Over the past decade, the new energy vehicle sector has surged forward; over the past decade, green and low-carbon lifestyles have become the norm; over the past decade, technological innovation and smart solutions have led the way.

Over the past decade, emerging industries have shown robust growth, the dual carbon goals have been effectively implemented, and smart manufacturing has been refined to perfection.

Industrial upgrading is a "history of import substitution." In the tide of global competition, standing still means falling behind, and even slow progress amounts to regression.

There are only two core elements: technology introduction and independent innovation.

This means that for local regions to achieve industrial development and technological progress, they must look far ahead, listen carefully, and act swiftly.

For both local governments and enterprises, the hardships and struggles of industrial upgrading stem from a deep-seated desire for technological innovation and long-term development.

Industrial Relocation Is Inevitable

In these extraordinary times, the global market is “trembling” amid the smoke of conflict.

Today, the greatest consensus is this: the crux of a sudden crisis lies not in changing things, but in accelerating trends that were already emerging.

The shift in global industrial chains began over a decade ago; it is only in recent years that the accelerated pace has drawn attention. This is underpinned by two logics: first, the laws of industry; second, trade barriers.

In the past, if someone heard your company was in Hunan, they might refuse to do business with you because of the distance; now, if they hear your company is in Guangdong, they might still refuse because of high costs.

From a profit-seeking perspective, if costs rise and profit margins shrink along an existing supply chain, the entities within that chain will naturally “vote with their feet”—a “natural migration” driven by cost pressures.

Upon closer examination, during the early stages of development, industries were predominantly labor-intensive, with relatively low labor costs. Over time, as workers’ skills improved and products underwent iterative updates, costs rose, and companies’ investment strategies in major cities consequently shifted.

Currently, there is a certain degree of relocation in low-end segments, and with the boost from external international trends, Southeast Asia is naturally stepping in to take over. However, within the global division of labor, the industrial chain is gradually moving up the value chain.

This implies that the outflow of low-end manufacturing is an inevitable, ongoing, and normal phenomenon in the process of industrial upgrading.

Imagine this: as regions transition from low-end manufacturing to high-end smart manufacturing, and then to R&D and design, they gradually move up the industrial chain, capturing high profits and returns, thereby accelerating the pace of industrial upgrading.

Industrial relocation: entering a narrow gate, walking a long road, and glimpsing a faint light.

Industrial Agglomeration: A Cyclical Process

When industries move into a region, they form industrial clusters.

Initial clustering, simply put, is the gathering of enterprises. Localities set no entry barriers for businesses, regardless of industry or scale. True industrial clustering, however, forms an industrial ecosystem.

When enterprises within a park share the same industry and a clear industrial positioning is established, investment promotion gains a clear direction. Over time, as enterprises operate along a single industrial chain with high interdependence, external economies emerge within the region, thereby reducing costs and promoting technological innovation.

Whoever establishes an industrial ecosystem first gains a competitive edge in attracting investment. Simply put, once an industrial ecosystem is established, competitiveness follows. Whether developing high-tech industries or strategic industries, the conventional mindset of “transplanting” industries is inadvisable; establishing industrial parks and building new cities are the most common approaches.

What matters is analyzing the specific stage of the leading industry: is it at the high-end or low-end of the value chain? In terms of industrial development, should the focus be on increasing industrial concentration and fostering large enterprises, or—given a lack of supporting infrastructure—on clustering small and medium-sized enterprises?

Under equal conditions, the higher the concentration of a particular industry in a region, the lower the average industry cost within that region compared to other areas. This attracts more capital to the leading industries in the cluster, thereby further strengthening industrial concentration.

We do not recruit anyone who takes shortcuts by simply following the crowd.

We will not engage in any low-end projects that merely go through the motions.

We will not engage in any land acquisition that is merely for show.

In industrial investment promotion, we must do the right things and do them right.

Industrial Upgrading: Breaking Through the Stalemate

Some believe that industrial upgrading involves replacing the old with the new, with traditional industries becoming "old drivers" and emerging industries becoming "new drivers."

However, this is not the case. Industrial upgrading involves a shift toward economic activities with higher productivity and greater value-added, and technological progress is the fundamental driving force behind this shift.

As markets and times change, companies have realized that the old, extensive, and high-cost manufacturing model no longer works—change is imperative. They are investing heavily in more advanced, intelligent equipment, attempting to improve quality and efficiency through “replacing humans with machines” to revitalize their operations.

Today, efficiency is paramount in every industry. If production still relied on manual tracking and coordination, the entire workshop would likely descend into chaos. Small-batch, rapid response has become the norm.

"Small-batch, rapid response" refers to first producing different product styles in small batches for market testing, then using big data feedback to quickly reorder promising "best-sellers." This approach improves marketability and reduces inventory risks, but it has had a fundamental impact on the entire industrial chain.

From this perspective, industrial upgrading is “endogenous,” with its primary driving force arising from the industrial development process itself—that is, from corporate innovation.

Currently, in many fields such as new materials and semiconductors, China, as a latecomer, holds a distinct advantage: the ability to research and select.

Once a specific industrial direction is identified, local governments can concentrate their “firepower” to make a concentrated push. This not only saves on trial-and-error costs but also enables strategic planning. Therefore, exploration is more difficult than catching up; when sufficiently close to the target, adjusting one’s approach becomes easier.

Regarding industrial upgrading, on the one hand, we must avoid a piecemeal approach that merely treats symptoms without addressing root causes; on the other hand, we must also reject unrealistic, impractical pipe dreams that are out of touch with reality, and instead listen to the practical insights of entrepreneurs.

Today, the existing bottlenecks remain, and expanding the market pie is becoming increasingly difficult. Yet, the call to action during this strategic investment phase still rings out. The answers we seek will not be found overnight, but over the next decade.

One cannot truly understand the difficulty of a task until one has experienced it firsthand; success may appear effortless, but the journey is fraught with hardship.