Supply-side reform: transforming from a manufacturing power to a manufacturing power

General Secretary Xi Jinping recently delivered an important speech at the provincial and ministerial level leading cadres to study and implement the opening ceremony of the Fifth Plenary Session of the 5th Plenary Session. The emphasis was on structural reforms on the supply side, with emphasis on the emancipation and development of social productive forces and the use of reforms. Promote structural adjustment, reduce inefficiencies and low-end supply, expand effective and mid-to-high-end supply, increase the adaptability and flexibility of the supply structure to changes in demand, and increase total factor productivity. This assertion has extremely special significance for such a manufacturing country that is in urgent need of transformation.

one

In recent years, the domestic and international environment for the development of China's manufacturing industry has undergone tremendous changes.

From the domestic environment, China's economic development has entered a new normal. The following main features are presented: First, speed shifting, from high-speed growth to high-speed growth; Second, structural optimization, tertiary industry, consumer demand gradually become the main body, the gap between urban and rural areas gradually narrowed, the development results benefit the broader masses Third, power conversion, from the factor driven to innovation driven.

The new normal of China's economy conforms to the general development law of catch-up late-developing economies. The process of industrialization and urbanization in China has not yet been completed. It is moving from upper middle-income countries to high-income countries. The new normal economy is a direct reflection of the progress of industrialization in the later stage. It is a more advanced form of the economy, more optimized division of labor, and a more rational structure. The necessary stages of the evolution of the stage.

The new economic norm, the core is to achieve power conversion. The key to whether the economic development can move smoothly to higher levels and higher levels under the new normal is whether the new and old powers can smoothly achieve continuity. After more than 30 years of rapid development, the basic driving force behind our country's support for economic growth, such as relying on inexpensive and high-quality labor, has undergone a turnaround. Under the new conditions, there has been a marked change in supply and demand. Constraints have been different from the past. All of this means that the original growth momentum must be adjusted. It is necessary to truly move from the mode of rapid growth of scale to the intensive growth of quality and efficiency. The economic development drive has shifted from relying mainly on large-scale factor-driven growth to innovation-driven growth.

From the global background, the global manufacturing landscape has undergone profound changes. In recent years, with the profound changes in the international economy, trade, and investment environment, manufacturing has become a wrestling field for some big countries to participate in the global industrial division of labor and compete for the high end of the industrial chain and value chain. On the one hand, after the international financial crisis, Europe and the United States and other developed countries launched the "reindustrialization" strategy one after another to try to seize the commanding heights of international competition. On the other hand, emerging economies such as India and Vietnam also use their relatively lower labor costs and other factors to rapidly advance their industrialization process.

In addition, a new round of technological revolutions and industrial revolutions have also profoundly affected the pattern of global division of labor.

In this context, China needs to find a new path for development. Form a new impetus for China's economic growth and shape new advantages in international competition, with a focus on manufacturing, difficulties in manufacturing, and outlets in manufacturing. It can be said that promoting the development of manufacturing in the adjustment and upgrading in the course of development is of great significance for enhancing comprehensive national strength, safeguarding national security, building a strong world, and achieving two hundred-year goals.

two

As the world's largest manufacturing country today, some manufacturing sectors in China are experiencing a slowdown in growth and insufficient growth.

On the one hand, with the decline in the number of labor forces, the increase in the cost of production factors, and the strengthening of resources and environmental constraints, the growth of low-end manufacturing industries such as resource-intensive, labor-intensive, high-energy-consuming, high-pollution and high-pollution industries has been sluggish, resulting in China The overall growth of the industry declined.

On the other hand, with the slowdown of economic growth and global industrial changes, some of the risks and contradictions accumulated in China's rapid economic growth over the past 30 years have gradually been exposed. For example, in most manufacturing sectors, there is a serious overcapacity, and the elimination of overcapacity requires the reorganization of assets and structural adjustments. These will inevitably lead to the collapse of some enterprises, the transfer of employees and even unemployment.

Of course, although the growth rate has slowed down, the room for improvement in the quality and efficiency of growth is still huge. From the perspective of the source structure of total factor productivity, the manufacturing industry is higher than the agriculture and service industries, the investment product manufacturing industry is higher than other manufacturing industries, the producer service industry is higher than other service industries, and the tradable sector is higher than the non-tradable sector. As the efficiency gap between departments is greater than the average level of the developed countries, China has a relatively larger space for industrial upgrading and productivity improvement.

It can be said that China's manufacturing industry still contains enormous opportunities for development in terms of structural adjustment, transformation and upgrading. The economic development has entered the new normal and has not changed the judgment that China’s development is still in a period of important strategic opportunities that can accomplish much. The only changes are the connotations and conditions of important strategic opportunities; there is no change in the fundamentals of China’s overall economic development, and only the economy is changed. Development methods and economic structure. The adjustment of economic structure will inevitably lead to pain, but if the adjustment is successful, it will improve the quality of assets, enhance the industrial structure, and enhance global competitiveness. “We can only see the rainbow after the storm.”

three

At present, although China is a large manufacturing country, problems such as large industries but not strong, insufficient capacity for independent innovation, backwardness in basic manufacturing, and low-level redundant construction are still prominent.

It is undeniable that the most prominent problem in China's manufacturing industry lies in the middle and low end of the manufacturing industry chain in the world. Many of the finished products are low-tech, low-value-added, and low-price “three-low” products, and are in international economic and trade trade. The distribution of benefits is at a disadvantage. From the standpoint of product competitiveness, some technical equipment and products with high technical content and high added value that are urgently needed in the domestic market are long-term dependent on imports. As large-scale enterprises or large-scale enterprise groups of research and development, there is a big gap between scientific research and development capabilities and advanced foreign standards. The investment in manufacturing R&D is lagging far behind developed countries such as Europe and the United States. Although we have companies such as Huawei, Lenovo, and ZTE that have invested heavily in innovation and are highly innovative, overall, China's manufacturing companies have not invested enough in research and development, accounting for only about 1% of sales. The backward technology and weak innovation capability have become serious obstacles to the structural adjustment and industrial upgrading of China's manufacturing industry.

At the same time, it must be noted that although China's manufacturing industry faces many challenges, it is still in a period of great strategic opportunities. Specifically, we have at least the following major advantages:

First, China has the largest consumer market in the world. Despite the slowdown in China's economic growth, the economic increase in 2014 reached nearly US$800 billion. According to the World Bank data, this increase has exceeded the total GDP of medium-developed Turkey for the entire year of 2014; China’s annual cargo imports amount to about US$2 trillion, equivalent to the total economic output of the tenth largest economy in the world. China has become the world’s second largest tourism exporting country, with over 100 million overseas trips in 2014 and overseas spending amounting to 164.8 billion U.S. dollars. This shows that as long as manufacturing companies can develop and produce safe, high-quality products, China has sufficient market potential.

Second, the quality of workers continues to increase. In China, more than 7 million college graduates or more graduates each year, and more than 2 million people receive continuing education at TV universities and adult universities. The quality advantage of human capital will largely offset the decline in the demographic dividend. Moreover, a considerable number of people are able to meet the standards of employing multinational companies. This is an important reason why more and more multinational corporations have chosen to establish R&D headquarters in China. The high-quality talent team has become a new advantage for Chinese manufacturing companies to participate in international competition.

Third, China has the most complete industrial system in the world. According to IBM statistics, China is the only country in the world that has all industrial categories in the United Nations Industrial Catalogue. It has 39 industrial categories, 191 medium-sized and 525 sub-categories, and has the most complete industrial system in the world. Industry supporting capabilities. This is a precious and rare solid foundation for China to realize its manufacturing power.

Fourth, China also has strong advantages in expanding emerging markets. Many emerging economies are accelerating industrialization, information, and urbanization. Infrastructure construction and the development of industrial parks are the focus. China has accumulated rich experience in these areas and has formed a complete industrial system and strong industrial supporting capabilities. As at the same stage of development, consumption and technology preferences are similar, China has stronger competitiveness in international capacity cooperation and expansion of emerging markets. This advantage will help China to achieve a smooth turn in the process of industrial restructuring and transformation and upgrading.

Fifth, the manufacturing industry has been highly valued by the country and has a good policy environment. While the manufacturing industry gains more development opportunities, the tertiary industry serving the manufacturing industry will also have new development opportunities.

four

The transformation and upgrading are the only way for China's manufacturing industry to improve its competitiveness, prevent the hollowing out of industries, and leapfrog the middle income trap. In the long run, China needs to accelerate China’s manufacturing transformation and upgrading and maintain China’s global competitive advantage in the longer term.

To promote structural transformation and upgrading, we must first clarify the goals and direction of structural adjustment. In my opinion, the goal and direction of structural adjustment is to establish a more coordinated structural relationship so that the relationship between domestic demand and foreign demand, investment, and consumption is more coordinated, and the development of high-end manufacturing, modern service industries, and traditional industries is more coordinated and the entities The development of economic and virtual economy is more coordinated, and economic growth is more dependent on technological advancement and the improvement of the quality of the workforce. This has made China's economic success evolve to a stage where the form is higher, the division of labor is more optimized, and the structure is more reasonable. For a long time to come, intelligent manufacturing that represents the direction of Industry 4.0 will be an important goal of China's industrial transformation and upgrading, and it will be a national strategy. At the same time, however, we will also need to make up for the lessons of Industry 2.0 and Industry 3.0 in terms of technical standards, quality control, etc. The overall improvement of China's manufacturing capacity.

Realizing these goals will be a difficult project. Under the new “three-phase superposition” economic normal, we are also facing the task of transferring the way, adjusting the structure, and stabilizing growth. We must grasp the relationship and balance between the three, and we must achieve rapid economic growth in structural adjustment. It is also necessary to achieve structural adjustment while maintaining steady economic growth. More importantly, it is necessary to nurture a new impetus for economic development by accelerating scientific and technological progress and innovation-driven; to speed up the comprehensive deepening of reforms, and to build institutional mechanisms that are compatible with the goals and tasks of structural adjustment; to speed up a new round Opening up to the outside world and realizing optimal allocation of resources within a larger space, promoting China’s rising position in the international division of labor, manufacturing, and economic development towards the mid- to high-end level.

Accelerating the construction of a powerful country is not only a historic mission that the era has given to manufacturing, but also a strategic choice that suits China's national conditions. To achieve the transition from a manufacturing power to a manufacturing power, major strategic and policy arrangements must be made:

First, we must strengthen traditional competitive industries and increase our core competitiveness. It can be seen that in the previous round, China’s manufacturing industry relied on “big” and its scale had leapt to the top of the world; in the next round, China’s manufacturing industry must rely on “strong”, and building advanced manufacturing industries is strengthening the Chinese economy. The backbone. How to understand this "strong"? Or can we say that what standards have been reached are truly manufacturing powers? The important sign is "three transformations": China's manufacturing has created a transformation to China, China's speed has changed to China's quality, and Chinese products have transformed into Chinese brands. Specifically speaking, we must strengthen traditional industries, promote traditional industries from processing and manufacturing to R&D, design, patents, financing, investment, brand building, business models, and logistics systems; we must master core technologies to promote manufacturing to the industrial chain. The high-end extension will promote the development of processing trade from low added value to high added value. China is only in the high-end position of the value chain and the core link of the industrial chain. The core competitiveness of the company has become stronger, and the surviving manufacturing industry has become stronger, and it can be considered as a truly powerful country.

Second, a group of manufacturing companies with international influence and a large number of specialized, refined, special, and new specialized production enterprises with international competitive advantages are formed. Of the ten most profitable companies in the world announced in 2014, four companies in China are listed. All of them are state-owned commercial banks and there is no industrial enterprise. Now that we are similar to Huawei, ZTE, Haier, and Lenovo, internationally clamoring too few transnational corporations, if we can form a large number of companies with core competitiveness and strong international influence, then China’s economic restructuring can be considered successful. .

Third, create a legal, honest, and fair competitive environment for manufacturing development and transformation. This is the core of China's manufacturing industry. In the future, manufacturing companies rely on the “shanzhai” approach to no avail. In the new stage of development, enterprises must build a more competitive innovation system and market environment, strengthen intellectual property protection, significantly raise the level of protection for knowledge innovation, and improve the policy environment for innovative development of enterprises. Really liberalize market access and encourage social capital to enter the manufacturing sector. At the same time, the government must provide supporting policies and policies to encourage enterprises to innovate in the manufacturing industry. The government can only make the market play a decisive role in the allocation of resources, let itself be the main body of market innovation, and provide more support and less intervention, so that China's economy will be able to generate strong vitality.

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