Are there future investment opportunities in China's manufacturing industry?

Beginning before the Chinese New Year, the statement that "foreign companies are accelerating their withdrawal from China" has been frequently seen in the media, and the reports about the sudden dissolution of Guangzhou Citizen Corporation have deduced this statement to madness. The Citizen incident is regarded by some public opinion as a "signature event" of the "wave of withdrawal" of foreign investment in China. But, is it really that serious? Is China really no longer a fertile land for investment and entrepreneurship?

Do not deny that China's manufacturing industry is in trouble. It has been several years since workers on the southeast coast could not be recruited. In the past two years, well-known foreign companies have indeed begun to retreat. Before the Spring Festival, I heard that Microsoft plans to shut down its factory in Beijing, and Nokia will also move the production equipment from its Dongguan factory to Vietnam. Microsoft is laying off a total of 9,000 jobs, which is a lot. There are also many other rumors. Panasonic, Daikin, Sharp, and TDK have plans to move their bases back to Japan. Uniqlo, Nike, Foxconn, Funai Electric, Clarion, and Samsung have also said they will expand their bases in Southeast Asia and India. Set up a new factory.

But what is the real situation? Global foreign direct investment fell 8 percent in 2014 from 2013 to about $1.26 trillion, according to UNCTAD data, as the global economy weakened. However, China attracted about $128 billion in foreign direct investment last year, an increase of about 3 percent from 2013, making it the largest recipient of foreign direct investment. China has ranked first among developing countries in attracting foreign investment for 23 consecutive years.

More importantly, it is structural: in 2014, foreign investment in the service industry reached 66.2 billion US dollars, a year-on-year increase of 7.8%, much higher than the 1.7% increase in total foreign investment in the same period. The entire service industry accounted for 55.4% of total foreign investment in China. What does this number indicate? This shows that China is no longer "reluctant" to foreign investment, but has begun to pay equal attention to "quality" and "quantity".

So, where is the capital going? In the past, "investing and setting up factories" seems to have become "the past tense", and more capital is directly or indirectly targeting opportunities in the field of "transformation and upgrading". We see more and more domestic and foreign private equity funds, venture capital funds, and venture capital funds searching for innovative companies in China. Every current business hot spot, such as intelligent manufacturing (industrial robots, etc.), Internet (e-commerce, taxi-hailing, etc.) , O2O, etc.), there are strong capital interventions.

At the same time, more and more entrepreneurs are also devoted to entrepreneurship and innovation. The latest case is Mao Daqing of Vanke, who left to start a business, trying to combine entrepreneurial services and real estate to become China's WeWorks.

Premier Li also clearly put forward the future vision of "mass entrepreneurship and innovation" in the report of the two sessions, and planned the Chinese version of "Industry 4.0" - "Manufacturing 2025", which shows that the decision-making level has a "transformation" in the future. "Upgrade" has a clear plan, and places great hopes on the main body of market innovation-entrepreneurs and entrepreneurs.

In this context, as a manufacturing enterprise, how should we keep up with the trend and even stand on top of the wave?

Still inseparable from the "smile curve". Obviously, R&D, design and sales services at both ends are lucrative areas; while manufacturing in the middle and bottom areas of the smiling face can only make very thin profits.

In fact, the "smile curve" itself has pointed out the development direction of China's manufacturing industry. To put it bluntly, Made in China must extend and develop to both ends of the smile curve, or it will die. Strengthen R&D, design and create intellectual property rights on the left, and strengthen customer-centric brand marketing and services on the right.

As for the left, to put it bluntly, it is either to develop high-tech industries, to upgrade from low-end manufacturing to mid-end or high-end manufacturing, or to improve manufacturing standards and technologies. For high-tech industries, we cannot blindly engage in what is popular, as interlaced as mountains. The trap of the Great Leap Forward of emerging industries in the past few years has trapped many enterprises that are eager to transform. A more reasonable choice is to improve R&D technology, manufacturing technology, etc. in your original field of expertise. If you do audio, try your best to tune the sound quality and improve the quality, and optimize the production process through industrial automation and other equipment; if you do clothing, cultivate better designers, retain more skilled workers, and use More advanced machines...

The typical example on the right is a case similar to a Xiaomi phone. Xiaomi itself does not produce mobile phones, but only focuses on design and development and customer service. Mobile phone manufacturers are responsible for manufacturing mobile phones. In addition to the mobile phone itself, Xiaomi provides consumers with complete life service solutions through mobile applications and home derivative products, creating huge added value at both ends of the "smile curve". Xiaomi's market value has long exceeded that of most mobile phone manufacturers themselves.

The inspiration of Xiaomi's success is the power of the combination of brand and Internet. In the past, it was difficult for a company that "made products" to be a brand, and the channels were all in the hands of middlemen. It was easier said than done to establish an independent portal. But with the advent of the Internet, the distance between brands and consumers has been greatly shortened, and the cost of brand penetration has been greatly reduced, which has opened new doors for us. Most of us can’t reach the height of Xiaomi and copy its gameplay, but we can settle for the next best thing. Aren’t the numerous e-commerce platforms and social brands on the Internet all efficient channels for us to promote our brands?

The upgrading of China's manufacturing industry is actually going on quietly. When many traditional companies are screaming that business is difficult to do, they have quickly embraced the new changes and used them for me. Between success and failure, the key lies in thinking, vision, as well as the determination and execution of change.