players, GKN moving developments in the global industry. remains confident. Arnaud Lesschaeve, GKN Driveline Asia Pacific President, said: “GKN is the only driveline supplier that can design, develop and produce intelligent AWD and hybrid AWD systems completely in-house, with capability to deliver globally.”
www.cbbc.org | 19 Conclusions & Next Steps
The Made in China 2025 initiative is businesses with an eye on the wider Furthermore, this report is just the far-sighted and wide-ranging. While picture should recognise significant beginning of CBBC and UKTI’s work there are short-term goals which opportunities too. Above all else, to help British companies meet the will prompt Chinese companies and UK companies must stay ahead of challenges and take advantage of the local governments into rapid action the game in terms of technological opportunities presented by MIC 2025. – and many have already begun – it development – it is this technology is important also to bear in mind the gap which China seeks to close, and In the coming period we will: objectives beyond 2025 and towards therefore it is here where British the second half of this century. players hold the aces. • Continue to share insights into, and analysis of, the implementation of In this respect the initiative can be But there is potential for mutually MIC 2025 considered in the same context as the beneficial cooperation. Ultimately the concurrent Belt and Road initiative, goal of MIC 2025 is to enable Chinese • Organise seminars and roadshows as a long-term and comprehensive manufacturers to stand on their own to showcase UK strengths in the 10 blueprint for Chinese growth on the feet in the global market through key sectors world stage. the development of independent strengths. This does not mean • Identify links with potential Chinese Geographically, the opportunities isolation from overseas players, but partners for UK companies in these will be widespread and diverse. rather closer ties, which can help raise sectors Companies will be well advised to the game of both sides, whether it be take a granular, local view. Openings through innovation in third countries • Organise visits to Chinese industrial will vary between different cities or closer adherence to international parks and institutions tasked with and regions of China, as will the way quality and environmental standards. MIC 2025 projects in which provincial governments And what China lacks in this process, implement the central plan. Turning the UK can, in many cases, provide – • Work at a provincial and municipal this to UK companies’ advantage will as we hope this report demonstrates. level to understand local initiatives, require a close understanding of the opportunities and incentive local business environment in the Follow-Up policies for MIC 2025, and how UK relevant sector of industry. CBBC and companies can take advantage our partners can help in this respect. Advice and support are available to both established UK operators and • Provide individual support to UK There are certainly risks and new entrants, from CBBC, UKTI and companies wishing to explore challenges to be aware of, but other partners across both countries. specific opportunities
20 | www.ukti.gov.uk And what China lacks in this process, the UK can, in many cases, provide - as we hope this report demonstrates.
UK Trade & Investment CBBC: Advanced Manufacturing Sector UKTI has invested in resources to support UK business across all areas of CBBC has sector specialists in MIC 2025. Our key sector targets are Advanced Manufacturing and aerospace and commercial aviation, Transport, Energy, ICT and other space, airports, automotive, advanced related industries both in China manufacturing (including new and and the UK, and a membership that advanced materials), innovation, includes global leaders like Rolls marine and rail. We are supported by Royce, Jaguar, and GKN. We also have key sector specialists in the UK and a highly experienced team of project China and by teams throughout China managers across all sub-sectors of and the UK. In particular we offer the MIC 2025 initiative who over the help and guidance on all elements of past two years have helped over 60 intellectual property law, protection UK companies to understand market and advice on defending IP in China. opportunities, identify customers and partners, establish a presence in We run regular missions in all sectors, China, and address specific industry arranging meetings and hosting challenges around regulation and dialogues between Chinese and British market access. companies to improve understanding of the markets and ensure that In 2015, CBBC organised more than 30 realistic, commercial partnerships are events and activities in the advanced formed to the mutual benefit of all manufacturing and technology sectors parties. We also run series of bilateral and we work closely with UK and working groups that engage the Chinese government departments highest levels of government to open to identify opportunities for British up access to markets. companies, and help Chinese investors to understand more about the UK. The Embassy more widely works to Our activity includes market briefings, shape policy across China and sets out policy dialogues, networking activities, the frameworks where the Golden roadshows and seminars across China, Era of Sino-British collaboration will and bespoke projects to support UK lead to a greater engagement in the Government lobbying on trade issues commercial sphere, bringing together like import taxation, and protection of the rich expertise and capabilities intellectual property. of the UK business world with the ambitious and diverse Chinese market. We have also undertaken a number of large high profile industry research projects, and produce regular sector insights across many industries including automotive, aerospace, transport, and technology working with trade associations and sector working groups across the UK and China.
www.cbbc.org | 21 Appendix: MIIT List of Pilot Demonstration Projects (2015)
Pilot Demonstration Project Chinese Company / Institute Province 1 Wisdom cloud aerospace products manufacturing Beijing Aerospace Science & Tech Company Beijing 2 Fertilizer & intelligent manufacturing services Sinochem Fertilizer Company Beijing 3 Mining & industrial intelligent cloud platform services General Research Institute of Mining & Metallurgy Beijing 4 Intelligent control systems Beijing Advantage Systems Engineering Company Beijing 5 Microelectronics intelligent assembly China Electronics Technology Group Corporation Shanxi 6 Smart aluminum production United Aluminium Company Inner Mongolia 7 Smart dairy production Yili Industrial Group Company Inner Mongolia 8 Digital mines - metallurgical Anshan Iron & Steel Group Mining Company Liaoning 9 Intelligent machine tools Shenyang Machine Tool Group Liaoning 10 Intelligent medical imaging equipment Shenyang Neusoft Medical Systems Company Liaoning 11 Hot-rolled steel intelligent demonstration plant Baoshan Iron & Steel Company Shanghai 12 Smart mechanised coal mining equipment World Technology Company Shanghai 13 Intelligent networks of automotive production Shanghai International Automobile City Group Shanghai 14 Shipbuilding intelligent pilot demonstration plant Nantong COSCO KHI Ship Engineering Company Jiangsu 15 TCM smart production pilot demonstration Jiangsu Kang Edge Pharmaceutical Company Jiangsu 16 Food & beverage production intelligent pilot Hangzhou Wahaha Group Zhejiang 17 Intelligent communications equipment manufacturing Eastern Communications Company Zhejiang 18 Electronic glass intelligent manufacturing Rainbow Hefei Company Anhui 19 Smart petrochemical plant China Petroleum & Chemical Corporation Jiangxi 20 Helicopter systems Changhe Aircraft Industry Group Jiangxi 21 Tyres smart pilot demonstration plant Racewheel Jinyu Group Shandong 22 Smart cement manufacturing China United Cement Group Co., Ltd. Shandong 23 Smart glass fiber factory Taishan Glass Fiber Co., Ltd. Shandong 24 Diesel intelligent manufacturing pilot demonstration Weichai Power Co., Ltd. Shandong 25 Appliances intelligent manufacturing Haier Group Company Shandong 26 Cheese dyeing intelligent plant pilot demonstration Shandong Kangping Group Shandong 27 Clothing customisation pilot demonstration Qingdao Red Link Group Shandong 28 Industrial innovation service cloud platform Application of Science & Technology Company Shandong 29 Intelligent manufacturing fiber pilot demonstration Optical Fiber & Cable Company Hubei 30 Construction machinery Intelligent manufacturing Sany Group Hunan 31 Industrial 3D printing system pilot demonstration Hunan Huasheng Shu-Tech Company Hunan 32 Injection molding equipment & services intelligent pilot demonstration Borch Machinery Company Guangdong 33 Intelligent manufacturing of TV equipment Shenzhen Skyworth - RGB Electronics Guangdong 34 Mobile phone accessories intelligent manufacturing Dongguan Jin Sheng Precision Components Guangdong 35 Keyboard integration intelligent manufacturing Shenzhen Pennefather Science and Technology Guangdong 36 Laser cutting machine intelligent manufacturing Hans Laser Technology Industry Group Guangdong 37 Smart rare earth smelting plant CHALCO Guangxi Guosheng Rare Earth Development Company Guangxi 38 Pharmaceutical preparations intelligent production Plymouth Hainan Pharmaceutical Company Hainan 39 Smart car manufacturing integrated demonstration Chongqing Changan Automobile Chongqing 40 Intelligent manufacturing TV pilot demonstration Sichuan Changhong Electric Sichuan 41 Hydraulic parts smart manufacturing demonstration AVIC Liyuan Hydraulic Guizhou 42 Intelligent power equipment service cloud platform Xi’an, Shaanxi Drum Power Company Shaanxi 43 Collaborative development & regional aircraft manufacturing pilot demonstration Xi’an Aircraft Industry Group Shaanxi 44 Smart foundry pilot demonstration Sharing Group Company Ningxia 45 Transformer intelligent manufacturing demonstration TBEA Company Xinjiang 46 Household products smart manufacturing pilot Meike International Houseware Company Jiangsu
Source: MIIT (http://www.miit.gov.cn/n11293472/n11293832/n12845605/n13916928/16746307.html)
22 | www.ukti.gov.uk Contact details
China-Britain Business Council
CBBC offers a wide range of support covering advice, events and access. UK We are a member organisation, representing nearly 1,000 UK companies 3rd Floor, Portland House in their business with China – multinationals, medium-sized and start-ups Bressenden Place – across all industry sectors. Our business services include market research London SW1E 5BH and advisory, business match-making and meetings, the CBBC Launchpad scheme to get businesses started on the ground, conferences, seminars, [email protected] networking events, webinars, training and translation services. Tel: +44 (0) 20 7802 2000
CBBC offices in the UK: London, Scotland, Wales, Northern Ireland, East China of England, East Midlands, West Midlands, North West, North East, South British Business Centre West, Yorkshire & Humberside. 1001 China Life Tower 16 Chaoyangmenwai Dajie CBBC locations in China: Beijing, Changsha, Chengdu, Chongqing, Fuzhou, Beijing 100020 Guangzhou, Hangzhou, Hong Kong, Nanjing, Qingdao, Shanghai, Shenyang, Shenzhen, Wuhan, Xian. [email protected] Tel: +86 (0) 10 8525 1111
UK Trade & Investment
British Embassy Beijing British Consulate-General Wuhan British Consulate-General Chongqing 11 Guang Hua Lu, 33/F, Ping An Finance Centre, Suite 2801, Jian Guo Men Wai Wuhan Tiandi, Metropolitan Oriental Plaza, Beijing 100600 1628, Zhongshan Avenue, 68 Zourong Road, China Jiang’an District Yu Zhong District Wuhan 430010, China Chongqing 400010, China Tel: +86 (0) 10 5192 4000 Fax: (+86) (10) 5192 4218 Tel: +86 (0) 27 8270 3600 Tel: +86 (0) 23 63691400/63691500 [email protected] Fax: +86 (0) 27 8270 3699 Fax: +86 (0) 23 6369 1525 [email protected] [email protected]
British Consulate-General Guangzhou British Consulate-General Shanghai 22/F Guangzhou IFC, The British Centre, 5 Zhujiang Road West, 17F Garden Square, Zhujiang New Town 968 West Beijing Road Guangzhou 510623, China Shanghai 200041, China
Tel: +86 (0) 20 8314 3000 Tel: +86 (0) 21 3279 2000 Fax: +86 (0) 20 8333 6485 Fax: +86 (0) 21 6279 7388 [email protected] [email protected]
www.cbbc.org | 23 Notes
CBBC UK Head Office CBBC China Head Office British Embassy Beijing 3rd Floor, Portland House, The British Centre, 11 Guang Hua Lu, Bressenden Place, Rm 1001, China Life Tower, Jian Guo Men Wai, London 16 Chaoyangmenwai Avenue, Beijing 100600 SW1E 5BH Beijing 100020 China
Tel: +44 (0) 20 7802 2000 Tel: +86 (0) 10 8525 1111 Tel: +86 (0) 10 5192 4000 www.cbbc.org www.ukti.gov.uk
ChinaBritain CBBC_China China-Britain 英中贸易协会 Business Council