After 30 years of uneven and rapid growth, the boom in real estate and infrastructure, the Chinese economy lost some endurance. Global companies move their factories back to the US and Europe due to lack of skilled workers and the increasing cost of labor in China.
While the Chinese economy is entering stagnation and social unrest and conflicts are growing rapidly, many Chinese are prone to irrational self-aggrandizement. Chinese media, especially the Internet media, with the tacit consent of the regime started a new round of campaign bragging: they extol the successes kitaysky industry, in particular the so-called quantum communications satellite, the launch of which is merely an attempt encryption with quantum theory and has nothing to do with satellite technology at all.
The Chinese government is actively developing space industry, but insiders can tell immediately that while China is able to produce engines for its rockets, its jet engines for the fighters leave much to be desired. China still followed the Soviet example and is committed to sending humans into space, and in the US, all space activities in near-earth space is carried out by private enterprises.
Communist leaders in China are tied for first place the power and “effective” use of state power in everything from birth control to scientific research. In 1970-1980 the meteor shower in Jilin province in northeast China. The authorities decided to use this rare celestial phenomenon, to improve the status of China in the international scientific community. Was launched a large-scale state program on study of meteorites and many articles published, but soon the research activity has stopped.
The German experience shows that state-supported private study and private research institutions contributed to the successful development of technology, especially in the manufacturing industry.
However, things made in Germany, has not always had this reputation as it is today. At the end of the second world war, the British demanded that the products imported from Germany, were marked Made in Germany, but not because these products were better, but because they were worse and the British wanted to distinguish them from their own. Half a century later the picture has changed dramatically and many countries want to emulate the German manufacturers, but to no avail.
Will China be an exception?
At the end of September this year, the German company DMG shut down their businesses in Shanghai, referring to the slowdown in economic growth in China and worldwide, the deterioration of the situation on the market, low utilization of capacity, high inflation and increasing production costs.
DMG is a global leader in the production of machine tools and almost all high-precision machine tools in China purchased from this German company. Production of Chinese cars, mobile phones and all branches of engineering depend on DMG, supplying to them the mechanisms and parts. We can say that DMG is the Foundation of Chinese production. Care DMG from China is undoubtedly a big blow to the sphere of production in China. An ambitious program of the Chinese state “Made in China 2025”, which includes manufacturing robots, 3-D printers, and much more, can be minimized.
Over the past 20 years the higher education system in China has experienced amazing growth, but no long-term and integrated planning. Due to the lack of quality control and commercialization of higher education completely distorted the overall structure of vocational education declined. The status of many colleges and technical schools were “upgraded” in the blind, which led to a decline in the quality of higher education and the shortage of skilled workers.
When the Communists sought power, they called the workers “advanced class”, and when they are firmly entrenched in China and needed more support workers, blue collar workers became outsiders. Their social status was going down a downward spiral over the last two decades, which in turn led to a decline in production in China today.
The famous “dual system” of vocational education in Germany puts the emphasis on the teaching factory practice. Everything, from the Minister of education of Spain to the Director of the industrial Union of great Britain, want to emulate the German Mittelstand (medium-sized enterprises). But in fact, the German model is not so easy to repeat.
Thomas Kautsch (Kautzsch) noted in a June article in the Harvard Business Review that the Germans are leading in the manufacture of vehicles, machines and spare parts, as they integrated software, sensors, networks, and components of all types in full. Now they are the leaders in digital manufacturing in everything from cars to kitchen appliances.
The Economist noted that the German method of production is not so easy to export, as their products. While small German company Beckhoff Automation produces control device to half of all wind turbines in China, Chinese companies are not so easy to copy the secrets of its production, although the Chinese are well known for their ability to copy everything. But Beckhoff Automation manufactures its products right under their noses — in Shanghai!
Beckhoff Automation is just one of those small and medium enterprises in Germany, which make up the Mittelstand. But their way of working and management style is nearly 200 years! According to Hans Beckhoff, one of four brothers and sisters who exercise a family office Beckhoff Automation, they own everything and nothing to borrow. These were traditionally family-run and private enterprises in China before 1949, but today all the leading manufacturing enterprises in China are owned by the state and depend to a large extent on borrowed funds and, therefore, are mired in debt.
Steven Rattner from the Ministry of foreign Affairs studied what America can learn from Germany. First, he said, is cooperation between the German government and private companies. Another advantage of the Germans is to produce the most fundamental, key components for everything, so the Germans like to say: “We make things that make other things make other things.” Small, nimble and adaptive to a German company focused on long term growth rather than short-term profit as the Chinese company.
The Germans have at least two weapons in the battle for the throne of world production: the machines of small companies such as Beckhoff and brands of major companies from Mercedes-Benz to BMW. State-owned enterprises in China are huge and not very well develop a niche, besides contract manufacturing for global brands strangling domestic Chinese brands.
The best example of cooperation between public and private institutions in Germany is the Fraunhofer Society, which is the driving force of exports of high technology from Germany. Even the Obama administration has asked for $1 billion to form a national network of innovation and collaboration on the model of Fraunhofer. It is hardly possible to implement in China, mainly because of the political system, bureaucracy, corruption, etc.
Author: Dr. Frank Tian Xie (John M. Olin Palmetto) Professor of business and Professor of marketing at the University of South Carolina at Aiken, USA.
