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Mint
3 days ago
- Business
- Mint
Ajit Ranade: The success of ‘Made in China 2025' alarmed the West
An after-effect of the global financial crisis of 2008 was that by the following year, China's exports dropped by 16%. This led to widespread factory closures and mass layoffs in provinces like Guangdong. China's prosperity had been built on the large-scale export of low-cost, labour-intensive manufactured goods for three decades. The crisis exposed the vulnerability of that strategy and overdependence on Western markets. Also, China was stuck in low-end assembly roles in global supply chains, with low value addition. Undoubtedly, its economic reforms from 1978 onwards made it possible for 300 million workers to move from rural and agricultural livelihoods to higher paying industrial and urban jobs. But 2008 was a rude reminder of several weaknesses. Real wages had not grown much. As a result, consumption spending was stuck at just 35% of GDP even as late as 2009. Domestic demand could not pick up the slack caused by falling external demand. Also Read: Kaushik Basu: Redefine prosperity; GDP tunnel-vision could prove costly In 2009, Chinese policymakers responded with a 4 trillion renminbi stimulus, with big spending on infrastructure. This restored growth to 10% next year, but also led to industrial overcapacity in sectors like steel and cement, and reinforced the dominance of state-led investment. Consumption was not picking up even as deflationary pressures were building, while state-owned enterprises were struggling, plagued by overcapacity. This in turn caused a debt explosion. China's debt has grown from 150% of GDP in 2008 to about 280% now. A real estate over-build-up made a crisis in this sector imminent, as was later demonstrated by the fall of Evergrande. This was the backdrop to Beijing's launch of 'Made in China 2025' (MIC25) ten years ago. By 2013, the new regime under President Xi Jinping had recognized the need for supply-side reforms by cutting overcapacity, addressing the consumption-export imbalance and reviving industrial growth with innovation and value addition. Also Read: China began de-risking its economy well before Trump's trade fury Partly inspired by Germany's Industrie 4.0, MIC25 aimed to upgrade Chinese manufacturing to high value addition and less dependence on foreign technology. It also aimed for technological self-sufficiency and domination of emerging high-tech sectors, and sought to promote indigenous innovation and green as well as smart manufacturing. It targeted 10 sectors, including aerospace, advanced rail-transport equipment and new energy vehicles, and aimed to raise the domestic content in high-tech industries to 70%. This industrial policy was focused on picking champions, channelling vast state subsidies, and guiding credit and support to chosen sectors from preferential government procurement. The West was unhappy, viewing MIC25 as mercantilist and violative of WTO norms as well as non-market driven. There were concerns about forced technology transfer and cyber theft. Unsurprisingly, when US President Donald Trump assumed office for his first term, he slapped punitive duties, put in export controls and investment screening. The EU followed suit in trying to decouple from China. Also Read: The time is right for a reset of India's trade ties with China Fast forward to 2025. There are now several independent assessments of MIC25. Of these, two major studies were commissioned by the American Chamber and European Chamber of Commerce. What emerges is that MIC25 has been a success and has led to a spree of backlash actions, such as this year's Trump tariffs. China now accounts for 30% of value added in global manufacturing, ahead of the US, which accounts for 16%. China's BYD dominates electric vehicles (EVs), while Huawei leapt ahead in 5G telecom and AI hardware. China is a leader in shipbuilding, batteries, solar power, turbines, drones, consumer electronics and pharmaceutical ingredients. DeepSeek's AI leap was a wake-up call to those enamoured by OpenAI's ChatGPT. The recent price slash by BYD shook the global EV industry. It sells more vehicles than Tesla in the EU despite higher tariffs. China now has more robots per 10,000 workers than Germany, according to a Financial Times report. Import dependency has reduced and foreign companies are incentivized to localize production. EVs, high speed rail, industrial robots, 5G and renewable energy are China's success stories, while it faces challenges in semiconductors, aerospace and biomedicine. The FT report notes that even now, Chinese aircraft are simply 'western aircraft with Chinese metal on them." Other risks are its huge EV and solar overcapacity, apart from the global backlash of tariffs and sanctions led by US actions. Hence, MIC25 has been repositioned and folded into a broader framework called 'new quality productive forces." Also Read: How Trumpian volatility is forcing policy changes in China At the rate it is going, China's share of valued addition in manufacturing could go up to 50% in the next 5-10 years. How this Cold War 2.0, which may see the US decouple from China, plays out is anybody's guess. China is also investing in trying to win the war of narratives and perception by describing its alternate development path. But initiatives like its Belt and Road plan have only met with limited success. China also cannot ignore some core and persistent vulnerabilities, including low domestic consumption demand, an ageing demography as well as a peaking labour force, rising unemployment, slowing growth and ballooning debt. Added to this is its increased friction with the Western world and barriers denying its exports access to markets in the West. The success of MIC25 cannot hide these related risks and challenges. The author is senior fellow with Pune International Centre.
IOL News
24-04-2025
- Business
- IOL News
AI-powered Lean could level the playing field for South African SMEs
Historically, advanced technologies like AI have been largely inaccessible to SMEs, putting them at a distinct disadvantage compared to larger corporations. Image: RON AI South African SMEs navigate a complex business landscape, juggling daily operational demands with the urgent need to adopt rapidly evolving digital technologies. Historically, advanced technologies like AI have been largely inaccessible to SMEs, putting them at a distinct disadvantage compared to larger corporations. However, a new wave of innovation, mirrored by developments in the Global North and championed by companies like LeanTechnovations locally, demonstrates how the strategic integration of AI with proven methodologies like Lean can empower SMEs and foster a more equitable competitive environment. In economies across the Global North, we've seen AI transform SME sectors. In Germany, the Industrie 4.0 initiatives have enabled smaller manufacturers to automate production lines, optimise supply chains, and personalise products, previously the domain of large enterprises. In the United States, AI-powered marketing tools are allowing SMEs to target customers with unprecedented precision, rivaling the reach of major brands. Estonia, a digital leader, has implemented AI in e-governance, streamlining bureaucratic processes and making it easier for SMEs to operate efficiently. These examples highlight a clear trend: AI is no longer a luxury but a critical tool for SME competitiveness. These successes offer valuable lessons for South Africa. Like their counterparts in the Global North, South African SMEs often face barriers to growth, including limited resources and access to advanced technologies. However, by embracing AI-powered Lean strategies, these businesses can overcome these obstacles and unlock new opportunities. LeanTechnovations is at the forefront of this transformation, recognising that while traditional Lean practices have proven effective in sectors like SME engineering, we now require a modern upgrade through the data-driven insights offered by AI. This fusion of Lean principles with intelligent technologies allows SMEs to move beyond reactive management and short-term solutions, unlocking their full potential. For many leaders in South Africa's corporate sector and within SMEs, balancing operational demands with the proactive adoption of new technologies can feel like a constant struggle. AI integration within Lean frameworks offers a solution by streamlining operations and providing intelligent insights that were previously either too costly or complex for SMEs to access. By leveraging AI, SMEs can gain a deeper understanding of their processes, identify areas for improvement with greater accuracy, and automate tasks, freeing up valuable time and resources for strategic, long-term planning – a capacity often limited by the relentless pressure of day-to-day operations. This access to sophisticated data analysis and automation capabilities through AI-powered Lean effectively levels the playing field. SMEs can now optimise processes with data-driven insights, using AI to analyse operational data to identify inefficiencies and bottlenecks that might be invisible through traditional methods. This will allow SMEs to make informed decisions for optimisation – a capability previously requiring significant investment in data science and analytics teams. This will enhance efficiency and reduce waste. By automating repetitive tasks and providing predictive analytics, AI can help SMEs minimise waste and improve overall efficiency, bringing their operational capabilities closer to those of larger, more technologically advanced competitors. AI-powered Lean will help SMEs Improve decision-making. Access to AI-powered insights enables SME leaders to make more strategic and informed decisions, based on real-time data rather than intuition alone. And, most importantly, this should foster much needed innovation. By streamlining operations and freeing up resources, AI-enhanced Lean allows SMEs to dedicate more focus to innovation and adapting to the rapidly evolving business landscape. LeanTechnovations' tailored strategies demonstrate that operational excellence and sustainable growth are not mutually exclusive for SMEs. By embracing this fusion of Lean and AI, South African SMEs can overcome the limitations of traditional approaches and compete more effectively in a market increasingly shaped by digital innovation. Our mission and objective to empower South African businesses to thrive in the digital age through intelligent Lean transformation, encapsulates this potential for SMEs to not just survive but flourish by embracing the power of AI. South Africa has a unique opportunity to leverage the lessons learned in the Global North. By investing in digital infrastructure, promoting AI education and training, and fostering collaboration between technology providers and SMEs, the nation can accelerate the adoption of AI-powered Lean and empower its SME sector to thrive in the digital age. This is not just about catching up; it is about leapfrogging into a future where South African SMEs are competitive, innovative, and driving inclusive economic growth. Rowen Pillai, CEO of LeanTechnovations Rowen Pillai, CEO of LeanTechnovations Image: Supplied. BUSINESS REPORT
