Effectiveness-Based Manufacturing as a Foundation of China’s Innovation Machine

Abstract

This chapter demonstrates the importance of manufacturing in China’s innovation machine. It explains the history of China’s industrialization and how it overcame early challenges to become the ‘world’s factory’. It argues that China has since progressed to become the ‘world’s workshop’, with the capability and capacity to translating complex designs into products with engineering precision and with unmatchable speed and scale. Examples are provided of large overseas companies attracted to manufacture in China, such as Tesla and Apple. It also examines a new model of mass customization facilitated by the country’s super e-commerce platforms such as Alibaba and Pinduoduo, which connects consumers with hundreds of millions of SME manufacturers, including China’s ‘hidden champions’ in niche areas of manufacturing. Chinese manufacturing possesses significant strengths in its resilience and flexibility, building upon its highly skilled workforce and digital infrastructure. The chapter shows how China’s manufacturing is benefiting from recent trends that have moved production in global value chains to countries with lower labour costs.