At a glance: The MIIT released another FYP that aims to advance China’s industry through comprehensive informatization of the economy. Specifically, the document outlines several key missions for 2025:
- Boost the adoption of digital services and tools across the economy, including digital business management, R&D and design tools, numerical control (automated machine production) of essential processes, etc.
- Transform manufacturing by upgrading industrial supply chains, interlinking equipment, building informatization and industrialization into standards development, etc.
- Prioritize industries like steel, petrochemicals, coal, aviation, shipping, automotive, raw materials, equipment manufacturing, and green manufacturing
MERICS comment: Moving up the value chain and boosting productivity is critical to achieving two top priorities set by China’s leaders: escaping the middle-income trap and mitigating demographic challenges.
For decades, China enjoyed the advantages of cheap low-skilled labor. Recently, wages have risen considerably, which has resulted in the offshoring of low-skilled production to other markets. Nevertheless, China’s industry lags behind in terms of total factor productivity and value-added production. In fact, productivity growth has slowed in recent years. Boosting productivity per worker through automation and enhancing product quality through smart manufacturing is viewed as essential to escaping the middle-income trap.
Higher productivity, widespread uptake of automation and smart manufacturing as promoted in this plan are viewed as key tools in addressing China’s quickly emerging demographic crisis. Unlike countries such as Japan and Germany which became rich before becoming old, China is aging in the middle of its development trajectory. China’s workforce is expected to decline by 35 million over the next five years. As the workforce shrinks and higher burdens are placed on the social security system, China’s economy will have to do more with less.
Leading European companies in these sectors may see abundant new opportunities. However, if China’s companies succeed in boosting productivity, European manufacturers will have to compete with much stronger companies in China, third markets and even at home.
Article: 14th FYP for the Integration and Development of Informatization and Industrialization (工业和信息化部关于印发“十四五”信息化和工业化深度融合发展规划的通知) (Link)
Issuing body: MIIT
Date: November 30, 2021