Why "capability" is becoming China's industrial backbone

Editor's note: He Jingyi is a reporter with CGTN's business department. The article reflects the author's views and not necessarily those of CGTN. This article was produced with the assistance of artificial intelligence (AI) tools for research, drafting and editing.

For decades, China's industrial ascent was measured in factories and freight containers, in the steady hum of mass production. 

Scale was king. Output was the metric of power. 

Today, that era is quietly fading. 

Capability - not sheer volume - now defines industrial strength. Factories are no longer just production machines; they are innovation engines, where AI, robotics and human ingenuity converge.

January's RatingDog Manufacturing purchasing managers' index (PMI) climbed to 50.3, up from 50.1 in December, marking the second consecutive month above the expansion-contraction threshold and the fastest rate of growth in three months, according to Investing.com. 

New orders, including exports, expanded for the eighth consecutive month. Employment rose for the first time in three months, while leaner inventories signal smarter production, not just bigger output.

From volume to value

The PMI snapshot underscores why China is pivoting its industrial strategy from volume to capability. 

China's 15th Five-Year Plan explicitly calls for maintaining a reasonable share of manufacturing while building a modern industrial system anchored in advanced manufacturing, according to Xinhua News Agency.

President Xi Jinping has reinforced this direction, stressing that sustaining manufacturing's share while vigorously promoting advanced sectors is essential to modernization.

The message is clear: scale alone will not carry China forward. Factories must innovate, integrate, and anticipate global demand.

Factories as backbone

Advanced manufacturing is the structural spine of China's industrial system. 

Centre for Economic Policy Research (CEPR) notes that China's output surpasses the combined total of the next nine largest manufacturing economies, making upgrading capability not optional but imperative.

The International Monetary Fund highlighted this resilience, saying "China's economy has shown notable resilience despite facing multiple shocks in recent years," which reflects the importance of structural depth and policy foresight in sustaining growth.

OECD research adds another layer: innovation, R&D investment, and workforce skill development are crucial levers for industrial competitiveness and long-term resilience.

Domestically, robotics, high-end equipment, digital manufacturing, and new energy vehicles are posting higher value-added growth than traditional manufacturing, demonstrating the tangible benefits of the pivot toward capability.

Capability over capacity

The January PMI tells a story of transformation. 

Factories are no longer mere volume machines. 

Orders are steady, employment is rising and inventories are lean. 

Production now integrates artificial intelligence (AI), automation and digital systems, enhancing both quality and output efficiency.

OECD analysis emphasizes that industrial policy tied to capability development - automation, innovation networks, workforce skill upgrades - positions economies to capture high-value opportunities and withstand global volatility.

McKinsey research corroborates this insight: China's advanced manufacturing investments allow firms to climb the global value chain, improving both profitability and competitiveness.

Even from a European lens, the European Commission's Joint Research Centre notes that competitiveness increasingly hinges on technological integration, not sheer scale, aligning with China's strategy.

This convergence of policy, data, and expert insight makes it clear: in China's next era, capability - not capacity - will define industrial success.

Global context and strategic implications

The pivot toward advanced manufacturing unfolds amid global supply chain reshuffling, heightened technological competition, and rising sustainability standards. 

The World Bank notes that economies investing in capability-driven industrial strategies are more insulated from commodity swings and geopolitical shocks.

For China, embedding capability into the industrial system ensures access to higher-value market segments, technological self-reliance, and workforce skill development, reinforcing resilience in an uncertain global environment.

Looking ahead

China's factories are stabilizing, innovating, and transforming. Rising orders, growing employment, and leaner inventories signal momentum in the right direction. The challenge is not growth itself, but how growth is achieved: by embedding systemic capability into every layer of production.

In this new era, factories will no longer be judged by volume alone. 

They will be evaluated by resilience, intelligence, and innovation - the hallmarks of the industrial backbone. 

By investing in capability today, China is laying the foundation for sustainable, high-quality growth and securing a leadership position in the global manufacturing hierarchy.