Double cutting edge about to get sharper

Clever use of two government initiatives will give companies in China and Germany an upper hand, envoy says

As China and Germany work together in manufacturing under the countries' initiatives, Made in China 2025 and Industry 4.0, their products will become more competitive worldwide, Germany's ambassador to China Michael Clauss says.

"Industry 4.0 and Made in China 2025 aim both at digitalizing manufacturing, i.e. bringing the digital world and manufacturing together," he says.

"We share the same approach because our economic structures are similar."

In an interview days before German Chancellor Angela Merkel visits China at the end of this month, Clauss says innovation will be a focal point of her talks in the country.

It will be Merkel's eighth visit to China since she took office 10 years ago, making her one of the most frequent visitors among Western leaders over the past decade.

Industry 4.0 is a strategy the German government has devised that promotes computerization in manufacturing. It aims to improve production by creating a networked, flexible and dynamically self-organizing manufacturing process for highly customizable products.

Made in China 2025 was unveiled by China's State Council in May, a project aimed at moving China from the low-end manufacturing it has relied on for the past 30 years to manufacturing of a much more advanced kind.

Different countries are taking different approaches to modernizing their industry. The United States, for example, is heavily emphasizing information technology, while Germany and China have stressed automation.

Manufacturing is critical to the economies of both countries, accounting for 40 percent of China's GDP and 25 percent of Germany's.

Leading industries in both are now working together under the frameworks of Industry 4.0 and Made in China 2025, and Clauss says that such collaboration will not only make what they eventually produce more competitive, but that it will transform the way they work, too.

Cooperation in the framework of Industry 4.0 and Made in China 2025 "is not a purely theoretical concept. It is being put into practice It is about how to become more competitive in the production of goods. This is a completely new field of Sino-German cooperation," he says.

He cites the German software company SAP and the Chinese networking and telecommunications company Huawei, which are looking at new manufacturing methods that will make production more efficient.

Another case in point is the German multinational Siemens, which has worked with the rubber and tire machinery supplier Mesnac in Qingdao, Shandong province, to build a digitalized factory.

Zhang Bin, head of Mesnac's research institute, says Siemens' software has helped the company deal with big data, resulting in much more efficient communications between different manufacturing areas.

"Drawing on big data, equipment is able to identify potential failures and can issue warnings, meaning technical experts can do maintenance work that forestalls problems," Zhang says.

Germany is China's largest trading and technology partner in the European Union, and China is Germany's largest trading partner in Asia; China is Germany's fifth-largest export market, and Germany is China's second-largest supplier of goods and services.

Trade between China and German was worth 160 billion euros last year, nearly 600 times what it was in 1972, when China and West Germany established diplomatic relations.

The trade, equal to China's combined trade with Britain, France and Italy, accounts for nearly one third of the trade between China and Europe.

Clauss says that compared to other European countries, Germany's advantages lies in its strong industry.

Merkel's visit comes as China presses on reform in many areas. The 18th Communist Party of China Central Committee will hold its Fifth Plenary Session in Beijing from Oct 26 to Oct 29.

High on the agenda will be the 13th Five-Year Plan (2016-2020), seen as critical for building a moderately prosperous society.

A previous announcement made after a meeting of the Political Bureau of the CPC Central Committee said China is entering a new normal of economic development and facing not only great opportunities but tough challenges, yet it will continue to focus on growth, putting a premium on quality, efficiency and sustainability.

In recent months, a slowdown in growth, turbulence in China's stock markets and depreciation of the renminbi have spurred debate about the country's economic prospects.

European countries that have pinned their hopes on China's reforms to boost their own economic prospects have been decidedly pessimistic.

"Many countries believe there will be a hard landing of the Chinese economy; we think this is a possible but unlikely scenario, especially unlikely if structural reforms were accelerated," Clauss says.

"A determined push for further reforms of the economy becomes ever more urgent. A clear signal toward accelerated reform and further opening-up, including toward foreign companies, is expected."

During the Third Plenum of the 18th CPC Central Committee in late 2013, Chinese leaders decided to deepen reform and opening-up. Under Premier Li Keqiang's leadership, numerous administrative approvals rules have been eased or abolished.

Clauss says that signals seem contradictory, because some indicate a further opening-up of the Chinese economy while others point in another direction.

Chen Zhimin, an expert on international studies with Fudan University in Shanghai, says: "As reform proceeds, there is a period in which new regulations overlap old ones, which may make it seem as though there are contradictions.

"Two years is too short a time to see substantial results from reform. Things need to be dealt with in a strategic way over the long term."

The European Union Chamber of Commerce in China undertook an audit on the third plenum this year based on the input of 37 working groups that cover different sectors.

Sixty-six percent of the groups said they saw some progress, but that work still remained, and 10 percent perceived targets had essentially been reached or that there was a clear working plan. However, 24 percent said they perceived little or no progress, or even regression.

Jia Xiudong, an international affairs expert at the China Institute of International Studies, says more patience is needed for China to implement reforms, given that industries may be at varying levels of development.

For industries that are important but less developed, such as banking, "it's best to take the time to ensure an efficient system of risk controls is in place", because if they are not that could pose risks worldwide, Jia says.

zhouwa@chinadaily.com.cn

(China Daily European Weekly 10/23/2015 page16)