Made in China 2025

Made in China 2025 (Chinese: 中国制造2025; pinyin: Zhōngguózhìzào èrlíng'èrwǔ)[1] (MIC25,[2] MIC 2025,[3] or MIC2025[4]) is a national strategic plan and industrial policy[5] of the Chinese Communist Party (CCP) to further develop the manufacturing sector of the People's Republic of China, issued by Premier Li Keqiang and his cabinet in May 2015.[6] As part of the Thirteenth and Fourteenth Five-year Plans, China aims to move away from being the "world's factory"—a producer of cheap low-tech goods facilitated by lower labour costs and supply chain advantages. The plan aims to upgrade the manufacturing capabilities of Chinese industries, growing from labor-intensive workshops into a more technology-intensive powerhouse.[7]

Made in China 2025 logo

The stated goals of Made in China 2025 include increasing the Chinese-domestic content of core materials to 40 percent by 2020 and 70 percent by 2025.[8] To help achieve independence from foreign suppliers, the initiative encourages increased production in high-tech products and services, with its semiconductor industry central to the plan, partly because advances in chip technology may "lead to breakthroughs in other areas of technology, handing the advantage to whoever has the best chips – an advantage that currently is out of Beijing’s reach."[4][9][10][11][12][13]

Since 2018, following a backlash from the U.S., Europe, and elsewhere, the phrase "MIC 2025" has been de-emphasized in government and other official communications,[14][15] while the program remains in place. The Chinese government continues to invest heavily in identified technologies.[14] In 2018, the Chinese government committed to investing roughly US$300 billion into achieving the plan.[13] In the wake of the COVID-19 pandemic, at least an additional $1.4 trillion was also invested into MIC 2025 initiatives.[16] Given China's current middle income country status, the practicality of its disproportionate expenditure on pioneering new technologies has been called into question.[17][18]

Background and stated goalsEdit

Since the 2010s, China has become an emerging superpower as the second largest economy and the largest one on a purchasing power parity (PPP) basis.[19] It faces manufacturing competition from countries with lower wages, like Vietnam, as well as from highly industrialized countries.[13][20] In order to maintain economic growth, standards of living, and meet the demand of its increasingly educated workforce, China undertook stimulating the potential of its economic and technological competitiveness with MIC 2025,[20] to become a "world-leading manufacturing power."[21] Alan Wheatley of British think tank Chatham House indicated, in 2018, that a broad and growing Chinese middle class is necessary for the country's economic and political stability.[22]

China believes in its industrial policy programs, which it sees as key to its economic success.[23] Its leaders hope that government investment in crucial technology sectors will lead to a strong position in the Fourth Industrial Revolution.[23] The key objective of the Made in China 2025 program is, in a world which it views as increasingly dominated by U.S.-China competition, to identify key technologies, such as AI, 5G, aerospace, semiconductors, electric vehicles and biotech, indigenize those technologies with the help of national champions, secure market share domestically within China, and ultimately capture foreign markets globally.[24]

The Center for Strategic and International Studies in Washington, D.C. described MIC 2025 as an "initiative to comprehensively upgrade Chinese industry", which is directly inspired by Germany's proposed Industry 4.0 strategy.[1] It is a comprehensive undertaking to move China's manufacturing base higher up the value chain[25] and become a major manufacturing power in direct competition with the United States.[26][27]

Key industriesEdit

Industries integral to MIC 2025 include aerospace, biotech, information technology, smart manufacturing, maritime engineering, advanced rail, electric vehicles, electrical equipment, new materials, biomedicine, agricultural machinery and equipment, pharmaceuticals, and robotics manufacturing, many of which have been dominated by foreign companies.[28]

MIC 2025 lists the following 10 key industries that the Chinese government targets for becoming a world leader.[29]

Key Industries of the Made in China 2025
Industry sector Description
Information Technology AI, IoT, smart appliances
Robotics AI, machine learning
Green energy and green vehicles energy efficiency, electric vehicles
Aerospace equipment
Ocean engineering and high tech ships
Railway equipment
Power equipment
New materials
Medicine and medical devices
Agriculture machinery

Premier Li has indicated advanced standards in industries are absolutely essential to foster innovation and eliminate bottlenecks in industrial development. China has a growing middle class who are demanding higher quality goods and services. Compared with overseas competition, the quality and innovation of Chinese goods have not caught up. Premier Li talks about the quality revolution. This revolves around entrepreneurship and craftsmanship. It will involve embracing a culture of continuous innovations and refinement in quality of goods produced.[30]

Some companies that have been named as leaders of the key industries are:[31][32]

Funding and evaluationEdit

China's investment in 5G is seen as part of the MIC 2025 program. As of early 2020, China had around 200,000 5G towers in use; by the end of the year, it aims to have more than 500,000, with an ultimate goal of 5 million.[16] In its 14th five-year plan, China’s National People’s Congress approved the spending of $1.4 trillion in 5 to 6 years to build 5G networks, "install cameras and sensors to create smart cities, and integrate this network with industry to accelerate progress in smart manufacturing."[14][16]

According to Barry Naughton, a professor and China expert at the University of California, San Diego, the average income in China was CN¥42,359 for urban households and CN¥16,021 for rural households in 2019. Even at the purchasing power parity conversion rate, the average urban income was just over US$10,000 and the average rural income was just under US$4,000 in China. Naughton questioned whether it is sensible for a middle income country of this kind to be taking "such a disproportionate part of the risky expenditure involved in pioneering new technologies". He commented that while it does not make sense from a purely economic perspective, Chinese policymakers have "other considerations" when implementing their industrial policy such as Made in China 2025.[17]

The European Union Chamber of Commerce in China said in a report that the "Made in China 2025" initiative distorts the market, and that market-based innovation provides a better way to pass through middle-income status than industrial policies. Joerg Wuttke, president of the chamber, said, "Very often these major plans, with lots of money, where government bureaucrats decide who's the winner and who's the loser, end up in tears."[18]

ReactionsEdit

European UnionEdit

A European Commission published report calling for the European Union (EU) to increase its industrial and research performance and to "develop a trade policy that can ensure a level playing field for EU companies in China and for Chinese companies in the EU", in response to the Made in China 2025 (MIC 2025) policy. It recognizes MIC 2025 as being similar to the "German and Japanese approaches to innovation and economic development".[36]

The EU Chamber of Commerce in China said that MIC 2025 would increase Chinese protectionism favouring domestic companies.[37]

JapanEdit

Japanese commentators note that MIC 2025 has led to growing exports of Japanese high-value goods such as semiconductor manufacturing equipment and production line robotization equipment and see it as a business opportunity, but fear that China may become a strong competitor in the long run.[38][39]

South KoreaEdit

A report by the Korea International Trade Association (KITA) sees MIC 2025 as a step towards Chinese self-sufficiency, threatening Korean exports, but also acknowledges opportunities for Korea due to changing industry demands. KITA calls for a response by improving Korean innovation, preventing brain-drain and loss of intellectual property through mergers and acquisitions, preventing unfair trade practices by China and actively playing into market opportunities that arise from MIC 2025.[40]

TaiwanEdit

Aggressive campaigns to recruit Taiwanese chip industry talent with lucrative offers resulted in the loss of more than 3,000 chip engineers to MIC 2025,[41] and raised concerns of a "brain drain".[42][41] Charles Kao, considered Taiwan's "Godfather of DRAM" was among those to leave Taiwan for a position in China, spending five years with Tsinghua Unigroup which, two years after Kao was hired, had also recruited Sun Shih-wei, formerly vice chairman of United Microelectronics.[43]

United StatesEdit

In 2018, the Council on Foreign Relations, an American think tank, stated that MIC 2025 is a "threat to U.S. technological leadership".[44] The Li Keqiang government maintains that MIC 2025 aligns with the country's World Trade Organization obligations.[45] On 15 June 2018, the Trump administration imposed higher tariffs on Chinese goods, escalating trade tensions between China and the U.S. The tariffs primarily apply to manufactured goods included in the Made In China 2025 plan, such as those integral to IT and robotics industries.[46][47]

The U.S. began individual investigations over Chinese companies participating in the MIC 2025 plan, such as Fujian Jinhua Integrated Circuit, based on concerns over technology theft and national security.[35]

See alsoEdit

Further readingEdit

  • Boris Lee (2019). Assessing Made in China 2025: The US - China Trade War and Ways Going Forward. Claremont Colleges Library.
  • Edward Alden, Nicholas Burns, Ash Carter, Jack Clark (2019). Technology and National Security: Maintaining America's Edge. The Aspen Institute. ISBN 978-0578427959.CS1 maint: multiple names: authors list (link)
  • BBC (2019) China: A New World Order [48]
  • Shaun Rein (2012). The End of Cheap China: Economic and Cultural Trends That Will Disrupt the World. John Wiley & Sons.

ReferencesEdit

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External linksEdit