Forging and foundry industries + AI + Aligning university majors with strategic goals

In this issue of the MERICS China Industries Brief, we cover the following topics:

Going hammer and tongs: China to transform forging and foundry industries
Cyber watchdog suggests far reaching regulation for generative AI
Universities to revise one fifth of majors to match strategic goals
Beijing ramps up rollout of controversial IPv6+ system
China’s innovative approach to incubate high-tech SMEs through strategic partnerships with large firms

1. Going hammer and tongs: China to transform forging and foundry industries

At a glance: Three ministries led by the Ministry of Industry and Information Technology (MIIT) issued support for China’s foundry and forging industries. Policymakers regard the industries as “indispensable technological links” for equipment manufacturing and therefore as critical for the continued progress of China’s industrial development. Targets for 2025 include:

Achieve breakthroughs in key areas of high-end casting and forging (e.g., 3D sand printing, ultra-high-strength steel thermoforming or integrated die-casting)
Reduce particulate matter pollution in the foundry industry by more than 30 percent and reduce the energy consumption per ton of forged materials by 5 percent compared to 2020
Encourage companies to integrate new digital technologies into manufacturing processes and improve product quality
Attract foreign enterprises to set up R&D facilities in China and cooperate with Chinese firms

MERICS comment: China has been the world’s largest foundry and forging market for over two decades, but the sectors are fragmented, and high-end products are predominantly imported. The new policy seeks to guide companies up the value chain, upgrade downstream sectors like aviation, automotive and machinery and equipment, and improve industrial resilience.

European companies are global leaders in the high-value segments of the foundry and forging industries. On the one hand, foreign technology providers remain highly sought after partners for Chinese firms. The government will provide financial and policy incentives for European companies to localize production and R&D facilities in China. On the other hand, Beijing wants to reduce its reliance on foreign technology. Downstream firms, especially state-owned enterprises, will be encouraged to source locally. In addition, localization and R&D cooperation carry the risk of technology transfer. Firms in forging and foundry that have so far exported to China might need to assess whether their business model is sustainable.

As a recent MERICS and EUCCC survey shows, many foreign firms have to balance the risks and rewards of investment in an increasingly politicized business environment in China.

Article: Guiding Opinions on Promoting the High-Quality Development of the Foundry and Forging Industries (关于推动铸造和锻压行业高质量发展的指导意见) (Link)
Issuing bodies: MIIT, NDRC, MEE
Date: April 14, 2023

2. Cyber watchdog suggests far reaching regulation for generative AI

At a glance: The Cyberspace Administration of China (CAC) released a proposal for the regulation and standardization for systems similar to ChatGPT, collectively known as generative AI. The main goal is to establish state control over the development of AI products, as most of the 23 articles specify how the state regulator can hold AI providers accountable. According to the draft regulations, providers of AI generated content are required to:

Seek approval by the CAC through a security assessment process
Ensure that content generated by generative AI reflects the “core values of socialism with Chinese characteristics”, delete inappropriate content and update the algorithm within three months
Take legal responsibility for content produced on their platforms and clearly label generated content such as videos
Make sure that the training data of their algorithms does not violate intellectual property rights (IPR)