Experts: Advancing modernization will move nation up the value chain

New economic growth drivers and competitive advantages will emerge as China beefs up its push to build a modern industrial system amid challenges including the US government's export restrictions on key technologies and the restructuring of global supply chains, renowned economists and industry experts said.

Hans-Paul Burkner, managing director and global chair emeritus of Boston Consulting Group, said China's efforts to advance industrial modernization will help the country move up the value chain, rendering its economy "more innovative, talent-intensive, consumption-driven and green".

The term "modern industrial system" has become a key phrase in China, with the top leadership highlighting it as a priority for the country's economic development.

In an article published in February in the Qiushi Journal, a flagship magazine of the Communist Party of China Central Committee, Xi Jinping, general secretary of the CPC Central Committee, said China should accelerate and upgrade its industrial system by planning ahead in key areas and comprehensively modernizing its industrial system.

At a group deliberation during the annual session of China's national legislature last month, Xi, who is also Chinese president, said the manufacturing industry is indispensable to China at all times, and the country should advance new industrialization.

Bai Ming, deputy director of international market research at the Chinese Academy of International Trade and Economic Cooperation, said President Xi's emphasis on manufacturing showed that a modern industrial system will be key to China's economic development over the next few years, and will have a profound impact.

"In the face of growing external risks, 'Made in China' needs to be backed by a stronger industrial system," Bai said.

Burkner agreed, telling China Daily that Chinese companies "have become very competitive, not just because of cost, but also because of quality and innovation. We see quite a lot of Chinese companies being top producers of patents and really good products, and we see them all over the world."

But a greater push is needed to further boost their innovation capabilities. This will help China maintain its important position in global supply chains amid headwinds such as geopolitical tensions and talks of relocating production back to developed countries, Burkner added.

China has the most complete industrial system in the world, with the country ranked the world's largest manufacturing country for the 13th consecutive year in 2022, when China's manufacturing output accounted for nearly 30 percent of the world's total, according to the Ministry of Industry and Information Technology.

But China still faces bottlenecks in crucial technologies such as semiconductors, and more efforts are needed to move toward greener, smarter and higher-end manufacturing, experts said.

"The industrial economy is the field with the most innovation activities," said Jin Zhuanglong, minister of industry and information technology.

Statistics show that the industrial economy accounts for less than 20 percent of the US GDP, but 70 percent of US innovation activities are directly or indirectly dependent on its industrial economy, he said.

Amid increasingly fierce international competition, it is necessary to build a modern industrial system and improve the resilience and security of China's industrial and supply chains, Jin said.

The United Nations has forecast that India will surpass China as the most populous country this year, and some experts worry that this could reduce China's advantages in manufacturing.

But Jeffrey Sachs, a renowned economist and director of the Center for Sustainable Development at Columbia University, said: "China's strength right now is that it is on the cutting edge of many of the most important technology innovations for the future, which will be very good for China's manufacturing industry in the future."

Denis Depoux, global managing director of consultancy Roland Berger, said industrial modernization is also crucial to unleash further domestic demand and consumption in China.

"To uplift consumption, more disposable income is the key. And this additional wealth can only be generated by an increase in productivity," Depoux said.