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Chinese company 2.0

We’re always excited to see radical change in big, entrenched industries. So when Foxconn, the world’s largest contract electronics manufacturer, recently announced that it would replace 60,000 factory workers in China with robots called “Foxbots,” the office began to buzz. The decision fuelled debate over workers’ rights and caused concern that more people might be edged out by intelligent machines. On the other hand, Foxconn and its proponents celebrated the robots as a means to free human beings from the menial, repetitive tasks that can make factory labour so miserable. Workers could then take on more complex, high-skill jobs, they argued.

Aside from the debate about automated work, we think this focus on up-skilling is a sign of what’s to come from China. More and more, Chinese manufacturers are moving up the value chain to produce more advanced, high-quality products. They’re carving out new core competencies and making international acquisitions. On all fronts, Chinese companies are redefining themselves.

Made in China

Part of this is due to Xi Jinping’s Made in China 2025 initiative, which aims to give Chinese companies a big upgrade. It sets out a plan to make manufacturing innovation-driven, focus on quality over quantity, and nurture human talent. Though we generally think of innovation as something that comes from the ground up, this initiative is interesting because it encourages Chinese companies to break from convention and seek out new ways of doing things. Of course this can’t happen in a silo, so it means more international engagement with China than ever before.

The case of Yanfeng

After acquiring a division of US-owned Johnson Controls in 2015, Yanfeng Automotive Interiors is now the world’s largest supplier of automotive interiors, with annual sales of $8.5bn. But is this China-based company ‘Chinese’? Perhaps not in the conventional sense. For one, the acquisition has created a mix of people from different cultures, different backgrounds and ways of thinking who come together at the global crossroads that is Shanghai. Even if Yanfeng is Chinese, their aspirations are distinctly international: they want to lead the world in creating a new type of interior for autonomous vehicles. Imagine in the future if 80% of drive time could be spent focusing other things. What would you do? Yanfeng is contemplating how to use interior patterned lighting to convey complex information and customize the environment depending on who’s in the car. They’re exploring the use of guided and predictive illumination to make the ride as seamless as possible. These bright ideas aren’t about cost cutting. They’re about creating an innovative, high-quality customer experience, not the cheapest option in the market.

New path, new shoes

Yanfeng is not the only manufacturer to redefine what it means to be a Chinese company. In January of this year, Chinese appliance maker Haier Group bought GE Appliances, taking ownership of 9 US manufacturing plants and over 12,000 employees. In the same month, State-owned ChemChina acquired German plastics machinery giant KraussMaffei Group, making it a major developer and owner of some of the world’s best plastics technology.

Time will tell how well these new acquisitions integrate with their Chinese counterparts. It’s certain, however, that these companies are making big moves in line with Xi’s initiative. In Chinese, there’s a saying that one should avoid “treading the old path in new shoes,” i.e. making no real change. It seems a path is being paved, and it leads straight into the future.

Illustration by Kate Rinker

Mark Bosse is an Associate Strategist at Wolff Olins New York. Follow him @wildbosse