How Big Is the Gap Between Chinese Manufacturing and Developed Countries?

Insights from Industry Dinners: Complaints and Truths

Recently, I attended several business dinners under the guise of “networking.” In reality, they were social gatherings where middle-aged men, mostly industry insiders, vented frustrations over drinks. These events included senior executives from upstream and downstream enterprises as well as university professors (jokingly referred to as “called beasts” — no offense intended).

As the alcohol flowed, formalities faded, and the real conversations began — often starting with “how tough the industry has become.” Business owners like myself talked about difficulties in getting orders, collecting payments, and dealing with irrational price wars. Meanwhile, the professors complained about inhumane administrative rules, challenging research assessments, and obtuse leadership. Honestly, no industry is without its chaos.

Yet sometimes, amidst these rants, real insights emerge. For example, university professors working within the system find collaborating with large enterprises relatively easy — thanks to government-subsidized research projects (产学研). These collaborations are often driven more by paperwork and subsidy applications than actual results.

Barriers for SMEs in High-End Collaboration

However, for small and micro enterprises (SMEs), it’s a different story. Getting the attention of a large corporation is already a huge challenge. Supplier qualification procedures in big firms are complex and deeply entrenched. Moreover, the pricing is cut-throat and payment cycles are long, because the money comes directly from the enterprise’s own pockets — leading to strict scrutiny.

Professors who leave academia and start businesses often find it hard to adapt, precisely because they lose the “institutional protection” and must face harsh market realities. At the same time, they’re also burdened by endless compliance in spending research funds — from complex rules to audits and even lifelong accountability.

By contrast, companies enjoy more flexibility in spending and execution, albeit with more business risks.

Why More Professors Are Outsourcing R&D

Many professors now realize that meaningful R&D cannot thrive within universities. Administrative burdens, teaching duties, and HR tasks consume too much energy. After age 40, innovation potential also wanes.

As a result, some smart professors now “outsource” their research: they provide the ideas and contract companies to execute the technical work, either under research collaborations or procurement arrangements. While we, as a tech SME, occasionally accept such projects, they’re usually resource-intensive and hard to scale. Most are custom, one-off developments — far from ideal for a growing company.

The Fallacy of the “Cost-Performance” Mindset

Another group in these circles — those close to industrial or economic policy — are obsessed with a “cost-down, dominate-down” strategy. In essence: lower the cost to beat others, then expand and scale up. It’s the classic internet-platform thinking — burn money to gain market share, then use scale to cut costs.

At first glance, this sounds effective — and there are successful cases. But this mindset has hidden pitfalls. It ignores the value of the customer experience and true innovation. If a poorly made product captures the market solely due to cheap price and strong connections, it distorts competition and leads to systemic risk. The debts incurred by such tactics often end up being paid by the whole nation.

Furthermore, it ignores how high-end manufacturing works. Unlike consumer goods, advanced industries are characterized by small demand but extreme performance requirements.

Real Examples from High-End Manufacturing

Take semiconductors: a specific type of laser, needed for a particular manufacturing step, might only sell a few dozen units per year — perhaps a 10 million RMB total market. But the buyers don’t care about “cost-performance.” They want the best, most reliable equipment because any drop in yield — say, from 100% to 99.99% — could result in massive losses.

Or consider premium medical devices like laser eye surgery equipment: would you pick the 20-year global leader charging 20,000 RMB or a cheap domestic option at 5,000 RMB? Most would go with the former — because even a tiny risk to one’s vision isn’t worth the savings.

Breaking the “Made-in-China Must Be Cheap” Curse

The lesson here is clear: cost-performance is not a universal strategy. In high-end sectors, cheap doesn’t win — trust and reliability do.

To truly compete globally, China must break free from the mindset that domestic products must be cheaper. This idea has become both a mantra and a curse. Huawei gets flak for its pricing, but Apple is praised for its premium status — why? It’s a cultural mindset problem.

When Chinese companies try to go high-end, there’s immediate sarcasm and pushback — reflecting the deep-rooted belief that “made-in-China” equals “cheap.” This needs to change — from top to bottom.

Conclusion: Where Does the Real Gap Lie?

So, back to the question: what’s the real gap between Chinese and developed-country manufacturing?

The answer lies in the long tail of high-end, niche demands. These cannot be met by subsidies or market flooding alone. We need to rethink our development strategy and encourage companies to aim higher, beyond the cost-driven mindset.

High-end manufacturing requires boldness, patience, and deep trust — not just affordability.