China’s manufacturing industry, which involves multiple segments such as equipment, automobile, steel, etc, plays a vital role in the country’s economic development. Though the industry’s share in the nation’s GDP declined in recent years while that of the service sector has continued to rise, the manufacturing sector still made up 27.2% of the GDP in 2019. Continued robust development of China’s manufacturing industry has led to high energy consumption and high pollution, generating a great amount of waste and consequently causing environmental issues. Sina reported that industrial pollution accounted for over 70% of total pollution, already becoming the main source of environmental pollutants in the country in 2015. To reduce the negative impacts of its economic activities on the environment, China has been ramping up its efforts in promoting more environmentally sustainable methods of manufacturing.
China prioritizes green manufacturing to solve environmental issues in the sector
Xinhua reported in June 2019 that more than 70% of global environmental pollutants came from manufacturing activities, generating approximately 6.2bn tons of waste annually. This has created a worldwide need to transform the traditional manufacturing industry and adopt environmentally friendly technologies in order to lower energy waste and mitigate pollution. According to a notice issued by the Ministry of Industry and Information Technology (MIIT) on September 20, 2016, China’s green manufacturing systems involve green factories, green industrial parks, environmentally-friendly designed products, as well as green supply chains. So far, MIIT has released five lists of entities and products, which could provide examples for the country’s green manufacturing development. The latest list named 719 green factories, 1,073 green products, 99 green supply chain enterprises, and 53 industrial parks, including the Guangzhou Development District. The following chart briefly introduces the four parts of China’s green manufacturing system.
Prior to MIIT’s notice for the green manufacturing system, State Council released an industrial plan called Made in China 2025, to boost the country’s manufacturing capabilities. The initiative prioritized green manufacturing, and support to upgrade the sector to be more tech-oriented with less energy waste and pollution. Specifically, policymakers will make efforts to innovate on energy-saving and environmental protection technologies, support enterprises to develop green products, and promote ecological design, encourage the application of green technologies in industries like the steering sector, etc.
Additionally, China’s 13th Five Year Plan that spanned from 2016 to 2020 further emphasized the green and sustainable development of industries. During the past five year period, regulators pledged to form a basic framework for the green manufacturing system by 2020, leveraging tech innovations to increase resource utilization efficiency and clean production capacity. MIIT officials introduced that, from 2016 to 2019, industrial enterprises with annual income from major businesses above RMB20m recorded a combined 15% drop in energy consumption per unit of value-added, which refers to an industry’s contribution to the GDP. The reduction was equivalent to saving 480m tons of standard coal and around RMB400bn in energy costs.
China’s has increased efforts to digitalize manufacturing processes
The Chinese government is implementing internet-based manufacturing to increase the economic and social value of industries. Digitalization in the manufacturing sector helps to transforming the traditional manufacturing industry to be more energy-efficient and environmentally friendly. Since 2015, regulators have launched a series of plans to integrate the internet, AI, and other technologies into the manufacturing sector, pushing for the development of so-called intelligent manufacturing. For instance, in June 2015, State Council issued guidelines, asking to initially form an internet-powered industrial ecosystem, covering markets including manufacturing, agriculture, healthcare, logistics, etc. Later in September 2016, MIIT and MoF released the 2016-2020 plan for intelligent manufacturing, requiring increased digitalization in key areas of the manufacturing sector by 2020. Also, in response to the Made in China 2025 initiative, MIIT announced 99 pilot and demonstration projects for intelligent manufacturing in September 2018. Comparatively, the 2015 list only included 46 projects in the pilot program, according to Orient Securities [600958:CH].
Insights for Regulatory Departments
While China is building up its manufacturing strength, regulators are coordinating development of the sector with environmental protection in mind to improve the current developing style, which consumes extensive resources with low efficiency. The country’s support to cultivate new industries that save energy, and to stress resource recycling and ecological restoration could significantly help in pollution reduction. Also, more specific and industry-targeted evaluating standards are required to examine the performance of involved parties in China’s green manufacturing systems. For instance, according to the 2018 edition of guidance issued by MIIT and the Standardization Administration, regulators asked to revise over 150 standards for intelligent manufacturing by 2018 and 300 standards by 2019.
Additionally, top leaders could improve laws and regulations in key areas of green manufacturing, such as energy utilization, and low-carbon development. Rules on energy conservation assessment and review, addressing climate change, and wastewater management also form important components of a comprehensive system for green development.
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