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4/19/2017 | 2 MINUTE READ

China Is Fast Becoming a High-Tech Competitor

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As its labor-cost advantage erodes, China’s manufacturing sector bolsters its high technology status.

For years now, American manufacturers have believed that one way to compete with low labor costs in China and other countries was through use of advanced technologies, such as computer integration and automation, to achieve higher efficiencies here at home. It now appears that the “high-tech” defense is in danger of being breached as China’s manufacturing sector evolves and matures, which is a stated goal of the government.

In the last few years, machinery supplies such as Engel Austria have been saying they see growing demand for more sophisticated technology in the Chinese molding market. There are also signs of this shift in promotions for next month’s Chinaplas show in Guangzhou, which proclaim, “Smart Manufacturing Technologies to feature in CHINAPLAS 2017 to support electronics & electrical industries.”

A “Smart Manufacturing Technology Zone” at the show will feature robotics and automation, 3D printing, and “smart factory solutions,” (China’s embrace of automation to offset rising labor costs is ongoing). There will even by an Industry 4.0 conference with talks by the same firms that have been pushing that concept in Europe and North America, such as Wittmann Battenfeld and Arburg.

As further evidence of China’s push for technological sophistication, we received word just last week that the Chinese branch of color and additive compounder Americhem, Inc., based in Cuyahoga Falls, Ohio, has been granted the status of “High-Tech Enterprise” by the Chinese government.

To win this prestigious award, Americhem (Suzhou) Co., Ltd. had to demonstrate that it has core intellectual property rights in China, conducts R&D activities, and that its technical staff is at least 30% of the entire organization, its R&D staff is at least 10% of its work force, and at least 60% of its R&D expenses are incurred in China.

Why do companies like Americhem (Suzhou) covet the High-Tech Enterprise designation? Because it grants them reduced tax rates. Americhem plans to reinvest these tax savings back into R&D, both internally and externally through technical collaboration with local universities.

Incidentally, Underwriters Laboratories (UL), based in Northbrook, Ill., recently designated Americhem’s Chinese plant as an alternate manufacturing site for the two North American plants of Americhem’s sister company, Infinity LTL Engineered Compounds. That means Americhem (Suzhou) meets UL’s requirements just like the North American plants.

If American manufacturers can’t match China on labor costs or beat it on technology, they will have to emphasize other home-court advantages, such as lower shipping costs, shorter lead times, greater overall responsiveness to customer needs, upfront design and engineering assistance, greater protection of intellectual property, and the “made in USA” label.