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China’s Manufacturing Industry Witnessed Significant Horizontal Upgrading with Insufficient Vertical Upgrading
- An Analysis of the Current Situation and Development Trend of Innovation Input by Listed Manufacturing Enterprises


By Yuan Dongming, Zhou Jianqi & Ma Shuping, DRC


Through comparing the changing intensity on innovation input of listed enterprises from 2012 to 2015, it can be found that significant improvement is yet to take shape in the innovation input of manufacturing industry in China. Analysis results show that at present, significant inter-industry horizontal upgrading is tangible in China's manufacturing industry, yet intra-industry vertical upgrading remains insufficient. In other words, innovative resources are more likely to gather around certain industries, while within the industry itself it is not obvious that the resources are moving towards competitive enterprises.

The general R&D intensity of China’s listed manufacturing enterprises continues to improve. In 2015, China's 1747 listed manufacturing enterprises made a total investment of 273.7 billion yuan on R&D projects, with R&D intensity standing at 2.92%, of which 2.67% for the main board market, 3.69% for SME board market and 5.26% for growth enterprise market (GEM). China's manufacturing industry in 2015 had 8.37 million employees and the per capita human capital investment was about 97,900 yuan, of which the main board market boasted the highest while the SME board market the lowest.

The past four years have witnessed a growing intensity of innovation input in China's listed manufacturing enterprises. First, in general R&D investment has maintained a rapid growth, with significant variations between industries. The R&D investment has increased steadily, but with a slowdown in growth rate. In addition, great differences in R&D investment could be found among the sub-sectors of the manufacturing industry. The growth of R&D investment in the sub-sectors of the manufacturing industry can be grossly divided into three categories: 1. sub-sectors with high growth rate; 2. sub-sectors with smooth growth rate; 3. sub-sectors with negative growth rate. Second, the industry gap of per capita human capital investment input among listed enterprises is phasing out. 1. The total investment in human capital maintains a rapid growth momentum, whereas the growth of per capita investment is slow. 2. The total number of employees in the sub-sectors has been growing in general, but with great disparities. 3. The per capita human capital investment of the sub-sectors is becoming similar and the industry gap is gradually turning narrowed. Third, the industrial differentiation of the innovation investment among listed enterprises is relatively prominent. Overall, significant improvement in the investment intensity of listed enterprises is yet to be fleshed out, while for the sub-sectors the changes in the intensity of innovation input vary sharply. Some others have experienced smooth development.

Some conclusions. First, under the pressure of downturn economic performance, China's listed manufacturing enterprises are facing an urgent need for innovation and development, and have maintained a fast growth of R&D investment. Second, in comparison with manufacturing powerhouses and the world's leading enterprises, a big gap remains for China's listed manufacturing enterprises in terms of the general intensity of R&D input. Third, the difference between the per capita human capital investment in the sub-sectors of the manufacturing industry is becoming smaller with a converging trend and it is unfavorable for the high-level development of the innovation-intensive industries. Fourth, in view of the changes in the innovation input of the listed manufacturing enterprises, at present China’s manufacturing inter-industry transformation and upgrading is characterized by significant horizontal intensification and insufficient intra-industry vertical development.