WHETHER China is willing to accept foreign standards on Industry 4.0 hinges largely on its own industrial prowess and adaptability. There’s indeed a chasm between China’s industrial leaders and laggards in terms of their capabilities and preparedness.

Specifically, the degree to which automation and information technology are currently utilized varies wildly across regions and industries.

A typical case in point is computer-aided design software. Such software have been around for decades and are commonly used in all of the world’s advanced economies, but by contrast they remain a novelty in some Chinese localities.

Gu Laifeng, deputy dean of the Overseas Education College at Shanghhai Jiao Tong University, lamented that only a small handful of Chinese firms like Haier and Midea — two leading suppliers of home appliance — have so far joined the Industry 4.0 club, while the rest mostly find themselves somewhere in the 2.0-3.0 category.

This discrepancy makes it difficult to apply a single standard nationwide when it comes to deploying Industry 4.0.

In the absence of a common objective, experts have been arguing for a two-pronged strategy in China — formulating its own national Industry 4.0 standard while also collaborating with the outside world on a global standard.

Made in China 2025

In official documents, China’s Industry 4.0 campaign is referred to as “Made in China 2025.” The nomenclature alone underlines the government’s ambitions to transform the country within the next decade from a producer of low-end goods into a revered manufacturing power.

The documents list 10 “key” sectors in which the government is keen to see “positive major developments.” These are: new-generation information technology, state-of-the-art numerical control machines and robotics, aerospace and aviation, maritime engineering equipment, advanced rail track, new energy cars, electricity equipment, farm machinery, new materials, biomedicine and medical devices.

According to experts who spoke to Shanghai Daily, Shanghai is home to a host of high-tech parks, famous universities and research institutes. Besides, it falls on the receiving end of a billion-dollar R&D funding pipeline originating overseas. These factors combine to make the city uniquely well placed to spearhead the country’s smart manufacturing revolution.

Nonetheless, for years Shanghai’s proclaimed aspirations were to become “Four Centers” (an international economic center, a financial center, a shipping center, and a trade center). But as the industrial hollowing-out deepens, threatening its ability to deliver on these goals, it has dawned on local authorities that the “Four Centers” would be a castle in the air without a solid foundation in high-end manufacturing. Therefore, another center was added to the existing four: an innovation center with global influence.

Government agencies drummed up support for this titanic undertaking by releasing a significant document last year. The document, containing 22 provisions meant to cut red tape and offer incentives to stimulate innovation, outlines dozens of “priority” sectors. They include AI, medicine, advanced display technology and so on. After careful review, Gu found that a third of these sectors overlap with the favored industries mentioned in the blueprint mapped out for “Made in China 2025.”

“These areas are bound to see some synergies of Chinese and foreign collaboration,” said an official from Shanghai Municipal Development and Reform Commission.

Contrary to conventional wisdom, which holds that big cities are expensive and thus shunned by cost-sensitive manufacturers, Gu argued that traditional constraints — land prices, labor costs, resources, pollution — that banish manufacturing from urban China might one day be overcome thanks to a paradigm shift made possible by the advent of smart manufacturing.

By setting up operations close to the market and consumers, companies could be more responsive and produce based on instantaneously received signals. This effectively reduces the need for storage space and convoluted distribution channels, said Gu, the Jiao Tong University educator.

Moreover, thanks to use of sophisticated clean technologies, the non-polluting nature of their operations will likely endear them to urban planners and residents.

Tough challenges

These new economic dynamics may well be Shanghai’s chance to regain its long-lost position as the country’s manufacturing poster child, as it was up until the 1980s.

Shanghai used to be known for its light industrial goods such as textiles, watches and bicycles. This time around it is aspiring to something much more complicated.

Despite its lofty ambitions, challenges are myriad. Much of the talk about Industry 4.0 is audacious, and tremendously inspiring; but this may be about as good as it gets, since conditions are not ripe for its full-scale realization.

Core industries like advanced industrial robotics are still dominated by foreign firms. And China’s industrial landscape is severely uneven, with a lot of leveling-the-playing-field yet to be done. Observers like Gu are inclined to believe that at the current stage Shanghai should position itself as an R&D “hothouse” as it scales the commanding heights of new economy; later it can evolve into a template able to pass on its experience to the rest of the country.

There are, however, many undercurrents to steer clear of during this process.

Taiwan-born and US-educated entrepreneur Peter Chen is fretful that the mainland business community is a bit hasty in its embrace of Industry 4.0. In fact, the tendency to obsess over robotics is “dead wrong,” said Chen.

Speaking to Shanghai Daily, the PhD holder and graduate of University of Nebraska-Lincoln in the US conceded that it is fine for national authorities to trumpet Industry 4.0 as a goal to mobilize entrepreneurial endeavors. Yet from the perspective of private businesses, many policy slogans are misleading and divert attention from important business fundamentals.

The Taiwan native frequently flies back and forth between Taiwan, the mainland and the US. Having advised countless foreign and Chinese firms — big names like Caterpillar counting amongst them — Chen has a big problem with what he says is the “blindness” of some entrepreneurs.

More realistic choice

They may be well informed of the latest fads, but lack basic knowledge of management science, Chen said, adding that a host of factors — marketing, sales, design and service — all contribute to a firm’s prosperity. What happens on its factory floor is just one factor of a business’s success or failure.

Therefore, there is a great need for debunking the Industry 4.0 myths, so that mesmerized entrepreneurs can look beyond the latest trends and buzzwords, refocus on business fundamentals and engage in more practical activities.

After all, instead of frantically overhauling everything along the lines of Industry 4.0, a still unattainable goal for most, a more realistic choice for manufacturers is to build an integrated service platform ready to process orders according to whatever customer needs that may arise.

Becoming increasingly wired — both within and outside an organization — will be crucial. “This is the very first step toward getting closer to the vision of Industry 4.0,” Chen argued.

This is the second and final part of a special commentary on China’s challenges and opportunities in developing Industry 4.0. Li Xiecun from Johns Hopkins University contributed significantly to the commentary.