Distinguished guests, comrades, friends, good afternoon. Having been invited by Caijing, I will give you a report on “Enhancing the Innovation Capabilities of Enterprises’ Independent Industries, Promoting a Solid industrial Base and Quality Brand Building.”

The report is divided into five sections. First, since the 18th Party Congress, the CCP Central Committee with Comrade Xi Jinping as the core has attached foremost importance to the development of the manufacturing industry. It has been proposed that by 2035, China’s manufacturing industry as a whole should reach the middle of the world’s echelon of manufacturing powers. At the 19th Party Congress, the accelerated construction of a manufacturing power and the development of advanced manufacturing were explicitly proposed. A manufacturing power is one of the critical indicators for our country to realize the Chinese dream two centuries in the making. Its connotation has six aspects: First is to improve the capacity for independent innovation further. The second is to optimize the industrial structure further. The third is to elevate the quality and branding of manufacturing products further. The fourth is to use green and intelligent production methods. The fifth is to achieve independent and controllable supply chains. The sixth is to optimize systems and mechanisms further.

In the next 15 years, China will face a complex situation at home and abroad. On the one hand, certain western developed countries suppress us in high-end product markets, and on the other hand, certain developing countries compete with us for the low-end markets. After the outbreak of COVID-19, global production and supply chains have also changed, shortening vertically and becoming regionalized horizontally. China’s manufacturing industry faces both opportunities and challenges.

We are currently a major manufacturing country, and the added value of the manufacturing industry has ranked us first in the world for 11 consecutive years, reaching RMB 26.6 trillion in 2020. We are large, yet we are not powerful, and we generally rank at the middle and lower end of the global value chain. In 2019, the Academy of Engineering organized experts to conduct a comparative analysis of 26 representative manufacturing industries. The results show that 11 sectors are world-leading or advanced, and 15 industries have a large or significant gap with the world’s manufacturing powers.

A solid industrial base is the only way to move from a major manufacturing country to a manufacturing power, a quality powerhouse, and a Brand China. The industrial base includes essential core components, vital basic materials, critical basic processes, industrial software, and a foundation of quality technology. The industrial base is an important symbol of the quality and performance of manufacturing products and an essential manifestation of the core competitiveness of China’s manufacturing industry. Only with a solid industrial base can our country’s goal of a manufacturing power be achieved. At the Fifth Central Financial and Economic Work Conference in 2019, the General Secretary explicitly proposed giving full play to two advantages to realize the advanced industrial foundation and the modernization of the production chain. In March of this year, China released the 14th Five-Year Plan and the Outline of Vision 2035, proposing the establishment of S&T self-reliance and independence as the strategic support for national development, the promotion of elevating the level of the industrial base and modernizing the production chain, the maintenance of the importance of the manufacturing industry at a basically stable position, the promotion of the optimization and upgrade of the manufacturing industry, the implementation of carbon peaking and carbon neutrality goals, and the continuous improvement in environmental quality.

China’s manufacturing industry is currently large but not strong, manifested, primarily, in the following four aspects:

First, the capacity for independent innovation is weak, the investment in research and development is low, the contribution rate of S&T innovation to national economic growth is low, and external dependence for key core technologies is high. Second, the industrial base is weak, high-end essential parts in specific critical fields rely on imports, such as the main shaft bearings of large shield machines and the electro-hydraulic bogies of electric vehicles, the consistency, stability, service life, and reliability of specific products are not high. Service lives are roughly only 30% of the best levels achieved in developed countries. The shortcomings are prominent, quality and efficiency indicators are low, and there is a lack of internationally renowned brands. Third, the utilization rate of resources and energy is low. The energy consumption per unit of GDP in the manufacturing industry is 2.6 times that of developed countries, and there is a significant gap with developed countries. Fourth, the level of digitized, networkized, and intelligentized technologies must be improved with urgency. Certain enterprises are still carrying out “remedial lessons” on digitization, and digitized and networkized manufacturing is still in its infancy. Digitized, networkized, and intelligentized manufacturing is still just beginning to be explored.

There are several reasons why China’s manufacturing industry has the above shortcomings:

First, our S&T innovation has been lagging behind and only imitating others for a long time. Self-reliance and self-improvement are lacking, major scientific issues are rarely raised in the field of natural science, there are not many significant endogenous technological achievements or transformative achievements in the field of technology, the capacity for independent innovation of enterprises is weak, and the integration mechanisms for production, education, and research is inadequate and have yet to be genuinely formed. Second, there is a lack of top-level design, insufficient attention to basic industrial research, uncoordinated development of the production chain, and a disconnect between complete machines, systems, and complete sets of equipment from the development of industrial infrastructure. Third, we cannot meet the needs of high-quality development of the manufacturing industry due to insufficient accumulation in the early stages and insufficient investment in the later stages of basic industrial research. Fourth, there is inadequate research on common technologies for industrial basics and inadequate integration of S&T with the economy. Technological innovation activities worldwide generally follow three stages: Once the intermediate link between basic research and product realization is weakened, the technological innovation chain will break, and the hypocrisies of the S&T economy will appear. Since 1999, most of the scientific research institutes in China’s industrial sector were transformed. Most were unable to research common critical technologies in the industry, resulting in a certain degree of rupture in the technological innovation chain. Fifth, the capacity for independent innovation within enterprises is not strong, and it has not yet become the primary source of technological innovation. The basic conditions for Chinese enterprises to research common technologies are poor, which restricts the improvement of basic conditions and the improvement of innovation capabilities. The impetus for technological innovation will forever be postponed to the day after tomorrow, and many are unwilling and afraid to invest too much in high-risk long-term R&D projects. The protection of enterprises’ core technology and intellectual property is lacking, the cost of infringement is too low, and the threshold for accountability is too high. The low treatment of technical personnel within enterprises makes it difficult for Chinese enterprises to gather high-level talents. Investment in a foundation of quality technology is insufficient, and there is a lack of quality talents. Sixth, institutions of higher education lack support for the integration of S&T and the improvement of the capacity of enterprises for technological innovation.

Next, I will introduce the experience and practices of industrialized countries such as Japan and Germany in strengthening their industrial bases. First, great importance is attached to the industrial base at the national level and formulates special laws and regulations to protect the domestic manufacturing industry. Second, importance is attached to the close integration of scientific research and industry, establishing common technology research and development institutions such as the Fraunhofer Institute, strengthening the supply of common technology in the industry, and ensuring the sustainable development of the industrial base. Third, the government, financial institutions, and industry associations work together to support the development of small and medium-sized enterprises. Fourth, importance is attached to multi-disciplinary cross-integration and collaborative research. Fifth, importance is attached to the innovation of production processes, and process innovation accounts for a relatively high proportion of research funds for product innovation. Sixth, importance is attached to the construction of quality infrastructure, elevating the construction of quality infrastructure to a national strategy, increasing investment in measurement, standards, inspection and testing, and certification and accreditation to occupy the commanding heights of quality brand competition. Seventh, importance is attached to the stable supply and demand relationship between complete machine enterprises and parts, basic materials, and advanced technology R&D and production enterprises. Eighth, a comprehensive and systematic vocational education system is established to supply a large volume of high-quality labor with the spirit of craftsmen to upgrade the manufacturing industry.

I come from China National Machinery Industry Corporation. Our group has four strengths: The first is the outstanding R&D advantages of 30 converted institutions. The second is that we have the survey and design capabilities of 11 design institutes. The third is our major equipment R&D and manufacturing bases, including China YTO, China Erzhong, and China Hengtian. The fourth is our rich international experience, serving more than 160 countries worldwide. The strategic positioning of our group is to forge the strengths of Chinese machinery and suit the needs of the country. Over the years, our group has been continuously exploring the improvement of technological innovation capabilities for enterprises, promoting a solid industrial base, and establishing quality brands. We have the following experiences to share with you:

The first is to attach importance to improving the basic capabilities of industrial technology, continuously increasing investment in research and development, focusing on solving the shortcomings and weaknesses in the primary fields of major equipment, and serving major national projects. The second is to attach importance to the industry-leading role of transformed institutions. Continuously and steadily support transformed institutions that develop key common technologies in the industry to promote an effective connection between basic research and products and be the “source” of original technologies. The third is to attach importance to the improvement of technological innovation capabilities of enterprises. Encourage qualified leading enterprises to become the “chain masters” of the production chain, gather high-end production factors, drive the development of small and medium-sized enterprises, and drive the transformation and upgrading of the production chain. The fourth is to attach importance to the construction of quality infrastructure, the in-depth implementation of high-quality projects, and the vigorous promotion of the spirit of craftsmen and scientists. Attach great importance to the construction of S&T innovation teams within enterprises, build for greatness on the high ground of technology, and produce leading talents in outstanding teams.

The next 15 years will be a critical period for China’s manufacturing industry to become powerful. To move from a major manufacturing country to a manufacturing power, we must improve the industrial base and excel in quality and brand building. Below, I will make several suggestions from institutional innovation, R&D institution construction, and outstanding talent training.

First, in terms of system and mechanism innovation, it is necessary to strengthen top-level design, classify and implement policies, and form sustainable promotion mechanisms. The second is to further innovate the mechanisms that stimulate independent innovation within enterprises. This includes enhancing the voice of enterprises in technological innovation, giving full play to the role of transformed institutions to create a source of original technology, encouraging leading enterprises to become owners of the production chain and to drive the development of small and medium-sized enterprises, encouraging enterprises to strengthen applied basic research with the state providing financial support or tax incentives, strengthening support for small and medium-sized enterprises, incubating a group of “specialized, refined, differentiated, and innovative” hidden champions, further improving the intellectual property protection system, and building distinguished industrial clusters in critical areas. This is the Several Measures to Improve the Competitiveness of Small and Medium-sized Enterprises just issued by the State Council in November. It is believed that in the near future, the innovation vitality of small and medium-sized enterprises in China will be further enhanced and will play an essential role in the process of upgrading China’s industrial base and modernizing our production chain. The third is to benchmark against world-class standards, strengthen the construction of national quality infrastructure, increase investment in research and development, develop measurement and inspection technologies for extreme conditions, high precision, high stability, and reliability, improve international, national, and group standard systems, establish quality classification system, carry out high-end quality certification, accelerate the “going global” of Chinese standards, and incubate well-known brands in inspection, testing, and certification.

In terms of establishing R&D institutions, it is necessary to layout the innovation chain around the production chain, layout the future production chain around the innovation chain, and establish and improve general technology R&D institutions. Encourage transformed institutions to give back to society, become the “source” of original technology, and play an essential role in solving critical problems for the country. Encourage large enterprise groups to form major equipment innovation consortia, unite institutions of higher education, institutes, host and parts companies, and create a sound ecosystem that allows for innovation integration across the upstream, middle and downstream and within both large and medium-sized enterprises. Give full play to the role of institutions of higher education in the national innovation system, support technological innovation within enterprises, participate in the refinement of enterprise projects, help enterprises analyze the S&T problems behind their problems, and carry out theoretical and applied basic research based on their own advantages.

In incubating outstanding talents, incubate strategic scientists, exceptional engineers, and high-skilled talents. Entrepreneurs are all guided by strategy. We must promote the spirit of scientists in our enterprises. Incubate strategic S&T leaders who combine the energy of scientists with the spirit of entrepreneurship. Incubate engineers with the quality of scientists and researchers with training in engineering. Deliver large numbers of high-skilled talents for enterprises that can combine engineering with learning. If we incubate, utilize, and respect talents well in these regards, the capacity for independent innovation within enterprises will be significantly improved.

In a word, the weak industrial base is the core issue of building China into a manufacturing power, quality power, and Brand China. It is also a critical issue that restricts the high-quality development of China’s manufacturing industry. Make concerted efforts to continuously enhance the capacity of enterprises to innovate independently and promote a solid industrial base and quality brand building.

That is all. Thank you!