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Is China a Leader in the Third Industrial Revolution?

Mar 02 , 2015
  • Feng Zhaokui

    Honorary Academician, Chinese Academy of Social Sciences

Jeremy Rifkin, President of the Foundation on Economic Trends and author of 19 bestsellers, including the latest one, The Third Industrial Revolution, recently published an article in Chinese media titled, “The World Looks East for the Third Industrial Revolution.” In the piece, Rifkin predicted that China will be a leader in the Third Industrial Revolution. He did not suggest a timeframe but gave the impression that his prediction would materialize soon enough. However, this author is of the view that China will not be in such a place for a long time to come.

The distinction between developed countries, otherwise known as industrialized countries, and developing countries, also known as industrializing countries, is well-established. China is a developing country undergoing industrialization. Most experts do not yet consider China having reached the middle (let alone final) stage of industrialization. How could it be claimed that China, still a long way from completing the first two industrial revolutions, be a leader in a third industrial revolution?

As for the future, whether China will lead the global trend depends on how soon the country becomes truly industrialized. It is estimated that around 2020, China’s manufacturing competitiveness will probably reach the level enjoyed by the United States, Germany and Japan in the middle stage of industrialization. By 2030, China will complete industrialization and be akin to the aforementioned countries in the 1990s. By 2050, China will equal the annualized growth rate of the three countries in their post-industrial period. Only then can China call itself a moderately developed country, as described in the three-step plan envisaged by Chinese leaders in the 1980s.

A “moderately developed country” is somewhere between a Third World country and a developed country. Given China’s higher-than-expected pace of growth, research institutions predict that China will attain such a status around 2040, in other words a decade in advance of its own deadline.

Currently, China leads the world in the output of 220 industrial products, many of which are in excess supply and need to be cut back to a more rational level. Generally speaking, China is still at the lower end of the global industrial chain and many of its core technologies are imported. China’s development model is far from efficient: its manufacturing value-added ratio is just half that of developed countries; the quality and technical standard of its products are not high; resources are poorly utilized; energy intensity is 1.2 times higher than the global average; the air, water and soil are seriously polluted; information technology is integrated into the manufacturing process in a rudimentary and localized fashion; and so on.

Given these challenges, China must make solid progress in industrialization before aspiring to higher goals. Hard work, perseverance and modesty: these are what China will need most. It must learn from the U.S., Germany, Japan and other technologically sophisticated countries; foster a few industrial clusters made up of tens of thousands of small and medium-sized enterprises which persist in sharpening their competitiveness year in year out; train an army of technical personnel, engineers and enterprise managers; cement the foundational technologies required for industrialization while at the same time make the most of the technological advances of the Third Industrial Revolution; promote digital, networked and smart manufacturing and boost innovation; make vigorous efforts to develop wind, solar, biomass and other renewable energy as well as energy-saving and environmentally-friendly technologies; protect the environment and alleviate the problems of water, air and soil pollution; take concrete steps to implement the November 12th, 2014 joint announcement with the US on climate change; improve product quality, develop modern manufacturing and service industries and nurture enterprise groups with international competitiveness and well-known brands.

In short, China must walk and chew gum at the same time: both advance toward industrialization and seize the opportunities provided by the Third Industrial Revolution. However, the picture is not uniformly favorable. By weakening China’s comparative advantage in labor cost, the Third Industrial Revolution enables the U.S. and other advanced economies to revamp manufacturing and draw back the production facilities that have previously moved offshore – a challenge that China must take seriously and rise up to.

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