How to start transformation and upgrading?

Tan Xuguang, Shandong Heavy Industry chairman, said that in order to clearly understand the true meaning of the transformation and upgrading of China's manufacturing industry, we should look at it from a comprehensive view of the global industry value chain, especially if we compare it with developed countries' manufacturing system.

"Judging from the global industry value chain, the upstream of manufacturing industry chain is research and development and high-tech components, which is mostly monopolized by the developed countries in Europe and America. Traditional manufacturing in China is located mainly in the middle of the industrial chain, which includes processing, assembly and other sectors, leaving core technology and core components in the control of others, to earn better profits. However, Chinese companies have begun to accelerate the shift to technology research, development and high-tech products", Tan said.

He added, "Chinese enterprises generally ignored the downstream industry chain. In fact, producer-service industry such as downstream sales and after-market services are in the high-end of the value chain. Taking the restructuring KION Group for example, in its 2011 sales revenue, 42% came from after-sales service, leasing and other producer services, and 53% from sales and other services".

Based on this concept, Tan came up with the new business model for his company: service-oriented manufacturing. He asked the Group to change the mode of just selling products and basic additional services as soon as possible, and become from product manufacturers to solution providers and industry chain integrators.

Zhou Jianxiong, Chairman of the Board in Xiangtan Electric Manufacturing Co., Ltd, said the transformation and upgrading of China's manufacturing industry can start from two aspects: on the one hand, traditional industries need continuous improvement, upgrading to become more energy efficient. "For example, in our company, we keep improving traditional motors, but we must upgrade them to energy-efficient motors."

On the other hand, we need to put more efforts into promoting strategic emerging industries, and vigorously develop new energy, change the high-energy-consumption, high-pollution traditional manufacturing.

"There are more than 1,400 thermal power plants in China. If it was not processed, the soot they produce could fill an Olympic-size swimming pool every two and a half minutes. Manufacturing enterprise transformation and upgrading must aim at being environmentally friendly and resource conservation friendly, providing good product that meets market demand".