By Lily Bearings
©2004-2008
The People's Republic of China, via a policy package passed by the Cabinet, has made a fundamental change in its targeted support for the country's manufacturing sector.
Until very recently, China's central planners had taken the position that the government would target and support assembled products. Companies focusing on assembled products were favored, through various means, because it was believed the economy would benefit from producing both the fundamental manufactured building-block components and the value-added skills and services that combined those basic components into more complex assemblies.
But the government has now reversed itself and policy will be favoring basic machinery and fundamental manufactured components.
The step back is necessary, the government believes, because China lags in most areas of research and development, production, quality and reliability of those basic manufactured components.
Promoting assembly has, to a large extent, resulted in poorly-made assemblies built from several or many inferior domestic components, creating a cascade of failure and products which have not been accepted on the world market.
Bearings were specifically noted as an area needing attention, particularly in the wind energy sector, where China's government-mandated ramp up in wind energy turbine production has meant foreign manufacturers now dominate in supplying those high-precision large bearings.
In fact, central planners now believe that failing to focus its efforts on world-class components is what is responsible for China becoming the world's largest net importer of several key components such as precision bearings, hydraulics and fluid control.
The government frets that its machine tool and basic machinery sectors depend too heavily on foreign-produced parts and components, as does its railroad infrastructure. They also contend that such dependency means foreign manufacturers are taking unfair advantage of the situation, putting China's manufacturers in the position of being forced to accept too-high prices, tolerate specifications and standards set by others, and adjust to unacceptable delivery schedules.
Going forward in the next planning period, the government will officially prioritize research and investment into producing higher quality and more reliable basic components. Once that is accomplished -- no specifics are being given -- the policy will then shift back toward the supporting production of value-added assemblies using domestically produced components.