Jiang Tanjun jtjbarry@163.com MANY people in the manufacturing sector have been engaging in heated discussions over the results of a survey stating that the costs of Made in U.S. will be lower by 2-3 percent than those of Made in China in 2018, released by Boston Consulting Group. Maybe a few people still think that the survey is a deliberate act of sensationalism only, and stick to the old thought of “China was and will be the world factory.” However, we are witnessing a continuous decrease in global demand, while the overall costs of Made in China continually increase. Some foreign-funded enterprises are moving from China to Vietnam, India or other low-cost regions. Meanwhile, the results of the data comparisons performed by some Chinese enterprises like Fuyao Glass and Jiangnan Chemical Fiber that have already set subsidiaries in the U.S. also revealed that lower costs of Made in U.S. than in China will unfortunately become an inevitable fact soon. Now we have to answer a serious question: How to cope with this embarrassing situation? On the macro level, heavy taxes, charges and costs from energy, logistics and land burdens upon enterprises in China should be appropriately reduced. Legitimate protection for intellectual property should be strengthened in order to mobilize the passions of enterprises for innovation. The industrial layout should be scientifically optimized and governed so as to eliminate low-level repetitive construction that causes dog-eat-dog competitions. An expert has claimed that the taxes and fees Chinese enterprises have to pay total nearly 40 percent, and called it a “Deadly Tax Rate.” Chinese manufacturers should also take action to improve business performance. On one hand, Chinese enterprises should take cost-reduction actions, but cost reduction is limited because there is no zero-cost enterprise in the world. So, on the other hand, Chinese enterprises should take actions to improve productivity, and productivity increases are unlimited. According to the description and data by Karel Eloot (McKinsey Quarterly, 2016/3rd), since the beginning of reform and opening-up, Chinese enterprises have been heightening productivity, but their productivity just reaches only one-fifth of that in developed countries. Due to consulting work, I often go to Chinese enterprises and see all sorts of chaos, such as very high nonconforming product rates, frequent equipment breakdowns, repeated customer complaints, delayed deliveries, accidents at work, messy stocks covered with dust, and the like. There is still much room to improve the productivity of Chinese enterprises. The competitive edge of high-level Made-in-China products is worse than their counterparts in Europe, America and Japan, but the competitive edge of low-level Chinese products is lower than that in Vietnam and India. We should soberly realize that there are countless obstacles in increasing our productivity. We must have craftsmanship spirit, tailored planning and determined execution. (The author is a senior management consultant.) | 