China Market Insider Germany is China’s preferred technology partner

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Asia Waypoint

Germany is China's preferred technology partner in the manufacturing industry — a double-edged sword.

China sees Germany as the most important source for the modernisation of its manufacturing industry. This trend, which has been clear for several years, has just been confirmed once again in a decree issued by the Beijing central government, in which Germany is the only partner country to be explicitly mentioned. In the short term, this creates major opportunities for German companies, especially in the field of advanced manufacturing, but in the medium to long term it also poses risks for Germany as a business location.

Last week, the Chinese Ministry of Industry and Information Technology MIIT published a new decree on the implementation of "Integrated Development of Manufacturing and the Internet". The fourth of four chapters is entirely devoted to “Chinese-German cooperation in the field of smart manufacturing”.

Behind these bureaucratic clichés lies an immensely important part of Chinese industrial policy, which decides on multi-billion-dollar subsidy programmes and current market opportunities in the People's Republic, but in the long term — due to the sheer size of the Chinese market and Beijing's nationalist policy — also has an impact on the competitiveness of the German manufacturing industry.

Five years ago, China published an ambitious modernisation plan for its manufacturing industry called “Made in China 2025”, which is largely inspired by German plans for Industry 4.0. The ambitious ten-year plan is one element of the strategy to turn the People's Republic into a global technological superpower by the centenary of its founding in 2049.

Outside of China, however, “Made in China 2025” had triggered much criticism. Since then, the name of industrial policy has been removed from the official vocabulary by the censors of the communist state and party leadership in Beijing. However, implementation continues to go according to plan, and that includes regular adjustments in implementation.

The latest update, published last week by MIIT, sets clear targets for the “integration of manufacturing and the Internet” to be implemented by 2020, as Maschinenmarkt (China) now reports. The first chapter deals with standardisation in the digitisation and networking of the manufacturing industry. In the second chapter, the central planners in Beijing give instructions for the further expansion of cross-industry internet platforms. Chapter three looks again at internet platforms for particularly important branches of industry, including mechanical engineering and the industrial sectors “green production” and “safe production”.

The entire fourth chapter is devoted to cooperation with Germany. Germany is the only country mentioned in the planning document apart from China. Under the heading “Chinese-German cooperation in the field of smart manufacturing”, the Chinese party and government apparatus is urged to “support” the companies, industrial associations and scientific research institutes in Germany and China which have taken up the cause of cooperation in modernising the Chinese manufacturing industry.

According to the document, Sino-German projects for “additive manufacturing, robotics, new energy vehicles, mechanical engineering and other industries to improve smart manufacturing capabilities” are mentioned by name and are therefore particularly desirable. China intends to cooperate intensively with Germany on the standardisation of Industry 4.0 solutions, the establishment of vocational schools and the development of model industrial parks with a focus on advanced manufacturing.

For German companies that develop and sell future technologies, this means that they will be particularly welcome in China in the coming years. This will create market opportunities. “Foreign companies with highly sought-after technologies can currently benefit from the upgrading of Chinese industry,” wrote the authors of a study published last summer by the German Mercator Institute for China Studies on this topic.

However, Mercator and other analysts also warn against naivety in Germany. Made in China 2025 and its currently ongoing implementation under a new name are aimed solely at expanding domestic Chinese skills and relocating entire high-tech production cycles to China in the long term, i.e. not at a win-win strategy, as is often the case in Chinese media at present, according to the observers.

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