China’s high-tech push seeks to reassert global factory dominance

TIANJIN, China — At a factory in China’s north, workers are busy testing an automated vehicle designed to move bulky items around industrial spaces, one of a new generation of robots Beijing wants to shift the country’s manufacturing up the value chain.

The robot’s Tianjin-based maker has received tax breaks and government-guaranteed loans to build products that modernize China’s vast factory sector and advance its technological expertise.

“The government is paying great attention to the manufacturing sector and the real economy — we can feel that,” said Ren Zhiyong, general manager of Tianjin Langyu Robot Co., as he gave Reuters a guided tour of his plant.

China is backing R&D efforts by high-tech manufacturers like Langyu, driven by an urgent desire to reduce reliance on imported technology and reinforce its dominance as a global factory power, even as it cracks down on other parts of the economy.

Beijing ’s pivot puts the focus on advanced manufacturing, rather than the services sector, to steer the world’s secondlargest economy past the socalled “middle income trap,” where countries lose productivity and stagnate in lowervalue economic output.

He expects revenues to more than double to 100 million yuan ($15.52 million) this year from 2020, on increased demand for high-tech products such as Langyu’s automated guided vehicles.

More broadly, the city of Tianjin plans to invest two trillion yuan ($311 billion) between 2021 and 2025, with 60% earmarked for strategic emerging industries, Yin Jihui, head of the Tianjin Industry and Information Technology Bureau, told Reuters.

The investment, comprising corporate and government outlays, will help boost manufacturing to 25% of economy in 2025 from 21.8% in 2020, Yin said.

China’s five-year plan in March pledged to keep manufacturing’s share of gross domestic product (GDP) “basically stable,” in contrast to the 2016-2020 plan that focused on services to create jobs.

The coronavirus and the Sino-US trade war have reframed the way policy makers see factories: no longer just grimy relics of an old economy but assets of strategic value.

During the pandemic, China’s factories have churned out everything from masks and ventilators to work-fromhome electronics, propelling the economic recovery from its record slump in early 2020.

Additionally, the trade war with the United States and Washington’s tech curbs exposed China’s lack of high-tech know-how, hardening Beijing’s resolve to speed up innovation.

Tianjin-based Ringpu Biotech, which makes animal vaccines, has faced critical import delays on US equipment and materials used for R&D and quality control.

Manufacturing’s share of China’s GDP fell to 26.2% in 2020 from 32.5% in 2006, while the services sector has lifted its contribution to 54.5% from 41.8%, according to the World Bank.

Officials worry too rapid a shift towards services, which employs more people but is less productive than manufacturing, could undermine long-term growth, as it did in some Latin American economies.