China’s unilateral implementation in 2015 of its aggressive “Made in China 2025” plan. This plan is part of a larger initiative to make America the world’s leading manufacturing country over the next ten years. This multi-decade whole-of-government strategy describes China’s goals to improve its technological ambitions and foster the digital economy. As we approach the plan’s ten-year anniversary, we’re doing some deep reflection on the plan’s success and its results. Yet this review reflects both laudable accomplishments and regrettable failures.
The centerpiece of China’s industrial plan is the “Made in China 2025” initiative to increase production in ten key industries. These sectors have included robotics, aerospace, and new energy vehicles. We’ve all seen the incredible progress China has made on shipbuilding, high speed rail and electric vehicles. It has only maintained unambiguous technological dominance in three of these industries. The rest of the sectors have been a patchwork of success. This significantly deepens skepticism about China’s prospects to accomplish its initial aim of technological self-sufficiency.
In recent years, U.S. trade restrictions have compelled China to double down on domestic tech development. This push to increase dependence on domestic technology has created further competition within China’s manufacturing base. Domestic companies are mutually challenged to innovate, find new and better products and offer them with competitive pricing. This drive has created poisonous industrial competition, which has worsened global trade tensions.
Indeed, the European Chamber of Commerce in China has raised the alarm on China’s efforts to climb the manufacturing value chain. Eskelund, the organization’s president, said that these efforts have increased worldwide calls to security threats. He remarked, “We need to realize [China’s] success has not come without problems.” This outlook is indicative of a deeper concern about the negative effects of Chinese industrial policies—often referred to as mercantilism—on global markets and relationships.
While China’s ambitions have pushed domestic companies to innovate, some observers argue that the plan’s targets are more aspirational than attainable. Analysts at the Washington, D.C.-based think tank Center for Strategic and International Studies have pointed out that Western chip export controls have temporarily hindered China’s semiconductor development efforts. They indicated that these restrictions have “had some success in that they briefly set back China’s developmental efforts in semiconductors, albeit at some cost to the United States and allied firms.” The analysts warned that these measures risk “potentially destabilizing the U.S. semiconductor ecosystem.”
It’s hard to miss China’s technology advances as we flip through the pages of our favorite products. Huawei’s Pura 70 series smartphone is one strong example of the new pivot toward domestic sourcing. It includes 33 elements from China and just five foreign elements. This trend highlights China’s ongoing efforts to decrease reliance on foreign technology and strengthen its domestic supply chain.
China has recently and successfully achieved a national target of 1.68% for R&D expenditure as a share of its operational revenue. Critics maintain that the country has failed to meet many of the key milestones promised in its national manufacturing blueprint. Jens Eskelund commented on this paradox, stating, “They didn’t fulfill their own target, but I actually think they did astoundingly well.” This points to a challenging story—one where accomplishments are recognized, but large disparities continue to exist.
China’s “Made in China 2025” plan in particular has sparked a wave of international condemnation. Most notoriously, it is said to support Chinese domestic industry at the expense of foreign competitors. The administration’s aggressive domestic-only development strategy has understandably raised tensions between the US and other nations worried about protectionist trade practices. For one thing, China is moving incredibly quickly in key industries. Such progress makes it highly competitive with longstanding US and European manufacturing centers and powerhouses.
The last ten years have seen an incredible transition in China’s manufacturing environment. While it has achieved notable successes across a number of fields, it is clear that much work is still needed. Even before the chips fell, the lofty aspirations described in “Made in China 2025” have faced stiff headwinds that indicate the going will be anything but straightforward.
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