Chinese manufacturers need to use technology to improve production, says report

In a report released at a World Economic Forum conference in Dalian, Deloitte said that companies "display different levels of maturity in informatisation" with only 42% of the manufacturing companies it surveyed having integrated IT into their production processes.

More will need to be done if manufacturers are to support the Chinese government's 'Made in China 2025' plan, with its emphasis on technology and innovation, Deloitte said.

Of 133 companies who responded to its survey, 46% admitted that only one part of their business has integrated IT into its production systems, and 6% have made no attempts to use IT in their manufacturing processes at all.

The most popular reason for not using IT is the challenge of building it in to the production process, with difficulties in collecting and analysing system data the second biggest barrier respondents identified, Deloitte said.

The percentage of companies making extensive use of automation equipment increased to 23% in 2015, compared to 11% in 2013, Deloitte said. Automobile and electrical machinery companies make the most use of automation, it said.

Shanghai-based Bernd-Uwe Stucken of Pinsent Masons, the law firm behind out-Law.com said: "We see indeed a growing number of enterprises increasing the level of automation. Sometimes the technical upgrade is radical and disruptive, turning labour intensive production lines into fully automated production lines run by a very few supervisors. It seems that privately owned enterprises in particular are cutting personnel cost by investing in automation."

"The trend to turn to smart manufacturing is good news for European machine builders for whom China will remain an attractive market even if, or maybe because, the Chinese economy is passing through a painful transition," he said.

"Chinese enterprises have also realised that they need to acquire foreign technology to improve their manufacturing capabilities. Hence, many companies have started to buy technology through various channels. The acquisition of technology-heavy enterprises in Europe has become a dominant theme and we expect that this trend will grow and be persistent in the next years, again even if the Chinese economy may be on a bumpy road for a while," Stucken said.

Gary Coleman, a senior adviser for Deloitte Consulting, said: "Multiple emerging technologies such as 3D printing, robotics and artificial intelligence are driving disruptive innovations and enabling new players to stake a claim in a range of industrial sectors including manufacturing. For example, technologies like the cloud are allowing new entrants in manufacturing to bypass legacy systems and enable faster communication all along their supply chains. China needs to strongly invest in and embrace these technologies to move from a current manufacturing giant to a global manufacturing power house."

Chinese companies are likely to use mergers and acquisitions to increase their market share and acquire technology, Deloitte said.

Chinese premier Li Keqiang called in August for faster development of the country's manufacturing sector to boost the Chinese economy. A lack of innovation, low added value and slow service are holding the sector back from the goals of the 'Made in China 2025' and 'Internet Plus' initiatives, Keqiang said at the time.

Launched in March, Made in China 2025 is a ten-year action plan designed to turn China into a world manufacturing power. It is often described as China's version of Europe's Industry 4.0.