Transforming China’s Manufacturing Through Industrial Internet of Things

Made in China 2025 is expected to create opportunities for foreign-invested enterprises (FIEs) in China in the medium-term.

December 2018, by Pilar Dieter

Digital capabilities of China's industrial sector are advancing its competitiveness. Chinese government's strategic plan, named "Made in China 2025", along with the industry's fourth generation technologies are driving Chinese factories to reduce the competitiveness gap compared to the Western world. The strategy seeks to engineer a shift for China from being a low-end manufacturer to becoming a high-end-producer of goods.

Since the country witnessed overcapacity in heavy industry which has dragged China's manufacturing down, the government started to roll out the "Made in China 2025" campaign. The overall growth of China's manufacturing GDP kept declining from 14.4% in 2005-2010 to 4.4% in 2015-2020.

The campaign, led by the Chinese government, is expected to encourage the growth of Chinese high-end manufacturing companies. Furthermore, this policy is also projected to create opportunities for foreign-invested enterprises (FIEs) in China in the medium-term.

The advancement and expansion of robotics is listed as one of the key focus industries in the "Made in China 2025" strategy. Aiming to make up half of the Chinese market by 2020 and 70% by 2025 is the ultimate goal is for Chinese industrial robots, by which local robotics is expected to have the capability in competing on par with global competitors. 

Chinese government considers that China will create new opportunities in consumption-driven industries and also new manufacturing sectors through the fundamental transformation driven by technology.

Aligned with the government strategy, Chinese manufacturers are starting to digitize and upgrade their factories, reduce costs and conclusively secure a high return on investment. Chinese manufacturers are catching up boldly and even outpacing several Western competitors by automating swiftly, although some are still in the digital followers and laggards category,

Disruptive technology, including Industrial Internet of Things (IIoT), portrays an important role in the automation of processes, as the future as Industry 4.0 unfolds,

Multinational corporations are present in most categories in the five layers of Industrial Internet of Things (IIoT) structure. Nonetheless, Chinese firms (Alibaba & Tencent) grow to be more proactive at the top of the stack, allowing integration into the industrial sector commonly dominated by hardware players. The large quantity of data, advances in video and voice recognition, as well as online payment schemes, have pushed Chinese firms into the top of the IoT stack - shifting into the B2B space and contributing end-to-end solutions.

Multinational corporations need to develop swiftly in order to capture bigger opportunity in IIoT, as the value pool is moving speedily from lower layers upwards to software and platforms - although this will need garnering relevant cases. The cost would reach around 20%-35% of IIoT spending in the top of the stack, with current players are China's Tencent and Alibaba along with United States' IBM and Oracle.

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