Global Manufacturing and Secondary Innovation in China. Xiaobo Wu

      Since the Reform and Opening-up, China’s manufacturing industry has been developing very rapidly. After joining the WTO in the year 2000, China has achieved even faster growth thanks to accelerating globalization. Despite a temporary set-back in the 2008 financial crisis, China’s manufacturing industry surpassed that of the US in output value in 2010, making China the world’s largest manufacturing power. Now, with the steady slowing-down of China’s economic growth, China’s manufacturing industry has moved into the new norm of in-depth resource integration and structural rebalance. Challenged by the tapering cost advantages and the diminishing competitiveness of labor-intensive manufacturing industry, China’s manufacturing industry sets the priority strategy as industrial restructuring, transformation and upgrading to move up on the ladder of value chain. In the context of renewed economic globalization spearheaded by the ongoing new industrial revolution, how to leverage the advantages of being a great manufacturing power to secure the in-depth integration of industrialization and informationization, boost the companies’ technological innovation capabilities, and drive the transformation and upgrade of economic structure become a pressing question for China’s manufacturing industry. It is also the main topic on which this book intends to elaborate.

1.1 New trend of globalization

      More than 500 years have passed since Europe’s great maritime navigation era, and the world has gone through three major waves of globalization. The first wave of globalization started in the maritime navigation era, at the end of 15th century, and lasted about 300 years; the second started in the 18th century’s industrial revolution in the UK and came to an end at the beginning of the World War I; and the third started at the end of “Cold War” in the 1980s and continues till today.

      Being the core of globalization, economic globalization is a market-driven free flow and the reasonable allocation of production factors like capital, technology, goods, information and labor around the world. It’s the result of the advancement of the world’s productive force, the progressing of science and technology, and the institutional arrangements of the countries concerned. Global trade activities, advanced science and technology, and improved communication transcend national economic barriers, and enable the unprecedented fast and wide free flow of production factors, including capital, technology, information, management and labor force. As a result, it also expands the international market and intensifies the international division of labor to make economies more open and integrated, forming an interdependent yet jointly developing globalized economic entity.

      Compared with the two historical predecessors, this on-going economic globalization has two distinct features. First, emerging economies are exerting powerful influence. Contrary to the previous globalization patterns characterized by domination only by the developed countries, the present mode is featured with the influence of the emerging economies represented by Brazil, Russia, India and China, which are playing important roles in the world’s economic arena. In the post-financial-crisis era, developed countries are plagued with sluggish economic development and social well-being advancement, giving developing countries the opportunities to surpass and catch up. The momentum of globalization is now gradually shifting from the developed countries to the developing countries. Second, for a country aiming to obtain and maintain its global competitiveness, innovation would play a decisive role. The past two globalization trends centered on trade and circulation. Thanks to the macro trend of globalization, the economies driven by the factors and investments were very successful, underplaying the role of innovation. With the constant advancing of globalization, factor and capital are now circulating at a faster speed. As a result, economic and social returns driven by the factors and investments are gradually tapering down. At the same time, due to the limited total market resources and utilization efficiency, countries are being urged to adopt innovation as the fundamental driving force to power their economic growth, grasping and influencing global market’s demands so as to acquire and maintain the long term competitiveness.

      In 2015, Premier Li Keqiang advocated to make the industrial innovation driven by the “Internet+Entrepreneurship and Innovation+Made in China 2025” an industrial revolution driven by China in the true sense. This revolution is the so-called “New Industry Revolution”. The novel economic globalization thereafter spawned will not only give tectonic quake to the global supply chain, industrial value chain and merchandise chain, but also bring everlasting influences to international trade, cross-border investment and global economic and trade governance. In the increasingly globalized world economy, China has advantages,