An Introduction to 'Made in China 2025'

China is already a world leader in manufacturing, but they want to take the lead in high-tech manufacturing. To achieve this, they are mobilizing state-owned businesses, gathering intellectual property, and cultivating new technologies to catch up and then surpass the West.

Washington, D.C. argues that this process includes forcing foreign companies in China to hand over technology, discrimination against foreign investment in China, and outright intellectual property theft. The U.S. government has responded by increasing its oversight of foreign investment in China, though there is remains debate on how to respond to China’s actions.

What exactly is Made in China 2025?

The short answer is that Made in China 2025 is a plan to turn China into a high-tech powerhouse. They want to be a world leader in robotics, information technology, new sources of energy and aviation. It is based roughly on Industry 4.0, Germany’s latest industrial revolution generating massive gains in productivity, precision, and efficiency through the use of wireless sensors, robotics, and the Internet. The goal of Made In China 2025 is to make China self-sufficient in high-tech manufacturing while allowing them to dominate the global manufacturing for these same products.

This evolution makes sense. They started industrializing with labor-intensive industries. They’ve worked to move up the value-added chain to compete as labor-intensive work moves to other parts of the world. They want to move away from the low-cost, low-quality reputation currently associated with “Made in China.” They are trying to move up into high-value manufacturing to avoid the “middle-income” trap.

Critics of Made in China 2025 are concerned that China is not just going to join the ranks of high-tech economies, but seeks to replace them. It raises concerns for countries that currently export high-tech products.

The Plan to Achieve Made in China 2025

China has identified five key principles to achieving Made in China 2025. Those are 'innovation-driven', 'quality first', 'eco-friendly', 'structure optimization', and 'talent development'.

Made in China 2025 outlines five major tasks they see as necessary to achieve this vision. The first is setting up a national innovation center. The second is strengthening their industrial base. The third is enhancing intelligent manufacturing. The fourth is cultivating green manufacturing. The fifth is using high-end equipment.

Made in China 2025 lists ten industries in particular for development and growth. For example, they have the goal of supplying more than two thirds of their domestic need for robotics while seeking to get at least one Chinese firm among the top five robotics manufacturers in the world. They want to produce aerospace and aviation equipment to supply up to 20 percent of the global market while improving their ability to create large aircraft engines. Railway transport isn’t an issue, because China is already at the high end of the value chain. They want to dramatically expand their ability to make maritime equipment and high-tech ships. China says they already have half a dozen world-class maritime manufacturers. Their goal here is to supply at least 40 percent of the international market.

China wants to become a high-tech leader in energy equipment. The Made in China 2025 plan includes becoming able to produce industrial scale thermal power, hydropower and nuclear power. They want to expand their national power transmission network until it is worth at least three trillion yuan in value.

They want to export at least 20 percent of all commercial vehicles sold in the world-market. And they want to have three of the top five companies in the world in terms of vehicle sales. China wants to become number one in agricultural equipment manufacturing. They want to produce at least 95 percent of their domestic demand for agricultural equipment and sell at least 800 billion yuan worth of such equipment. They want their equipment and automation in this area to be equal to advanced international standards.

China wants to produce at least 90 percent of their demand for new materials domestically. They want to produce at least 80 percent of their mobile communications equipment locally, and they want to provide 40 percent of the international market. They want to bring several Chinese IT firms up to the top international tier.

The last market segment identified for development is high tech medical devices. Made in China 2025 seeks to bring biopharma production to international standards. They also want to commercialize a number of Chinese medicines and innovative medical products.

Does Made in China 2025 threaten global trade?

Critics of Made in China 2025 would say yes. If China is able to control its entire supply chain, it can become self-sufficient in many areas. By becoming a major supplier of goods without depending on supplies from other countries, China could become the main supplier of particular products. This can be leveraged into political clout. China’s strong control over cobalt, a key ingredient in most modern electronics, is a good example of this.

China is intent on absorbing an entire high tech supply chain by subsidizing domestic production and limiting imports from rival nations. This is seen as necessary to meet goals like achieving 70 percent self-sufficiency in core components in 2025. A number of countries think this violates WTO rules. President Trump responded to Made in China 2025 with threats of tariffs. This approach may not be effective, because Chinese industries are still under development. For example, China remains a big customer of Boeing, though they’re trying to develop their own equivalent technology. Yet the fact remains that China will not be able to compete with Boeing for years. Made in China 2025 is a greater threat to countries like Germany and South Korea that are heavily reliant on high-tech exports.

So where are we now?

Trade talks are ongoing. Yet, China is under pressure from the bottom up to modernize. They have to because of rising labor costs and a younger generation uninterested in working in factories. These businesses know they have to modernize or go out of business. Their modernization may not hit the world-class standard by 2025, but China will go in that direction because they have no other choice.