Industrial upgrading, services key to Chinese manufacturing success

With China taking more decisive and practical measures to help companies in their industrial upgrading processes and diversify their sales channels worldwide, Porsche Consulting GmbH, a German management consultancy, pledged to offer more services to heighten Chinese firms' innovation strength and resources allocation during the 14th Five-Year Plan period (2021-25), said a senior executive of the company.

China's 14th Five-Year Plan not only provides a long-term vision, but also mandates a strategic shift toward an innovation- and technology-driven economy, said Zhao Jiawei, managing director and CEO of Porsche Consulting (China).

In the past, China relied primarily on the development of economies of scale, leveraging its substantial domestic market as well as rich labor reserves in advancing almost all of its industrial sectors. A great deal of businesses, including international companies, benefited from this development.

However, sustaining growth in upcoming decades will require a stronger focus on "quality" rather than simply "quantity", Zhao said, adding this means investing in building fundamental research capabilities in science and technology, developing physical and digital infrastructure, as well as boosting the financial and capital markets.

"Such a transformation and its key elements have been publicly discussed in China for a considerable period of time," he said, adding that what the company sees now is literally an overarching road map strongly backed by the government.

"It should be fairly encouraging to the business community as China implies a more advanced economic development cycle and offers tremendous opportunities for growth," Zhao said.

Founded in 1994, in response to successful restructuring of the Porsche automaker, Porsche Consulting's clients include multinational groups, medium-sized companies, as well as clients from the financial services sector, consumer goods, retail and construction sectors.

After opening its first office in Shanghai in 2014 and its second branch in Beijing this year, the Stuttgart-based company plans to open its third branch office in South China in 2022, as China has already become a strategic market for the German firm and it is keen to continue to enlarge its client base geographically in the country.

In addition to applying proven solutions from the automotive industry to other sectors, Zhao said the company, supported by more than 670 employees worldwide, will deploy more resources to help its Chinese clients put strategies into practice, in particular in areas such as the internet of things and digitalization.

In terms of the ongoing transformation after the COVID-19 pandemic was brought under better control in China, the executive said that companies from different sectors have a wealth of experience to share.

Digitalization, service model innovation and new ways of working are not all driven by the COVID-19 crisis. Nonetheless, the crisis has compelled these companies to revisit these topics as a means of improving efficiency and enriching customer experiences.

"What matters is not what to change but how to change," Zhao said.

"Taking digitalization as an example, we see companies digitalize for the sake of digitalization such as introducing systems that are not synchronized, leading to designs that do not fully account for customer pain points," he said.

In this scenario, he said it is more critical to develop strategy top-down and deploy it programmatically. Companies will seek ways to change or transform more actively than before, but fundamental business principles such as customer centricity and lean operations should remain unchanged in the post-COVID-19 era.

China's 14th Five-Year Plan highlights efforts to cultivate advanced manufacturing clusters and to promote the development of key industries.

They include integrated circuits, aerospace, marine engineering equipment, robots, advanced rail transit equipment, advanced power equipment, engineering machinery and medical equipment.

Sun Fuquan, vice-president of the Beijing-based Chinese Academy of Science and Technology for Development, said a large number of companies rely on transportation and geographical convenience, abundant resources, policy dividends and other factors to create cost advantages. This prompted enterprises to concentrate on specific areas. But such approaches are just a scale-expansion strategy.

"Many Chinese companies have continued to add investment to improve the technical content in a bid to move up the value chain," said Bai Ming, deputy director of international market research department at the Chinese Academy of International Trade and Economic Cooperation.

By working with global partners, he said a growing number of Chinese companies have also begun to cultivate their "soft power" for exports.

Chinese companies focus on improving comprehensive capabilities of supply chain management, brand building, quality control and after-sales services to further compete with foreign rivals, he said.