Dong Mingzhu, chairperson of Gree Photo: Courtesy of Gree

Editor's Note:

Recent media reports have highlighted Chinese manufacturing firms' struggles with financial losses and job cuts, exacerbating the public's anxiety about the future of China's manufacturing, a national pillar industry. The upgrading of China's manufacturing industry is the only way for its manufacturing enterprises to move beyond these problems, especially at a time when the whole world is going through a new phase of the Industrial Revolution. Global Times reporter Liu Tian (GT) recently interviewed Dong Mingzhu (D), chairperson of Zhuhai-based Gree Electric Appliances Inc, a Chinese veteran manufacturer of household electronic appliances, to address these issues and provide some guidance for Chinese manufacturing firms undergoing industrial transition and upgrading.

GT: There have been reports that many Chinese manufacturing firms are struggling with financial losses and job cuts. What's the root cause of this? Will this tide continue?

D: Manufacturing is the topmost priority in a country's economy. The biggest problem facing China's manufacturing is that Chinese manufacturing firms have not gained control of the core technology. Besides, some Chinese manufacturing firms are not trustworthy and do not show proper respect for consumers, as they are often eager for quick profits. If these issues are not addressed, an increasing number of Chinese manufacturing firms will collapse in the next three to five years.

But Chinese entrepreneurs should hold on as China's manufacturing encounters great difficulties. It is not enough to rely solely on branding to build the global image of Chinese manufacturing. China should be committed to building more brands that produce good-quality goods and possess leading technology. Only by promoting more and more excellent Chinese manufacturing brands to the international market can China's manufacturing sector improve its image.  

GT: What is the key to upgrading China's manufacturing industry? What problems do Chinese firms have to face to achieve that goal? And what should the Chinese government do to promote manufacturing upgrading?

D: The Chinese government issued the "Made in China 2025" plan in May 2015 with the aim of converting China into a manufacturing powerhouse, and it has promoted manufacturing upgrading to an unprecedented height in the country. In my view, self-dependent innovation is the core of China's manufacturing upgrading.

Chinese manufacturing lacks a "spirit of craftsmanship," meaning precision management, manufacturing competitive products and the pursuit of perfection. Some enterprises blindly strive for short-term profits through counterfeiting and patent infringement, and their behavior will ultimately adversely affect the whole industry and sully the industry's image. What the Chinese government should do is to create an environment for fair competition and guide manufacturing companies toward independent innovation.

GT: What should China's small firms do to develop their technology despite a lack of funds?

D: China's small manufacturing firms must stick to independent innovation, even if they are low on funds. It is very important for them to focus on investment and master core technologies, as only through these means can they attract external funding support.

GT: Gree has been promoting industrial diversification by branching out into the mobile phone, robotics and new energy industries. Will diversification distract Gree from its focus on appliance manufacturing?

D: A lot of people think that specialization represents focus and diversification will divert a company's energies. But in my view, both specialization and diversification can't happen without focus. Many Chinese manufacturing firms are forced to diversify due to meager profits or no profits in their original industries. This kind of industrial diversification can't be successful because it takes an absolute, speculative attitude. Gree decided to promote industrial diversification after much deliberation and was not forced to do so by meager profits. Gree's diversification is an extension and expansion of its advantages in its original industry and technology.

GT: Do you think the manufacturing industry would benefit more if more venture capital and private equity funds were to invest in the sector? How should enterprises deal with the relationship between enterprise development and capital?

D: It's quite dangerous for China's manufacturing firms to grab money by dazzling capital operations, which may leave companies with nothing overnight. In China's capital market, it's common to see many people become millionaires overnight and be left paupers the next day. Core technology and core products are always the most important thing to manufacturing enterprises, and capital plays an important supporting role in bolstering enterprises' long-term development. Only when we have strong manufacturing companies can we have a stronger economy and can China turn into a manufacturing power.

Newspaper headline: Independent innovation key to manufacturing’s future