China's Manufacturing Evolution: Isabel Hilton on Lighthouse Factories & Future Trends

CGTN Europe

CGTN Europe spoke to Isabel Hilton, founder of China Dialogue, about the "Made in China" concept and how country's manufacturing has changed over the years.

Transcript

00:00For more on Made in China, let's talk to Isabel Hilton, founder of China Dialogue.

00:05Isabel, welcome back to the programme.

00:06How would you describe the evolution of China's manufacturing over the past decades?

00:12Oh gosh, well you've seen it go from the kind of low added value, low wage manufacturing

00:19that is fairly characteristic of the first stage of a kind of catch-up industrialisation

00:24which China went through from the sort of 80s and the 90s.

00:28And then when you get to the point where China joins the WTO, so 2002, there's a lot of inward investment,

00:38there's a lot of joint venturing and China begins to take off.

00:43It begins to take off in moving up the value chain, moving up the technology chain

00:48and then the final frontier, if you like, which is innovation.

00:52So China has been very good at innovating in process and we're just beginning to see the breakthroughs in innovations and technologies.

01:02So Chinese factories now are extraordinarily well organised, they're extremely efficient.

01:09They do, sometimes, you know, foreigners do complain and other countries do complain that they enjoy privileges from the government

01:16in the way of cheap land and cheap credit and there's some truth to that.

01:20But less often discussed is the absolutely ferocious competition that goes on.

01:25So there is an absolutely, when an industry gets to a certain level of maturity,

01:29and you're seeing it now, for example, in electric vehicles,

01:32there is ferocious competition and price struggling and only the fittest survive.

01:37So those that do survive are really among the best in the world.

01:40And I wonder, Isabel, if you could explain this concept of a lighthouse factory

01:45and what could be said about their growth in China.

01:49A lighthouse factory, it's an idea that comes from McKinsey and the World Economic Forum.

01:54And it's a factory that embodies the qualities of what they call the fourth industrial revolution.

02:01And that's the industrial revolution which brings together advanced technologies of various kinds

02:06for, you know, to get a bigger bang for your buck.

02:09So it might be bringing together AI, cloud computing and robots, you know.

02:17And China has, again, pretty much been on the front line of this.

02:24So if you look back to 2020, for example, China had six globally recognized lighthouse factories.

02:34And now it's got around 45.

02:37That's about a third of the world's total.

02:39And that's in five years.

02:41So, you know, China is very much at the forefront of industrial innovation at this point.

02:47And you touched on how well organized China's factories are.

02:50And China's labor market is known for its discipline, its efficiency.

02:54Do you think other countries can match China's manufacturing output prowess if needs be?

02:59Well, certainly not overnight.

03:02I mean, you mentioned the labor force and certainly the labor force, again, is very highly disciplined.

03:09They work longer hours than the global average, too.

03:12So they're pretty hard working.

03:14The industrial labor force is not the majority of the labor force in China.

03:20And you're getting a kind of bifurcation between the industrial labor force, which is increasingly highly skilled,

03:26and casual labor, the gig economy, agricultural labor.

03:30So, you know, there are big differences in labor conditions in China.

03:36But you can't just pick up a factory and plonk it down in another country, in another culture,

03:43and have the level of skill that modern factories demand.

03:47And that has been – it's been a problem, actually, because there have been some efforts.

03:52You know, there's quite a lot more effort to reshore, a bit of decoupling that's gone on in the last five or six years.

03:59And the labor force has always been the problem.

04:02You know, if you move a factory from Asia to the United States, for example,

04:06you come across very entrenched privileges.

04:12So holidays, weekends, you know, working hours, that kind of thing, which, you know,

04:18China has less respect for, shall we say.

04:22So that's often a problem.

04:25I mean, I do expect the labor force in China to change because it's getting older and, you know, it's getting less numerous.

04:31So I think the factory of the future, there will be more robots than people.

04:35As ever, really great to get your reflections.

04:38We appreciate it.

04:39Isabel Hilton, founder of China Dialogue, thank you.

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