In terms of the completeness of the industrial system, China, with 39 major industrial categories, 191 medium categories, and 525 minor categories, has become the only country in the world to possess all industrial categories listed in the United Nations industrial classification. All industrial categories listed in the UN classification can be found in China. If a manufacturing company can complete supporting work with a half-hour phone call in China, it might take half a month to accomplish the same in other countries.

　　

1. In the modern industrial system, all industries can be divided into 39 major categories, 191 medium categories, and 525 minor categories. A complete industrial system emphasizes breadth and comprehensiveness rather than just high-end sophistication.

 

2. In terms of the completeness of the industrial system, China, with 39 major industrial categories, 191 medium categories, and 525 minor categories, has become the only country in the world to possess all industrial categories listed in the United Nations industrial classification. All industrial categories listed in the UN classification can be found in China. If a manufacturing company can complete supporting work with a half-hour phone call in China, it might take half a month to accomplish the same in other countries.

 

Next is the United States; I have seen specific data before but cannot find it now, though it should account for about 94%. Then come Russia, the European Union, and Japan, which barely qualifies (mainly in the civilian manufacturing system).

 

3. The main role of a complete industrial system is reflected in external competitiveness and national defense military strength.

 

In foreign trade competition, a more complete industrial system can reduce the cost of industrial supporting production, which is conducive to producing high-quality and low-cost products, strengthening the competitive advantage of domestic products in international trade. Due to globalization, many raw materials, semi-finished products, and products are more advantageous to import from abroad than to produce domestically, so maintaining a 100% complete industrial system seems unnecessary and would instead increase product costs. This is why other countries' industrial systems are not absolutely complete except for China.

 

The greatest value of a 100% industrial system is reflected in war, enabling independent production of all war products without being choked off by foreign countries. In wars between small and large countries, the large country can completely eliminate the small country with a few advanced products. However, in wars between large countries, the gap in advanced technology is not large enough for one side to be completely defenseless. Therefore, at such times, the ability to mass-produce mid-range weapons quickly is more practical than slowly producing a few expensive high-end weapons. An example can be seen in the tank battles between Germany and the Soviet Union.

 

Since the end of World War II, the world has been dominated by white people who monopolize the largest amount of global resources and profits. China is an anomaly in this international system. The Communist Party has a saying: "Seek peace through struggle, and peace will exist; seek peace through concession, and peace will perish." China has not only had military conflicts and even wars with the US and the Soviet Union but also faced situations where the US and Soviet Union planned to jointly divide China. Thus, the danger of national collapse has always been a threat to China. An absolutely complete industrial system that does not rely on outsiders has become the most realistic choice for China.

 

Of course, even now, a complete industrial system is still very valuable to China and is significant for China's industrial upgrading. Even for various high-end products often criticized, China's technological capabilities rank among the top in the world. Whether a country is backward or advanced depends on who it is compared to, and China's speed in technological catch-up and mergers and acquisitions is very fast.

 

Why is a complete industrial system so important to a country? This is because if the industrial system depends on foreign countries, the entire economic system of that country could be severely damaged during conflicts.

 

Let's take a simple example: North Korea was not always so miserable. In the past, North Korea's living standards were higher than those of China and South Korea. Later, the Soviet Union collapsed, the Council for Mutual Economic Assistance collapsed, and North Korea could not get enough oil, mechanical parts, and technology. As a result, its oil-based agriculture collapsed, and its mechanized system collapsed, becoming what it is today. Of course, North Korea is a small country and cannot accommodate a complete industrial system. This is also an advantage of China as a large country.

 

Don't look at the fact that China still needs to import many things (such as chips). If the supply were really cut off, China could still produce low-end chips for use. Although the yield rate is relatively low, power consumption is high, and speed is slow, it is still enough to support the industrial system.

 

Therefore, the significance of a complete industrial system in national security is very significant. No matter which country wants to threaten that country, they do not have the ability to collapse that country's economic system through trade embargoes. This gives a country an advantageous position in international conflicts.

 

From the perspective of economic development, because a country's industry is relatively complete, foreign investment can easily find local manufacturers, greatly reducing product production costs (importing parts from abroad not only requires paying freight but often also tariffs). This makes China, even though labor costs are significantly higher than many developing countries, still retain a large amount of industry (of course, complete infrastructure is also an important reason).

 

Therefore, a complete industrial system is not only beneficial to national security but also greatly aids economic development.

 

China's earliest complete industrial system was built on 156 projects aided by the Soviet Union. This means that even if China simultaneously falls out with the Soviet Union and the United States, its own economic system will not collapse.

 

Currently, the only countries with complete industrial systems in the world are probably China, the United States, and the European Union, with Russia being somewhat marginal. Japan counts as half, severely limited by natural resources. Among them, the United States and the European Union are the strongest, basically leading the world in all fields. China's levels in basic materials, precision instruments, electronics, etc., are usable but indeed weaker. Russia has seriously regressed.

 

The United States does not produce many things, not because it cannot, but because production is unprofitable. It still possesses the specific technology. When necessary, the US can still restore related production capabilities.

 

Manufacturing: It is said that after the emergence of a certain five-axis machine, foreign product prices were directly halved. Moreover, domestic five-axis machines are said to be quite rough.

 

But if this thing lags by 100 years, others eat meat while you drink the northwest wind. Lagging by 60 years means others eat meat while you drink leftover soup. Lagging by 10 years, you still drink soup, but others can only follow and drink soup too.

 

This thing cannot be rushed; just endure it. Be prepared to continue losing money for decades. The focus is not on how much profit your product makes but whether the price of imported products can be halved again and again.

 

Let's talk about switches in the communication industry. Fifteen years ago, a board cost 200,000. Ten years ago, 100,000. This is normal technological progress. But please note, it's not because the technology used is very advanced. These are all technologies matured for more than a decade. But because of technological monopoly, the price only halves every five years.

 

But the most frustrating is the guide plate, just an iron plate used to fill empty slots, guide airflow, and control equipment temperature. It costs 35 US dollars each, weighs one pound, and is not even stainless steel... The price hasn't dropped for many years. Can you say this is good technology? But they monopolize switch technology; other brands are not recognized. If you dare to assemble it yourself, the whole machine won't be under warranty.

 

Ten years ago, domestic switches began to have mid-to-high-end products. They had many bugs but were cheap, so they started being used in some small cities. After three years, they became more stable, with a failure rate half that of European and American products. Once this result came out, the price of imported switches began to plummet.

 

A board costing 100,000, after 5 years it's 10,000, and after another 5 years... many European and American factories have already closed down and disappeared...

 

As for that $35 iron plate? Given for free. Later it was made clear that actually, it's okay not to have the iron plate, so just don't include it...

 

This is reality. What's important is not whether your product is exquisite, but whether your ability can make foreigners honestly lower their prices.

 

Latecomers are very sad and can only endure quietly. The so-called win-win is actually a beautiful lie.

 

At first, the laggards had no ability, so when others said 10,000, it was 10,000. Later, when the laggards gained some ability, others said, 'I'll give a 5,000 discount, but don't bring your products out to compete in the market... hmm, win-win...'

 

In the past, our country's industrial level was low. Cement plant mills used gear reducers; back then, foreign gear reducers sold for 10 million each, and domestic gear reducers couldn't yet develop stable products. After localization, foreign large gear reducers basically withdrew from the domestic market because domestic ones might only cost 3 million. Similarly, prices of various equipment in the entire system dropped. This led to the great development of the domestic cement industry, and today cement prices have almost dropped to rock-bottom levels. Then the great development of the cement industry led to the technical accumulation of CNBM International, the world's largest cement engineering general contractor, making overseas contracting business account for 80% of its business. This in turn fostered the great development of the cement industry in Africa and Southeast Asia. Can you imagine a time five years ago when Africa had few cement plants and only cement importers? So, when others say China is a developed country crusher, I feel great. European lifestyles didn't come out of nowhere. When Chinese couldn't make things, and they could sell a $5 item for $50, have you ever thought that during your lifetime, 80% of your work supports European and American countries so they can enjoy leisure and vacations, and keep a face that is not bullied.

 

Still in the gear reducer industry. Look at how European and American countries treat others with a gentleman's heart but suspect ill intentions. In 2005, Siemens acquired a company. For a giant, it's no big deal, a 1.2 billion euro acquisition, neither too big nor too small. But it profoundly affected the global gear reducer industry landscape. The acquired company was Flender, the top in the gear reducer industry. After acquisition, Siemens filled its gap in this area. But for GE, which competes widely with Siemens in many fields, this was a scary thing. Especially in wind power, where the key part of the wind turbine is the gear reducer, and previously GE mainly bought from Flender. GE and Siemens are direct competitors in this field. One is an American giant, the other a German giant, and Flender is also German. Even without perfect cooperation, it shouldn't affect GE and Flender's cooperation, right? The story should end with everyone living happily ever after. But that's just a story. GE's immediate reaction was to find a Chinese company to cooperate with, cutting off cooperation with Flender because they feared Siemens would choke them at a critical moment. So they cultivated a Chinese company, which in just a few years grew from a production value of over a billion to tens of billions, becoming the world's number one in wind turbine main unit shipments. International giants all know being choked is unacceptable. I wonder, after so many Chinese industries were taken over by Chinese people and realizing how much foreigners earned, with countless such examples, many still view foreigners with innocent eyes. Should I say naive or foolish?

 

Do you think manufacturing can be bought just because you have money? That you can buy it whenever you want?

 

What I want to say is, if a certain instrument is not domestically produced, foreign products will be sold to you at double the price. Only when truly competitive domestic products are produced will their prices significantly drop in unison.

 

Inability to industrialize means having to purchase at high prices on the international market, always facing technology blockades and export bans.

 

Inability to industrialize means that the huge domestic procurement demand only ends up fattening a group of comprador agents, while only the top engineering students can join international high-tech companies with high salaries, and the rest can only bitterly join contract manufacturers.

 

Using well-known industries as examples for a superficial discussion.

 

1. Localization of the integrated circuit industry.

 

Whether it's basic industries like precision machine tools and CNC machine tools, or cutting-edge industries like missiles, radar, ships, aerospace, integrated circuits are needed as the core. In the early 1980s, 8086 chips had to be imported. How much foreign exchange did the country have then? It was earned by exporting textiles, handicrafts, furniture, etc., and then spent at high prices to buy 8086/8088 chips with negligible cost from the international market. Moreover, high-end chips were often blocked by the Coordinating Committee for Multilateral Export Controls (CoCom). This bitterness was simply unbearable.

 

Institutes like the Institute of Microelectronics of the Chinese Academy of Sciences, Tsinghua Microelectronics Institute, and Fudan Microelectronics Institute mainly worked to counter many countries' technology blockades on China's mainstream microelectronics manufacturing technologies. During that period, their main task was to develop integrated circuit production processes. Simply put, when an institute developed a 0.6um integrated circuit production process, we would show the US and CoCom that China had mastered this technology. If they continued to block exports of 0.6um chips to China or sold them at high prices, China would develop and produce them independently within five years, no longer importing from them. Then the US industry association would lobby Congress to approve exports of this product to China.

 

China still imports a large number of chips, but on one hand, mid-range and below chips can definitely be domestically produced, only high-end chips are imported.

 

Let me tell you a story. When we made analog integrated circuits and RF circuits, if we wanted to learn from some important foreign chips, what did we do? We would first polish off the packaging, then extract the chip; use etching to remove the chip's upper layers layer by layer, then photograph, manually reverse-engineer the layout, analyze the circuit, and simulate it with Spectrum simulation tools. Oh yeah! Our country's ability to learn, understand, and digest is world-class.

 

Relying on such wild growth methods, the integrated circuit industry began developing around 1990, initially aiming to master advanced manufacturing processes for cutting-edge R&D and to gain import rights for new chips; then through multiple channels sought world-class chip foundries to settle in China, leading to Taiwanese Zhang Rujing starting SMIC in Beijing Yizhuang in 2000. In 2004, the integrated circuit industry was encouraged to develop, with major universities training at least 2,000 engineers annually for the IC industry. By 2007, IC companies like Infineon and Qimonda in Xi'an were also thriving.

 

I don't know if any company acquired core international IC industry technology during the 2009 financial crisis, but I do know that by 2014, after 25 years of integrated circuit industry development, Northern Microelectronics independently developed a 12-inch 28nm plasma silicon etching machine that fully passed SMIC's production line process verification and received orders. This is a breakthrough from zero!

 

2. Localization of Rail Transit Equipment

 

Keeping pace with the development of the international community is very difficult. China cannot remain at the low end of the international industrial chain for a long time, and it certainly cannot be controlled by others in key technologies and key equipment for a long time. China cannot buy modernization from abroad. (Unless 1.3 billion people work overtime farming, weaving, and doing processing to support the modern life of 50 million privileged people.)

 

The rail transit field is a typical example. By 2010, the National Development and Reform Commission approved the construction of 50 subway lines in 35 cities (25+10), with each subway line costing about 20 billion yuan. Among these, electromechanical equipment (locomotives, tracks, shield machines, contact networks, platform screen doors, automatic ticketing systems, etc.) accounted for at least 8 billion yuan per line, totaling 400 billion yuan for 50 lines. Only by establishing a domestic rail transit equipment R&D and manufacturing system can subway costs be effectively reduced.

 

If all equipment is imported, the cost of electromechanical equipment would increase by at least 50%. After spending so much money, who benefits? International product manufacturers! Their gross margin is at least 50%, so their engineers can work 5 days a week, 5 hours a day, with over a month of vacation annually, traveling to China in business class and staying in five-star hotels. Product agents take about 5% commercial costs and earn around 8% profit, with 17% VAT (subway construction is funded by central and local governments, so VAT is just a transfer). Import tax rebates, customs clearance, and other fees mean that agents doing 400 billion yuan in business only keep 30 billion yuan in profit, directly creating about 3,000 jobs.

 

If localization is achieved, how many people can be supported by 400 billion yuan in industrial sales? Huawei had sales of 239 billion yuan in 2013 with 150,000 employees (Huawei's employee salaries are also high), and countless supporting companies outsource or subcontract for Huawei; 400 billion yuan in electromechanical equipment procurement would directly create over 400,000 jobs, which I consider a conservative estimate.

 

How much can the consumption of 400,000 high-income people drive the markets for dining, entertainment, home appliances, automobiles, and housing?

 

Therefore, establishing a complete industrial system in the industrial sector and achieving localization in key technologies and equipment is the real way to common prosperity. Otherwise, only a small group of people will become wealthy.

 

Here's a story about the localization of AFC (Automatic Fare Collection) systems. The protagonist is Shanghai Huahong. The AFC systems for Shanghai Metro Lines 1 and 2 were all from the American company CUBIC, with Line 1 debugging completed in September 1998 and operation starting in March 1999. However, fully imported systems had drawbacks: high cost, high operating expenses, key technology secrecy causing difficulties in maintenance and upgrades, insufficient spare parts, senior maintenance personnel had to fly from the US, and labor costs started counting from departure. Therefore, when bidding for Line 3, the government required foreign suppliers to provide localization measures, resulting in a consortium of Shanghai Huahong and Spain's INDRA winning the bid and gradually localizing application software and maintenance parts during implementation.

 

At that time, Shanghai Huahong's capabilities were still limited, but with government support—the government believed Shanghai Huahong had preliminary independent design and manufacturing capabilities—so at the end of 2001, in the bidding for the northern extension of Line 1's AFC, Shanghai Huahong won over CUBIC with a bid of 60 million yuan, completed the work solidly by 2004, and trained a group of personnel who were later poached by companies like Gaoxin Modern, Shanghai Youtong, and Shanghai Huateng with higher salaries. By 2008, the domestic AFC industry was basically free of foreign companies.

 

A contract of 100 million yuan per line, with 50 lines, was mostly divided among Shanghai Huateng, Shanghai Huahong, Nanjing Panda, Gaoxin Modern, Peking University Founder, and Zhejiang University Netnew.

 

At the same time, Shanghai Huahong cooperated with Fudan Microelectronics (see, I mentioned microelectronics first!) to provide fully localized system products, also driving the development of the microelectronics industry.

 

The impressive part of this story is that it took less than 8 years to go from technology introduction to kicking out foreigners, while also training a large number of practitioners.

 

3. Localization of Equipment in the Petrochemical Field

 

The scale of the previous two examples is not large; the real big deal is here!

 

Question: What industries are needed for the basic production of a region with a population of one million?

 

Answer: Small coal mines, small steel mills, small machinery factories, small fertilizer plants, small cement plants, small power plants, small textile factories, small printing factories, small food factories.

 

This was actually a plan proposed when the country formulated the Fourth Five-Year Plan in 1970. Specifically, the central government allocated 8 billion yuan in special funds to support provinces and regions in developing five types of industrial projects: small coal mines, small steel mills, small fertilizer plants, small cement plants, and small machinery factories.

 

At that time, a second large-scale introduction of complete sets of technology and equipment was carried out. A total of 26 projects were actually signed with foreign parties, among which investments over 1 billion yuan included Liaoyang Petrochemical Fiber General Plant (2.9 billion yuan), WISCO's 1.7-meter rolling mill (2.76 billion yuan), Daqing Fertilizer Plant (Japanese yen loan, exchange rate adjusted, investment increased to 2.67 billion yuan), Shanghai Petrochemical General Plant (2 billion yuan), and Tianjin Petrochemical Fiber Plant (1.35 billion yuan).

 

Note, this was 11.65 billion yuan in 1970, when the official exchange rate was 2.46 yuan to the US dollar! That's 4.7 billion USD!!! Foreign exchange reserves were only 20 million USD at that time, and it was not until 1975 that reserves reached 500 million USD!!! Additionally, in 1979, China's money supply was 2.6 billion yuan, and GDP was 27.2 billion USD (numbers from the internet, please correct if wrong).

 

China's limited foreign exchange was not even enough to import ethylene fertilizer equipment, so how could it afford to buy televisions?

 

Among the 13 sets of equipment mentioned above, except for the three sets at Dongdan, Anqing, and Zhijiang which used naphtha as raw material, the rest used natural gas as raw material.

 

The 10 sets using natural gas as raw material mainly imported technology from the United States and the Netherlands. The ammonia synthesis units used the Kellogg process from the US, and the urea units used the Stamicarbon CO2 stripping process from the Netherlands. Some enterprises adopted the ammonia/urea process from Japan's Toyo Engineering Corporation.

 

One mu of land requires 10 kilograms of fertilizer per year. The introduction of 3.9 million tons of fertilizer production equipment can meet the fertilizer demand of about 260 million people.

 

Thanks to the equipment and technology introduced back then, manpower was mobilized for tackling key projects such as 110,000-ton ethylene equipment, 300,000-ton ethylene equipment, and large fertilizer projects. Through the efforts of predecessors skilled in borrowing, learning, and researching, the production lines of petrochemical equipment were gradually developed, directly or indirectly solving food supply issues.

 

Don't take it lightly. Without these basic industrial systems, a single low-precision precision lathe could cost you 3 million, and high-end ones are embargoed. Not to mention making propellers, submarines, or large aircraft. For ordinary people, they'll be dealing with slow trains their whole lives.

 

The first is the LCD panel industry.

 

In 2004, I was a product manager for 15-inch panels at a state-owned enterprise. At that time, I was a greenhorn with less than two years of work experience after graduate school. The whole team spent 3 months on design, 1 month on mask and material selection, 2 months on trial production. Before official production, our estimated cost was $220 per panel. The market price was $260. Six months later, we had about 25% of the global 15-inch market share. At that time, the market price had dropped to a scary $160, while our cost was $180, losing money badly.

 

We can look at BOE's financial reports; basically, they make a profit once every three years, haha. According to market economy logic, such a company should shut down? But if you calculate roughly, in 2005, for every 1 yuan loss in China's panel industry, the cost of Chinese LCD displays and TVs dropped by 20 yuan. This is the power of localization.

 

Thanks to the efforts and contributions of BOE, Tianma, SVA, TCL over the years. Without the huge national investment in the panel industry, there would be no success in the domestic TV industry. The Chinese government invested about 100 billion yuan in the LCD panel industry, and in 2014, China produced 140 million LCD TVs. The years of investment were recouped by the TV industry in just a few months.

 

The second example is the new energy sector I am currently involved in.

 

In 2010, we negotiated with all the international gas giants, including Linde, AL, AP, all Fortune 500 companies, for the supply of an alkane gas. Their quotes were close, 45,000 yuan per kilogram, even though we knew their suppliers' costs were below 25,000. Then we cultivated a domestic supplier in Fujian, whose cost was a bit higher, around 28,000. We bought at 31,000. Less than a year later, these Fortune 500 companies came back to us offering 27,000. According to some free market believers, we should abandon domestic suppliers and cooperate with foreign giants? No way. We know clearly that if this domestic supplier dies, these foreign giants will raise prices to over 40,000 without hesitation. By the way, the negotiators from these international companies were all Chinese comprador staff from their Chinese subsidiaries.

 

Another example: in 2013, we acquired an American company burdened with debt. If Chinese investors hadn't stepped in, it would have definitely gone bankrupt. Even so, this acquisition was subject to an antitrust investigation by the US Congress, delaying the deal by three months. The so-called antitrust concern was not really about monopoly, but about our company's relationship with the Chinese government and the resulting technological military applications.

 

This company's production technology required 0.5mm thick wound steel plates. When we tried to localize production in China, US and Japanese suppliers said they could not export to China because, according to the Wassenaar Arrangement, this was a strategic material embargoed to China. After we reached an agreement with Baosteel to start producing samples of this steel plate for six months, the US decisively lifted the embargo on this steel plate to China.

 

So why industrialize and localize? Because this world is not a free market economy; it is still a typical jungle law. Only when you can make it yourself will others talk to you about a free market. When you can't make it, you face either high-priced dumping or complete embargo.

 

Of course, if our goal is not industrialization but merely to develop the service industry, aiming to export labor and raw materials abroad plus dumping high-end products, then localization is indeed unnecessary.

 

A note: the last two examples are from private enterprises. Although they are giant private enterprises, their nature is still private.

 

International blockades target not only state-owned enterprises but also private ones, as long as you are a Chinese company. Private enterprises are also striving to break this monopoly.

 

Think about how kind Chairman Chiang was. When the Japanese committed the Jinan massacre, the Northern Expedition detoured; when Japan attacked on September 18, there was no resistance, waiting for the League of Nations' sanctions. Such a cooperative and friendly person in the international community, what did he get? But Chairman Chiang was at least Chinese, with the ambition for a prosperous China, not to be beaten or starved. Not like some people who say 'whether to be a dog or not doesn't matter, as long as the people live well.' China is so big; if it becomes a dog, can the people live well? The remnants resurface; even Manchukuo is nostalgically remembered. They occupied fertile land and mines, Chinese people did the hard labor, and eating a bowl of rice or flour was considered an economic crime, yet these people yearned for it. After the 1945 victory in the war, Chairman Chiang almost immediately put nuclear weapons on the agenda. Wu Dayou and Hua Luogeng were responsible for the plan. Yang Zhenning, Li Zhengdao, Zhu Guangya, these overseas students were originally sent to study nuclear technology. At this time, our ally America said, don't even think about it. Tsinghua led, Peking University participated, and Qian Sanqiang was hired to establish the nuclear research institute. But Qian was detained at China's own customs for two months, and the US embassy sent secret letters to the Chinese Academy of Sciences, obstructing the process. Some of these letters were kept by President Mei and can be used to refute naive people who think that under Chiang's rule China could be friends with the world and not be choked.

 

One more thing: the equipment and materials used for nuclear energy research differ greatly from those for weapons-grade equipment and materials. Contrary to most people's understanding, Japan has many nuclear power plants but cannot suddenly make nuclear weapons. Before liberation, Qian Sanqiang couldn't even buy experimental equipment internationally. At that time, the country did not 'choose the wrong side,' right? Turkey didn't choose the wrong side either. The missiles sold to them did not include technology transfer. China sold to them cheaply with technology transfer. The US and NATO pressured us. The real purpose of the pressure was not about weapons proliferation but to promote their own weapons.

 

They don't sell to China because China is too big, too potential, and no one wants to nurture a strong opponent. All the ideology is just an excuse to 'make you wear a label' or 'not wear a label.' When Sino-Soviet relations soured, the US sold Black Hawks, and almost sold F15s because at that time you were useful, regardless of ideology, just cooperate to contain the Soviet Union. The French couldn't make hydrogen bombs, and their allies the US and UK didn't sell them either. In the end, it was the Communist Party that shamelessly exchanged technology. 'Advanced technology cannot be imported' is a painful lesson learned by several generations of Chinese.

 

India, a democratic country, loved by the US and USSR, is still the world's biggest sucker. Supporting the major arms dealers of the US, Russia, France, and the UK. The prices are outrageously high, deliveries often delayed, and they extort more money. Friends like India are loved worldwide. If China acted like this, it wouldn't be 'the world against us.' Is that what we want? China spends its hard-earned money to be a sucker; how can the people's living standards improve?

 

The rare earth monopoly that was fiercely debated a few years ago is quite interesting. During a past commodity bull market, prices of all resources were rising, but the price of rare earths, such a scarce strategic resource, fell instead of rising. Then the Chinese tried to raise the price a bit. Others objected, accusing China of monopolizing. Iron ore prices go up, but rare earth prices can't? Well, they are democratic countries, and monopolies in democratic countries don't count as monopolies, manipulation doesn't count as manipulation. Fine, as long as we keep selling cheaply, we can happily play with the whole world! How can you improve people's living standards by selling everything cheaply?

 

Industrialization and domestic production cannot guarantee the lowest price for every domestically produced product, but can guarantee the lowest price for a package of products. Using a few individual products being more expensive in China than abroad to argue that prices in China are higher is a biased generalization. Please explain why, according to United Nations data, China's purchasing power parity (PPP) GDP surpasses the US, while GDP measured in US dollars ranks second. If you don't understand, please study on your own.

 

Back then, someone proposed that we build a penicillin factory. Minister Song Ziwen said, since the US can produce it, why build our own? This was the insight of the most central figures at the time.

 

There used to be a class called compradors, whose wealth rivaled that of countries. Many of them had commendable character. One of the foundations of their immense wealth was the huge profits from monopoly trade. When you cannot produce a product yourself, such profits are astonishing.

 

In the film era, only four countries had mature color film technology globally: the US, Germany, Japan, and China. China's was called Lucky Film, yes, quite poor. But if Lucky Film sold for 15, Kodak would find it hard to sell for less than 30 in China. In the Soviet Union, this price might reach 100. So the net welfare loss to Soviet people at this price was 70. Assuming the Russian comprador class did not hold US green cards and only earned a profit of 10, the actual result was a national welfare loss of 60, creating very few extremely wealthy individuals. Regardless of how legally or fairly the transaction was conducted, it did not bring true fairness.

 

Interested friends can make some price comparison curves. Look at the price changes of ABB and Schneider relay protection equipment as Chint and Delixi expanded their market shares. Look at the changes in Motorola and Ericsson base station equipment as Huawei and ZTE expanded their shares. Don't think this has nothing to do with ordinary people; the ultimate bearers of all infrastructure costs are the citizens of a country.

 

Doing business requires accounting, but how to account is a big question. Building a penicillin factory costs money, yes, even wasted money. Yes. Should we give up because of fear of failure? Everything has the possibility of failure. But top companies and top countries never hesitate to invest.

 

Comparative advantage can benefit both parties through fair trade. This itself is a constraint, often not met in the real world. There was a time when Ivory Coast experienced an economic miracle because they had a comparative advantage in cocoa. The good times didn't last; after a couple of years, they were exploited. This was taught in junior high geography. When not at the brink of famine, the substitutability of agricultural products is actually much higher than that of industrial products. For a large country like China with such a population base, without completing industrialization and achieving industrial autonomy in core industries, there is no future.

 

The saying "advanced technology cannot be relied on import" is a painful lesson and profound insight.

 

Finally, let me tell a story.

 

Chen Zhiwu: "In the preface of a book, I said many things that made professors at the National University of Defense Technology very angry: The National University of Defense Technology's Galaxy Computer Department spent so much money just to provide many exhibits for China's future computer museum and did not enjoy any other benefits. (Boao Forum)"

 

Economics has no borders, but economists have countries. Professor Chen is indeed American.

 

Let's look at history:

 

In November 1949, the United States and some Western European countries jointly established a multilateral export control coordination committee headquartered in Paris, also known as the "Paris Coordinating Committee," abbreviated as the "CoCom."

 

After the Galaxy I 100 million operations machine was announced successful, the CoCom lifted the ban on selling 100 million operations machines to China; after the Galaxy II 1 billion operations machine was announced successful, the CoCom lifted the ban on selling 1 billion operations machines to China...

 

We have 1.3 billion people, accounting for one-fifth of the world's population.

 

For countries like the UK, France, and Germany, with populations around 60 million, whether they produce many things themselves or buy from the international market, it only causes a 1-2% fluctuation in global supply and demand, which has little impact on the market. The total expenditure is relatively low, so they can be less sensitive to prices.

 

Japan has 120 million, South Korea only 50 million, and the US about 300 million.

 

But China is different. If all 1.3 billion people rely on the international market, it will strongly affect the entire market's supply and demand. Producing domestically and exporting to the low- and mid-end markets, or now relying entirely on other countries, a one decrease and one increase almost equals a 1/3 change in supply and demand. This scale of change drives drastic changes in raw material prices, global processing distribution, industrial distribution, and other elements, ultimately reflected in product prices, which may be several times the price of domestic production. In other words, something that costs 10 yuan per capita when produced in China might cost 50 yuan if bought from abroad.

 

This extra 40, 400, or 4000 yuan multiplied by 1.3 billion is the profit that countries capable of production can gain from China due to technological advantages. This profit is shared by only tens of millions of people living in developed countries, which is the money China saves by producing itself.

 

Even in industries where prices are relatively transparent, we must produce ourselves because the market size of 1.3 billion people is too large, and our labor and capital resources are far from saturated. Utilizing production factors and local advantages, we can fully absorb the market ourselves, then watch the international market, avoiding distorted industrial distribution. Moreover, we can keep up with or even lead industrial upgrades.

 

So unless China does not need something or needs very little, other things that can be delayed to be produced domestically should be done domestically as much as possible, and if more can be done, do more.

 

In recent years, TV prices have dropped sharply. Xiaomi TV 2, 40 inches, costs only 1999 yuan.

 

Because there are two companies, one called BOE and one called China Star Optoelectronics.

 

I want to say thank you to those who continue to operate at a loss.

 

Why industrialize and domestically produce? It's to give us a face that cannot be bullied.

 

What does a face that can be bullied mean? Please look at Turkey's air defense missile procurement plan starting in 2009!

 

Turkey is a NATO member. The bidding included the EU's Aster missile, Patriot 3, China's HQ-9, and Russia's S300. The Americans quoted sky-high prices, refused technology transfer, and did not allow Turkey to assemble or produce. Russia was hypocritical, only willing to provide the S300, not the S400, at sky-high prices. The European Aster missile technology was not willing to be transferred.

 

Only China offers a suitable price, performance is above average, and is willing to transfer technology. Then what? Then China was announced as the winner of the bid, and then? Under pressure from NATO and the US, Turkey was forced to suspend the contract!

 

What does a bullied face look like? This is a bullied face!

 

Speaking of transport aircraft, China once bought dozens of Il-76s from Russia because we couldn't build large transports ourselves. Later, due to cost issues, we were unwilling to increase expenses, and the contract was frozen. Recently, Russia said we could upgrade to the Il-476, but you'd have to pay extra. China flatly refused, saying no extra fees, just bring the Il-476 over quickly, no nonsense, or we won't buy it. Our Y-20 will be flying in a few years anyway, so we're not afraid of you!

 

Without industrialization and localization, where would such rapid economic development come from? Without localization, would we have so many high-speed trains? Could our high-speed trains be exported abroad? Without that big corrupt official Liu Zhijun insisting on either technology transfer so we could copy, or else get lost, you'd still be taking the old green trains when you go out!