AS manufacturing slips as a driver of Shanghai’s economy, the city is trying to reinvent the role of its industry by pushing factories to adopt advanced technologies, become more innovative and attract more professional talent.
The government has unveiled plans to become a “national hub for smart manufacturing” by 2020, with 100 model digital factories and 1,000 upgrades in traditional sectors like automobiles, heavy equipment, shipbuilding and aviation.
Industrial output last year in Shanghai accounted for 26 percent of the city’s gross domestic product, down from 26.9 percent last year and nearly 40 percent five years ago.
Filling the gap have been gains in “soft realms” like commerce and services, but “manufacturing should remain the backbone” of the city’s economy, said Tang Huihao, chief economist at the Shanghai Statistics Bureau.
The city that was once a prime industrial center of China is now aiming to meld the Internet age and other new technologies with classic manufacturing to put industry at the vanguard of what the world will need tomorrow.
To nurture 100 digital factories and 1,000 upgrades, the government is taking a page from the strategies of global giants like German-based Siemens and US-based General Electric, Liu Ping, head of the equipment department at the Shanghai Commission of Economy and Information Technology, told Shanghai Daily.
The idea is to create “integrators” as pilot projects in smart manufacturing.
Among those projects is a partnership between Baosteel and Siemens to digitize hot-rolling production, and one between INESA, an instruments producer, and Japanese-based Fujitsu to automate 23 production lines.
“They need both digital technologies and industrial know-how,” Liu said.
Shanghai is ahead of the curve in that it has fewer plants to close among cities nationwide trying to streamline manufacturing, said Chen Mingbo, director of the Shanghai commission.
Many outdated plants have already been phased out in the past decade, reducing over 45 percent of the city’s coal use among coal chemical plants and closing five major blast furnaces.
Chen said the manufacturing landscape may change, but industry will always be a part of Shanghai in its thrust to become a global center of innovation.
Beijing and Shanghai both have proposals to create such centers. Beijing’s plan focuses on technology startup to take industry into the new century; Shanghai relies more on improving production and innovation at existing manufacturing giants.
Most of Shanghai’s major manufacturers are state-owned, comprising about a quarter of the city’s gross domestic product, according to Chen.
Model digital factories and industrial upgrades will come largely from the automobile and shipbuilding sectors — main users of equipment such as machine tools, engines and turbines, Liu said.
Shanghai Electric is a poster company in industrial innovation. It became the world’s largest player in offshore wind power generation last year, utilizing 489 megawatts at full capacity. The result “was largely due to our efforts to digitize wind power operations, helped by Siemens,” said an engineer at the group.
Two years ago, Shanghai Electric received tens of million yuan from the government to start that project.
In the coming five years, Shanghai said it will allocate 10 billion yuan (US$1.4 billion) to help transform technology research in areas such as industrial components and high-end chips. It will also award key industrial projects at least 100 million yuan each, according to the city’s development and reform commission.
The coming years are crucial in industrial upgrading, the commission’s Chen said.
The upgrades will add an estimated 500 billion yuan to industry gross output value. Of the money, 300 billion yuan will come from the upgrades at existing companies.
Upgrades among local producers will become a “major motivation” for manufacturers worldwide to come to Shanghai, said Tom Tan, president for China at US-based car parts maker BorgWarner.
By the end of last year, Shanghai was home to 411 research centers of multinational companies. “That’s not just because Shanghai serves as an access to the enormous Chinese market,” Tan said. “More importantly, the city provides more abundant talent and more advanced companies to work with.”
Twenty years ago, nearly 80 percent of the company’s components had to be imported. Today, nearly 90 percent of them are made locally, Tan said.
“In the next five years we need to accelerate our efforts,” Chen said. “Who would dare risk such a smart opportunity to win the global manufacturing race?”