Industrial Upgrade in China

Essay by kevin5University, Master'sA-, March 2009

download word file, 17 pages 5.0

BiMBA Final Paper

Industrial Upgrade in China

BiMBA Part-time 2007 Class2

Group 13


As the development of industry and improvement of individual income in china, the labor cost became more expensive. And our commercial environment is changing rapidly, especially the appreciation of RMB. These factors all increase the crisis of traditional industry in china. So the industrial upgrade in China is an imminent issue recently. The direction of industrial upgrade for manufacturing should be from OEM to ODM and OBM. Meanwhile, Service outsourcing seems great potential with industrial upgrade. The most exciting thing is that the industrial upgrade not only contributes to coastal cities, but also benefits inland cities.

Industrial upgrade for manufacturing in china

Current status of china's manufacturing industry

In spite of the immense trade surplus gained in recent years, China's

manufacturing still remains at the low end of the international division of labor spectrum and derives much of its international competitiveness from its advantages in low production costs.

Chinese manufacturing enterprises are also characterized by low profit margins. How should China's manufacturing industry pursue industrial upgrade?

Introduction of optimum path to realize upgrade

The optimum path for an enterprise in emerging market economies to realize upgrade and innovation is to evolve from simple contract manufacturing, through R&D design engineering, to eventually building its own brand. For almost three decades, since China initiated reform and opening up to the outside world, OEM (original equipment manufacturer), as an effective cooperative model, has become an important way for Chinese manufacturing enterprises to enter the international value chain system and participate in international market competition. To upgrade from OEM to ODM (original design manufacturer) and OBM (original brand name manufacturer), the former provides capital accumulation and technological accumulation for the latter, while laying the groundwork for future brand promotion.