On the premise that China has established the most complete and largest manufacturing economy globally, building a manufacturing power has become the primary focus and mission of future industrial development. China’s manufacturing industry has achieved a significant leap from large to powerful. It serves as a major support for the building of a quality power, aerospace power, cyberpower, transportation power, and ocean power. It is essential for establishing a country rich with talent, S&T, trade, sports, and education. It is the cornerstone of economic construction in building a powerful modern socialist country. The building of a manufacturing power is a complex collective process involving multiple levels such as systems, policies, strategies, and organizations, as well as various entities such as countries, localities, enterprises, scientific research institutions, social organizations, and individuals. A structured understanding of a manufacturing power requires identifying the critical dimensions of the many intricate factors that affect the success or failure of the building of a manufacturing power and then focusing on exploring the strategic points of each dimension.

1. Three critical dimensions of building a manufacturing power

The process of leapfrogging beyond and upgrading the industrial capacity of human society is also the process of the emergence and replacement of manufacturing powers. Although these manufacturing powers have possessed different industrial forms and institutional capabilities. They have all been the leaders of dominant technologies and strategic leading industries in each technological wave or industrial revolution. They all have stimulated the emergence of many breakthrough technological innovations with specific institutional structures. At the same time, as each rising manufacturing power has faced different internal and external challenges, the main obstacles to overcome in the process of becoming a manufacturing power and the strategies for overcoming these obstacles (whether these strategies are designed in advance or learned in the process) obtained) must be different. Combining the generalized experiences of developing a manufacturing power and the unique internal and external conditions that China faces in building a manufacturing power, China’s manufacturing power strategy in the future should include technology and market leadership in strategic areas, manufacturing operation security under extreme pressure, and continuous innovation-driven manufacturing as the three critical dimensions for building an endogenous development mechanism. Of these dimensions, technological and market leadership in strategic fields and long-term accumulation of innovation-driven development are typical characteristics of building a manufacturing power. At the same time, the security of manufacturing operations under extreme pressure conditions is a unique constraint faced by China as it builds a manufacturing power in the future.

Forming leading advantages in strategic leading industries, leading a new round of S&T revolution and industrial transformation, and making unique Chinese contributions to cutting-edge technological breakthroughs and business model innovations in human manufacturing are the core facets of China’s building of a manufacturing power. Almost every late-developing manufacturing power has risen through new windows of opportunity opened by a wave of new technology and the resulting industrial revolution. By leading the large-scale assembly-line production method, the United States rose in strategic leading industries such as vehicles and chemicals at that time. Japan became a leader in consumer electronics, home appliances, energy-saving vehicles, and other sectors by pioneering lean production methods, becoming a manufacturing power. When breakthrough innovations in underlying technologies (or root technologies) and general-purpose technologies open up technological opportunities and market space, industrial countries with a certain strength will participate in the torrent of competition in the new industrial revolution based on their respective institutional capabilities and technology roadmaps. Whoever ultimately masters the dominant design and forms a business model compatible with that dominant design will hold the most powerful position and obtain the greatest value in the global value chain of the given strategically leading industry. Through the diffusion and application of general-purpose technology in other sectors, an overall and substantial improvement in economic efficiency and industrial competitiveness will be achieved, ultimately establishing the status of a manufacturing power.

In the face of the normalized containment and suppression of China by certain developed countries, ensuring the regular operation of the manufacturing industry in extreme circumstances and forming adequate support for economic, social, and national defense security is the basis for my China’s building of a manufacturing power. Competition between manufacturing powers has occurred with each new industrial revolution, and each revolution has been rife with international plots of repression and defense. For example, to prevent Japan’s integrated circuit industry from overtaking, the United States forced Japan to sign the Japan-US Semiconductor Agreement twice in 1986 and 1991, respectively, to restrict the export of Japanese semiconductors to the United States and expand the market share of American semiconductors in Japan. This directly led to Japanese enterprises losing their advantages in the global semiconductor industry competition after the 1990s. However, since China is a big country with fundamental differences in ideology from the leading countries, in the process of China’s progress from a manufacturing country to a manufacturing power, not only do we face pressure from leading countries under the pretext that the framework for cooperation at the strategic level is basically stable, but we may also face overall containment and extreme suppression that can undermine the general cooperation framework. As such, China’s building of a manufacturing power must promote leadership in strategic fields and ensure the security of strategic industries and even the overall manufacturing economic system.

Effectively establishing an innovation-friendly environment at home and an atmosphere abroad that is sufficiently open and cooperative and establishing an endogenous mechanism for China’s manufacturing industry to go from being large to becoming powerful is the premise for China to build a manufacturing power. In the most general sense, building a manufacturing power results from continuous high-intensity innovation and diversified competition among many innovative enterprises. Whether it is the strategic orientation of enterprises or the competitive relationship between enterprises, they are all determined by the incentive structure shaped by the institutional structure of a country. Since China has generally been in a stage of economic catch-up and institutional transformation for the past four decades, the technology learning method based on technology introduction, the surging consumption, and the imperfect market system have all contributed to the large-scale investment-driven manufacturing development model. Although Chinese entrepreneurs too have been full of enterprising spirit since the reform and opening up, the enterprising spirit induced by large-scale market opportunities and low technical barriers is more arbitrage-oriented than innovation-oriented. Although China is the most competitive industrial product market globally, corporate competition is full of undifferentiated and vicious competition. Neither the rules-based competition order of American and European enterprises nor the cooperation-based competitive relationship of Japanese enterprises have yet to form in China. Therefore, it can be said that the process of China’s transition from a manufacturing country to a manufacturing power is essentially a profound change in the competition paradigm of China’s manufacturing micro-entities.

2. Strategies and policies for establishing leading advantages in strategic leading industries

If we want to establish a leading position in a strategic leading industry and at the same time deeply integrate with the global manufacturing production system, some things must be done and some things must not be done. We must also focus on areas where China has institutional and capability advantages that open doors left closed to others. Although China has formed certain technological and industrial advantages in 5G, rare earth processing, UHV, and other areas, it would be difficult for these advantages to pose a substantial threat to the core and long-term interests of the United States’ asymmetrical competitive advantage. The fourth wave of industrial revolution of intelligentization, digitization, and networkization provides China an unprecedented window of opportunity to build a manufacturing power. Leading in the strategic leading industries of the new wave of industrial revolution is the micro-foundation for China to overcome the middle-income trap. It is the mission that China must fulfill to become a manufacturing power. Although several outstanding enterprises have emerged in China, as represented by BAT, in the era of the mobile internet, in general, these transaction-oriented platform enterprises are still downstream applications based on American root technology. Only by establishing a leading position in the Internet of Things (IoT), such as in the industrial internet, AI, and the new generation of digital economy root technologies, can China truly become a power that takes the initiative in the industrial competition among countries.

(1) Realize leadership in strategic leading industries in the process of building an international community

The digital economy is a strategic leading industry for a new wave of industrial revolution, and it is also an important carrier of American technological and industrial competitiveness. To form an effective countermeasure against continued pressure from the United States, it is still necessary to seek breakthroughs in technologies and industries related to the digital economy. The field of competition for the new wave of industrial revolution in the future and the field that China should focus on fostering and promoting as a strategic countermeasure is the industrial internet. This is because, first of all, the industrial internet represents the development direction of the digital economy. It is the most promising strategic area for developing the digital economy in the future. It will be the field of high-density agglomeration and integration of breakthrough technologies in the future. Secondly, the industrial internet is an emerging field undergoing a period of rapid expansion. As no country has yet to form an absolute technological or market monopoly advantage, not only will it be easy to de-Americanize the underlying technology, but there are also opportunities to build asymmetric advantages.

Jointly developing new industrial internet architecture and technical standards with Europe, sharing the economic benefits of the vast industrial internet market, and forming an industrial internet technology, market, and industry community is an effective strategy for China to create a leading edge in the industrial internet in the future. The future trend of industrial internet development will be the integration of communication technology and production and operation technology. China has the world’s leading-edge in communication technology, while Germany and other European countries lead the world in production and operation technology. If China and Europe can complement each other and open up cooperation, it will significantly accelerate the process of global industrial internet technology and ecosystem incubation. At present, European countries have a very positive attitude towards developing the digital economy as a whole. European economic strategies such as the Made in Germany: Industrial Strategy 2030 and the Manifesto for a European Industrial Policy Fit for the 21st Century have emphasized changing the backwardness of the European digital economy and realizing an economic revival through the digital economy. Furthermore, European countries do not want to be wholly controlled by the United States in the digital economic ecosystem. If we can promote the integration of the information technology advantages of China’s Huawei, ZTE, and other enterprises with the production and operation advantages of Germany’s Siemens, Bosch, Schneider, and other enterprises, as well as the industrial software advantages of France’s Dassault, Germany’s Siemens, and other enterprises, while also giving other European countries, Japan, South Korea, and the vast majority of developing countries sufficient industrial positions and benefits, it is entirely possible to jointly promote the development of a new industrial internet ecosystem with Europe, Japan, and South Korea. To improve the feasibility of international cooperation on the industrial internet, the dominance of the technical architecture, technical standards, and protocols of the industrial internet can be mastered and promoted by European standards organizations. At the same time, China can achieve technological and market advantages.

Under the guidance of this strategy, actively incubating platform-based enterprises in the field of the industrial internet should become the focus of China’s industrial policy in the future. Although China has incubated several leading enterprises in search engines, e-commerce, social media, and other transactional platforms in the past two decades, leading Internet platform enterprises such as Alibaba, Baidu, JD.com, Tencent, and NetEase are all transaction-oriented platform enterprises targeting domestic market demand. Innovative platform enterprises that face global market competition and can lead the development of China’s IoT have not yet formed. Although several Chinese manufacturing enterprises such as Huawei, ZTE, Sany Heavy Industry, and Haier have developed unique capacities for digitalization, intelligentization, and networkization in their respective fields, in general, the technology platforms of these enterprises are all private technology platforms and product platforms. There is still a long way to go before they can become leading platform-based enterprises that define industry architecture and standards. In this regard, it is necessary to strengthen the organization, coordination, and top-level design of China’s strategic technologies and industries, to strengthen the horizontal communication and cooperation of various industry management departments, to eliminate the policy blind spots of ecosystem controls and supports for new technology industries, and to resolve the problem of industrial policy fragmentation. Further clarifying the primary rights and persons responsible for the formulation and implementation of significant industrial policies such as major national projects while drawing upon the mission-oriented policy management model of DARPA and other institutions in the United States and introducing mature project management processes will significantly improve the organization and implementation efficiency for significant projects. In terms of industrial deployment, the overall deployment of the digital economy, new infrastructure, and the manufacturing industry should be focused on incubating innovative platform enterprises in China’s industrial internet through cross-industry vertical deployment. Industrial policies should effectively coordinate across industry, academia, and research, guide the industry to develop independent technical standards, open up new technology roadmaps, and promote the integration of China’s technical standards and industrial ecosystem with international technical standards and industrial ecosystems. In terms of cooperating with Europe to promote the development of IoT technologies such as the industrial internet and incubating Chinese IoT innovative platform enterprises, China’s strategies, plans, and policies should focus on contributing China’s unique talents, technologies, and market achievements, highlighting the privacy protection, information security, and fair competition behavior norms of Chinese platform enterprises, rather than benchmarking and catching up with developed market economy countries, thereby elevating the inclusiveness of China’s building of a manufacturing power.

(2) Redefine traditional industrial technology based on Chinese demand and leading global markets

In addition to achieving a technological catch-up in strategic leading industries such as the industrial internet, promoting a large number of traditional high-tech and medium-high-tech industries to achieve leaps from technological imitation and catch-ups to technical leadership is also an essential aspect of China’s building of a manufacturing power. The critical points of strategies and policies to promote traditional high-tech and medium-high-tech industries to catch up and surpass leaders are encouraging and supporting local enterprises to make full use of the uniqueness of Chinese market demand and achieve technological leadership by redefining technical standards and products. It is generally believed that technological catching-up results from the interaction between technological opportunities and appropriate catching-up strategies. Industries with short technology cycles (such as communications and electronics) will continue to experience the substitution and replacement of technology roadmaps. It is more conducive for latecomers to catch up by opening up new technology roadmaps (an important reason China may catch up in the field of IoT, such as with the industrial internet, is that the technology roadmaps of these emerging industries have not yet been established). Conversely, latecomers have a harder time catching up in mature industries with long technology cycles. However, economic history shows that latecomers can achieve technological catch-ups in mature industries with long technology cycles. Japan’s automobile, home appliances, and other industries attained the goal of subversive innovation and continuous improvement in the 1960s and 1970s to overtake the United States and Europe. For traditional high-tech or medium-high-tech industries such as vehicles, home appliances, and engineering equipment, architectural innovation is essential for latecomers to achieve technological catch-ups. The core of architectural innovation is to redefine products according to the differences in market demand. China’s market demand is characterized by its ultra-large-scale. According to World Bank statistics, China’s final consumption accounted for about 11.6% of the world’s total in 2018, while China’s final consumption accounted for about 46.9% of upper-middle-income countries as defined by the World Bank; China’s total final consumption was equivalent to about 71.8% of the total of all Eurozone countries. The ultra-large market has created favorable conditions for China to become a manufacturing power. However, from the perspective of technology catch-up, an ultra-large market is not an adequate condition; in other words, an ultra-large market advantage is not adequate for building a manufacturing power. Spain is one of the countries with the longest high-speed rail mileage outside China. However, Spain has never developed the capacity for high-speed rail technology like Germany, France, and Japan. Rather, it is only a user of high-speed rail technology and equipment from other countries. Large-scale market advantages do not necessarily lead to technological catch-ups for late-developing countries. Only by using market demand to grow independent technical capabilities can domestic industries catch up. Only by redefining technology, standards, and products can a nation become the new leader. Taking the example of high-speed rail further, based on technology introduction, imported technology can be improved according to China’s extreme climatic and geographical conditions, such as regions of high cold, high temperature, and complex and diverse geography. Adhering to Chinese market demand for interconnection and interoperability and relying on the development of standard EMUs to form independent intellectual property rights are the fundamental reasons why China’s high-speed rail equipment ultimately completed technological transcendence based on the introduction of technology and through bold design. Therefore, concerning high-tech and medium-high-tech industries with relatively mature technologies, the focus of industrial policy for manufacturing power should be to encourage Chinese enterprises to meet the unique needs of the Chinese market, especially the new market needs to be formed with the intelligentization, digitization, and networkization of these industries. In this way, the country can carry out architectural innovation and even redesign core components and modules to achieve a technological catch-up.

Another critical point of strategy and policy for spurring China’s traditional high-tech and medium-high-tech industries to catch up and overtake industry leaders is transforming integration into localization as a strategic focus, accelerating the promotion of Chinese manufacturing enterprises, especially leading enterprises, that more directly access leading markets by going global in developed market countries, and integrating and utilizing international high-end elements of innovation. In the past four decades, direct investment by multinational corporations and technology spillovers have been major channels for China’s manufacturing technology learning. However, with the strengthening of supply chain security awareness in the United States and Europe after the start of the COVID-19 pandemic, the global investment layout of multinational enterprises will consider factors that influence production chain security, weakening China’s labor cost advantage. Together with the security-driven adjustments to the supply chain, this will promote a return of manufacturing to developed market economies. To comply with the trend of global investment adjustments while also avoiding tariff and non-tariff barriers caused by rising trade protectionism, the focus of China’s manufacturing opening strategy in the future should gradually shift from attracting inward direct investment from multinational enterprises and encouraging Chinese enterprises to export, supporting outward direct investment by Chinese manufacturing enterprises. This will ensure that China’s manufacturing industry will suffer minimal losses in the process of global supply chain adjustments. From the perspective of technological catch-up, U.S., European, Japanese, and Korean markets are of great value to Chinese enterprises for technical learning and catching-up. First, Chinese enterprises should maintain deep embeddedness in the global innovation network dominated by the United States, Europe, Japan, and South Korea by occupying these leading markets, and by taking advantage of local research universities, public research institutions, and the flow of technical and engineering talents, they can integrate and utilize advanced science, general technology, and engineering technology. Second, through direct competition with global leaders, enterprises can continuously improve operational efficiency and even carry out breakthrough technology and business model innovations. Finally, by meeting the local needs of leading markets, they can form more active user interaction and improve localization and dynamic capabilities. Unlike Germany, Japan, South Korea, and other manufacturing powers that use foreign direct investment to occupy developed economic markets, the catch-up path is different. Due to China’s huge domestic market, the globalization model of most manufacturing enterprises in China is domestic to global, that is, utilizing domestic resources to produce products and then exporting them to meet the needs of the international market. Although more and more leading Chinese enterprises have begun to set up R&D centers in the United States, Europe, Japan, South Korea, and other countries in recent years, using global S&T elements to carry out R&D activities, in general, the scale of direct investment by Chinese enterprises in the international market is still minimal. Even if there are cases such as Geely’s acquisition of Volvo and Midea’s acquisition of Kuka, these reverse acquisitions are more for technology absorption. Chinese enterprises have not yet entered the stage of the global-to-global competition with global production and technological elements directly facing developed markets. In this sense, although China’s automobile, home appliances, construction machinery, and other industries may be better than some European, American, Japanese, and Korean companies in terms of financial performance, there is still a big gap compared to world-class companies in terms of capabilities. Chinese industries must continuously improve their technical and management capabilities through larger-scale foreign direct investment in leading markets to form excellent dynamic capabilities.

3. Strategies and policies to ensure production chain security in extreme circumstances

Ensuring that the manufacturing industry can operate normally under extreme circumstances and that it can still form a strong guarantee for China’s economic, social, and national defense security under extreme circumstances is the basis for building a manufacturing power. In the context of the deep integration of the global innovation system and production network, changes in the international political and economic situation and sudden natural disasters have all posed challenges to national manufacturing system resilience and security. As a new wave of technological revolution and industrial transformation continues to impact global innovation networks and production chains, Chinese enterprises, in particular, have risen to the critical links of advanced manufacturing and high-tech industries. The future building of a manufacturing power faces an entirely different competitive environment from the past building of China as a manufacturing country: In the past four decades, as China, as a whole, has been in a stage where the level of its technology is relatively backward and technological progress is mainly based on technological imitation and introduction, leading countries have spontaneously promoted the process of building China’s manufacturing power through outsourcing and industrial transfer out of industrial and trade interests. In other words, the building of China as a manufacturing country and the technology and industrial output of developed industrial countries were incentivized and compatible. However, as China’s technological capabilities converge towards developed industrial countries, these countries, represented by the United States, continue to strengthen restrictions on the export of critical components, major equipment, core technologies, and essential S&T resources to China, significantly inhibiting the technology acquisition method that manufacturing industry development had relied on in the past. It can be expected that the systematic suppression of core technologies and strategic industries by the United States will be a long-term challenge for the development of China’s manufacturing industry in the future.

(1) Incubate a production chain based on next-generation technology according to the principle of securing the bottom-line

In the fields where the leading countries with competitive relationships have mastered monopoly advantages but where China cannot catch up in the short term (such as current integrated circuits and basic software), the principle of securing the bottom-line should be implemented. This means developing and improving the domestic supply chain to replace the previous generation of technology in extreme cases, ensuring that China’s manufacturing industry remains sufficiently resilient and secure in the face of normalized and sudden extreme pressures such as production chain disruptions, wars, and major epidemics. Taking integrated circuits as an example, in the integrated circuit production chain below 14nm (mainly 7nm and 5nm), the United States and its allies have an absolute monopoly in the fields of design software, high-end photolithography and polishing machines, and certain high-end materials (such as high-end photoresist and its raw materials and high-end CMP polishing pads). Because of this, it is difficult for China to incubate a substitutional capacity within a short period. Moreover, it is also challenging to incubate a long-term stable and reliable supply chain from other countries, so there is a significant risk of being throttled by the United States. In fact, the continuous suppression of Huawei by the United States since 2018 has reflected the absolute dominant position and voice of the United States in the industrial system. It has formed a certain restraint on the development momentum of China’s leading enterprises. Given this, China should rely on major S&T projects and other significant endeavors under the framework of the national system to accelerate the formation of technical capabilities in the fields of 28nm integrated circuit design, manufacturing, packaging and testing, equipment, and materials and to incubate a wholly domestic production chain. Similarly, China can use this approach to accelerate the establishment of a research and development system for basic research, common technology, and cutting-edge technology that can support the development of the 28nm integrated circuit production chain, make up for shortcomings and ensure security, and form a guarantee for the secure operation of strategic industries under extreme circumstances.

Of course, the complete replacement of the production chain based on the previous generation of technology is only a passive guarantee for the security of the production chain. A more resilient and secure manufacturing power also requires the initiative to form an asymmetric competitive advantage in next-generation technologies that others cannot do without, improving China’s say in negotiations and strategic cooperation with other countries while fundamentally avoiding broken chains. Taking the example of integrated circuits further still, if the system-chip-process-equipment and materials production chain of 28nm or 14nm can make up for shortcomings and ensure security, it can also form leading or differentiated advantages in the local fields of the 7nm and 5nm industry chains, it can provide the dual insurance of passive protection and active defense to ensure the security of China’s integrated circuits and the entire electronic information industry.

(2) Accelerate the establishment of a complete national production chain security management system

The policy orientation of the industrial management system gradually established in China in the past forty years is entirely reliant on import substitution and catching-up, and production chain security management is actually missing in China’s industrial management system. This purely catch-up-oriented industrial management system was applicable when China was in an early stage of economic development and the level of global openness was constantly improving. However, with the rise of the tide of anti-globalization and in the international environment where the improvement of China’s industrial competitiveness has caused developed countries to act vigilant and even curbed, such an industrial management system is not conducive to China’s building of asymmetrical competitive advantages with developed market economy countries. Moreover, it is not conducive to China’s manufacturing industry to win the global multilateral governance system initiative. It is not conducive to the overall planning and coordination of industrial catch-up and production chain security. In recent years, developed countries such as the United States have accelerated the improvement of the top-level design of industrial security management and continuously strengthened the strategic position and administrative functions of industrial security. However, China’s industrial security management system is still lacking a policy framework and decentralized decision-making. In industrial policy and competition policy, production chain security management is marginal at best. Although China’s current industrial management and policy system has partially included the functions and contents of production chain security management, given the low administrative level and high dispersion of various production chain security management authorities within different industrial management authorities, China’s production chain security management is absent from the perspective of a complete organizational management system.

To improve China’s production chain security management capacity, it is far from enough to rely on patchwork reforms under the existing management system and policy framework. It is necessary to establish a new production chain security management system and workflow according to the task requirements of China’s production chain security management, to fundamentally ensure that the future development of China’s industry can effectively deal with the complex and changing competitive environment and fundamentally ensure the strategy, continuity, and effectiveness of the competitive process. In this regard, the construction of the policy system and governance system of China’s production chain security management should be accelerated, and the production chain security management should be made clear as a prerequisite for China’s industrial policy, S&T policy, competition policy, and trade policy. China’s production chain security legislation should be prepared as soon as possible. In the form of legislation, clarify the primary status of production chain security management in economic policy systems such as industrial policy, competition policy, and trade policy, strengthen the role of production chain security management in guiding and coordinating the formulation and implementation of microeconomic policies such as China’s manufacturing development plans, major S&T projects, and anti-monopoly initiatives. Accelerate the construction of a production chain security organization and management structure with clear rights and responsibilities and close multi-authority collaboration, including the establishment of the National Production Chain Security Committee as a strategic decision-making platform for China’s production chain security management, the establishment of an independent national production chain security management agency, and the strengthening of the administrative power and professional capabilities of production chain security management. Build a professional and independent production chain security analysis and evaluation agency to conduct comprehensive and systematic analysis, evaluation, and dynamic supervision of strategic industries such as 5G, integrated circuits, AI, basic software, medicine, and scarce natural resources.

4. Strategies and policies to consolidate the foundation of manufacturing innovation and development

The transition process of the manufacturing industry from large to powerful is the result of the long-term, high-intensity, innovation-oriented market competition of manufacturing enterprises. The root cause of being big but not strong in China’s manufacturing industry is that most enterprises are imitative and market opportunistic. The building of a manufacturing power requires that the institutional environment and policy environment for developing China’s manufacturing industry should be innovation-friendly, and the opportunistic investment-driven competition paradigm of local governments and enterprises should be replaced by innovation-oriented, especially original innovation-oriented, competition paradigms. In this process, Chinese enterprises should build an internal independent innovation system and more extensively integrate into the global innovation system and integrate and utilize globally-advanced innovation elements. Endogenous innovation is not as binary as independent innovation and closed innovation. Instead, endogenous innovation puts forward higher-level requirements for more open integration into the global innovation network. For this reason, Ren Zhengfei emphasized that self-reliance is possible only in those non-leading and non-frontier fields, and open innovation must be adhered to in leading and cutting-edge technologies in frontier fields. In constructing an open innovation system, a talent network must be built with in-depth cooperation, high-frequency interaction, and a good flow of global leading S&T talents. Therefore, the requirements of innovation and development in the building of a manufacturing power must be realized through three aspects: Strengthening the innovation incentive system, opening up the innovation system, and building a global talent network.

(1) Promoting the formation of an innovation-friendly system and policy environment

The first is to strengthen the incentive orientation of local governments for innovation and development and the formation of a public resource allocation pattern for innovation-driven development. Unlike other manufacturing countries and manufacturing powers, the local government is an important hub for allocating China’s economic resources and a key node for the innovation and development of China’s manufacturing industry. The transformation of the local government’s development orientation from investment-driven to innovation-driven is the institutional prerequisite for China’s manufacturing sector to achieve innovation-driven development. In this regard, according to the inherent requirements of the innovation-friendly system, the central government should accelerate the adjustment of the performance appraisal standards and methods of local governments at all levels, accelerate the improvement of the tax system and fiscal transfer payments, and encourage local governments at all levels, per their respective resource endowments, to take a differentiated and high-quality development path in inter-regional competition. At the same time, restricting and guiding local governments to focus their industrial policies on technology and product innovation so that the development of China’s advanced manufacturing industry can escape the vicious circle of repeated introduction and overcapacity as soon as possible.

The second is to force the innovation-driven development of the manufacturing industry by strengthening intellectual property protection. Improve the efficiency of implementing intellectual property protection legislation, strengthen the administrative status of intellectual property protection organizations and management agencies, and make intellectual property protection and utilization genuinely become the primary means of market competition for enterprises. In the context of the accelerated reframing of global multilateral rules, China should ensure that other countries do not dominate it in adjusting the intensity to protect intellectual property. Instead, we should proceed from the actual needs of China itself as a latecomer to catch up and surpass others. China should actively grasp the strength and flexibility of implementing the intellectual property system on the premise of strengthening the protection of intellectual property rights in general. In addition, according to the differences in the technical level and industrial characteristics of various regions and industries, China must determine protection strength and its policy mix in phases and on a regional basis.

The third is to promote the formation of an endogenous mechanism for innovation-driven development by strengthening the fundamental position of competition policy. At the national level, in formulating economic policies and implementing the governance system, improving China’s legislative, judicial, and law enforcement systems will effectively strengthen the authority and independence of competition policy formulation and implementation entities, fundamentally ensuring the authority and stability of competition policy. When structural industrial policy and competition policy conflict in formulation and implementation, ensuring the effectiveness of competition policy becomes the priority principle and common practice. At the enterprise level, further optimizing the layout of the state-owned economy, improving the state-owned capital supervision and management system and the management personnel assessment and evaluation mechanism will ensure fair competition among various ownership systems.

The fourth is to build a manufacturing innovation system with complete functions and efficient operations to improve the capability of manufacturing innovation to drive development. Encourage a shift in public policy resources from granting subsidies to building efficient manufacturing innovation systems consisting of first-class research institutions and major S&T infrastructure, high-level general R&D institutions, national laboratories that can support major national strategic tasks, and technology diffusion service institutions with sufficient public welfare. The orientation of these institutions is as follows: Research institutions and S&T infrastructure are mainly oriented to meet the needs of basic research and endogenous innovation in building a manufacturing power and enhancing the endogenous innovation capabilities of the manufacturing industry. The central positioning of national laboratories is to carry out task-oriented research relying on interdisciplinary collaboration and long-term high-intensity financial support to meet the major strategic needs of a manufacturing power. The function of common technology service centers is to provide the common key technology of industry development and address the bottleneck in the supply of critical technologies that serve as a precondition for an advanced manufacturing industry. The role of public technology diffusion service institutions is mainly to encourage the diffusion and application of advanced and applicable technologies, especially manufacturing technologies and best management practices, amongst enterprises (primarily small and medium-sized enterprises). In addition to making up for the structural deficiencies of China’s manufacturing innovation system, the institutional barriers to interaction and cooperation between various innovation entities should be gradually eliminated, and the institutional barriers that restrict the effective transfer and transformation of S&T achievements in research institutions and general technology R&D institutions should be eliminated.

(2) Continue to deeply integrate into the global innovation system and production networks

Guide and promote the development of multilateral trade and investment systems in a more open, cooperative, and inclusive direction, gradually change the current situation in which China relies too heavily on the United States in the global innovation system, and increase opening up to and cooperation with Germany, Japan, the United Kingdom, France, and Nordic countries to diversify China’s technology sources and strive to create a more friendly global innovation environment. Throughout the history of the development of international manufacturing powers, no manufacturing power has ever caught up under closed conditions. This is not only because the formation of a manufacturing power requires the use of the market resources of other countries, but more importantly, key R&D elements and core technological achievements are highly decentralized. Open and integrated innovation has become the dominant technological innovation paradigm today. In integrating into the global innovation chain, making full use of international technological elements and gradually occupying the core position of the global value chain has become the only way to build a manufacturing power.

In this regard, the construction of an open environment for a manufacturing power should, on the one hand, make full use of the differences in interest demands between the United States and Europe, Japan, South Korea, and other regions and countries. We should try to guide the Sino-US trade war from a game of political ideology and values to a matter of rules, avoiding the trap of politicization of technology and trade issues promoted by the United States. This will ensure that the problem of broken links in the global innovation chain is addressed at the economic and technological levels and ensures that China will continue to be deeply integrated into the global innovation network. On the other hand, it is necessary to speed up strategic design and deployment and play a more active role in reconstructing international multilateral rules. Under the WTO reform requirements and multilateral regulations and standards such as the CPTPP, we should accelerate adjustments in the level of compliance of China’s domestic industrial policies to ensure that China meets the entry conditions for the new wave of multilateral systems. The period from 2020 to 2035 is a period of in-depth adjustment of international multilateral rules. In the future, China should comprehensively use diplomatic, economic, and trade means, maintain the most adequate communication with WTO and CPTPP member states, strive to play a more active role in the WTO, and strive to join the CPTPP multilateral framework at an early date.

(3) Strengthening the construction of a global talent network

Since the reform and opening up, attracting high-tech talents to flow to China has been an important channel and method for China to achieve manufacturing technology learning. Talent flow can help latecomers overcome the barriers of tacit knowledge learning and significantly improve technological catching-up efficiency in late-developing countries. Taking Japan as an example, the secret to the technological catch-up of Japanese companies was the quick identification of critical S&T talents (the know-who) who can solve specific technical problems and their introduction to Japanese companies or their provision of technical consulting for companies, solving the know-how problem faced by cutting-edge technology or product engineering. Considering the strategic significance of the flow of high-tech talents to China’s technological catch-up, the United States has taken the flow of high-tech talents from China as an essential part of its strategic containment. It has adopted a series of policies to restrict the flow of S&T talents, especially those of Chinese descent, to China. In this regard, on the one hand, promoting the formation and development of a more open and inclusive multilateral system of rules should impede the unreasonable restrictions on the flow of talents from the United States; on the other hand, building high-level, world-class research institutes and public research institutions that meet international governance and incentive norms, launching an international S&T talent project that is oriented to the global S&T frontiers and is conducive to mutual benefit and win-win for the participants, thereby attracting and gathering global S&T leaders, and build a talent exchange and gathering platform that is in line with international standards can effectively serve the establishment of China as a manufacturing power.

5. Conclusion

The building of a manufacturing power is a necessary support and traction for establishing a powerful modern socialist country. It is the core issue of industrial development now that China has established a highly integrated industrial system and has become the world’s largest manufacturing economy. The establishment of China as a manufacturing power should conform to the general requirements of a manufacturing power and give deeper connotations to the manufacturing power mission given the unique environment faced by China’s push to become a manufacturing power. Given this, China’s manufacturing power strategy for endogenous development should include three aspects: Technology and market leadership in strategic fields, manufacturing operation security under extreme pressure, and continuous innovation-driven manufacturing. Of these dimensions, technological and market leadership in strategic areas and establishing a mechanism for high-intensity innovation-driven development are the general characteristics of building a manufacturing power. At the same time, the safety of manufacturing operations under extreme pressure conditions is a unique constraint faced by China as it builds a manufacturing power in the future.

The leading strategy for strategic leading industries should highlight the uniqueness of Chinese market demand to redefine technical standards and products and actively build asymmetric competitive advantages. The strategic points to solve the security problems of China’s production chain are to develop a wholly-domestic production chain based on next-generation technologies (such as the 28nm process of integrated circuits) according to the principle of securing the bottom-line while also striving to form an effective countermeasure in local areas of cutting-edge technologies. The second is to accelerate the construction of a production chain security organization and management system, especially establishing specialized production chain security management authorities. To realize the transformation of China’s manufacturing industry from investment-driven to innovation-driven development through the establishment of innovation-driven internal mechanisms, the key is to establish an innovation-friendly system and policy environment that can truly stimulate the endogenous innovation enthusiasm of local governments, enterprises, and other microeconomic entities with the incentive-compatible realization of the transformation of the competition paradigm of manufacturing micro-entities.

Finally, it must be emphasized that, in terms of the value orientation of establishing China as a manufacturing power, in addition to focusing on core elements such as strength, innovation, and security, development should also highlight the contribution of China’s unique talents, technology, and market forces to the promotion of global frontier technological breakthroughs and the development of emerging industries while demonstrating inclusiveness that comes with building a manufacturing power.