Why China’s “smart manufacturing” is not just a technological narrative: rewriting the way manufacturing competition works through Tianjin

This discussion in Tianjin around smart manufacturing was, on the surface, an industry forum, but in essence it reflected a deeper shift in the logic of competition within China’s manufacturing sector.

At the “CEO: Grow with China” roundtable held during the 2026 World Smart Industry Expo, executives from German, Danish, and Chinese companies all mentioned the same keyword: efficiency. But here, efficiency is no longer just about labor costs, logistics speed, or line utilization in the traditional sense; it has been redefined as a complete set of smart manufacturing capabilities that are replicable, scalable, and continuously upgradable.

This change means that the advantages of Chinese manufacturing are moving beyond “large scale and a complete industrial ecosystem” toward “large scale, a complete industrial ecosystem, and the ability to rapidly integrate AI, robotics, and smart terminals.” This is not a simple addition of technologies, but a change in how the industrial system operates. For global supply chains, the signal it sends is clear: future competition will not be about the automation level of a single factory alone, but about whether a region can integrate data, software, equipment, talent, and scenarios into a continuously evolving production system.

One important reason foreign-invested enterprises have remained positive in this round of discussions is that China’s infrastructure-based manufacturing advantage remains highly prominent. Rainer Kern, CFO of Karcher Greater China, described China as “the engine of global innovation and manufacturing.” Behind this statement is not mere market rhetoric, but an assessment of the completeness of China’s industrial system. For large-scale AI deployment, a complete industrial supply chain means lower trial-and-error costs, faster iteration, and an easier path for new technologies to move from demonstration setups to mass production lines.

This is also why “smart manufacturing” in China is not limited to upgrading a single piece of equipment. The “AI Plus” initiative mentioned in the Chinese government work report emphasizes the large-scale application of artificial intelligence in key industries and fields, rather than treating AI merely as an independent technology track. In other words, policy focus has shifted from “developing AI” to “bringing AI into the production function,” making it a general-purpose capability across manufacturing, logistics, quality inspection, R&D, and operations.

From the perspective of industrial research, this shift is significant. Once AI enters factories at scale, it changes not just individual machines, but the way factories are organized. Process control, production scheduling, inventory management, and equipment maintenance, which once relied on experience-based judgment, will gradually become data-driven. The result is not simply “smarter machines,” but a resetting of the competitive threshold in manufacturing: whoever can turn algorithms into productivity faster will gain new advantages in delivery cycles, yield rates, and customization capabilities.European Union Chamber of Commerce in China Vice President of the Tianjin Chapter Christoph Schrempp noted that China’s transition to highly automated production has been impressive, and believes that AI capabilities will continue to mature over the next five to ten years. The key to this judgment is not whether “AI will become widespread,” but the speed of diffusion in China’s manufacturing sector. For the industrial sector, technological maturity is not always the निर्णining variable; what truly shapes the industrial landscape is often the speed of application diffusion. China’s advantage lies precisely in the fact that this diffusion can happen faster across larger-scale manufacturing scenarios.

A survey jointly released by Roland Berger and the EU Chamber of Commerce also provides supporting evidence from another angle: 75% of respondents believe their production efficiency in China is higher than in other regions. This figure does not merely indicate that China is “cheaper”; it also shows that the overall efficiency of Chinese manufacturing still holds a cross-regional comparative advantage. For multinational companies, the question has already shifted from “whether to produce in China” to “how to produce more intelligently in China.” Behind this is the reconfiguration of manufacturing networks, not the replacement of a single production location.

Notably, John Markmann from Grundfos China described China as both a “test bed” and a “launchpad.” This judgment is highly significant because it reveals China’s new role in manufacturing: not only absorbing global capacity, but also serving as a function for technology validation and process iteration. For multinational companies, if a market simultaneously offers massive demand, a complete supply chain, fast trial production capabilities, and a supply of AI talent, then it is not merely a sales market, but a central node for global product and process innovation.

Chinese domestic companies are also leveraging this system in the same way. Jamie Erin Wood, head of investor relations at Dreame Technology, noted that AI-driven production, robotics, and deeply integrated supply chain networks are amplifying the industrial advantages China has long built up. The key here is “amplifying.” In other words, Chinese manufacturing is not starting from scratch with AI; rather, it is using new technologies to improve coordination efficiency on top of an existing industrial organization base. This path is more in line with the reality of China’s manufacturing sector than “technology first, factory later,” and it is also more likely to achieve large-scale implementation.

For global industrial chains, this means changes in two directions. First, smart manufacturing will further strengthen China’s clustering effect in mid- to high-end manufacturing. Whether in home appliances, pumps and valves, industrial equipment, or the broader applications of smart terminals and robotics, as long as complex supply chain coordination is involved, China’s systemic advantages will become more apparent. Second, the role of foreign-invested enterprises in China is also changing: they no longer see China merely as a cost center, but rather as a three-in-one platform for process innovation, market testing, and supply chain optimization.Tianjin’s case is especially worth attention. As a traditional industrial city, Tianjin is redefining its industrial positioning by leveraging smart manufacturing and the AI ecosystem. The report notes that Tianjin’s AI-related industries generated more than RMB 300 billion in operating revenue, which shows that local industrial competition has shifted from “competing for land, tax incentives, and capacity” to “competing for intelligent ecosystems, industrial coordination, and innovation density.” For old industrial bases, this is a very important upgrade path: using smart manufacturing to transform existing industrial foundations into new industrial competitiveness.

From a long-term perspective, the significance of smart manufacturing in China lies not in any single expo, nor in optimistic remarks at a particular forum, but in its potential to reshape the rules of manufacturing competition. In the past, global companies were accustomed to viewing China as the world’s factory; now, they need to see it as a large-scale industrial innovation platform. On this platform, AI, robots, smart terminals, and industrial software are no longer isolated tracks, but fundamental tools that determine the efficiency of manufacturing networks.

This also explains why “smart manufacturing” has become a common point of focus for foreign-invested enterprises, Chinese domestic companies, and local governments. For companies, it is about upgrading production lines and global布局; for localities, it is about industrial capability and investment attraction structure; for global supply chains, it is about where manufacturing networks will concentrate, where they will move, and which links will continue to deepen in China in the future.

If the keyword for the previous round of China’s manufacturing upgrade was “automation,” then this round is closer to “intelligent restructuring.” Its core is not replacing machines with more advanced machines, but enabling production systems to have learning capability, responsiveness, and cross-link coordination capability. For global buyers, supply chain managers, and industrial researchers, this is the change most worth tracking.