China to develop 10,000 “little giants” for advanced manufacturing
People walk past the temporarily closed 300-meter SEG Plaza in the Chinese Technology Center in Shenzhen, southern China’s Guangdong Province, May 24, 2021. Photo: CFP
Six Chinese ministries jointly issued a directive over the weekend stating that by 2025, the country aims to develop 10,000 “small giant” companies specializing in niche sectors and 1,000 champion companies in a single industry, as well as leading business groups.
Industry watchers said the directive underlines China’s strategic policy shift over the next five years to focus on breakthroughs in specific and critical sectors and supply chains where the country may be vulnerable. in the midst of a spiraling tech war between the world’s two largest economies.
Preserving a large and comprehensive domestic manufacturing sector could remain a key part of the overall plan, but China will also step up efforts to create local “hidden champions” – the small and medium-sized enterprises (SMEs) that dominate the major markets in the world. niche sectors – to fill gaps with the United States, Japan and Germany in advanced manufacturing.
Among the six ministries were the Ministry of Industry and Information Technology (MIIT), the Ministry of Science and Technology, the Ministry of Finance and the Ministry of Commerce.
They proposed the establishment of a working mechanism to guide specialized SMEs to become “small giant” companies in key sectors of the internal market and champions on the international market.
Large groups will also be guided to become competitive leaders on a global scale. Such a “gradient pattern” in manufacturing is expected to form by 2025.
Other measures of the directive relate to improving the capacity for independent innovation, facilitating the modernization of industry and supply chains, and improving policies for financing and developing talent.
An MIIT official said this effort is necessary to boost the vitality of market entities and promote high-quality development of the manufacturing sector. It will also help prevent risks and improve self-sufficiency in industry and supply chains.
“It’s a lesson we learned from the US crackdown on China’s technological rise. During the period of the 13th Five-Year Plan (2016-20), we prioritized market scale and industry production, but the bitter technology war between China and the United States exposed the risks of running out of “hidden champions” in congested industries, “Tian Yun, vice director of the Beijing Economic Operations Association, told the Global Times on Monday.
Analysts said the “hidden champions” – portrayed by Netherlands-based lithography equipment maker ASML – are of strategic importance to the new round of global manufacturing competition.
The United States, Japan and Europe, which have already established a foothold in niche sectors, are redoubling their efforts to close the gaps and consolidate their leadership positions.
The Biden administration is reportedly leading a supply chain review in sectors critical to the US economy, including semiconductors and high-capacity lithium batteries. The move aims to address vulnerabilities and build domestic manufacturing capacities.
“China has accumulated rich experience in the development of industry titans like Huawei in the past. Now we need to change policy direction to move up the manufacturing ladder during the period of the 14th Five-Year Plan (2021- 25), “Tian said.
Efforts are already underway in China. A third generation semiconductor industrial base developed by Bronze Technologies is being built in Shenzhen, in the province of Guangdong (southern China). The project, with a total investment of 350 million yuan ($ 54.17 million), was ranked among the city’s major projects in 2021 and marks a new effort by local authorities to accelerate the development of the chip industry.
Analysts said China is still in the second and third rungs of advanced manufacturing, but leading in sectors such as 5G, quantum communications and aerospace.
Hu Qimu, chief researcher at the Sinosteel Economic Research Institute, told the Global Times on Monday that China’s complete industrial chain, along with a systemic advantage and abundant supply of talent, could help the country in a sprint total to narrow the gap with the tastes of the United States and Europe.
China is now the largest manufacturer in the world, with industrial added value reaching 31.3 trillion yuan in 2020. It is also the only economy in the world to have all industrial categories listed by the UN, according to media reports.
“Making inroads into stuffy industries requires investment over a decade, and we could see early results in the next five years,” Tian said.