Integration of services, production key to future

China's 2026 Government Work Report introduces a directive that may sound technical but signals a deeper structural development: The country will "press ahead with trials to promote the integrated development of advanced manufacturing and modern services".

In a world shaped by reconfigured supply chains and rapid technological change, this is not just an industrial policy. It reflects the recognition of the broader transformation in how economies generate and capture value.

The line between producing goods and delivering services no longer holds. China is combining both into a coordinated, data-driven system. This shift moves the country beyond scale-based competition toward ecosystem-based competitiveness, whereby production, services and digital intelligence operate together.

For decades, structural change has been framed by some as a trade-off, in which services would expand as manufacturing declined. China's recent trajectory challenges that assumption. In 2025, China's GDP surpassed 140 trillion yuan ($20.6 trillion) for the first time, with growth at 5 percent, and its core digital economy industries contributed more than 10.5 percent of GDP.

Those trends point to convergence rather than substitution.

This approach is quite different from those seen in some advanced economies, where service expansion has often coincided with industrial weakening or stagnant productivity. China is avoiding that outcome by directly embedding services in industrial processes. It now stands among the few major economies maintaining industrial depth while upgrading through service integration.

Manufacturing is no longer a stand-alone activity. It anchors a broader system in which software, logistics, data analytics and after-sales services drive value creation. Services no longer support production from the margins. They tend to shape productivity, differentiation and long-term competitiveness.

The new-energy vehicle sector illustrates this shift with clarity. China produced and sold more than 16 million units in 2025, while its national electric vehicle charging network surpassed 20 million units by the end of 2025, according to the National Energy Administration. The country currently has the world's largest and most rapidly expanding EV charging infrastructure. But scale alone no longer defines leadership. Competitiveness now depends on how effectively enterprises integrate hardware with digital services.

Ultra-fast charging networks, real-time battery monitoring, artificial intelligence-based predictive maintenance and continuous software upgrades turn vehicles into connected platforms. Value moves away from the factory floor and concentrates across the product life cycle.

This transformation is not confined to mobility. It is spreading to sectors such as industrial equipment, consumer electronics and smart infrastructure. As the "AI Plus" initiative advances, companies increasingly treat physical products as service nodes within broader digital ecosystems.

The integration of manufacturing and services is also reshaping industrial entities.

China is moving away from highly vertical structures toward distributed innovation networks. Small and medium-sized enterprises now play specialized roles across the value chain. They deploy computer vision in quality control, design certified testing systems, optimize logistics algorithms, and secure industrial networks.

Competitiveness now depends less on scale concentration and more on coordination across specialized actors. This marks a shift from scale-driven industrialization to coordination-driven competitiveness.

In addition, data has become a core production factor. Digital governance has become a central arena of global governance. China is actively engaging in international digital frameworks, including efforts to join the Digital Economy Partnership Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

Other Global South countries and emerging markets can draw a clear lesson from this model. Sustainable competitiveness will not come from choosing between industry and services. It will come from integrating both within a coherent institutional framework. Future competitiveness will depend less on where goods are produced and more on how effectively economies connect manufacturing, services and data in unified systems.

In the emerging global landscape, the ability to connect systems will matter more than the ability to scale them.

The author is the director of China-Brazil Center for Research and Business.

The views do not necessarily reflect those of China Daily.