On the 26th, the Ministry of Industry and Information Technology (MIIT) released a report by MIIT’s Zhang Miaowei to the National People’s Congress on advancing supply-side structural reform and accelerating the transformation and upgrading of the manufacturing sector. The report stated that China’s manufacturing industry is undergoing a transition from large-scale to strong, and its long-term fundamental outlook remains positive. However, it faces multiple challenges, including a shift in growth speed, structural adjustments, and a transformation of growth drivers. Whether we can smoothly achieve the strategic shift from quantity expansion to quality improvement and make manufacturing an important pillar for China’s basic realization of modernization hinges on firmly implementing “Made in China 2025” and unswervingly pursuing the development of manufacturing. The report emphasized that manufacturing is the backbone of the real economy and the main battlefield for technological innovation. Building a manufacturing sector with international competitiveness is essential for enhancing China’s overall strength, safeguarding national security, and building a world-class power. The Party Central Committee and the State Council attach great importance to the development of manufacturing. The 18th National Congress of the Communist Party of China pointed out the need to promote the healthy development of strategic emerging industries and advanced manufacturing. The Fifth Plenary Session of the 18th CPC Central Committee stressed the implementation of “Made in China 2025” and accelerating the building of a manufacturing powerhouse. The State Council’s Executive Meeting has specifically studied supply-side structural reform and the implementation of “Made in China 2025.” All departments and localities have earnestly implemented the decisions and deployments of the Party Central Committee and the State Council, steadily and orderly promoting supply-side structural reform and the transformation and upgrading of the manufacturing sector. Since the reform and opening-up, especially since the beginning of the new century, China’s manufacturing sector has achieved globally remarkable accomplishments. Its overall scale has expanded rapidly, its innovation capacity has significantly strengthened, and its industrial structure has continued to optimize. During the 12th Five-Year Plan period, China’s manufacturing sector achieved an average annual growth rate of 9%, becoming an important pillar for resisting the global financial crisis and maintaining stable macroeconomic development. Particularly since the launch of “Made in China 2025” in 2015, under the strong leadership of the Party Central Committee and the State Council, guided and promoted by the National Leading Group for Building a Manufacturing Powerhouse, various tasks have yielded positive results. Eleven special planning guidelines for “Made in China 2025” have been issued and implemented, a batch of supporting policies and measures have been introduced, and all provinces (autonomous regions and municipalities) have formulated implementation plans or action outlines. A policy system featuring horizontal coordination, vertical integration, and multi-party collaboration has basically taken shape. In 2016, the value-added of the manufacturing sector grew by 6.8% year-on-year, laying a solid foundation for the nation’s GDP growth of 6.7%. (1) New breakthroughs have been made in supply-side structural reform in manufacturing. First, excess capacity has been actively and prudently resolved. An inter-ministerial joint conference mechanism has been established to address excess capacity in steel and coal industries and facilitate their recovery and development. Detailed implementation plans have been refined, and special inspections have been carried out. In 2016, more than 65 million tons of crude steel capacity and over 290 million tons of coal capacity were eliminated, exceeding the annual targets in both quality and quantity. The placement of workers was generally stable and orderly, and subsidy funds were largely disbursed. Innovative approaches to industry management have been adopted, and “zombie enterprises” have been dealt with according to their categories. Industry mergers and reorganizations have been vigorously promoted, effectively increasing industry concentration and enterprise competitiveness, gradually improving market supply-demand relations, and yielding positive results in boosting efficiency, promoting transformation, establishing a fair competition market order, improving expectations and stabilizing confidence, preventing economic and social risks, and exploring long-term development paths. Second, efforts have been made to reduce costs and increase efficiency in industrial enterprises. The pilot program of replacing business tax with value-added tax has been fully rolled out; the policy of additional deduction for R&D expenses has been implemented; fee-cleaning reforms have been advanced; administrative fees related to enterprises have been canceled or reduced; information sharing between banks and enterprises has been strengthened; the financial sector has been guided to increase support for manufacturing; pilot programs for investment-loan linkage have been steadily promoted; industrial chain finance has been improved, reducing financing costs. The “deregulation and service” reform has been deepened, removing various implicit barriers such as “glass doors” and “ceilings.” Efforts have been focused on promoting mass entrepreneurship and innovation, supporting large manufacturing enterprises, major internet companies, and basic telecom enterprises to establish platforms for mass innovation and entrepreneurship. Guarantee compensation mechanisms have been established in six provinces (municipalities), and government-supported guarantee institutions have been developed to promote the development of small and medium-sized enterprises. Third, shortcomings in the quality of physical products have been addressed. A special campaign called “Three Products”—increasing variety, improving quality, and creating brands—has been organized to improve the industry ecosystem and boost consumer confidence. Twenty-three industrial product quality control and technical evaluation laboratories have been approved, and 55 national standards for consumer goods and 208 industry standards have been released. Mergers and reorganizations and quality traceability in the infant formula milk powder industry have been promoted. (2) New progress has been made in the development of advanced manufacturing and the cultivation of new growth drivers. First, industrial innovation capability and system-building have been further promoted. The manufacturing standards system and innovation network have been improved, and the construction of national and provincial-level manufacturing innovation centers has been advanced. Currently, the National Power Battery Innovation Center has been established and is widely recruiting universities and upstream and downstream enterprises in the industrial chain, operating under a market-oriented model of “company + alliance.” The National Additive Manufacturing Innovation Center is being set up, and 19 provincial-level manufacturing innovation centers have also been cultivated and built across the country. By innovating systems and mechanisms and integrating resource elements, manufacturing innovation centers have been transformed into key carriers for research on common technologies and demonstration of industrial applications. Second, the foundational capabilities of industry have been continuously strengthened. The Industrial Foundation Strengthening Project has been continuously implemented, focusing on the “four foundations” of industry—core basic parts and components, advanced basic processes, key basic materials, and industrial technology foundations—and carrying out demonstration applications of key products and processes. Positive results have been achieved in some key products and processes. Third, the level of intelligent manufacturing has been steadily enhanced. Guided by the principle of “establishing common standards first and addressing urgent needs first,” a general framework for the intelligent manufacturing standards system has been proposed, and 81 pilot verification projects have been launched. Taking the intelligentization of major products and complete sets of equipment as a breakthrough point and promoting smart factories as an entry point, the Intelligent Manufacturing Engineering has been organized and implemented, and pilot demonstrations of intelligent manufacturing have been carried out. Preliminary surveys show that pilot demonstration projects have increased production efficiency by more than 30% on average, improved energy utilization rates by more than 10% on average, and reduced operating costs by more than 20% on average, continuously raising the level of digitization, networking, and intelligence in manufacturing. Fourth, the innovative development of high-end equipment has been promoted. Equipment upgrading has been designated as a key focus of “Made in China 2025,” and the industrialization of major equipment has been actively promoted, achieving a number of landmark results in fields such as aerospace, rail transit equipment, high-end CNC machine tools, ships, and marine engineering equipment. The China Aviation Engine Corporation has been successfully established; high-precision CNC gear grinders and other products have entered the world’s leading ranks; the C919 large passenger aircraft is about to make its maiden flight; the Long March-5 heavy-lift carrier rocket, manned spaceflight, and the world’s first quantum satellite have all been successfully launched; the “Haidou” unmanned submersible has successfully been launched; and China’s standard high-speed trainsets have successfully completed the world’s first 420 km/h passing test. Fifth, green manufacturing has been further promoted. A green manufacturing system centered on green standards, green factories, green products, green industrial parks, and green supply chains has been built. The Green Manufacturing Engineering has been implemented, and 44 demonstration projects for comprehensive utilization of industrial resources in the Beijing-Tianjin-Hebei region have been constructed, promoting the creation of 51 national low-carbon industrial parks. Measures for industrial energy conservation have been issued, and special inspections for energy conservation have been conducted in 20 provinces, autonomous regions, and municipalities. In 2016, the energy consumption per unit of industrial value-added of enterprises above designated size nationwide decreased by 5.47% compared to the previous year, and water consumption fell by 6% year-on-year. (3) New achievements have been made in the transformation and upgrading of traditional industries. First, policies and measures for technological upgrading and transformation have been improved. The innovation-driven development strategy has been deeply implemented, promoting mass entrepreneurship and innovation, and fully leveraging China’s talent advantages. The “Notice on Implementing Major Engineering Packages for Manufacturing Upgrading and Transformation” has been issued, along with the “Investment Guide for Technological Upgrading and Transformation of Industrial Enterprises,” guiding enterprises to use new technologies, new processes, new materials, and new equipment to upgrade traditional industries and continuously raise the level of industrial technology and the proportion of advanced production capacity. During the 12th Five-Year Plan period, the average annual growth rate of labor productivity in industry reached 12%; new materials such as lithium-ion battery materials, nanomaterials, high-performance alloys, and composite materials have been industrialized; and the manufacturing capabilities of petrochemical equipment, high-speed trains, CNC machine tools, smart instruments, and marine engineering have been greatly enhanced. Second, social investment in the industrial sector has been actively guided. The “Notice on Further Doing a Good Job in Private Investment” has been issued, treating the promotion of healthy private investment as an important component of supply-side structural reform. Special inspections and rectifications have been carried out, and localities have been guided to improve their work. Since 2010, China’s industrial investment has grown from 13 trillion yuan to 22.8 trillion yuan, and the share of manufacturing investment in total industrial investment has risen from 79.5% to 82.5%. Third, the spatial layout of industry has been continuously optimized. The three major regional strategies have been deeply implemented, and coordinated development of the four major sectors has been promoted. Both central and local initiatives have been fully utilized, and pilot demonstration cities (groups) for “Made in China 2025” have been established, aiming to create a number of replicable and scalable experiences. Annual revisions and updates of the “Made in China 2025” guides for each province and city have been carried out. The construction of national new industrialization industry demonstration bases has been deepened, promoting the formation of a new pattern of manufacturing development tailored to local conditions and regional linkages. Fourth, a new chapter has been opened in the “going global” of manufacturing. Bilateral and multilateral cooperation mechanisms have been leveraged to strengthen strategic alignment and industrial cooperation with Germany, the United States, Russia, and others. Relying on the Belt and Road Initiative, cooperation agreements on production capacity have been signed with more than 20 countries, driven by cooperation on end-product capacity and turnkey project contracting, thus promoting the systematic and clustered “going global” of upstream and downstream enterprises, advanced technology standards, and supporting services. Trade frictions in industries such as steel have been properly addressed, safeguarding the rights and interests of Chinese manufacturing enterprises. (4) The integration of manufacturing and information technology has reached a new level. First, the integration of manufacturing and the Internet has been deepened. The “Guiding Opinions on Actively Promoting the ‘Internet Plus’ Action” and the “Guiding Opinions on Deepening the Integration of Manufacturing and the Internet” have been issued. Through policy guidance and concerted efforts, the Internet has been widely integrated into all stages of R&D and design, and the pace of intelligentization of key products and equipment has accelerated. In 2016, the penetration rate of digital R&D tools among Chinese enterprises reached 61.8%, the connectivity rate of digital production equipment reached 38.2%, and the CNC rate of key processes reached 33.3%. A number of new business models based on new applications and new modes have emerged rapidly, and top-level designs for the development of vehicle-to-everything networks and industrial Internet have been well prepared. Second, the level of military-civilian integration has been continuously raised. Two-way transfer of military and civilian technologies has been promoted, and mutual sharing of military and civilian resources has been facilitated. The construction of the national military-civilian integration public service platform has been continuously advanced, and annual catalogs of “military-to-civilian” and “civilian-to-military” technologies have been released. In 2016, the “military-to-civilian” catalog included 160 advanced technologies in six fields such as intelligent manufacturing, information technology, new materials, and new energy; the “civilian-to-military” catalog covered 155 technologies and products in 14 key areas such as command and control. The first China Military-Civilian Dual-Use Technology Innovation Application Competition was held. Third, service-oriented manufacturing has been accelerated.Implement a special action plan for service-oriented manufacturing, launch a selection process for demonstration enterprises in service-oriented manufacturing, and guide manufacturing companies to shift from production-based manufacturing toward “manufacturing + services” and “product + services.” Taking the establishment of national-level industrial design centers as a key driver, we will focus on enhancing industrial design capabilities and standards. We will also guide and support the accelerated development of supply chain management, information technology services, and energy-saving and environmental protection services. China’s manufacturing sector possesses the foundation and conditions necessary to become a manufacturing powerhouse; however, compared with advanced nations, there still exists a significant gap. The overall characteristic is that China’s manufacturing industry is large but not strong, and the growth model centered primarily on scale expansion has yet to be fundamentally reversed. Specifically: First, the overall innovation capability remains weak, and the manufacturing innovation system is incomplete. Second, the overall level of product quality and technical standards is not high, and brand value has not been fully realized. Third, resource and energy utilization efficiency is low, and environmental pollution remains a prominent issue. Fourth, structural adjustments in the industrial sector still need to be deepened. Fifth, the breadth and depth of integration between informatization and industrialization are insufficient. Moreover, influenced by multiple domestic and international factors, downward pressure on manufacturing continues to intensify, and rising costs pose a real challenge to the development of the manufacturing sector. Prices of traditional factors such as resources, environment, labor, and land keep increasing, making it a long and arduous task to reduce enterprises’ institutional transaction costs. At the same time, China faces a “two-way squeeze” in the global manufacturing landscape—namely, the return of high-end manufacturing and the shift of low-end manufacturing overseas. Since the global financial crisis, developed countries have vigorously implemented “reindustrialization” strategies, striving to revitalize their manufacturing sectors and seize the initiative in development. Many emerging economies have also elevated the development of manufacturing to the status of national strategy. China’s manufacturing sector is currently undergoing a transition from large-scale to strong-scale manufacturing. The fundamental trend toward long-term improvement remains unchanged, but it faces multiple challenges including a shift in growth speed, structural adjustment, and transformation of growth drivers. Whether we can smoothly achieve the strategic shift from quantity expansion to quality enhancement and enable manufacturing to become a crucial pillar for China’s basic realization of modernization hinges on firmly implementing “Made in China 2025” and unswervingly pursuing the development of manufacturing. We must fully leverage the decisive role of the market in allocating resources and better play the role of the government. We should make good use of the existing foundations and advantages of manufacturing, and promote the coordinated advancement of upgrading traditional industries and fostering the development of emerging industries. We should implement a higher-level opening-up strategy and accelerate the cultivation of new competitive advantages for Chinese manufacturing on the global stage.