Abstract: Addressing the major problems facing the development of China's CNC industry, including small scale, low industrial concentration, insufficient capital investment, weak technological transformation, weak technological innovation capabilities, backward production of CNC machine tool components, and a shortage of CNC professionals, this paper proposes specific policies that the state should adopt to support the development of the CNC industry. Keywords: CNC industry; CNC machine tool; CNC system; policy 1. Major Problems Facing the Development of China's CNC Industry Modern basic machinery, represented by CNC machine tools, is an important means for the manufacturing industry to achieve modernization. The level and quantity of CNC machine tools are important indicators of a country's industrial modernization. Therefore, the State Council, in its "Opinions on Measures to Revitalize Specific Basic Machinery and Basic Components," clearly pointed out that developing CNC machine tools is the key to revitalizing China's basic machinery, and developing CNC systems is the key to developing CNC machine tools. Since the 1990s, domestic demand for CNC machine tools and CNC systems has increased year by year. However, facing strong international competitors, domestically produced CNC machine tools and CNC systems are difficult to compete with products from developed countries in terms of performance, quality, and price. The market share of domestically produced CNC machine tools and systems has remained sluggish due to the strong impact of imported CNC machine tools and systems, with imports dominating the majority of the market. Therefore, improving the international competitiveness of my country's CNC industry, accelerating industrialization, and increasing market share are crucial issues facing the development of my country's machinery industry. Currently, the market share of domestically produced CNC machine tools is gradually increasing, and my country's CNC industry is emerging from its trough, showing a positive development trend. However, we must be aware that the development of my country's CNC industry still faces challenges such as small scale, low industrial concentration, slow progress in commercialization, marketization, and industrialization, insufficient investment, limited investment channels, weak technological innovation capabilities, inadequate technological transformation, outdated machinery and equipment, backward production of CNC machine tool components, and a lack of CNC professionals. To improve the competitiveness of my country's CNC industry, strengthen and refine the industry, fundamentally change the long-term sluggish development of China's CNC industry, and revitalize my country's CNC industry, more arduous efforts are needed from government departments and industry sectors. The state should provide necessary support and guidance in terms of policy, especially in terms of policy coordination. Only by forming a mutually supportive policy coordination system and creating synergy can we achieve twice the result with half the effort. 2 State policies to support the development of CNC industry 2.1 Continue to support the development and industrialization of CNC technology 2.1.1 State organizes scientific and technological research From the Sixth Five-Year Plan to the Ninth Five-Year Plan, the state has been organizing CNC technology research. However, due to the failure to properly handle the relationship between CNC technology development and CNC industrialization, coupled with the complexity, difficulty, large investment, and long development cycle of CNC technology, as well as the poor management of the industrialization process of research results and the incompatibility of the management mechanism of the research task undertaking unit with the market economy, although we have entered the world's advanced ranks in some technologies or solved the relevant problems, the progress of commercialization, marketization and industrialization is slow, and the market is still occupied by imported products. Therefore, based on the past research experience and existing problems, the following points should be noted in future CNC research. (1) The selection of research projects should not simply pursue the advanced nature of technology, but should aim at marketization and industrialization. The selection of CNC key projects must fully consider China's national conditions (such as technical conditions, financial conditions, industrial foundation, etc.), take advanced and applicable as the principle, and take market demand as the starting point. It should not blindly pursue "high, sophisticated" and "large and comprehensive", but should select projects with large market demand and broad market prospects for key breakthroughs. (2) The selection of key project undertaking units should take into full account market factors. The selection of national CNC technology key project undertaking units should not only consider their technical strength, but also whether their management system is flexible, whether they have formed an efficient and sensitive operating mechanism and an effective competitive incentive mechanism that adapts to the requirements of the market economy. Expand the selection scope from state-owned enterprises to private high-tech enterprises and joint venture high-tech enterprises. Give private enterprises and joint ventures an equal opportunity to compete with state-owned enterprises, encourage strong private and joint venture enterprises to apply for national science and technology projects, ensure their equal participation in competition from the planning management system, and give equal support to private and joint venture enterprises that obtain projects. In addition, the supervision of the key project process should not only check the progress of the key project undertaking unit's technology development, but also check its adaptability in management system and operating mechanism, as well as the implementation of relevant technology industrialization measures. 2.1.2 Establishing a National CNC Technology Industrialization Risk Fund The CNC industry is a high-tech industry requiring high investment, with a long payback period and many uncertainties. Like other high-tech industries, it faces a significant problem of insufficient investment, a major reason being the underdeveloped venture capital sector in my country. According to relevant data, among the scientific and technological achievements already commercialized in my country, 56% of the funding came from self-raised funds, 26.8% from national science and technology program loans, and only 2.3% from venture capital. In contrast, in developed countries, venture capital plays a crucial role in the commercialization and industrialization of high technology. Due to the lack of venture capital, some CNC manufacturing enterprises in my country, even with good technology, lack the funds to commercialize, market, and industrialize it, thus hindering the development of the CNC industry. Therefore, establishing a national CNC technology industrialization risk fund is extremely urgent for the current development of my country's CNC industry. The national CNC technology industrialization risk fund will primarily be funded by national fiscal investment, supplemented by social fundraising, and will be mainly used for the industrialization of CNC technology. The technology sources for industrialization can be technologies developed through national CNC technology research projects, technologies developed by enterprises themselves, or technologies imported from abroad and digested. The criteria for support are that the CNC technology itself has strong industrial relevance and broad commercial prospects. 2.1.3 Supporting CNC Enterprises to Go Public and Raise Funds Currently, only a handful of CNC enterprises in my country have issued shares and gone public, such as Shenyang Machine Tool, Kunming Machine Tool, Nantong Machine Tool, Qinchuan Machine Tool, and Top Software (including CNC systems and CNC machine tools). Compared with other industries, the number of listed companies in the CNC industry is clearly too small. Therefore, the government and industry regulatory authorities should implement certain preferential policies to expand the number of listed CNC enterprises and the issuance quota, selecting and prioritizing support for CNC enterprises with independent intellectual property rights, competitive products, strong strength, and great development potential to issue shares and raise funds through listing; especially actively supporting enterprises to enter the Hong Kong Stock Exchange's Growth Enterprise Market (GEM) and the soon-to-be-established second boards of the Shanghai and Shenzhen Stock Exchanges. In addition, the government can also support qualified enterprises to raise funds through the issuance of corporate bonds or convertible bonds. 2.1.4 Formulate Policies to Encourage Enterprises to Increase R&D Investment The state should formulate various policies to encourage enterprises to increase R&D investment and accelerate new product development, including implementing VAT refund policies, returning a portion of the VAT paid by enterprises to them as special support funds for product research and development; allowing enterprises to extract a certain percentage (3% to 5%) of their sales revenue before tax for R&D and technological innovation activities, and calculating costs based on actual expenses; allowing enterprises to implement rapid depreciation of production equipment; providing tax reductions and exemptions for high-performance CNC systems and CNC machine tools; and encouraging financial institutions to actively support enterprise technological development through interest subsidies and guarantees, increasing the scale of science and technology loans, and promoting the commercialization and industrialization of scientific and technological achievements. 2.1.5 Encourage Industry-University-Research Collaboration Support CNC enterprises should be encouraged to establish long-term and stable cooperative relationships with universities and research institutes. Through technology transfer, commissioned development, joint development, and joint construction of technology development institutions, various forms of industry-university-research collaboration should be carried out to gradually form a collaborative mechanism with enterprises as the main body, universities and research institutes widely participating, and sharing benefits and risks. The government actively promotes industry-academia-research collaboration through policies, funding, and information. 2.2 Guiding and Supporting the Restructuring of the CNC Industry: my country's CNC machine tool and CNC system production is not only low in output but also highly fragmented. There are over 100 CNC machine tool manufacturers in my country, of which only 42 can mass-produce, with an average annual output of only 40-50 units. There are also hundreds of companies engaged in CNC system production, most of which produce economical CNC systems. Currently, the annual output of domestically produced CNC systems nationwide, including economical CNC systems, is only about 5,000 sets. Even if produced by a single company, this output would not achieve economies of scale. Solving the fragmentation problem cannot be achieved by administrative means to prevent small enterprises from entering the CNC industry. Instead, priority should be given to supporting a few high-quality, well-structured enterprises to rapidly develop and grow, relying on these larger enterprises to capture the market and increase the concentration of the CNC industry. Simultaneously, economic means should be used to encourage mergers and acquisitions among enterprises. 2.3 Focusing on the Development of General-Purpose CNC Machine Tools to Drive Technological Upgrading of the CNC Industry my country's CNC machine tools are classified into economic (low-end), general-purpose (mid-range), and high-end types according to different application fields and complexity. General-purpose CNC machine tools are the mainstay of my country's market demand and are currently the focus of my country's CNC industrialization. Their development can drive the technological upgrading of economical CNC machine tools and reduce the cost of high-end CNC machine tools. Although the domestic general-purpose CNC machine tool market is largely dominated by imported products, based on my country's current level, it is fully capable of competing with them, regaining some market share, and even dominating the domestic market. Recently, driven by the national policies of expanding domestic demand and developing the military industry, the domestic CNC machine tool market is further expanding, with a significant increase in demand for general-purpose CNC machine tools. my country's CNC industry is facing a new development opportunity. "During the 15th Five-Year Plan period, popular CNC machine tools will remain the focus of my country's CNC industry development. The most pressing issue in developing popular CNC machine tools is achieving industrial scale, expanding the market, increasing market share, and thus promoting the technological upgrading and development of the entire CNC industry. 2.4 Developing Specialized Production and Process Specialization of CNC Machine Tool Components Because the development of my country's machine tool accessory industry lags behind that of the machine tool mainframe industry, its specialization level is low, and the quality of components is poor. This has resulted in the inability to source important CNC machine tool components domestically, forcing a large reliance on imports. The high price of imported components keeps CNC machine tool costs high, losing its price advantage and significantly hindering the development of my country's CNC machine tool industry. Improving the specialized production level of CNC machine tool components in my country, and reducing CNC machine tool costs and improving quality through specialized cooperation, is the only way to revitalize the national CNC machine tool industry. This consensus has been reached among relevant government departments and the industry. Reversing the backward situation in the production of CNC machine tool components requires the joint efforts of the CNC industry and relevant government departments, adopting appropriate policies based on the specific conditions of various components." (1) For components whose technical and economic indicators are close to the international advanced level (such as ball screws), the state encourages their manufacturers to further improve quality and performance, and provides key support in scientific and technological research and development and technological transformation projects. The competent authorities recommend their products to machine tool manufacturers and publicize them in relevant media. (2) For components with low technical level and production capacity (such as tool magazines, spindles, sheet metal parts, etc.), the state guides and supports some machine tool manufacturers with technical and equipment conditions to switch to producing these products. The overall production capacity of the machine tool industry is excessive. The conversion of some machine tool manufacturers to produce components not only strengthens the specialization of component production, but also alleviates the contradiction of insufficient main machine tool production. The conversion process should be combined with institutional reform. The state can also provide preferential (interest-free or low-interest) technological transformation loans to enterprises that switch to production, so that they can quickly adjust their product structure. (3) For components that are not yet domestically produced (such as shafts, certain hydraulic standard parts, etc.), the state encourages foreign investors to participate in the production of these components in the form of wholly-owned or joint ventures, and provides appropriate preferential conditions. (4) Encourage CNC machine tool manufacturers to establish stable long-term cooperative relationships with domestic component manufacturers, and encourage the priority use of domestic components under the same conditions; encourage cross-shareholding between machine tool manufacturers and component manufacturers. (5) Encourage machine tool manufacturers to disseminate certain manufacturing processes (such as casting and forging) or separate them in some form to form independent process-specialized enterprises. Through key national support, the alliances, mergers, and shareholding cooperation among enterprises, combined with self-development and foreign joint ventures, will enable my country's machine tool accessory industry to form a number of advantageous small giant enterprises, develop and produce high-level, high-quality, specialized, and serialized key components required for various CNC machine tools, and strengthen the division of labor and cooperation among enterprises through the market, facing the whole country, forming scale, reducing costs, and thus creating a good external environment and conditions for the development of my country's CNC machine tool industry. 2.5 Encouraging the adoption of domestically produced CNC systems and machine tools: In recent years, some Chinese CNC system manufacturers have seized historical opportunities and developed a number of high-performance CNC systems based on PC platforms with independent intellectual property rights and open architectures (such as the SKY series of mid-to-high-end CNC systems developed by Nanjing Sikai Company). The technical level and reliability of these products are comparable to foreign products, especially in software development, where some domestic CNC systems are superior to foreign systems, changing the passive situation where domestic CNC system technology always relied on foreign countries. However, due to the negative impact of the original image of domestic CNC systems and the long-standing positive image of foreign brand-name products in the minds of users, domestic CNC machine tool manufacturers and users still mainly consider imported CNC systems (such as Mitsubishi Vanaco and Siemens) when choosing CNC systems. This situation is not only detrimental to the development of domestic CNC system manufacturers, but also results in high costs and difficulty in lowering prices for domestic CNC machine tool manufacturers, thus putting them at a disadvantage in competition with imported CNC machine tools. In order to change this situation, the state should adopt the policy of "selecting the best and the strongest" to support several CNC system manufacturers in terms of funds, technology and policies, create several famous Chinese brands in the field of CNC systems, and formulate corresponding incentive policies to implement procurement guidance: (1) The government should publish a catalog of domestic CNC products, promote excellent CNC systems and CNC machine tools, and support them to increase their market share. (2) Provide preferential buyer credit. The condition is that the purchase of CNC systems or CNC machine tools reaches a certain batch (such as 5 sets or 5 units). The preferential content is a lower interest rate and a longer repayment period. (3) For some major national projects, it should be stipulated that domestic CNC systems and CNC machine tools should be given priority when the performance-price ratio is basically the same. (4) Enterprises that give priority to domestic CNC systems and machine tools under the same conditions should be commended and rewarded. 2.6 Supporting Key CNC Machine Tool Manufacturers in Large-Scale Technological Upgrading The competent authorities for the CNC machine tool industry should focus on supporting a number of key enterprises to carry out technological upgrading. The focus of the upgrading is to replace ordinary machine tools with CNC machine tools in key processes and key production lines. The aim should be to avoid excessive reliance on foreign technology and to achieve a one-step solution, prioritizing economic efficiency and practicality, and using domestically produced CNC machine tools as much as possible. Equipping Chinese CNC machine tool manufacturers with domestically produced CNC machine tools can achieve two goals: firstly, it can improve the technological equipment level of my country's CNC machine tool industry; secondly, it can expand the demand for CNC machine tools and alleviate the contradiction of insufficient production capacity among CNC machine tool manufacturers. 2.7 Adjusting Protection Policies for the CNC Industry After Joining the WTO Joining the WTO brings opportunities for Chinese CNC enterprises to attract foreign investment, introduce advanced technologies and equipment, and develop joint ventures and cooperation. However, after joining the WTO, the non-tariff protection measures previously enjoyed will be abolished, and my country's CNC industry will face a strong impact from foreign competitors and their products, especially for my country's mid-to-high-end CNC machine tools, which will face severe challenges. The state should make some adjustments to the protection of the CNC industry: (1) Change from the traditional approach of import control measures to a new approach that conforms to the W11 agreement, such as setting special technical standards, subsidizing scientific research, and government priority procurement, to support the development of the CNC industry. (2) Cancel the policy of reducing or exempting tariffs on CNC machine tools for technological transformation projects. (3) Adjust the tariff rates on CNC machine tools and CNC machine tool parts. Without increasing the average tariff rate, increase the tariff rate on popular CNC machine tools, reduce the tariff rate on high-end and low-end machine tools, and reduce the tariff rate on parts, especially parts in which my country has a relative advantage. 2.8 Establish and improve the national education and training system for CNC professionals and talents at all levels. The competent departments of the CNC industry can work with the Ministry of Education and the Ministry of Labor and Personnel to make predictions on the demand for CNC professionals and talents at all levels, provide a basis for the enrollment plans of colleges and universities, secondary vocational schools, vocational schools or technical schools, and provide guidance on the curriculum and teaching content of CNC majors in schools at all levels. Meanwhile, given the relatively weak state of CNC technology education in schools at all levels in my country, CNC manufacturing enterprises are encouraged to actively participate in CNC professional education in schools at all levels, especially higher education institutions. This can take the following forms: recommending domestically produced CNC machine tools as teaching demonstration equipment; cultivating potential users of domestically produced CNC machine tools and systems; sending engineering and technical personnel to lecture CNC students at all levels; providing internship opportunities and facilities for CNC students at all levels; and providing thesis topics for master's and doctoral students. 2.9 Supporting the Development of Non-State-Owned CNC Enterprises National policy support should not be limited to state-owned CNC enterprises, but should support the development of CNC enterprises of all ownership types according to the principle of favoring competitive winners. In recent years, the non-state-owned economy has developed rapidly, and some non-state-owned enterprises in the CNC industry have emerged (such as Nanjing Sikai Company). Some state-owned enterprises have been or will be transformed into non-state-owned enterprises after restructuring. The state should give these non-state-owned enterprises equal treatment with state-owned enterprises and support the best among them to become a vital force in competing with foreign CNC enterprises. National support for non-state-owned CNC enterprises is beneficial to the development of the entire national CNC industry. References: [1] Shi Qingqi. Problems and countermeasures in the development of China's high-tech industry. China Industrial Economy, 1999, (5): 35-39 [2] Yang Xuetong, Li Dongru. The current situation and development measures of China's CNC industry. China Mechanical Engineering, 1999, 10 (10): 1081-108B [3] Zhou Yanyou. The development of CNC systems and the CNC transformation of machine tools. Machine Tool Manufacturing, 1999, 37 (7): 6-8 Click here to download the original text