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Internet plus strategy to help solve manufacturing overcapacity

Zhao Xuejie and Hu Yuanyuan
Updated: Aug 27,2015 4:27 PM     China Daily

China’s manufacturing industry will make use of the Internet plus strategy to solve its overcapacity and slowing growth, experts said at a forum on Aug 25.

“The manufacturing industry needs to combine the virtual economy with the real economy to revolutionize the current production mode,” Chen Quansheng, an economist and State Council counselor, told the forum held by Peking University and Beijing Weimin Zhiguang Research Center of Internet Technology Development.

The 2015 Forum of “Internet +” and New Economy Development is aimed to discuss how this Internet + concept could be applied to stimulate China’s economy.

The Internet + coœœncept was one of the key strategies introduced by the government this year. It is estimated that it will help to raise China’s GDP by 0.3 percent to 1 percent, according to Mckinsey.

Yang Xueshan, former vice-minister of Ministry of Industry and Information Technology, said that the integration of industrial and information technology will create a new economic environment and enhance different industries.

However, Chen said that the manufacturing industry is not directly linked with the Internet market compared with other sectors like banking, insurance and finance.

China’s manufacturing industry is suffering from overcapacity. China’s PPI index, one of the key indices of the economy, fell by 5.4 percent over the same period last year in July, according to the National Bureau of Statistics. It is the lowest since 2009. China’s monthly PPI index has been dropping continuously for 41 months.

“Overcapacity makes it hard for product price to recover. Whenever the price is up, the unused capacity will become active again making the price fall,” said Chen. “That’s why manufacturers cannot make profit.”

Information technology, however, could help to create needs for products from the manufacturing industry, industry experts said.

“Using built-in network and cloud software for manufactured goods could greatly improve the product performance,” said Lai Maosheng, vice-president of China Information Industry Association.

Chen said it is also possible to use the Internet to attract talents and train employees. E-commerce can also play an important role in it.

“To realize the reform of the manufacturing industry structure, we have to rely on the Internet’s ability to search and analyze,” said Chen. “E-commerce can step up from trading goods to trading corporations, which can help the transformation of those important companies.”

Some experts said it is possible to make Internet+ the basis of all business. Lai said that the information technology would significantly change the way all products work. Others say that the original industries are still the most vital part in business.

“Personally, for manufacturing, I am more for the plus Internet idea not Internet +” said Chen. “I would like to name my speech ‘Let Internet be the Wings to Traditional Industries’.”