Have You Heard About “Made in China 2025”? You Will

Seeking to become a dominant force in global high-tech manufacturing, the Chinese government launched what’s being called “Made in China 2025.” By using subsidies, mobilizing state-owned enterprises, and pursuing intellectual property acquisition, the program aims to catch up with, and then surpass, western technological prowess in advanced industries.

However, Washington argues that the policy relies on the discriminatory treatment of foreign investment, forced technology transfers, intellectual property theft, and cyber espionage, among others. This has led to the tightening of oversight of foreign investment, intensifying the debate over how best to respond to China’s behavior.

What Exactly is Made in China 2025?

China’s president, Xi Jinping, is the force behind Made in China 2025. Made in China 2025 is the blueprint for China to transform into a high-tech powerhouse, dominating advanced technologies. China wants to be the leader in industries like robotics, advanced information technology, aviation, and new energy vehicles.

At first glance, this makes sense within the context of China’s trajectory. They want to transition away from labor-intensive industries and climb the value-added chain as wages rise to avoid falling into the “middle-income” trap. Made in China 2025 is loosely based on “Industry 4.0,” a German concept that proved advanced technology like wireless sensors and robotics, along with the internet, can produce significant gains in productivity, efficiency, and precision.

Critics of the initiative worry that China’s intention with Made in China 2025 is to not just join the ranks of high-tech economies like Germany, The United States, and Japan, but to replace them altogether. ‘Made in China 2025’ wants to achieve self-sufficiency while becoming a manufacturing superpower that dominates the global market in critical high-tech industries. That raises issues for countries that rely on exporting high-tech products.

The Strategic Plan for Made in China 2025

To make the plan a reality, there are five principles and five major tasks that focus on improving 10 key manufacturing sectors.

Key Principals

Innovation driven
Quality first
Eco-friendly
Structure Optimization
Talent development

Major Tasks

Set up a national innovation center
Strengthen the industrial base
Enhance intelligent manufacturing
Promote green manufacturing
Use high-end equipment

The plan also highlights 10 key industries, some of which have already been talked about. The full list includes:

Robotics. Robotics to supply 70 percent of the domestic market. One to two companies to rank among the top five in the world.
Aviation and Aerospace Equipment. Domestically produced commercial aircraft and turboprop regional airliners to supply up to 20 percent of the international market. Complete major development work of a prototype of a large aircraft engine.
Railway Transport. China occupying the high end of the value chain for global railway transportation.
Energy Equipment. China aims to reach the globally advanced level in producing large-scale thermal power, hydro power, and nuclear power equipment. Industry size of power electric power transmission to reach three trillion yuan.
New Materials. Domestically produced basic materials products should meet 90 percent of local demand.
New Generation of Information Technology. A handful of companies becomes top-tier internationally. Domestically produced mobile communications equipment meets 80 percent and 40 percent of the domestic market and international market demand respectively.
Maritime Equipment and High-Tech Ships. China to have more than five internationally renowned manufacturing companies. Maritime equipment to supply 40 percent of the international market.
New Energy and Energy Saving Vehicles. China aims to export 20 percent of all commercial vehicles and have three companies that are ranked in the top five for sales internationally.
Agricultural Equipment. Industrial output aims to reach 800 billion yuan and China will become the world’s biggest agricultural equipment maker. Domestically manufactured equipment will meet 95 percent or more of Chinese market demand. Automation technologies and equipment to reach advanced international standards.
High-tech Medical Devices. Biopharma innovative development and production to reach international standards. The commercialization of innovative chemical medicines and Chinese medicines to be achieved.

The Goods Traditionally Associated With “Made in China”

For many people, especially those in the west, the “Made in China” label has become synonymous with low-cost and low-quality. There was a time when people enjoyed products from China. They viewed products manufactured in China as a unique, quality product and one that had cultural value.

Then China became the world’s factory and produced countless items for countless brands. When that happened, people started to change their views. This shift was due to a combination of consumer experience and influence of media coverage related to Chinese-made products.

If you don’t have a personal or direct experience with a certain country, the media will dictate your opinion. If you read a lot of negative articles, that leads to a negative perception. That’s why people started viewing things labeled “Made in China” as cheap and low quality, instead of unique and cultural.

The ‘Made in China 2025’ initiative aims to do away with that label by breaking into high-tech industries controlled by Western powers.

Is ‘Made in China 2025’ A Threat to Global Trade?

Is China’s desire to become a high-tech powerhouse a threat to the global market? Its critics would answer with a defiant, “yes.” There’s a worry that China’s ambition to control entire supply chains means that entire industries could come under the control of a rival geopolitical power.

The cobalt industry is a prime example of this. Cobalt powers most modern electronics, and if China were to control the entire supply chain, it could spell trouble.

Critics also worry that China is distorting global markets by prioritizing political considerations over economic incentives. In March of 2018, a Trump administration investigation concluded that China’s actions were “unreasonable and discriminatory.”

‘Made in China 2025’ Triggered the Wrath of President Trump

To put it simply, it’s because it will put China in direct competition with the U.S. That’s why President Trump has explicitly stated that proposed U.S. tariffs are designed to impede the ‘Made in China 2025’ program.

This strategy is unlikely to be effective and risks undermining rather than boosting U.S. manufacturing. Most of the Made in China 2025 advanced industries are still in development and not yet exporting to the United States.

For example, China wants to develop its aviation industry, but it is still many years away from competing with Boeing. For now, China remains a big buyer of Boeing aircraft.

Why Does Everyone Hate ‘Made in China 2025’?

Countries fear the quotas China is establishing violate WTO rules against technology substitution. Made in China 2025 lays out targets to achieve 70% self-sufficiency in core component and basic materials by 2025. That could devastate countries like South Korea and Germany, who are heavily reliant on high-tech exports.

Typically, these supply chains span across many borders, with highly specialized components often produced in one country and modified or assembled somewhere else. However, China is intent on absorbing the entire global high-tech supply chain through subsidizing domestic industry and mercantilist industrial policies.

Why ‘Made in China 2025’ Will Succeed, Despite President Trump?

Why Made in China 2025 Will Succeed, Despite Trump

The reason ‘Made in China 2025’ will succeed can be found on any factory floor in China. Factories that once employed a sea of workers are running out of candidates for the jobs. Rising labor costs and a new generation with little interest in toiling in factories are forcing change.

Now the sea of people is being replaced by an array of machines, each performing work it used to take 15 people 26 steps to finish. That tells you the ‘Made in 2025’ initiative isn’t just something being pushed by China’s leaders. Instead, it is being pushed from the bottom up. The businesses and cities across China that know they must modernize, or perish.

The modernization may not happen by 2025. It may be long after that. But China will get there because it has to.

The 90-day Trade Truce

To combat ‘Made in China 2025’, the Trump administration put in place a series of tariffs against China. We are currently in the midst of a 90-day trade truce. However, the president has indicated if there are good, solid movements and good action, he might be willing to extend the 90 days.

The trade talks are moving in a positive direction at the moment, but it is wise to hold on to your optimism. Don’t rush to any conclusions, and wait this one out.

It’s a Sticky Situation

Like most things, especially in politics and global trade, nothing is really black and white when referring to Made in China 2025. From one point of view, it’s the desire of a nation to keep up with advancements in technology and reap the benefits. Countries like Germany and Japan have done similar things before China put this plan in place.

On the other hand, it looks like China wants to put a stranglehold on certain industries in the global market. By achieving some of the goals set forth by ‘Made in China 2025’, several other countries will be put at a severe disadvantage.

With the U.S. fighting back and other countries keeping a close eye on the events as they unfold, time will only tell what will happen with ‘Made in China 2025’.

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