How important is strong industry to China?

The following is an excerpt from "How Important is a Complete Industrial System to China"

Author: Chen Jing

1. The role of a complete industrial system is mainly reflected in external affairs Competitiveness and defense military power.

In foreign trade competition, a more complete industrial system can reduce the cost of industrial supporting production, facilitate the production of high-quality and low-price products, and strengthen the competitive advantage of domestic products in international trade. Due to the influence of globalization, many raw materials, semi-finished products, products, etc. are more advantageous to import from abroad than domestic production. Therefore, it is unnecessary to maintain a completely 100-percent industry. On the contrary, it will increase the cost of products. This is why the industrial systems of other countries except China are not absolutely complete.

The greatest value of a 100-percent industrial system is reflected in war, and it can independently produce all war products without being choked by foreign countries. In a war between a small country and a big country, the big country can completely wipe out the small country with a few cutting-edge products. However, in a war between big countries, the gap in cutting-edge technology is not so large that one side is completely unable to resist. So at this time, can a big country be wiped out? It is more practical to produce mid-range weapons in batches quickly than to slowly produce a small number of expensive high-end weapons. For example, see the tank war between Germany and the Soviet Union.

Since the end of World War II, the world has been dominated by white people, monopolizing the largest amount of resources and profits in the world. China is an outlier in this international system. The Communist Party has a saying: "Seek peace through struggle, and peace will survive; seek peace through concessions, and peace will perish." Not only did China have military conflicts and even wars with the United States and the Soviet Union, but it even encountered a situation where the Soviet Union and the United States made an agreement to divide China. Therefore, the danger of national subjugation was always around China's neck. It was absolutely complete and did not ask outsiders. An industrial system has become the most realistic choice for China.

Of course, up to now, a complete industrial system is still of great value to China and is of great significance to China's industrial upgrading. Even for various high-tech products that have been criticized, many of China's technical capabilities are among the best in the world. Whether you are backward or advanced depends on who you compare with, not to mention that China's technological catch-up and mergers and acquisitions are so fast.

Why a complete industrial system is so important to a country. This is because if the industrial system relies on foreign countries, the country's entire economic system may be seriously damaged in a conflict.

Don’t look at the fact that many things in China still need to be imported (such as chips). If the supply is really cut off, China can still produce low-end chips for use, although the yield rate is relatively low, the power consumption is high, and the speed is Slow, but still enough to support the industrial system.

Therefore, the significance of a complete industrial system in terms of national security is very significant. No matter which country wants to threaten that country, they do not have the ability to bring down the country's economic system through a trade embargo. This puts a country in an advantageous position in international conflicts.

From the perspective of economic development, since a country's industries are relatively complete, when foreign investment occurs, it is easy to find local manufacturers, which greatly reduces the cost of product production (importing parts from abroad not only requires paying Freight charges and customs duties are often paid). This means that even though China's labor costs are significantly higher than those in many developing countries, a large number of industries still have to stay in China (of course, perfect infrastructure is also an important reason).

Therefore, a complete industrial system is not only good for national security, but also of great help to economic development.

2. The only countries with complete industrial systems in the world now are China, the United States, and the European Union, and Russia is relatively reluctant. Japan is half the country and is severely restricted by natural resources. Among them, the United States and the European Union are the strongest, and they can basically reach the world's leading level in all fields. Although China's level in basic materials, precision instruments, electronics, etc. is acceptable, it is indeed poor. Russia has deteriorated more seriously.

The fact that the United States does not produce many things does not mean that it cannot produce them. It’s just that production is unprofitable. The specific technology is still there. When necessary, the United States can still restore relevant production capabilities.

Especially due to the existence of "Batumi", an arms embargo began in the late 1980s. Beihang University cannot buy genuine Adobe products, and the United States recently banned Intel from exporting XEON processors to China. Haha, there is an embargo under the free market. (Zi Guanjun [ID: china_2049] interrupts: Do students know what "Batum" is? Let me explain it to you. Batumi is the abbreviation of the Paris Coordinating Committee, and its official name is "Export Control Coordinating Committee"?, it is It was secretly established in November 1949 at the initiative of the United States. Because it is headquartered in Paris, it is often called the "Paris Coordination Committee". Its purpose is to restrict the export of strategic materials and high technologies to socialist countries and include them in the embargo. The list includes tens of thousands of products in three categories: military weapons and equipment, cutting-edge technology products and rare materials. On April 1, 1994, Batumi officially announced its dissolution. However, the list of prohibited items it formulated was later adopted by Wassenaar. Inherited by the agreement and continued to this day)

Manufacturing industry. It is said that after a certain five-axis machine came out, the price of foreign products was cut in half. Moreover, the domestic five-axis is said to be rough.

But this thing is 100 years old. It means that others eat meat and you drink the northwest wind. The difference of 60 years is that others eat the meat and you drink the leftover soup. After 10 years, you still drink soup, but others can only follow suit.

If you can’t rush this thing, just use it up. Be determined to continue losing money for decades. What matters is not how much you earn from your own products, but whether the price of imported products can be cut in half again.

Taking another example from the communications industry, let’s talk about switches. 15 years ago, a board cost 200,000. 10 years ago, 100,000. This is normal technological progress. But please note that it is not the technology used. They are all technologies that have been mature for more than ten years. But if someone has a technology monopoly, it will only take five years to reduce the price by half.

But the most embarrassing thing is the deflector, which is just an iron plate used to fill empty slots, guide airflow, and control the temperature of the equipment. 35 dollars a piece. Weighs 1 kilo. Not stainless steel yet. . . . No price reduction for many years. Can you say this is good technology? But they have a monopoly on switch technology, and they don’t recognize other brands. If you dare to install it yourself, the entire machine will be void of warranty.

Ten years ago, domestic switches began to have mid-to-high-end products. There are so many bugs. But the price is low, so it has been used in some small cities. After using it for 3 years, it has become more stable, and the failure rate is half of that of European and American products. As soon as this result came out, the price of imported replacement equipment began to plummet.

A 100,000 board, 10,000 in 5 years, and another 5 years. . . Many European and American factories have closed down and disappeared. . . .

As for the $35 iron plate? Free delivery. Later, I made it clear that it would be fine if I didn’t have an iron plate, so I just don’t deserve it...

This is the reality. What matters is not whether your product is exquisite. It’s about whether your own ability can make foreigners honestly lower prices.

The underachievers are very sad and can only endure it. The so-called win-win. In fact, it is a beautiful lie.

At the beginning, I was backward and incapable. People said that ten thousand is ten thousand. Later the laggards gained some ability. People say I'll give you a profit of 5,000, but don't go out to grab the market with your product. . . . Well, win-win. . . .

In the past, our country’s industrial level was relatively low. For the reducer used in the cement plant's grinding mill, foreign reducers sold 10 million units at that time, but domestic reducers could not develop stable products. After localization, foreign large-scale reducers have basically withdrawn from the domestic market. Because domestic production may only cost 3 million. Similarly, the prices of various equipment in the entire system have dropped. Then there was the great development of the domestic cement industry, and today cement prices have almost dropped to cabbage prices. Then, with the great development of the cement industry, the technology accumulation of Sinoma International, the world's largest general contractor of cement projects, has resulted. Today, Sinoma International's overseas general contracting business accounts for 80% of its business. This, in turn, created the great development of the cement industry in Africa and Southeast Asia. Can you imagine a time five years ago when Africa had few cement factories and only cement importers? Therefore, I feel very happy when others say that China is the crusher of developed countries.

European life did not come out of thin air. When the Chinese could not make things, but they could sell things for 50 yuan for 50 yuan, have you ever thought that if you work all your life, 80% of it is paid? It was given to European and American countries to raise them for leisure and vacation. It allows them to have a face that has not been bullied.

It is still in the reducer industry. Look at how European and American countries use the belly of a gentleman to judge the heart of a villain. In 2005, Siemens acquired a company. It was not a big deal for a giant. The acquisition of 1.2 billion euros was neither big nor small. But it has profoundly affected the pattern of the world's reducer industry. The acquired company is called Flender, and it is the number one leader in the reducer industry. After being acquired by Siemens, Siemens filled the gap in this area. But for GE, which competes extensively with Siemens in many fields, it is a very scary thing. Especially in the field of wind power, the key part of the wind power host is the reducer. Previously, GE mainly bought from Flender, and GE and Siemens are the most direct competitors in this field. One of the two is an American giant, the other is a German giant, and Flanders is also a German company. Even if they don't cooperate seamlessly, it won't affect the cooperation between GE and Flender. The end of the story should be that everyone leads a happy life together. It’s just that that’s the story. GE's most direct reaction was to find a company in China to cooperate with and cut off cooperation with Flender because they were afraid that Siemens would choke them at a critical moment, so they cultivated a Chinese company and in just a few years, this company From the output value of more than one billion to the level of tens of billions, the shipment volume of wind power main engines ranks first in the world. International giants all know that they can’t be choked by others. I was just thinking that after so many industries in China were captured by the Chinese, they discovered that foreigners had made so much money. There are countless examples of this, but many people still act in an innocent way. When looking at foreigners, should I call them stupid or naive?

3. Do you think manufacturing can be bought if you have money? Is it something you can buy if you want?

What I want to say is that if a kind of instrument is not available in China, then foreign products will be sold to you at double the price. Only when truly competitive domestic products are produced will their prices drop significantly.

Failure to industrialize means having to purchase products at high prices in the international market and facing technological blockades and export bans at any time. The inability to industrialize means that the huge domestic procurement demand will only fatten a group of compradors. However, only the top group of Chinese engineering students can join international high-tech companies and get high salaries, while the others can only join in hard work. Foundry.

Give examples of well-known industries and conduct a brief discussion.

1. Localization of the integrated circuit industry.

Whether it is basic industries such as precision machine tools and CNC machine tools, or cutting-edge industries such as missiles, radars, ships, aerospace, etc., integrated circuits are required as the core. In the early 1980s, all 8086 chips had to be imported. How much foreign exchange did the country have at that time? With the foreign exchange earned from exporting textiles, handicrafts, furniture, etc., one can then spend a high price to purchase chips like 8086/8088 from the international market with minimal cost, and high-end chips are often blocked by "Batumi". This kind of sour feeling is simply It's unbearable.

The main work of a number of microelectronics institutes such as the Institute of Microelectronics of the Chinese Academy of Sciences, the Institute of Microelectronics of Tsinghua University, and the Institute of Microelectronics of Fudan University is to deal with the technical blockade imposed by many countries on the mainstream manufacturing technology of China’s microelectronics industry. In this stage, the main work of the Institute of Microelectronics is to develop the production process of integrated circuits. In short, when a microelectronics institute develops a 0.6um integrated circuit production process, we will show the United States and Batumi a message: Our country has mastered this technology. If your country continues to block the 0.6um process If you export your chips to our country, or sell them to our country at a high price, then our country will take five years to develop and produce them on its own and will no longer import your country’s chips. Therefore, the US industry associations will lobby Congress to approve the opening of exports of this product to China.

China is still importing a large number of chips, but on the one hand, mid-range and below chips can definitely be produced domestically, and only high-end chips are imported.

Let me tell you a story. When we make analog integrated circuits and radio frequency circuits, what if we want to learn from some important foreign chips? We will first polish off the package, then disassemble the chip; use etching to remove the upper layer of the chip layer by layer, then take photos, manually remove the layout, analyze the circuit, and use Spectrum simulation tools to simulate it, Ohyeah! Our country's ability to learn, understand, and digest is the best in the world.

Relying on such brutal growth methods, the integrated circuit industry began to develop around 1990. The industry first conducted cutting-edge research and development with the goal of mastering advanced manufacturing processes and obtained the right to import new chips; then through multiple Channels sought to locate the world's most advanced chip foundries in China, and Taiwanese Zhang Rujing began to operate Semiconductor Manufacturing International Corporation (SMIC) in Yizhuang, Beijing, in 2000. In 2004, he began to encourage the development of the integrated circuit industry. Major universities train at least 2,000 people every year. engineers are sent to the IC industry. In 2007, IC companies such as Infineon and Qimonda in Xi'an were also booming.

I don’t know if any company acquired the core technology of the international IC industry during the 2009 financial crisis, but what I know is that by 2014, after 25 years of development of the integrated circuit industry, the North The 12-inch 28nm plasma silicon etching machine independently developed by Microelectronics has passed the full-process process verification of the Semiconductor Manufacturing International Corporation (SMIC) production line and received an order. This fucking thing is a zero breakthrough!

2. Localization of rail transit equipment

It is very difficult to keep up with the development of the international community. China cannot remain at the low end of the international industrial chain for a long time, and it is more and more important in key technologies and equipment. You cannot be controlled by others for a long time. China cannot buy a modernization from abroad. (Unless 1.3 billion people work overtime to cultivate textiles and engage in OEM processing to support the modern life of 50 million upper-class people)

The rail transit field is a standard example. I remember that by 2010, the National Development and Reform Commission approved the construction of 50 subway lines in 35 cities in 2510. The cost of each subway was about 20 billion, of which electromechanical equipment (locomotives, tracks, shield machines, contact network, screen doors, automatic ticketing, etc.) at least 8 billion, and 50 lines is 400 billion. Only by forming a R&D and manufacturing system for my country's rail transit equipment can the cost of subway construction be effectively reduced.

If you buy all imported equipment, the cost of electromechanical equipment will increase by at least 50%. And who will benefit from spending so much money? International product manufacturer! Their gross profit is at least 50%, so engineers from product manufacturers can work five days a week, five hours a day, have more than one month of vacation a year, and stay in business class five-star hotels in China. The product agent spent a business cost of 5 and took away a profit of about 8, with a value-added tax of 17 (subway construction is an investment by the central and local governments, and the value-added tax is left to right), import tax rebates, customs clearance, etc., the agent did 4,000 A business worth RMB 30 billion leaves only a profit of RMB 30 billion, directly creating only about 3,000 jobs.

If localization is achieved, how many people will be supported by 400 billion industrial sales? Anyway, Huawei had sales of 239 billion yuan in 2013, with 150,000 employees (Huawei’s employees’ salaries are still very high), and there are countless supporting companies that outsource or subcontract for Huawei; the purchase of mechanical and electrical equipment worth 400 billion yuan directly created 400,000 employees. I think jobs with more than 100 employees are more conservative.

How big can the consumption of 400,000 high-income people drive the catering, entertainment, home appliances, automobiles and housing market?

Therefore, the only way to truly achieve common prosperity is for the industry to establish a complete industrial system and achieve localization of key technologies and equipment. Otherwise only a handful of people will become rich.

Tell me a story about the localization of AFC (automatic fare collection system). The protagonist is Shanghai Huahong. The AFCs of Shanghai Rail Transit Lines 1 and 2 are all products from the American CUBIC Company, and the commissioning of Line 1 was completed in September 1998. Operated in March 1999.

However, the disadvantages of all imports include high cost, high operating costs, secrecy of key technologies that make system maintenance and upgrades difficult, insufficient spare parts, senior maintenance personnel having to fly from the United States, and labor hours starting from the time of departure from the United States. Therefore, during the bidding for Line 3, the government required foreign suppliers to provide localization measures, and the consortium of Shanghai Huahong and the Spanish company INDRA won the bid. During the implementation, it gradually realized the localization of application software and the localization of maintenance parts.

In fact, Shanghai Huahong's level at this time was still limited, but it could not withstand government support - the government believed that Shanghai Huahong initially had the ability to independently design and manufacture, so at the end of 2001, the northern extension of Line 1 was launched. During the AFC tender, Shanghai Huahong killed CUBIC at a price of 60 million, and actually finished the work in 2004. It also trained a large number of people and was hired by units such as Gaoxin Modern, Shanghai Postal Communications, and Shanghai Huateng. If you dig them out with a higher salary - by 2008, there will be almost no foreign companies in the domestic AFC industry.

With a contract value of 100 million per line, 50 lines were divided up by units such as Shanghai Huateng, Shanghai Huahong, Nanjing Panda, Hi-tech Modern, Peking University Founder, and Zhejiang University Insigma.

And at this time, Shanghai Huahong also cooperated with Fudan Microelectronics (you see, the first thing I said was microelectronics!), which can provide localized products for the whole system, and also promote the microelectronics industry. development of the industry.

The amazing thing about this story is that it only took less than 8 years from the introduction of technology to the kicking of foreigners, and it also trained a large number of practitioners.

3. Localization of equipment in the petrochemical industry

The scale of the first two examples is not large, but the real big one is here!

Excuse me: What industries are needed for basic production in an area with a population of one million?

Answer: Small coal mine, small steel factory, small machinery factory, small fertilizer factory, small cement factory, small power plant, small textile factory, small printing factory, small food factory.

In fact, it was a plan put forward when the country formulated the Fourth Five-Year Plan in 1970. The specific content is that the central government will allocate 8 billion yuan of special funds to support the development of small coal mines in various provinces and regions. Five types of industrial projects include small steel plants, small fertilizer plants, small cement plants and small machinery plants.

At that time, the second large-scale introduction of complete sets of technical equipment was carried out, and 26 projects were actually signed with foreign countries. Among them, Liaoyang Petrochemical Fiber General Plant (2.9 billion yuan) invested more than 1 billion yuan. RMB), Wuhan Iron and Steel's 1.7-meter rolling mill (RMB 2.76 billion), Daqing Fertilizer Plant (Japanese yen loan, exchange rate adjustment, investment increased to RMB 2.67 billion), Shanghai Petrochemical General Plant (RMB 2 billion), Tianjin Petrochemical Fiber Plant ( 1.35 billion RMB)

Note, this is 11.65 billion in 1970. The official exchange rate at that time was 2.46 RMB against the US dollar! 4.7 billion US dollars! ! ! In 1970, only US$20 million of foreign exchange reserves were spent, and it was not until 1975 that there were US$500 million of foreign exchange reserves! ! ! In addition, in 1979, China's money supply was 2.6 billion yuan, and its GDP was 27.2 billion U.S. dollars (the figures are all from the Internet, please criticize those with knowledge)

China's little foreign exchange was used to introduce ethylene fertilizer equipment If that’s not enough, what kind of TV do you want to buy?

List of 13 large-scale fertilizer plants introduced in the 1970s:

1. Qilu Second Fertilizer Plant? Construction started in April 1974 and completed in July 1976, with an investment of 263.03 million yuan. Yuan;

2. Sichuan Chemical Plant? Construction started in May 1974 and completed in December 1976, with an investment of 160.12 million yuan;

3. Luzhou Natural Gas Chemical Plant? April 1974 Construction started and was completed in March 1977 with an investment of 206.42 million yuan;

4. Daqing Fertilizer Factory? Construction started in May 1974 and was completed in June 1977 with an investment of 2.67447 million yuan;

5. Cangzhou Fertilizer Factory? Started construction in July 1973 and completed in December 1977, with an investment of 243.12 million yuan;

6. Liaohe Chemical Fertilizer Factory? Started construction in June 1974, completed in December 1977, with an investment of 343.42 million yuan; Ten thousand yuan;

7. Yunnan Natural Gas Chemical Plant? Construction started in January 1975 and was completed in December 1977, with an investment of 187.59 million yuan.

8. Qixiashan Fertilizer Factory? Started construction in September 1974 and completed in October 1978, with an investment of 321.28 million yuan;

9. Anqing Chemical Fertilizer Factory? Started construction in March 1974. Completed in December 1978 with an investment of 405.26 million yuan;

10. Chishuihe Natural Gas Fertilizer Plant? Construction started in January 1976 and completed in December 1978 with an investment of 171.85 million yuan;

11. Dongting Nitrogen Fertilizer Factory? Started construction in April 1974 and completed in July 1979, with an investment of 313.29 million yuan;

12. Hubei Chemical Fertilizer Factory? Started construction in October 1974, completed in August 1979, with an investment of 29,875 yuan Ten thousand yuan;

13. Guangzhou Fertilizer Factory? Construction started in December 1974 and was completed in October 1982, with an investment of 507.39 million yuan;

Among the above 13 sets of equipment, the removal of nitrogen, Except for the three units in Anqing and Zhijiang, which use naphtha as raw material, the rest use natural gas as raw material.

The main technology importing countries for the 10 units using natural gas as raw material are the United States and the Netherlands. The synthetic ammonia unit adopts the American Kellogg production process, and the urea unit uses the Dutch Stamicarbon carbon dioxide stripping production process. Some companies have adopted the synthetic ammonia/urea process of Japan's Toyo Engineering Company.

One acre of land uses 10 kilograms of fertilizer a year, and 3.9 million tons of fertilizer production equipment has been introduced, which can meet the fertilizer needs of approximately 260 million people.

We relied on the imported equipment and technology, and mobilized manpower to tackle key problems, such as 110,000 tons of ethylene equipment, 300,000 tons of ethylene equipment, large-scale chemical fertilizers, etc., relying on those who were good at it. Drawing on the efforts of our predecessors to learn, study and research, we chewed down the production lines of petrochemical equipment one bite at a time, directly or indirectly solving the problem of eating.

Don’t take it seriously. Without these basic industrial systems, a low-precision precision lathe alone can cost you 3 million, and high-end ones are embargoed, let alone propellers, submarines, and large aircraft. When you come to the common people, you will have to deal with green cars for the rest of your life.

The first one is the LCD panel industry.

In 2004, I worked as a product manager for 15-inch panels in a state-owned enterprise. At that time, I was just a young man who had just graduated from graduate school and had been working for less than two years. The entire team spent three months on design, one month on masking and finalizing materials, and two months on trial production. Our estimated cost before formal production was $220 per piece. At this time, the market price is 260 US dollars. Six months later, we had approximately 25% of the global 15-inch market share. At this time, the market price was a terrifying US$160, and our cost was US$180. Even my grandma’s family did not recognize the loss.

We can take a look at BOE's financial report. Well, it basically makes a profit once every three years. According to the market economy, this kind of enterprise should be closed down? But if you do the math, the rough relationship is that in 2005, for every RMB 1 loss in China's panel industry, the cost of China's LCD and TV companies would drop by RMB 20. This is the power of localization.

Thanks to BOE, Tianma, SVA, and TCL for their efforts and contributions over the years. Without the huge investment from the panel industry countries, there would be no success in the domestic TV industry. The Chinese government's investment in the LCD panel industry is about 100 billion, and China's LCD TV production in 2014 was 140 million units. After many years of investment, the TV industry has made back its profits in a few months.

The second example is new energy.

In 2010, we negotiated with all international gas giants, including Linde, AL, and AP, which are Fortune 500 companies, for the supply of an alkane gas. Their quotation is very close, 45,000 per kilogram, even though we know that the supplier behind them costs less than 25,000. Then we worked hard to train a domestic supplier in Fujian. The cost was higher, about 28,000, and we bought it for 31,000. Then less than a year later, these top 500 companies came to us again and said we would sell them to you for 27,000. So according to the views of some believers in free market economy, we should abandon domestic manufacturers and cooperate with large foreign companies? Only ghosts do this. We know very well that when this domestic company dies, these foreign giants will raise the price to more than 40,000 without hesitation. By the way, the people negotiating with us are all Chinese compradors of the Chinese subsidiaries of these large international companies.

To give another example, in 2013, we acquired an American company. This company was riddled with debt. If the Chinese tycoons did not take action, it would definitely die. Even so, the acquisition was subject to an antitrust investigation by the US Congress, and the acquisition was delayed for three months. As for the so-called anti-monopoly, what US imperialists are really concerned about during the process is not monopoly, but the relationship between our companies and the Chinese government, and the resulting military applications of technology.

This company’s production technology requires the use of 0.5 mm thick coiled steel plates. When we wanted to produce in China after localization, suppliers in the United States and Japan said they could not export to China because according to Brazil According to regulations, this is an embargo of strategic materials to China. Six months after we and Baosteel reached an agreement that Baosteel would start producing samples of this steel plate, the United States decisively lifted the embargo on this steel plate to China.

So why do we need industrialization and localization? Because this world has never been a free market economy, it is still a typical law of the jungle. At any time, only if you can create it, will others talk to you about the free market. When you can't make it, you'll either face dumping at high prices or a complete embargo.

Of course, if our goal is not industrialization, but just the development of the service industry, and the goal is to export manpower and raw materials abroad and dump high-end products, then there is really no need for localization.

--------------------------Please see the attachment for Chapters 4 and 5.