China needs to ride 'next wave' to keep growing, Deloitte report says
China faces an inflection point: The ingredients that propelled its rapid expansion and unprecedented development over the past 30 years will not fuel its expansion over the next three decades. Instead, China faces an opportunity to transition to a new wa
To move up the “value chain”, China must evolve from relatively commoditised manufacturing and lower-skilled assembly to a more innovation-based economy, which includes design, logistics, financial and business services, high-tech industries and life sciences, says Deloitte Global’s report “Competitiveness: Catching the Next Wave in China”.
“There is no question that China’s economic transformation over the last three decades has been remarkable,” said Gary Coleman, Deloitte Global managing director for industries. “To grow to even greater heights, China today must embrace new sectors and strategies for growth, as well as build a culture of innovation, in order to maintain its comparative advantage.”
The report maintains that to thrive amid today’s global economic challenges, China must transition from labour- and capital-intensive activities to those that utilise knowledge, innovation, design, information-technology sciences, software, and marketing. The sectors driving China’s “next wave” of growth should focus on more specialised and innovative production.
Aerospace: Currently a small proportion of the national manufacturing industry, aerospace has been identified as a high-priority sector in China’s growth plans. Developing a viable aircraft industry will test Chinese firms’ ability to penetrate a space clearly dominated by the United States. With government support, China could very well become a significant player in the aviation sector.
High-value machinery and components: China is likely to become a regional hub for machinery production. Similarly, a shift in electronics components has caused a rapid increase in trade of higher-tech products and components.
Life sciences: The domestic market for drugs and medical devices is rapidly expanding within the Chinese life-sciences industry. With government support and rising investments from foreign pharmaceutical firms into research and development, China is positioned to become an important and potentially disruptive layer by 2025.
Mobile technology: China is now the world’s largest consumer of mobile phones, with its subscribers growing from 7 per cent of the total in 2000 to nearly 90 per cent last year. Chinese innovation in mobile gaming, communications, e-commerce, and shopping software and services holds enormous potential to boost the national competitiveness and spur new mobile-specific industries.
Logistics and other services: Shifting to innovative and specialised manufacturing creates opportunities for companies to capture new value in the aftermarket for goods after production. Adding cloud computing and data analytics to business practices has tremendous potential to propel the distribution sector to one of the fasting-growing industries over the next two decades.
Education services:With an annual government investment in education of about $250 billion, boosting the quality of the education system has become a top government priority in the transition towards a more services-based economy. Despite companies opening private universities for their employees, expanding access to education is still a critical factor in China’s economic development.
Energy: China’s rapid growth and development have created a demand for more innovative and environmentally friendly energy policies. This demand is creating opportunities for China to address growing ambient air pollution and greenhouse-gas emissions while fuelling economic growth.
The report also discusses the role of government and its revamping of economic policies. Among these is the opening up of markets to increased foreign investment critical to China’s continued growth trajectory and its ability to take its place on the world stage.
