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Beijing Boom The Wily Way Of The Dragon

  • Li Yuan
  • May, 2019
  • 223
  • Made in China

CHINESE ARE STOPPING AT NOTHING TO MATCH AMERICAN MANUFACTURING AND MR. TRUMP IS STOPPING AT NOTHING TO STOP THAT SAGACITY

China will succeed in building a powerful technology industry that will match America, even if President Donald Trump starts a trade war to stop it. The reason can be found on the fourth floor of a nondescript factory in a city once famous for cheap manufacturing and prostitution.

This factory floor, in the southern Chinese city of Dongguan, once employed what one employee called a ‘magnificent sea of people’. Rising labour costs and a new generation with little interest in toiling in factories forced a new tack. Now the sea of people is being replaced by a whirring array of boxy machines, each performing work it used to take 15 people 26 steps to finish.

The factory suggests that Beijing’s vision of ‘Made in China 2025 - the ambitious state-driven plan to retool China’s industries to compete in areas like automation, microchips and self-driving cars - is not being pushed just by the Communist Party’s top leaders. Instead, the drive is also coming from the bottom up: from the businesses and cities across China that know they must modernise or perish.

The Trump administration is not wrong to face Beijing over ‘Made in China 2025’. ’Chinas top-down approach gives its companies unfair advantages and could continue to tease global trade relations long after Mr. Trump retires to Mar-a-Lago.

But ‘Made in China 2025’ is also being pushed by businesses like Dongguan Mentech Optical & Magnetic Company, the owner of the factory, which are worried about labour costs and their own futures. It comes from local governments looking for ways to stay relevant. It comes from a growing network of private-sector entrepreneurs, academics and local politicians who are increasingly working together to overhaul China’s factories and its future. Other cities - Suzhou, Wenzhou, Xuzhou and the industrial areas around Shanghai are just a few examples - have also brought about their own automation plans.

The modernisation may never happen in 2025. In fact, it may be long after that. But China will get there, mostly because it has to.

A city of eight million people in the Pearl River Delta, Dongguan long depended on making and exporting shoes, toys and electronic parts to America and Europe. In many ways, it looks like the factory-dominated China of popular imagination, with whole parts of the city filled up by rows of rectangular factory buildings, one after another.

Then the 2008 financial crisis hit. Orders dried up. Dongguan became known as ’Chinas capital of prostitution until a government crackdown cleaned it up.

Beyond the financial crisis, China’s very prosperity threatened Dongguan’s future. The average worker’s income rose fourfold over the past decade. Fewer young people wanted to work on dull and stressful assembly lines, preferring service jobs - like waiting tables and delivering e-commerce packages - that let them interact with people or move around. Some factories moved to lower-cost countries or shut down for good.

Dongguan’s companies and government had to do something. They committed to modernising.

Before ‘Made in China 2025’ became policy, Dongguan began a ‘replacing-humans-with-machines initiative’ and funded it with about $30 million a year. It later channeled more money into other automation initiatives. Companies that could prove they had a worthy research project or were willing to invest in industrial robots, software or advanced machinery could win subsidies and tax breaks. The government picked up 10 percent to 20 percent of the tab. Smartphone, furniture, machinery and even cake companies won support, official documents show.

Mentech, the telecom equipment supplier, once had hundreds of workers winding, packaging and testing magnetic wires that were thinner than hair, all by hand. Even today, the company is desperate for workers. On the side of one factory building it lists the on-the-job benefits it offers: monthly wages with overtime of up to about $1,100, air-conditioned dormitories, free Wi-Fi and even a birthday present.

Zhang Xiaodong, a research and development manager but labour costs and a lack of hands were holding it back. During the Lunar New Year holiday, when most of China shuts down and goes home, some 500 Mentech executives, engineers and administrative staff had to work three-hour shifts after their normal workday to keep the factory running.

Today, a factory floor that once needed over 300 workers now needs 100. More than half of the factory has been automated. The workers will probably be replaced by machines themselves in a year or two.

To help, the Dongguan government provided $1.5 mill...

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