Made in China 2.0

FOREWORD
Replacement of old industries has entered a crucial phase
China's export manufacturing industry: challenges and opportunities
INTRODUCTION
Learning from the leaders admist economic transformation
NOTE ON REPORTING
EXECUTIVE SUMMARY
UPDATE ON CHINA'S EXPORT MANUFACTURERS
A strong sector, starting to slow
Headwinds ahead
Challenges to capturing opportunities abroad
A buyer's market
MADE IN CHINA 2.0 READINESS INDEX
Made in China 2.0 Priorities
Recognition of the Made in China 2.0 Priorities
Performance of the Made in China 2.0 Priorities
Made in China 2.0 Readiness Index
LESSONS FROM THE LEADERS
Made in China 2.0 Leaders
Made in China 2.0 Leaders' business performance
Made in China 2.0 Leaders' growth strategies
• Global footprint
• Diversifying your B2B and B2C customer base
• Understanding the role of logistics
• Priorities for the future
• Selling finished goods vs. unfinished goods
• Identifying the impact of emerging trends
CONCLUSION
01
01
02
03
03
04
05
08
09
09
10
11
12
13
14
16
17
18
19
19
20
CONTENTS
Produced by：UPS / Caixin Media
发行单位 / 出品单位：UPS / 财新传媒
Research Support：Lightspeed GMI
调研支持机构：Lightspeed GMI
Produced by：UPS / Caixin Media
发行单位 / 出品单位：UPS / 财新传媒
Research Support：Lightspeed GMI
调研支持机构：Lightspeed GMI
Editor-in-Chief：Simon Webb
主编：Simon Webb
Editor：MingXu/JunyangTang/QinghuiWu
编辑：徐明 / 唐隽阳 / 吴庆辉
Workflow Editor：Jiajun Zhao / Muxiao Zou
流程编辑：赵佳君 / 邹牧晓
Creative Director：Lekai Shi
视觉总监：石乐凯
Senior Designer：Bin Zhou
资深设计师：周斌
For more information, kindly contact:
Faith Wang
UPS China, Brand Communication Manager
wangfaith@ups.com
27

01 Foreword
The future of exporting in China Lessons from the leaders
Replacement of old industries has entered
a crucial phase
China's GDP growth rate fell from 10.6% in 2010 to 6.9% in
2015, and continued to fall in the first half of 2016. What is the
reason for the sustained softening of the Chinese economy in
recent years? In general, opinions fall into one of two categories.
The first opinion is that the downturn is cyclical. In other words,
domestic and foreign economic fluctuations have caused
a slowdown in economic growth. From 2000 to 2007, the
average annual growth of Chinese exports was 22%. In 2015,
exports fell to 1.8%. There is a very clear logical relationship
between a drop in export growth and the economic downturn
it causes. Thus, it is clear that the economic softening in China
can be attributed to a certain degree to a slow global economic
recovery following the 2008 financial crisis.
The second theory is that the economic softening is a trend;
in other words, the speed of growth has fallen as the level of
development has risen. The less developed a nation is, the more
possible it is for that country to experience rapid growth; this
is the so-called "advantage of backwardness". In 1978, per
capita GDP in China was only US$200, at which point China had
staggering advantages in low costs. By 2015, however, GDP
per capita in China already exceeded US$8,000, bringing China
close to technologically developed nations. At the same time,
we passed the peak of our laboring-age population; the number
of laboring-age citizens has been falling by 3 to 5 million
annually. So the softening economic growth in China is — to a
great degree — a trend that will be difficult to reverse.
Between the cyclical downturn and development trend,
however, there is also an important structural challenge to be
faced by China's economy: the replacement of old industries
with new ones. In simple terms, the pillar industries that once
supported China's economy have been losing vitality for a long
time, and there is an urgent need for new industries to drive the
next round of economic growth. Economic growth was formerly
primarily dependent on exports and investments, with the rise of
the "world's manufacturing center" in the background.
There were two major components of the economy then.
The first was labor-intensive manufacturing concentrated in
Southeastern coastal cities. The other was resource-intensive
Huang Yiping Professor & Vice-President of National School of Development, China Center for Economic Research, Peking University
heavy industry concentrated in the Northwest and Northeast, the
primary product of which was investment goods1
. It is becoming
difficult, however, to maintain these two industries.
The only way to maintain growth is through innovation and
industry upgrading. The reality is that the replacement of old
industries is already happening. For one thing, the economic
activities of some traditional industries are rapidly dropping off;
it would not be an overstatement to call this a "hard landing". At
the same time, some emerging industries are developing rapidly,
including large machinery equipment, telecommunications,
intelligent machines, electric cars, tourism, and the internet
economy. The fundamental reason that the economy is facing
sustained pressure in the form of falling growth is that new
industries are not yet well established. The only way to achieve
an economic turnaround is for companies to bring about industry
upgrading and product replacement more rapidly.
In compiling this year's report, owners of companies we have
surveyed were optimistic about economic prospects on the
one hand, but on the other hand felt that the economy is still
in a downward slump. Although some companies hope for
improvements in demand for exports, most have realized that
China's competitiveness in exports can no longer be sustained
by low prices, but instead must be realized through increases
in product quality and improvements to customer experience.
Research indicates that leading companies are adopting
strategies and logistics for developing foreign market growth.
But the majority of export manufacturers have yet to take the
first step towards industry upgrading. What can be done to
convert the successful experiences of leading companies into
practical guidelines for tens of thousands of other companies in
China? This is precisely the question this year's 2016 Made in
China 2.0 Report aims to tackle.
The only way to maintain growth is through innovation and industry upgrading.
1
Investment goods, differing from consumption goods, refer to goods
directly sold to manufacturing enterprises for production

02
Foreword
China's export manufacturing industry:
challenges and opportunities
In 2016, Caixin Media and UPS collaborated once again to
produce the 2016 Made in China 2.0 Report. This year's report
comes at a time as China's export manufacturing industry faces
much uncertainty in the global market, and as the ripple effect
of Brexit and other economic events of the summer are being felt
across the world. This report takes a deep dive into the challenges
currently faced by Chinese export manufacturers.
Faced with uncertainty, export manufacturers have two choices:
adapt and seek breakthroughs or fall behind. This continuation of
our 2014 report aims to guide the transformation and upgrading
of the Chinese export manufacturing industry and respond to the
realities currently faced by export manufacturers. It is also drawn
from UPS's strong experience in working closely with China's
export manufacturing sector over several decades.
An important discovery we made in this report is that lower
prices may not be the best strategy for export manufacturers to
become more competitive. Our research indicates that a lower
price is the least compelling factor for buyers when considering
new suppliers. This indicates that the market has transitioned
from low-cost suppliers towards one where buyers expect higher
quality products and added value through closer partnerships with
suppliers.
In other words, the strategy upon which Chinese export
manufacturers formerly depended for survival – low prices – is no
longer effective in more mature markets, where consumers are
becoming more discerning. This development is closely aligned
to the entry of China's economy into the "New Normal". Leading
export manufacturers who are able to respond to market changes
and remain competitive are seeing better performance than those
unable to adapt.
Considering present conditions, the four key pillars that were
identified in the 2014 report to guide reform for China's export
manufacturing sector remain relevant today. We discovered that
Made in China 2.0 Leaders – companies that have taken UPS's
Made in China 2.0 Priorities to heart – take a much broader
perspective on the role of logistics in driving competitive
advantage. These companies have a clearer understanding than
other export manufacturers on the value that logistics can add
Huang Shan Associate Editor, Caixin Weekly / Member of Editorial Board, Caixin Media
to a range of business objectives, including cost reduction, sales
growth and improving customer experience.
Made in China 2.0 Leaders are three times as likely to recognize
that logistics can play a highly important role in reducing costs
and growing sales as compared to other export manufacturers.
They are also more than twice as likely to identify the highly
important role it can play in enhancing customer experience.
In other words, modern logistics plays an extremely prominent
role in reducing cost, increasing sales, and improving customer
experience.
Let's also take a look at two current hot topics in China: "One
Belt, One Road" and "Connectivity" both of which convey
the significance of modern logistics in helping China to
achieve international productivity collaboration and economic
transformation. For example, the China-Singapore (Chongqing)
Demonstration Initiative on Strategic Connectivity is the third
inter-governmental project that China and Singapore have
undertaken in China's western region. The project, which
focuses on modern connectivity and modern services, has
identified transportation and logistics as two of its key priorities,
demonstrating the importance of these two areas in China's new
economy.
UPS, an international leader in logistics, has drawn from over
100 years of experience in helping Chinese export manufacturers
grow their business, to provide valuable insights to this report.
Caixin Media, one of China's foremost multimedia groups, has
long followed trends in China's economic construction as well
as the development of its export manufacturing industry. Caixin
spoke to four leading academics and experts in Beijing, Tianjin,
Shanghai and Shenzhen to discuss the growth challenges for
export manufacturers in these cities, and sought their advice
and recommendations for companies currently facing intense
global competition. Together, we hope that this report serves
as a valuable resource in helping Chinese export manufacturers
prepare for stronger growth and greater competitiveness in the
Made in China 2.0 era.
As China undergoes economic transformation, the differences between strong and weak companies are becoming clearer.

Learning from the leaders amidst
economic transformation
In the era of Made in China 2.0, customer-led focus on innovation, adaptability and logistics
remains key to success.
Richard Loi President, UPS China
03 Introduction
When we conducted the first round of this research
in 2014, it was already clear that the future survival
and success of Chinese manufacturers would depend
on their willingness and ability to make fundamental
changes to the way they do business. Many of the
themes identified in the initial research have now
found voice in the idea of China's "New Normal" – a
crucial rebalancing of China's economy which places
innovation at the forefront of growth and moving
Chinese manufacturing up the value chain.
The latest research shows that our observations
were well founded with demand both at home and
abroad in decline, the headwinds faced by China's
manufacturers remain considerable. UPS's Made in
China 2.0 initiative is geared now, as it was then,
towards helping businesses face these conditions head on.
The necessity for change remains great. Our research
clearly shows that great opportunities lie ahead for
companies that have succeeded in implementing
what we identify as key principles for future
competitiveness.
This report identifies how these successful
manufacturers achieved better performance than
their peers by organizing themselves differently and
deploying different strategies. What is notable from
UPS's point of view is the expansive and sophisticated
way leading export manufacturers view logistics
compared with less successful companies.
In my introduction to our 2014 report, I wrote
of UPS's ongoing commitment to China's export
manufacturing sector and our support for
individual export manufacturers eager to hone
their global competitiveness. We continue to be
deeply committed to this spirit of partnership,
and remain dedicated to accompanying
Chinese exporters at every step as they pursue
further success around the world.

Note on reporting
This report is based on 1,000 interviews
conducted in December 2015 with senior
decision-makers from Chinese export
manufacturing companies. It follows research
conducted in July and August 2014 with another
1,000 senior decision-makers.
In order to qualify, respondents in both research
phases were required to have senior decision-
making responsibilities from manufacturing
companies with at least 40% export value of their
goods.
Respondents were drawn from an online panel
maintained by Lightspeed GMI, a multinational
research company.
Beyond analysis of the overall results for the
Chinese export manufacturing sector, this report
focuses on analysis across two key variables:
• Variation by the sector from which
the export manufacturer was drawn.
In particular, we look at variations in the
responses from manufacturers in the retail
goods sector, the industrial manufacturing
and automotive and the high-tech sectors.
• Variation based on the location of the
manufacturer. Specifically, we look at
three key manufacturing hubs across China:
Shenzhen, Shanghai and the Beijing-Tianjin
corridor, as well as their three surrounding
areas.
These variations are displayed as indexed values
showing how the result for each sector or
location differed from the overall average (scored
as 100). An indexed score of 125, for example,
shows that the result for that sector or location
was 25% higher than the average result, and a
result of 80 shows that it was 20% below the
average.
Location of export manufacturers
Size of export manufacturers
Seniority of respondents
34%
55%
19%
29% 15%
9%
40%
23%
36%
42%
Shanghai and surrounding areas
Small and medium enterprises
-200 or fewer full-time employees
C-suite executives
Beijing-Tianjin orridor
Large enterprises
-over 1,000 full-time employees
Mid-tier executives
Shenzhen and surrounding areas
Mid-market enterprises
-201-1,000 full-time employees
Senior executives
Rest of China
04 Note on reporting

05 Executive summary
EXECUTIVE
SUMMARY
T
his 2016 Made in China 2.0 Report provides a clear way
forward for a manufacturing sector facing growing headwinds
domestically and internationally. As the Chinese economy
slows, excess manufacturing capacity has opened up in the
local economy. Under the government's "One Belt, One Road" initiative
and other related policies, Chinese export manufacturers are being
encouraged to look to new markets overseas to absorb this excess
capacity. It is against this backdrop that we look at the current state of
export manufacturing in China.
The latest data from the report shows that both China's export
manufacturing sector in particular and the economy in general have
experienced further setbacks since we first surveyed manufacturers
in 2014. The export manufacturing sector continued to slow in the
intervening period, with new orders and output both down year-on-
year. While a majority of export manufacturers remains optimistic
about the economy, the number who say it is worsening is on the rise.
Export manufacturers are increasingly finding
themselves being squeezed by a combination of falling
domestic demand and growing domestic competition.
Meanwhile, despite these pressures, they report being
less concerned about RMB appreciation, holding out
hope of better export opportunities later in 2016.
Competition among export manufacturers not only
remains fierce, but is also expected to intensify
this year. Furthermore, manufacturers know that
customer loyalty is low and that many would, given
the right incentive, readily seek alternative suppliers.
It is important to note that a lower price is the least
important inducement to switch, suggesting that export
manufacturers need to look to improving the quality
of their offering to customers and focus less on simply
reducing the cost of that offering.

In the face of these intensifying pressures, the four Made in China
2.0 Priorities outlined in UPS's Made in China 2.0 reform agenda
are increasingly important in helping to develop healthier client
relationships, authentic partnerships and, ultimately, better profits for
China's export manufacturers.
If manufacturers are to survive and thrive in a tougher, more
competitive export market, they must:
Strengthen Knowledge and Understanding by
building a deeper and more nuanced understanding of
customer business needs, markets and environment
Develop Responsiveness and Collaboration by
elevating customer relationships to the level of true
partnership, understanding that their success is your
success
Deliver Tailored Logistics Solutions to enable
competitive advantage and provide value to their
customers
Build Capacity for Innovation by developing internal
capabilities for change and corporate strategy
To assess the extent to which China's export manufacturers are
prepared for a more competitive export environment, we created
the Made in China 2.0 Readiness Index. The results of
the 2015 Readiness Index reflect the degree of which export
manufacturers recognize the importance of the four priorities and
how they are responding to them. At 45.2, the Readiness Index
shows a slight fall from 46.6 in 2014, driven by a small decrease
in the number of companies that recognize the importance of these
priorities.
The Index is scored from 0 to 100, where 0 is not at all ready for the future of export
manufacturing and 100 is completely ready for the future of export manufacturing.
45.2
47.0
46.5
46.0
45.5
45.0
2014 2015
46.6

Export manufacturers based in the Beijing-Tianjin corridor performed better on the Readiness Index in 2015 than those in Shenzhen where
performance decreased notably compared to 2014. The performance of Shanghai-based manufacturers remained unchanged. Interestingly,
there was no significant difference in the Index performance of export manufacturers based on their industry sector.
Think like a leader for success
While the overall results of the Readiness Index show there is still considerable room for improvement, much can be learned from
focusing on companies that have taken the Made in China 2.0 Priorities to heart. We have given these companies the name Made in
China 2.0 Leaders. These Made in China 2.0 Leaders are from all over China. From all industry sectors and represent companies of all
sizes. They significantly outperform their peers in terms of profitability, productivity, market share and revenue. Made in China 2.0
Leaders represent the top 8% of export manufacturing companies, and score 90+ in the Readiness Index2
. Studying these Leaders in
depth, significant differences are apparent in both their businessperformance and thestrategies they deploy.
Made in China 2.0 Leaders' business performance
When it comes to their performance over the last year and how they expect to perform in the year ahead, Made in China 2.0 Leaders
enjoy significantly better business results and forecasted a more positive outcome than other export manufacturers in the following
areas:
Their businesses are also significantly more likely to be on a growth trajectory. Being prepared for the future of export manufacturing
has an immediate payoff today in terms of business results.
Global footprint
The global footprint left by Made in China 2.0 Leaders provides further instructive contrast to manufacturers who are
less prepared for the future. Leaders, for example, have a broader footprint overall with a significantly higher presence
in Hong Kong, Thailand, Indonesia, France and the UK. They are also much more focused on key emerging markets for
Chinese products in Eastern Europe and Oceania.
Channel diversification
Made in China 2.0 Leaders have developed a more diverse customer base than other export manufacturers and are
more likely to use both B2B and B2C channels to reach customers — not just one or the other. They also understand
the importance of capturing opportunity by constantly scanning their surroundings to understand the key driving factors
underpinning emerging trends in their market.
Challenge identification
One of the key factors that appears to support the success of Made in China 2.0 Leaders is their ability to clearly identify
and overcome the issues affecting their businesses, both now and in the future.
Supply chain optimization
Made in China 2.0 Leaders have a much more expansive view of the role of logistics in driving competitive advantage.
They also understand their role in other crucial areas of business, including growing sales, reducing cost and enhancing
customer experience.
Market share Revenue ProfitProductivity
2 The UPS Readiness Index reflects a combination of Recognition and Performance Score. An indexed score of 90 reflects an average score of at least 9
or higher (on a scale of 1 – 10) for each dimension. There are 10 dimensions each for Recognition and Performance Score.

Update on China's
Export Manufacturers

Conditions facing China's
export manufacturers 2014-15
Economy is better
overall than
12 months ago
Economy is worse-off
overall than
12 months ago
2015
2014
Company's output
increased in the past
12 months
Company's new orders
increased in the past
12 months
78%
70%
75%
69%
63%
74%
29%
16%
A strong sector, starting to slow
Data from the 2016 Made in China 2.0 Report shows that
pressure is intensifying for China's export manufacturers.
The overall outlook for the sector remains strong, with large
majorities reporting increases in new orders and output.
However, when it comes to new orders, the number of
companies saying they have experienced an increase has
fallen from 75% to 69%. The number of those reporting
increased output meanwhile has fallen from 78% to 70%.
Both of these changes suggest that the New Normal may
have hit export manufacturing.
Headwinds ahead
Consistent with experiences in their respective sectors, the
assessments from export manufacturers in this latest report
regarding the overall health of the economy were more
pessimistic than the year before. The number of companies
reporting an improvement in the economy from the previous
year fell 11 percentage points to 63% and the number
reporting a deterioration increased 13 percentage points to
29%.
REGIONAL BREAKOUT:
A clear regional divide is apparent with companies in
the Beijing-Tianjin corridor significantly more likely to
have seen new orders and output increase in the last
year compared with manufacturers in other parts of
China. They are also considerably more bullish on the
performance of the overall economy.
New orders
Output
Better overall economy
100
Shanghai
region
Shanghai
region
Shanghai
region
Shanghai
region
102
91
120
124
Beijing-Tianjin
region
Beijing-Tianjin
region
Beijing-Tianjin
region
Beijing-Tianjin
region
120
133
43
81
Shenzhen
region
Shenzhen
region
Shenzhen
region
Shenzhen
region
81
81
127
09 Update on China's export manufacturers
Worse-off overall economy
These variations are displayed as indexed values showing how the result for each sector
or location differed from the overall average (scored as 100). An indexed score of 125, for
example, shows that the result for that sector or location was 25% higher than the average
result, and a result of 80 shows that it was 20% below the average.

Increasing competition from
companies in China
Decreasing demand for
products in China
Strengthening of the RMB against
other currencies
37%
39%
29%
37%
32%
24%
Challenges to capturing opportunities abroad
Chinese export manufacturers are feeling pressure from both the demand and supply sides — the two challenges most commonly
cited are increasing competition from Chinese companies and decreasing demand from Chinese customers. The number of export
manufacturers citing a decrease in domestic demand as highly challenging has increased eight percentage points since 2014 to a
high 37% — only two percentage points behind the 39% citing increased competition from domestic players.
There are reasons for optimism for export manufacturers: the proportion that see the appreciation of the RMB as a challenge to their
business has fallen from 32% to 24% in this year's report.
Key challenges facing China's export manufacturers 2014-15
2015
2014

A buyer's market
Respondents' sentiments of competition in export manufacturing
Possible reasons for switching suppliers
The competition faced by manufacturers is set to grow with 80% expecting competition to
increase in 2016, continuing a trend of increasing competition over the last five years.
Export manufacturers face not only a proliferation of new competitors, but also the prospect of
their customers switching to these competitors who offer a more attractive deal.
Competition grew in the last five years
Competition grew in the last year
Competition will grow in the next year
77%
80%
68%
Offers higher quality products
Shows understanding of their business and
helps them to compete more successfully
Offers a faster and more efficient
supply chain
Offers a better
customer experience
Helps reduce costs in their
supply chain
Offers a lower price
Importantly, for export manufacturers looking to compete in the market, reducing price may not
be the optimal solution. Of all of the tested inducements to switch suppliers, price reduction
was selected by the fewest export manufacturers. This suggests the market has matured beyond
lowest cost suppliers, to one where manufacturers are expected to offer higher quality products
and add value through closer partnership with customers.
83%
82%
80%
82%
80%
71%

Made in China 2.0
Readiness Index

Made in China 2.0 Priorities
It is against this backdrop of tightening economic conditions and increasing competition in the export manufacturing sector that UPS's
Made in China 2.0 Priorities are increasingly important. Developed in 2014 to help Chinese manufacturers retool for the future of
exporting in China, four priorities were identified to guide reform:
The Made in China 2.0 Readiness Index assesses Chinese export manufacturers' preparedness for the future of their industry – in
other words, how ready they are to succeed in an ever-changing and evermore competitive environment. The Index combines a
Recognition Score based on how well companies understand the Made in China 2.0 Priorities and a Performance Score that assesses
how well companies are delivering on those priorities within their organizations.
Priority 1: Strengthen Knowledge
and Understanding
Helping their customers innovate to secure
competitive advantage
Building partnerships with their customers to
jointly expand to new markets
13 Made in China 2.0 Readiness Index
Gathering market intelligence on their industry's
competitive initiatives
Using market intelligence to stay current with trends
and ensure their products meet customers' evolving
expectations of service and technology
Developing cross-cultural business and language
skills to interact more closely with their international
customers
Understanding their international customers'
legal and regulatory environment
Priority 2: Develop Responsiveness
and Collaboration
Priority 4: Build Capacity for
Innovation
Improving customer experience by aligning their
global logistics capabilities with their customers'
demands
Enhancing their global logistics which, in turn,
allows their customers to be more flexible and
responsive
Developing in-house capabilities for innovative
product development
Developing in-house strategic planning capabilities
to constantly evaluate and refine their business
model
Priority 3: Deliver Tailored
Logistics Solutions
1
5
2
6
3
7 9
4
8
10

45%
55%
Index Methodology
The Made in China 2.0 Readiness
Index Score is calculated by combining
two related metrics – a Recognition
Score and a Performance Score.
The Recognition Score is calculated
based on the number of export
manufacturers who understand each
measure to be very important to their
success (by rating its importance as
9 or 10 out of 10 on a scale from 0
to 10, where 0 is not at all important
and 10 is extremely important). The
Performance Score is calculated the
same way and refers to the number
of export manufacturers who say they
perform each task very well (by rating
their performance as 9 or 10 out of 10
on a scale from 0 to 10, where 0 is not
at all well and 10 is extremely well).
The Made in China 2.0 Readiness Index
is marked out of 100 by combining a
company's Recognition Score (marked
out of 50) and a Performance Score
(marked out of 50).
Each measure is weighted equally, as
are both the Recognition Score and
the Performance Score. This is done to
reflect their equal contribution to the
task of readying themselves for China's
manufacturing future.
Recognition of the Made in China 2.0
Priorities
Recognition of the Made in China 2.0 Priorities has decreased slightly with the
Recognition Score down from 25.4 in 2014 to 23.6 in 2015. This fall was driven
primarily by a decrease in the number of export manufacturers who recognize
the following three key areas as highly important to their success:
• Building partnerships with customers to expand to new markets
(down 10 percentage points)
• Developing in-house corporate strategy capabilities
(down 6 percentage points)
• Helping customers innovate (down 6 percentage points)
Overall, the decrease suggests a reduction in focus on collaboration and
creating true partnerships with customers.
Made in China 2.0 Recognition Score 2014-15
23.6
25.5
25.0
24.5
24.0
23.5
2014 2015
25.4
Developing in-house corporate-
strategy capabilities to constantly
review our business model
Building partnerships with
our customers to expand to
new markets together
Helping our customers
innovate to get ahead of
their competitors
2014
2015
Changes in the Recognition of key areas of
the Made in China 2.0 Priorities 2014-15
49%
43%
48%
54%

REGIONAL BREAKOUT:
The Recognition Score varies significantly across China. Companies
in the Beijing-Tianjin corridor score particularly well, when it comes
to developing in-house innovation capabilities and gathering market
intelligence about their competition. Shenzhen-based manufacturers
are less likely to recognize the importance of seven of the ten Made in
China 2.0 Priorities, resulting in a low Recognition Score.
SECTOR BREAKOUT:
The Recognition Score does not vary significantly based on the
manufacturer's sector. Companies in the industrial manufacturing &
automotive and retail sectors are more likely than those in the high-tech
sector to recognize the importance of developing in-house corporate
strategy capabilities and partnering with customers to expand to new
markets. Conversely, those in the high-tech sector are more likely to
recognize the importance of understanding their customers' regulatory
environment and partnering with them to expand to new markets.
Made in China 2.0 Recognition Score 2015 by region
Made in China 2.0 Recognition Score 2015 by sector
24.2 23.7 24.7
Industrial
Manufacturing &
Automotive
High-tech Retail
24.5 26.6 20.9
Shanghai
region
Beijing-Tianjin
region
Shenzhen
region

REGIONAL BREAKOUT:
When it comes to six of the ten priorities, export
manufacturers in the Beijing-Tianjin corridor are much
more likely than those in other parts of China to perform
very well. Shenzhen-based companies, on the other
hand, are less likely to perform well when it comes
to building in-house corporate strategy and gathering
market intelligence. These two factors lead to a much
higher Performance Score from companies in Beijing-
Tianjin and a lower score for companies based in and
around Shenzhen.
SECTOR BREAKOUT:
Consistent with their Recognition Score, Performance
Score does not vary based on the type of products
manufactured.
Made in China 2.0 Performance
Score 2015 by region
Score 2015 by sector
Performance of the Made in
China 2.0 Priorities
While recognition of the Made in China 2.0 Priorities may
have decreased slightly, the performance of the priorities
has not. The Made in China 2.0 Performance Score has
increased marginally from 21.2 in 2014 to 21.6 in 2015.
However, the Performance Score still lags behind the
Recognition Score, confirming a finding first seen in 2014
that more export manufacturers recognize the importance
of the Made in China 2.0 Priorities than are actually
implementing those Priorities. In other words, while some
Chinese exporters know what to do, they do not follow
through on that knowledge.
Score 2014-15
Shanghai
region
Beijing-Tianjin
region
Shenzhen
region
22.6 25.1 18.6
Retail
22.1 22.3 22.1
21.6
22.0
21.5
21.0
20.5
20.0
2014 2015
21.2
Industrial
Manufacturing &
Automotive
High-tech

Made in China 2.0 Readiness
Index
Based on the fall in the number of export manufacturers that
recognize the importance of the Made in China 2.0 Priorities,
our latest study shows that the Made in China 2.0 Readiness
Index has fallen slightly from 46.6 in 2014 to 45.2 in 2015.
Score 2014-15
45.2
47.0
46.5
46.0
45.5
45.0
2014 2015
46.6
Industrial
Manufacturing &
Automotive
High-tech Retail
46.3 46.0 46.8
44.8 44.7
52.2
20152014
REGIONAL BREAKOUT:
One of the most important findings in the latest
Made in China 2.0 Readiness Index is that export
manufacturers in the Beijing-Tianjin corridor are
heading in the right direction. They have seen an
almost seven-point increase in the Index Score
from 45.0 in 2014 to 51.7 in 2015. This increase
is mirrored by an even larger decrease in the Index
Score for companies based in and around Shenzhen,
from 53.9 in 2014 to 39.5 in 2015.
SECTOR BREAKOUT:
While across industry sectors the Index Score does
not vary much, there has been a decrease in the
Index Score of manufacturers in the retail sector
from 52.2 in 2014 to 46.8 in 2015.
Shanghai
region
Beijing-Tianjin
region
Shenzhen
region
47.1
51.7
39.5
48.3
45.0
53.9
20152014

Productivity
Market share
Revenue
Profit
Looking at the performance of export manufacturers on
the Made in China 2.0 Readiness Index, a small segment
of elite companies are leading the way in terms of their
understanding and implementation of the Made in China
2.0 Priorities.
Made in China 2.0 Leaders provide a model of success
for other Chinese export manufacturers to emulate.
By identifying how these Leaders differ from other
businesses, a roadmap can be developed for export
manufacturing success.
Broadly speaking, Made in China 2.0 Leaders differ
from other companies when it comes to their business
performance and theirstrategies for growth.
Made in China 2.0 Leaders'
business performance
There is a clear connection between an organization's
investment in the Made in China 2.0 Priorities and
business performance. When it comes to productivity,
market share, revenue and profit, Made in China 2.0
Leaders tend to do much better than companies less
aligned with the priorities.
The Made in China 2.0 Priorities are connected to hard
measures of business performance in the here and now.
Investing time and resources into aligning with these
principles pays performance dividends.
Across the four measures of business performance —
productivity, market share, revenue and growth — Made
in China 2.0 Leaders are significantly more likely to have
seen improved performance in the 12 months preceding
the research. Similarly, they are also more likely to
expect to see their performance improve in the next 12
months.
It is hardly surprising then that the overwhelming
majority (83%) of Made in China 2.0 Leaders say that
their businesses are experiencing growth. Leaders are
13% more likely than other export manufacturers to be
on a growth footing and 7% less likely to say that their
business is currently declining.
Business is currently
growing
holding steady
declining
Other export manufacturers
Next 12 months
Last 12 months
Business trajectory – Made in China 2.0
Leaders vs. other export manufacturers
Business performance - Made in China 2.0 Leaders
outperform other export manufacturers
19%
18%
17%
25%
17%
28%
27%
30%
70%
83%
16%
10%
14%
7%
19 Lessons from the Leaders

Global footprint
In today's environment, it is vital to capture growth wherever it presents itself. The Chinese government's "One
Belt, One Road" and Third-Country Market Cooperation initiatives reinforce how important it is for manufacturers to look
overseas to reach new customers in new markets. As manufacturers move up the value chain and as the New Normal sees
diminished domestic demand, excess manufacturing capacity must turn to meet export demand.
The global footprint of the Made in China 2.0 Leaders provides a further clue for Chinese manufacturers looking to enhance
their competitiveness. Leaders sell to considerably more markets than other companies and are particularly strong in Asia,
with 97% of Leaders selling to at least one Asian market.
Thailand Hong Kong SAR France Indonesia The UK
Compared to other export manufacturers, Made in China 2.0 Leaders are particularly
focused on key markets in Asia and in Europe. They are more likely to sell to:
161% 151% 116%126% 115%

Made in China 2.0 Leaders are more likely to have a presence in these areas:
Made in China 2.0 Leaders are:
Target regions Target markets
Oceania
Western Europe
Eastern Europe
Asia
546%
59%
146%
21%
Thailand
Taiwan
Hong Kong
Korea
Japan
Indonesia
France
UK
161%
82%
151%
97%
76%
116%
126%
115%
South America
Central America
North America
31%
46%
71%
When it comes to the expansion plans of the Made in China 2.0 Leaders,
Asia is a key focus. They are more likely than other businesses to consider
expanding to Malaysia and the Philippines in the next couple of years.
Aside from the focus on Asia, the most sold-to markets on a region-by-
region basis are Western Europe and North America. Made in China 2.0
Leaders are six times more likely than other Chinese manufacturers to
sell to Oceania and more than twice as likely to sell to Eastern Europe,
although they represent smaller markets overall.
Made in China 2.0 Leaders do a better job of leveraging their presence
in these markets in order to enter neighbouring markets that may have
previously been overlooked. For example, Leaders not only focus on the
USA, but also on Canada.
Oceania
more likely to sell to more likely to sell to
Eastern Europe
6x 2x

Diversifying your B2B and B2C customer
base
Made in China 2.0 Leaders have also developed
a more diverse customer base than other export
manufacturers. With the manufacturing sector
shifting away from selling only to B2B customers or
only to B2C customers, Leaders are at the forefront
of this shift.
Two-thirds of Made in China 2.0 Leaders sell to
a mix of both B2B and B2C customers, making
them 49% more likely to do so than other
export manufacturers. Meanwhile, other export
manufacturers are considerably more focused on
B2B manufacturing, which is often associated with
lower-margin and lower-quality production.
Customer type – Made in China 2.0 Leaders
vs. other export manufacturers
Sell primarily to
B2B customers
Sell to both
B2B and B2C
customers
Sell primarily to
B2C customers
Other export manufacturers
43%
15%
64%
18%
42%
18%

Understanding the role of logistics
Made in China 2.0 Leaders know that investing in logistics
can add value across a range of key corporate objectives.
Made in China 2.0 Leaders also have a more expansive
view than other companies about the role of logistics in
driving competitive advantage. Leaders are three times as
likely to recognize that logistics play a highly important role
in reducing costs and growing sales. They are also more
than twice as likely to identify the highly important role it
can play in enhancing customer experience.
Made in China 2.0 Leaders are more
likely to recognize the important role
of logistics than others
Cost
reduction
>3X
more likely
>3X
more likely
>2X
more likely
Sales
growth
Enhanced
customer
experience

Leaders are more likely to
understand that logistics can
reduce costs by…
The chart below outlines the Made in China 2.0 Leaders' view on the role of logistics in driving business objectives.
Reducing labor costs
Reducing storage fees
from a more efficient
supply chain
Managing compliance
activities better to
avoid fines and delays
Reducing costs from
fewer lost documents
and lost shipments
Reducing training costs
through simplified shipping
and tracking processes
Allocating staff more
effectively thanks to
enhanced workflow
visibility
Reducing printing costs
by using shipping labels
to print logos, ads
and links to product
warranties and return
policies
Increasing repeat sales
Improving cash flow and
payment speed
Increasing customer
satisfaction by reducing
shipping errors
Increasing customer
bases by shipping to
new markets
Increasing customer
satisfaction through better
shipment tracking
Better managing stock
levels to avoid stock
outs and allowing sales
of in-bound inventory
grow sales by…
Enhancing quality
assurance of order
fulfilment
Simplifying product return
processes
Providing better visibility
and certainty to customers
of delivery times
Being able to better
forecast shipment
delays and put in place
mitigation strategies
Offering shipping options
to fulfil customer needs
Sending a customer
survey upon product
delivery to better identify
customer needs
Streamlining customs and
other procedures to reduce
delays and speed up
delivery times
enhance customer experience by…
Offering shipping
options to balance
speed and cost to meet
customer needs
Role of logistics as recognized by

Made in China 2.0 Leaders understand the importance of agility.
They know that they need to constantly scan their surroundings to
understand the key driving factors underpinning emerging trends in
their market. Just as importantly, they need to be poised to move
quickly and decisively in response to these trends both now and in the
future. Leaders regularly review their business strategies to ensure they
are continuing to meet customer expectations.
Priorities for the future
When asked to rate priorities for the future success of their company,
Made in China 2.0 Leaders were significantly more likely than other
companies to rate all priorities as highly important.
Among the seven future priorities, improving logistics and growing
sales were the two areas where the gap between Made in China 2.0
Leaders and other companies was greatest. Made in China 2.0 Leaders
were 170% more likely to identify improving logistics as highly
important and 168% more likely to say the same of improving sales
growth. These are the two areas where the assessment of Leaders and
other companies diverge the most, suggesting that they represent the
areas most overlooked by other export manufacturers.
However, across all of the priorities tested, Made in China 2.0 Leaders
were considerably more likely than all other companies to recognize
the significance of these priorities to their company's future success.
Made in China 2.0 Leaders are more likely to believe that the following are
highly important:
Increasing product quality
Cost reductions
Product innovation
Growing sales
Business model innovation
Improving logistics
Enhanced customer experience
85%
111%
168%
170%
100%
96%
136%
130%

Selling finished goods vs. unfinished goods
Product innovation is pushing the Made in China 2.0 Leaders up
the value chain. As Leaders focus on product innovation, we can
see a move away from selling unfinished goods and towards more
finished goods. Made in China 2.0 Leaders are 63% less likely than
other export manufacturers to sell mainly unfinished goods.
Identifying the impact of emerging trends
Made in China 2.0 Leaders also have a more finely tuned radar for
future developments in their market and are considerably more
focused on identifying and dealing with these changes. When
asked to rate the impact of a series of emerging industry trends,
Leaders were more likely than other Chinese export manufacturers
to say that all of the tested trends would have a significant impact
on them.
Made in China 2.0 Leaders differ most from other businesses when
it comes to their assessment of the impact of nearshoring as well
as industry and consumer e-commerce (which allows companies
to sell directly to their business and consumer clients respectively).
Made in China 2.0 Leaders are more
likely to recognize that the following
trends will have a big impact:
Emerging market
pressures
Nearshoring
Pre-purchase
online reviews
Consumer
e-commerce
Industry
e-commerce
23%
24%
24%
29%
41%
Made in China 2.0 Leaders not only have a better roadmap for
success, they are also much more attuned to emerging industry
trends and the inherent threats and opportunities. Logistics, in
particular, has a key role to play in many of the trends currently
overlooked by other export manufacturers – from negating the
impact of nearshoring to opening up new channels for consumer
and industrial e-commerce.

27 Conclusion
Lessons from the leaders Guiding the future of China's export industry
This year's Made in China 2.0 Report shows that both China's export manufacturing sector and the overall economy are experiencing
stiffer headwinds than when we first surveyed manufacturers in 2014. Export manufacturers face growing pressure from falling
domestic demand and growing competition – both domestically and internationally.
The Made in China 2.0 Readiness Index Score － which assesses the extent of China export manufacturers' readiness for a more
competitive export environment － fell from 46.6 in 2014 to 45.2 in 2015. There is room for improvement when it comes to how
well export manufacturers recognize the importance of being prepared for the future of manufacturing, particularly when it comes to
working closely with their customers on expanding to new markets and innovation.
Much can be learned from the Made in China 2.0 Leaders – export manufacturers who are the most ready for China's export future,
who have experienced stronger business performance and are on a growth trajectory.
Key differences between the Made in China 2.0 Leaders and other export manufacturers include
• Having a broader geographic footprint: Made in China 2.0 Leaders have diversified their investment into new
emerging regions to harness growth. They are looking to source growth from Eastern Europe and Oceania.
• Building a diversified B2B and B2C customer base: Made in China 2.0 Leaders have shifted away from selling
only to B2C or B2B customers to include a mix of both types of customers.
• Being able to better identify the impact of emerging trends: Leaders are much more attuned to macro
emerging industry trends and are able to recognize the huge impact of 'nearshoring' to their future success.
• Understanding the role of logistics: Leaders recognize that investing in logistics can add value and offer the
competitive advantage in cost reduction, sales growth and better customer experience.
As we have established in 2014, this report reminds export manufacturers that there is value today in being prepared for tomorrow.
From profitability to productivity, and from market share to revenue, Made in China 2.0 Leaders continue to significantly outperform
those who are less ready for the changes to come. Leaders sell in more markets around the world and enjoy greater success in them.
These market leaders are the export champions of tomorrow and have set a strong example for Chinese companies, as well as for
companies throughout Asia. By adopting the lessons learned from these Leaders with a more expansive outlook of the future, export
manufacturers could continue to thrive in the increasingly competitive environment.
This is the time of Made in China 2.0, a laboratory for global business and commerce, a dynamic environment in which ingenuity
and problem solving will fuel unprecedented innovation. Made in China 2.0 is here to present the growth opportunities for export
manufacturers as China enters the New Normal.
To understand how Made in China 2.0 applies to your organization, we invite business leaders to visit the Made in China 2.0 platform
at ups.com/lianhe. UPS is driven by the belief that great things happen when people work together. Our uniquely human logistics
network of more than 400,000 employees collaborate with our customers and stakeholders to solve complex challenges for the
transformation of companies and industries. This is an invitation to policy-makers, businesses of all sizes playing different roles in the
global value chain, in China and around the world, to join in the Made in China 2.0 conversation.
For more information, kindly contact:
Faith Wang
UPS China, Brand Communication Manager
wangfaith@ups.com
Conclusion

Made in China 2.0

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Destacado

Destacado (20)

Similar a Made in China 2.0

Similar a Made in China 2.0 (20)

Último

Último (20)

Made in China 2.0