How China Beat the World at Manufacturing

By prioritising vision over profits, China built a manufacturing empire while others clung to short-term gains.

In 1984, I wrote several cover stories critically comparing the development of 15 industrial sectors in China and India. Based on published facts and data, I showed that while India was marginally ahead in three sectors, China led in four, and in the remaining eight, both were more or less on par. I concluded that although China was not comprehensively ahead in industrialisation, it seemed poised to take significant strides to employ its poor, hard-working population and modernise the nation.

I was young, but I could write on complex techno-business subjects, as the organisation I worked for allowed me to analyse industrial development globally. Some events unfolded before my eyes, though at the time I didn’t grasp their full significance. Only later did it become clear how China outmanoeuvred the West—and the rest of the world—to emerge as the dominant manufacturing powerhouse. Many iconic industrial technology companies that eagerly sold process technology and plants to China have since lost their prominence or shut down.

At the time, the synthetic fibre, yarn, and textile industries were booming, with DuPont in the USA and Zimmer in Germany leading as global suppliers of process technology and plants. By the 1990s, however, demand had declined and overcapacity was widespread, so when Chinese state-backed companies invited tenders for large-scale PSF/PFY/polyester fabric plants, Western firms eagerly responded. To meet China’s requirements, they offered their latest and best technologies for the largest capacity plants and even arranged foreign exchange funding. I recall my German company visiting Chinese clients with every luxury imaginable at our Frankfurt head office.

Interestingly, the Chinese negotiators didn’t push hard on price but insisted on technology transfer and joint development of detailed engineering with Chinese government firms. Western companies, hoping for big orders in a sluggish market, agreed—failing to see the long-term implications. In time, this move shifted the balance, paving the way for China’s dominance in the sector.

Unknown to Western companies—and even governments—China placed less importance on profit and share prices. Instead, its visionary leaders had a long-term strategic plan to become the world’s leading suppliers of textiles, clothing, and apparel. To achieve this, China first equipped its EPC companies with top-tier technology, engineering, manufacturing, and construction experts, often doubling manpower capacity. Clear directives were given: learn, copy, and improve the technology during project implementation so similar plants could later be built independently. That’s precisely what they did, creating massive capacity to meet global demand.

The development stunned the West. Many synthetic yarn and fabric producers worldwide became unviable and shut down. In India, most iconic polyester plants and textile mills closed, and numerous popular clothing brands from the 1990s vanished or dwindled into obscurity.

But China didn’t stop there. They next set out to dominate the apparel sector, acquiring expertise in making cotton, silk, viscose, and synthetic garments. Their strategy was to replicate these garments using synthetic materials and sell them globally at lower costs. They did this quietly and thoroughly—ironically, with help from those they would later displace.

China hired weavers, artisans, and fashion designers worldwide, offering high salaries. For instance, expert weavers from Kanchipuram and Varanasi were flown in to demonstrate traditional saree weaving. The designs were digitised and uploaded to modern power looms, producing synthetic versions of Benarasi and Kanchipuram sarees at 5–10% of the original cost. These now flood Indian markets, often mis-sold as genuine. Facing this wave of cheap imitations, many traditional Indian weavers are abandoning their age-old crafts and losing their livelihoods.

As mentioned earlier, in 1980 India’s textile-related industries were still thriving and ahead of China’s. However, our plants and mills were small and fragmented. Only Reliance, under Dhirubhai Ambani, set up large-scale units despite government restrictions and even persecution. In contrast, China’s industrial miracle stemmed from a strong vision, long-term planning, and coordinated efforts between government agencies and private players. We lacked a leader like Deng Xiaoping, a national goal, or the ability to formulate and implement a focused strategy.

India has missed the manufacturing bus. Despite repeated promises to revive the sector, little progress has been made in the last decade. Numerous plans with flashy acronyms, crafted by bureaucrats and pseudo-experts and hyped by politicians, mostly failed to take off. Private businessmen, secure in protected legacy businesses, are unwilling to take risks or compete globally. Yet, industrial manufacturing remains the only viable way to generate large-scale employment—especially as the IT sector, which grew largely without government support, now shows signs of stagnation.

Blindly copying another country’s model may not work, but there’s no magic alternative either. As India rethinks its manufacturing strategy, policymakers would do well to study the Chinese model in depth.

(The author is a veteran journalist based in Mumbai. Views personal.)