The central aspect of supply-side reform requires domestic manufacturers to remove the walls standing in their way of their connections to world resources, said Zhou Yunjie, a deputy to the National People's Congress (NPC) and rotating president of Haier Group, in a recent exclusive interview with China.org.cn during the ongoing two sessions.

Zhou Yunjie, a deputy to the National People's Congress (NPC) and rotating president of Haier Group.[Photo/China.org.cn]

A supplier of one of China's well-known electric home appliances, Haier has been troubled as much as its rivals by the prevailing overcapacity and fierce market competition.

"Fundamentally speaking, manufacturers should hold a clear view of their merchandise, whether it is directed to markets or inventories," Zhou said.

Integrating sources, such as designs, research, development and assembly lines on one platform, the company is responding to personalized demand of its users, who are allowed to look over the manufacturing processes with the help of online services.

"It is impossible to reduce inventory by studying customers' demands after the products are off the assembly lines," Zhou said, "research on the products should be conducted before they are heading to the market and should not start until the customers give their orders."

Without a change of business models and processes from the enterprises which, on the contrary, chase size, projects and overlapped investments blindly, the inventories can hardly be emptied and overcapacity lingers, Zhou added.

The businessman reckons that it's a painful process to deepen supply-side reform as the manufacturer has to guarantee that every product on the assembly line can be endorsed with an order from customers.

Haier has pulled down the walls for a company to extend its connections to the world, Zhou said.

According to him, the critical factor for supply-side reform is innovation carried on with the adoption of new technologies and materials to resolve the inconveniences of the products ordered by their users.

To encourage the involvement of customers into the design of products, the electric home appliances supplier has launched online interactions to understand and respond to the demands raised by their clients.

Quoting Zhang Ruimin, the board chairman and CEO of Haier Group, Zhou said the transformation is as critical and painful as those who choose to jump from a cliff. "To save their lives, they had to take a plane right off the assembly line before landing," he said.

To work toward openness, Haier has established a platform for the participation of micro enterprises to sell their services in manufacturing, logistics and sales sectors.

So far, the incubator has spawned 100 micro enterprises, each with an annual revenue over 100 million yuan (US$15.37 million), there are also 22 micro partners having attracted venture capital and 12 start-ups with their values estimated to surpass 100 million yuan each.

According to Zhou, Haier has finished its transformation in the first phase to create open platforms and therefore embarked on the second phase to upgrade micro enterprises to turn them into mature Internet companies with differentiated business models.

"There are no successful enterprises but the enterprises that respond to the needs of the time," Zhou said.

Chinese Premier Li Keqiang proposed supply-side reform which has been highlighted throughout the government work report delivered a few days ago during the opening ceremony of National People's Congress, the country's top legislature convention.