Industry 4.0: China’s New Opportunities

By+Lan+Xinzhen

Industry 4.0， also known as the “fourth industrial revolution，” is a concept put forward by Germany which promotes automation of the manufacturing industry. It is based on computer-controlled physical production systems that connect resources， information and people. The goal is the smart factory， which is characterized by adaptability， resource efficiency and ergonomics as well as the integration of customers and business partners in business and value processes.

Industry 4.0 represents the latest trend for the manufacturing industry and the direction of Chinas future industrial upgrading. In an action plan on Sino-German cooperation for the next five to 10 years released during Premier Li Keqiangs visit to Germany in October last year， the two countries agreed to strengthen cooperation in developing Industry 4.0 in both countries.

The world has experienced three industrial revolutions. The first one took place in the 18th century and was characterized by mechanization of production using water and steam power. The second one， which happened in the beginning of the 20th century， introduced mass production with the help of electric power. The third one， which started in the 1970s， utilized electronics and information technology to further automate production. China lagged behind during the first three industrial revolutions； however， it will hopefully be able to lead the fourth one.

The realities of Chinas manufacturing industry require the country to develop new methods of production. According to statistics from the Ministry of Industry and Information Technology， the output value of Chinas equipment manufacturing industry in 2013 surpassed 20 trillion yuan （$3.2 trillion）， accounting for one third of the global total. Among the 500 major types of industrial products， China ranks first worldwide in terms of output in more than 220 categories.

Despite its large output， Chinas manufacturing industry is far from strong， with most core and cuttingedge technologies being created by developed Western countries. It lacks competitiveness in the international market except for its price advantages. The competitiveness of the industry has conspicuously declined when countries like the United States shifted their focus back to the real economy after the 2008 global financial crisis. Furthermore， with the disappearance of the demo- graphic dividend， labor supplies declined and labor costs increased. This—along with the reduced willingness of the new generation workers to join in the manufacturing industry—has dealt a heavy blow to the competitiveness of Chinas manufacturing industry.

Furthermore， many Chinese factories are nothing more than labor-intensive assembly workshops. Such an approach is at the bottom stage of the manufacturing industry. With labor costs rising constantly， Chinas manufacturing industry will be increasingly restricted by the shortage of labor force. In this context， transforming China from a manufacturing power into a leading innovator has become the priority of the Chinese Government and companies. It is expected that Industry 4.0 will help China accomplish such a task.

Industry 4.0 has two components： smart factories which connect the physical world of the shop floor with virtual IT systems； and smart production which deals with production， logistics management， interaction between people and machines and the application of the three-dimensional technology. Small and medium-sized companies will be the driving force for implementing the program. They will become the beneficiaries of smart production as well as the creators of sophisticated technologies.

The Internet of Things and big data networks are the bases for developing Industry 4.0. From this perspective， China is on par with Western countries because it is making rapid progress in IT. China has the worlds fastest supercomputer and has made remarkable achievements in cloud computing and big data. This will provide strong technological support for the integration of the Internet and industries.

However， Industry 4.0 is only at the preliminary stages of development. A unified standard of communication modes and data formats needs to be formulated for different companies to follow. The problem of cyber security also needs to be addressed， as the computer system will face the risks of cyber attacks once it gets connected.