It’s Time to Wake Up and Smell the Green Tea

Recent stories in the Western press describe impending doom for Chinese manufacturing. These stories compare the decline of Chinese manufacturing to Japan in the 1990s and tout the re-shoring of manufacturing to America. But to real China-watchers and experts, this is a naïve view. It assumes that the Chinese government will sit back and do nothing to correct the trends and that the Chinese economy will stagnate due to lack of innovation.

While Chinese manufacturing is not known for innovation, it really is just a matter of time. During the Cultural Revolution in the 1960s, Mao Zedong shut down the universities and China produced very few educated engineers. These would-have-been engineers of the 1960s are 60-70 years old today. If they had been educated, they would be very senior engineers and leading innovation. So there is a gap in senior Chinese engineering, but not for long. With 700,000 graduating engineers per year, China is quickly becoming the world’s powerhouse in manufacturing engineering and in continuous improvement.

The next phase in China’s industrial development is innovation and optimization.

With the average salary of an experienced Chinese manufacturing engineer at about $2500/month, it is becoming increasingly difficult for the rest of the world to keep up. Other low-cost countries do not have enough engineers or don’t have the infrastructure to compete. So manufacturing and manufacturing engineering will stay in China for many years to come.

To address the innovation gap, the Chinese government advocates student exchange programs and invites thousands of visiting professors into its universities to infuse creativity into the education systems. Over time, this will reignite the creative innovation spark that the Chinese displayed over thousands of years, inventing printing, gun powder, deep water bridges, massive sailing ships and irrigation to name a few. While U.S. politicians tell us not to worry because China cannot innovate, the Chinese are busy proving them wrong.

To address optimization, China has started on the journey toward industrial automation. Automation and the adoption of software systems will dramatically increase productivity at factories and governmental agencies, and will drive continuous improvement and optimization. Although this is a long road to travel, it is nonetheless the road Chinese manufacturers are on.

Although the current European economic crisis will soften the growth for Chinese manufacturing, long term it will have little effect. This is because China is rapidly increasing its production for domestic markets as export markets decline. China’s domestic market will soon be the largest in the world.

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