Mature vocational system to aid growth

Roland Berger says while China's manufacturing industry has made huge strides in the past 30 years, there is still a great deal of room for improvement. CHINA DAILY

Trust the Germans to come up with the goods when it comes to technology and engineering, and the marketing item. The country that brought us "Das Auto" and "Vorsprung durch Technik" (Progress through technology) has now introduced to the world "Industry 4.0". That is the moniker the German government has adopted to describe the mass computerization and mechanization of traditional industries, which some are calling the fourth industrial revolution.

One of those who knows a lot about Industry 4.0, and who has spent the best part of half a century getting commercial and corporate messages across, is Roland Berger, head of Roland Berger Strategy Consultants, based in Munich and with nearly 50 offices in 35 countries.

Even though the term Industry 4.0 was, like Berger, born in Berlin, he believes its applications are as relevant to China as they are to his own country.

While China's manufacturing industry has made huge strides in the past 30 years, there is still a great deal of room for improvement, he says, not to mention opportunities for China and Germany to work together.

"China and Germany are already much more similar than they are different in terms of income and level of development. Both are highly industrialized, open, manufacturing-oriented, export-focused economies. Both are clear winners of the past several decades of globalization and both have successfully weathered the global financial crisis."

Berger was born in 1937, and his father Georg was the head of a food company and for a time a top official in the economics ministry of the Third Reich before quitting in the aftermath of Kristallnacht in November 1938. Near the end of World War II, Berger senior was a prisoner in Dachau concentration camp.

Roland Berger founded his consultancy in Munich in 1967 after quitting as a partner in an American consulting firm based in Boston and Milan.

Roland Berger Strategy Consultants has since grown into one of the world's top five strategy consultancies. Starting with the company's founding, Berger was CEO for 36 years, and until 2010 chairman of the supervisory board.

Just as the consultancy has changed dramatically over the years, Berger says the phrase "Made in Germany" has taken on a completely different dimension. For most people it denotes top quality, he says, which was not always the case.

"The label was originally introduced in Britain by the government to mark German products more obviously, as German manufacturers had been falsely labeling inferior goods with the marks of renowned British manufacturing companies and importing them into the United Kingdom."

Not until later, when German manufacturing standards improved, did "Made in Germany" become associated with product reliability and quality, Berger says.

As with German products in the early days, those selling anything made in China now strive to break its "cheap and inferior quality" image, he says. That means China can learn from Germany.

"Improving the image of 'Made in China' involves not only raising and sustaining the quality of products, but also improving the standards in factories with regard to social, environmental and other issues.

"Both government bodies and industrial associations can push this process, for example, by setting regulations or encouraging companies to voluntarily adhere to certain standards."

In addition, China's diminishing demographic dividend has forced the country to change its development path, he says.

"It's true that China is likely to lose its cheap labor advantage due to a diminishing labor supply. To deal with that and maintain the competitiveness of its economy, it will have to increase the productivity of its human capital."

This will include introducing advanced management skills to better control cost and boost efficiency on the one hand, and developing its own innovations rather than keep relying solely on playing technological catch-up instead, on the other, Berger says.

"Also, China should nurture a mature vocational training system that is closely and dynamically linked to industry. It would not only provide a steady supply of highly skilled graduates, but also help avoid unemployment among young people.

"Similar to Germany's vocational training system, the Chinese government should, first, expand the legal and administrative framework for vocational traineeships; second, encourage Chinese companies to engage in building a systematic vocational training system that delivers the skills they need and, third, campaign for the acceptance of high-skilled vocational training as a solid start to a successful career, which is in many cases is equal or even preferable to a university degree with theoretical knowledge and uncertain prospects."

As China transforms its manufacturing, the two countries will have many opportunities to work together, Berger says.

German companies have played a key role in China's economic and technological development, and Chinese companies that have gone global have found an open door for outbound investment in Germany, he says.