Ancient city, modern methods

Zhao Bin, chairman of XKNC, is at the forefront of China's factory upgrading.

His company makes computer numerically controlled machines, which are vital in advanced manufacturing processes. It also has a robotics subsidiary, which it hopes to take to the market in an IPO next year.

The 52-year-old founded the company in 2000 as a joint venture with the Japanese company Kitamura Machine Works, and it now employs 420, including 200 at its headquarters in Xi'an and the rest at subsidiaries in Shanghai, Beijing, Shenzhen and Chongqing.

Zhao, who worked for his Japanese partner in Japan for two years before setting up the company, says China has no alternative but to move into advanced manufacturing.

"The last time I attended an exhibition in Chicago, I spoke to the chairman of one of the major machine tool associations in the United States and he said that companies that had parts made outside the US were wanting to bring the manufacturing back onshore. This could put a squeeze on a lot of Chinese manufacturers."

The company is one that has been nurtured on Xi'an High-tech Industries Development Zone, one of China's biggest and successful high-tech parks, which could be key to the success of the Made in China 2025 strategy.

Some of the city's leading universities, which have national reputations, are either on, or close to, the zone, including Xidian, Northwest and Xi'an Jiaotong Universities.

Yang Renhua, deputy director of the zone, says the zone can play a vital role in upgrading industry.

"Many companies in the zone have already shifted from low-end to high-end manufacturing. The local government has been particularly keen for companies to upgrade their technology and their production lines."

Zhao at XKNC says his company was able to buy land at a reduced rate and also pays corporate tax at a lower rate of 15 percent, compared with a national rate of 25 percent.

"One of the major benefits is being near to three universities, however. Having high-skilled labor is vital to our success. The zone administrators are always introducing new talent to us, enabling us to have meetings with graduate students. We have sponsored five of our employees to do doctorates at the local universities."

It is not surprising that attempts to boost China's manufacturing strength should partly focus around Shaanxi province, which is already home to aviation giants Xi'an Aircraft Industrial Corporation and Shaanxi Aircraft Company, a leading military aircraft maker, and Shaanxi Automobile Group, one of China's biggest truck makers.

Lu Bingheng, professor of mechanical engineering at Xi'an Jiaotong University, says the 2025 manufacturing strategy will be building on that strength.

"Shaanxi is one of China's most important manufacturing bases, focusing on aviation, aerospace and machine tools manufacturing. Under the new policy, there will be an accelerated upgrading of what is already there," he says.

Zhao, who majored in machine design at Harbin Industrial University and once worked as a researcher at the Aerospace Research Institute in Xi'an, says the 2025 plan is the right way forward for China.

"I think the ultimate test of whether you are a high quality manufacturing country is whether you can build state-of-the-art aircraft. The Americans can do this, those European countries that make up Airbus can do this and so can the Russians. We are still at a very low level."

He believes a strong manufacturing base can provide the platform to a vibrant services sector.

"The strong services sector in Japan has been dependent on the evolution of its manufacturing sector. Some see the US economy as being services-led but it has some of the most advanced manufacturing in the world in aerospace and in military equipment.

"Mr (US President Barack) Obama wants manufacturing to be at the vanguard of the US economy and this is certainly the course that China needs to follow."

(China Daily Africa Weekly 09/11/2015 page7)