In 2020, the COVID-19 pandemic caused four major changes in Chinese manufacturing industry.

Change 1: IoT introduction accelerated
　The city of Wenzhou, which led to the rapid shut down of the city due to the COVID-19 pandemic, has become clear that many of its production sites use many Chinese workers in traditional manner.

The biggest hurts in manufacturing industry were those with the most workers and those with traditional, non-automatic management techniques.

Regardless of large or small and medium-sized enterprises, the production method with many workers in the old-fashioned work-site has proven to be inefficient, inflexible and expensive to operate under special circumstances such as the COVID-19 pandemic. It has shown that digitization and the introduction of IoT make manufacturing faster, more flexible and less costly.
Chinese manufacturing industry is now signaling the arrival of a full-scale IoT implementation.

Change 2: Activity status for cost reduction and productivity improvement
　In recent years, the Chinese manufacturing industry is facing a gradual increase in labor costs, environmental measures, and taxes. In order to improve productivity in various situations, an increasing number of companies have stopped investing in not generating profits, such as human resource development. Rather than establishing a waste-free manufacturing site through the continuous activities by leaders who have well knowledge of waste-free production sites or by consultants of Japan, Germany, and Korea, companies were trying to reduce costs and improve productivity by implementing IoT in the operational aspects such as supply, marketing, and transportation. However, cost reduction and productivity improvement cannot be solved simply by reducing training and transportation costs. Because the root causes of wastes are not solved, yet.
“At Post-COVID, practicing and establishing waste-free production site makes possible to reduce cost and improve productivity on the whole shall be the mainstream opinion.”

Change 3: Realignment of the industry from a value chain perspective is inevitable
　The pandemic has put many of Chinese manufacturing industries at a risk of survival, especially small and medium-sized enterprises. In order to resume operations that have stopped, business restructuring from the value chain perspective continues to increase.
Some powerful manufacturers don’t miss the opportunity to buy at a low price.

Of course, the Chinese government has taken relief measures to deal with the crisis for survival, such as reducing taxes and fees or providing subsidies. However, few small and medium-sized companies can actually receive subsidies.

In short, many small and medium-sized enterprises today are expected to survive by finding sponsors and other strong external entities.

Change 4: The business model with enhanced cash flow is required
　　In the past times, many owners of manufacturers had known the importance of cash flow, but in the midst of the current pandemic, many manufacturing management felt the importance of cash flow for the first time in the true sense of its importance. Today, most business owners recognize that cash flow is important in superficial operations, but they have never faced a serious crisis like this before.

A group of small and medium-sized manufacturing companies that are not listed often do not have a cash flow strategy for their business. It is often considered that the causes of collapse of such companies could be by a “bad environment” like COVID-19, but that is a mistake; it is because of not having the cash flow strategy.

Many Chinese management of manufacturing, who experienced the crisis management of cash flow after COVID-19, have realized the real importance of cash.

The biggest reason for slow improvement is that the management and leaders do not understand the nature of the TPS. In that situation, they only want to “get results of great improvements in the short term.”

While waste-free production requires continuous KAIZEN, the management and leaders are lacking in the philosophy and recognition of TPS, which prevents them from taking the basics such as 5S seriously, and if ia problem rises, KAIZEN activities shall be stopped.

1. In the future, China will become more aware of the health, safety and quality of life of the Chinese people.
These areas are the strengths of Japanese companies.
Therefore, Japanese companies have a great opportunity to show their strengths.

2. Japanese companies must pay special attention to the development of new infrastructure, which is actively being discussed in China. As the new infrastructure involves many parts, raw materials and production facilities, Japanese companies can still play a very important role. So the business opportunity is huge.

3. The Chinese market has not changed much. China is probably the fastest to recover its economy, and it recovers its economy to the maximum in the world. This is because Japan’s leading companies are looking for a rapid recovery in the Chinese market in order to fill the gap between the U.S. and European markets, and taking actions for that.