Changzhou is located in the Yangtze River Delta, about midway between Hangzhou in the south and Beijing in the North. It is only an hour away from Shanghai by high-speed train. Nicknamed “Dragon Town,” it has a rich 2,500-year history dating back to the Western Zhou Dynasty, a period of constant strife and barbarian invasions. The Duke of Zhou is said to be the one who first formulated China’s Mandate of Heaven doctrine, declaring that only one emperor could claim a legitimate right to rule China—a right conferred (or, often enough, retracted) by heaven in accordance with his personal merit or virtue.
Today, the comb factory seems a world apart. It appears to share very little in common with the city’s brisk modern industry. State-of-the-art production facilities now occupy twelve colossal industrial parks. Stepping into one is like entering onto a sci-fi movie set. Everything is scrubbed and polished, and you are surrounded by robotic control systems operated by workers in starched-white lab coats.
And yet looking upon these ultra-modern production lines, one cannot help think of the city’s more humble comb makers. They are not scientists or engineers, but they too strive for quality, precision, and innovation. They seem to represent something more than a quaint vestige of a bygone era now catering for tourists. In one sense—symbolically, at least—they represent China’s forgotten heritage of fine craftsmanship. Western merchants from Marco Polo in the 13th century to the freewheeling traders of the East India Company in the 18th century knew its value when they came in search of fine silks or to try to pinch the secrets of porcelain-making.
The past quarter-century, barely a flash in history, has witnessed a decline in China’s reputation for quality workmanship. And also a decline in the sense of China’s ability to innovate, for only two hundred years ago China used to bring to mind such momentous inventions as the magnetic compass, gunpowder, papermaking and printing. These have been overshadowed in our time by an export drive in low-cost, low-value-added products to the West. For over a generation, Westerners have formed the opinion, mistakenly or not, that China is capable only of churning out vast quantities of low quality goods or merely copying other countries’ technological achievements. The drive in basic, labour-intensive manufactures, often using foreign capital and know-how, was necessary, some would argue, to restore China’s economic vitality as it emerged from a long stretch of turmoil in the 19th and 20th centuries brought about by foreign incursions, civil wars, and devastating socio-economic experimentation. It allowed the People’s Republic to build capital and acquire technology quickly and cheaply.
The recent global financial crisis, however, has sounded a warning knell of sorts. It has caused a precipitous drop in China’s basic exports and led to millions of factory workers being laid off, underscoring Beijing’s admonition that the nation’s industry will not be able to rely on the status quo indefinitely. Add to this rising labour costs, an aging population, and mounting competition from other developing countries and it becomes clear that China’s position as “factory to the world” is weakening.
Beijing knows it must do things differently—that it must move more quickly to help lift industry up the value chain, just as the United States, Japan, and South Korea have done.
Changzhou represents a regional model for this upgrading. Originally one of the birthplaces of modern industry in China, Dragon Town has transformed itself from a cotton and textile center in the 1920s into a significant high-value-added manufacturing hub. It now produces everything from precision CNC tooling machines to advanced electronics, solar photovoltaic cells, medical devices, and biopharmaceuticals.
Beijing’s most recent Five-Year Plan (2011-2015) calls for more science and technology to be integrated into manufacturing. “Quality and innovation” rather than “mass production” has become the nation’s new catchphrase. Many businesses, however, are thought to be responding too slowly. Over the past decade or two they seem to have become complaisant, favouring quick profits from basic manufacturing and OEM contracting instead of making difficult structural changes and long-term investment in R&D. Although Chinese manufacturers are steadily improving product quality, as evidenced by fewer safety recalls and contamination scandals in recent years, some policymakers feel that deeper changes are being resisted by companies that still pin their hopes on a return to strong overseas demand for basic goods, or else on an expectation that domestic consumption will quickly balloon and fill the gap.
With China’s customers in Europe and North America facing protracted economic uncertainty and high debt, however, they are gradually changing their purchasing habits. Domestic consumption in China, even though expanding, remains behind what was hoped for and short of what is needed at this juncture. The average Chinese worker’s income does not yet allow for the sort of conspicuous consumption that has fuelled American demand, and the nation’s more affluent still prefer to spend on foreign goods, which offer a level of quality and brand prestige not yet widely attained by Chinese companies.
China’s response is to accelerate efforts to deepen domestic consumption while it tries to push through changes to industry that will move it up the value chain and into lucrative export markets still largely barred to it by stringent Western safety and quality standards. The American auto market, which China has struggled unsuccessfully to enter for a decade, is but one example.
Production depth achieved through quality and innovation will pay many dividends as China rebalances its economy in order to remain competitive (and integrated) in the global market. It will encourage small and medium-sized companies to become true multinationals and facilitate the nation’s “going out” strategy. It will expand the nation’s pool of knowledge-based assets, including management capabilities and intellectual property, as well as strengthen the rule of law. These, in turn, will make it easier for the services sector in China to grow and will reinvigorate foreign direct investment.
It may seem odd to think of the comb makers of Changzhou in this context, but they do represent an appropriate analogy, resonating with China’s desire to rebuild a tradition of quality, innovation, and indigenous branding. And they are also, perhaps, more than merely symbolic, for they point to the wisdom of looking back sometimes for inspiration to find a way forward.
The Honorable Yao Xiaodong, mayor of Changzhou, recently visited Atlanta and Chicago with a delegation of senior Chinese business and government officials to give bilateral trade and investment presentations co-sponsored by the U.S.-China Chamber of Commerce. DC contributor Paul Nash spoke with him in Chicago about Changzhou’s economic development.
Dr. Yao, a former senior visiting fellow at the Wharton School at the University of Pennsylvania and the Kennedy School at Harvard University, was born in 1962 in Yancheng, Jiangsu Province. Before becoming mayor, he served as deputy secretary of the Communist Youth League, vice-minister of communication and vice secretary-general of Jiangsu Province. He is widely noted for his fresh, open-minded leadership approach. Yao became acting mayor in 2011, when Changzhou achieved GDP of RMB 358.04 billion, which represents RMB 77,473 per capita (well above the national average). Located in Eastern China, roughly midway between Shanghai and Nanjing, the city is a major investment hub attracting billions of dollars in foreign direct investment and thousands of foreign enterprises from over a hundred countries, including General Electric, Texas Instruments, Motorola, Toshiba and Mitsui & Co. It has a population of about 3.6 million.
[NASH]: Mayor Yao, Changzhou is regarded as one of the top business cities in China. Last year, the Hong Kong Chinese Industry & Commerce Association ranked it eighth amongst China’s most attractive investment destinations, and Forbes placed it 14th on its list of best Chinese commercial cities. What is it about Changzhou that makes it so attractive?
[YAO]: We are very proud of Changzhou’s development. But, of course, Changzhou is not the best, though we hope that one day it may be considered the best. We have been working continually towards this goal. There are many factors that have brought Changzhou to where it is today: an advantageous location at the heart of the Yangtze River Delta, a strong educational system that focuses on scientific research, and vocational training, and a friendly business environment, to name just a few.
In my opinion, though, the most important factor—the factor behind all these advantages—is the city’s people. Changzhou’s achievements can be attributed to the people of Changzhou. You know, since China embarked on its reform and opening up policy, a great number of small and medium-sized enterprises have sprung up and contributed enormously to the prosperity of the area. These enterprises have been built on Changzhou’s exceptional human resources. We try very hard to foster these resources in order to make Changzhou a city of innovation, especially in science, engineering, and enterprise technology. We have 17 colleges and universities, 24 research and development institutes, and over six hundred scientific research centers and incubators.
Another element I should mention is the efficiency of the city’s administration. All the city’s governmental departments and civil servants have done an exceptional job in serving the local people and helping them to achieve a better livelihood. And they work together to create a business-friendly atmosphere. Their efforts have helped Changzhou to achieve the high reputation it enjoys today.
[NASH]: Changzhou has a remarkable history that stretches back thousands of years. It was one of the birthplaces of modern industry in China and was at the forefront of economic reform and opening up in the early 1980s. It seems now that the city is taking a lead in transforming industry—moving it up the value-chain, away from basic manufacturing to higher-value-added production. With its current emphasis on scientific research, product R&D, precision manufacturing and high technology, would you say that Changzhou is or could be a model for the rest of China to follow?
[YAO]: I hope so...I really hope that Changzhou can be a model for the whole of China. But we realize that there are still a lot of things we must learn. It is true that Changzhou generally has a strong industrial foundation; but, as you know, each industry has its own features, and we are still in the process of upgrading all industries, linkages between industries or products, and traditional manufacturing. We have over thirty-six thousand industrial enterprises. We have distinguished ourselves in equipment manufacturing, new energy, information technology, advanced materials, biotechnology and pharmaceuticals. But there remains a lot of work to be done. The modern service sector, for example, occupies a large proportion of the economy, but we feel we should raise its share in order to facilitate upgrading the whole local economy. To this end, we must continue developing certain industries such as financial services, logistics and other modern services that support advanced manufacturing.
[NASH]: How did you become mayor of Changzhou and what do you hope to accomplish? How do you envision Changzhou at the end of your term in office?
[YAO]: As you know, I was previously vice secretary-general of Jiangsu Province. Last July, I was transferred from the provincial government to the role of deputy secretary of the CPC Changzhou Municipal Committee. When the former mayor of Changzhou reached the age of retirement, I succeeded him as acting mayor. In January of this year I was formally elected mayor by the People’s Congress. This is a new role for me, and one to which I will bring great care and dedication in order to earn the trust of the people. The term of service for mayor is five years. Within these five years I think the fundamental task or goal of mayor is to realize the goals set by the last session of the People’s Congress for the modernization of the city of Changzhou. My vision is that we will achieve the specific targets set for this planning cycle in the areas of economic growth and restructuring, social equality, and environmental protection. As a result, I believe that the people will enjoy a better livelihood and be more confident in their technical development.
This article was originally published in the July/August edition of the Diplomatic Courier.