Industry in transformation: from “Made in China” to “Created in China”

China – the world’s second-largest economy after the US – is undergoing a fundamental transformation. Xiaomi and Huawei are two companies that have set a new course

China used to serve as the world’s extended workbench. Low wages, low production costs, a good knowledge of how to produce low-cost consumer goods for the world market – companies from all over the world set up business there to be able to manufacture for themselves at low cost. But now China is refocusing. One reason is that it is losing its price advantage, mainly because of rising wages and transportation costs.

This means that quality and service have to improve. The government is investing more in research and development (R&D), and the country intends to drive forward innovative technologies and switch to high-quality products.

On the road to quality and innovation

Huawei and Xiaomi Tech are textbook examples of Chinese companies that have already completed this transformation from low-price manufacturers to companies that stand for quality, service and innovation. Huawei, a telecommunications manufacturer based in Shenzhen with 150,000 on its payroll, was initially sneered at as a cheap supplier. Now, however, it has long surpassed competitors such as Nokia and Alcatel-Lucent. The reason for its success is that Huawei focuses on innovations. Its R&D expenditure grew to $5.5 billion in 2013.

Many Chinese companies are investing in research now, and it is slowly paying off: Chinese companies occupy a leading position when it comes to technology. They benefit from government support: Premier Li Keqiang has called for the adoption of “innovation as a driver of economic development” as a strategy.

Dialog with customers

Another flagship company is mobile phone company Xiaomi Tech, considered “Asia's answer to Apple.” It has set itself the goal of including consumers in the process of refining its Smartphones. It works like this: once a week it releases a new beta version of its Smartphone interface, and registered users are allowed to test this version and provide feedback. Entrepreneur Lei Jun’s strategy seems to be working: last year Xiaomi sold 18.7 million units, with turnover of $5 billion. Globally, Xiaomi is no. 6 in the mobile phone market. In 2014, influential US magazine “Fast Company” rated Xiaomi Tech no. 3 in the list of the most innovative companies world-wide.

Chinese companies are often considered perpetual copiers of Western products. Yet quite a lot of innovations have come out of China. Chinese online service provider QQ, for instance, introduced a chat app long before WhatsApp became popular. Weixin – known abroad as WeChat – was the first app capable of transmitting voice messages.