China’s ambitious plan to become self-sufficient in technology, known as the “Made in China 2025” initiative, has faced challenges and missed key targets, according to a recent report by the European Chamber of Commerce in China. The plan, unveiled in 2015, aimed to propel China to the forefront of global technology leadership, but has fallen short in several areas, leading to concerns about unhealthy industrial competition and global trade tensions.
While China has made significant progress in dominating the domestic auto industry, it has not met its targets in aerospace, high-end robotics, and the growth rate of manufacturing value-added. Out of the ten strategic sectors identified in the plan, China has only achieved technological dominance in shipbuilding, high-speed rail, and electric cars. The country’s targets are seen more as a direction rather than specific numerical goals to be achieved by a certain deadline.
One of the notable examples cited in the report is China’s self-developed airplane, the C919, which still heavily relies on U.S. and European parts. Additionally, while industrial automation levels have increased, it is primarily due to foreign technology. The growth rate of manufacturing value-added reached 6.1% in 2024, falling short of the target of 11%.
Despite these challenges, China has transformed itself over the past decade to account for 29% of global manufacturing value-added, almost on par with the U.S. and Europe combined. The country’s rapid development in various sectors has made it a direct competitor to Western countries, prompting concerns about global competitiveness.
The U.S. has imposed restrictions on China’s access to high-end technology and has encouraged advanced manufacturing companies to establish factories in America. Recent measures include export licensing requirements for U.S.-based chipmakers, such as Nvidia and AMD, to limit the transfer of advanced technologies to China. These restrictions have forced China to focus on developing homegrown alternatives to restricted items.
China’s efforts to achieve technological self-sufficiency have also faced challenges related to overcapacity and security concerns. The electric car industry, in particular, has seen intense competition leading to price wars and losses for automakers. Despite high levels of spending on research and development, efficiency remains a concern for Chinese companies.
As China looks ahead to its next five-year plan, which will emphasize support for the digital economy, the country will continue to pursue its goal of becoming a global manufacturing powerhouse. However, the challenges and criticisms faced by the “Made in China 2025” initiative highlight the complexities of achieving technological leadership in an increasingly competitive global landscape. In various industries, the push towards innovation and advancement has not necessarily translated into robust business growth. This observation was made by an industry expert who highlighted that China’s ambitious “Made in China 2025” targets may have actually contributed to a phenomenon known as involution. This term refers to a situation where companies become trapped in intense competition, leading to diminishing returns and a lack of real progress.
The expert also pointed out that China’s efforts to elevate its manufacturing capabilities from producing simple Christmas ornaments to high-end equipment have raised concerns globally, particularly regarding security risks. This shift towards more sophisticated manufacturing processes has not only intensified competition but has also failed to generate the expected economic benefits for many businesses.
In a bid to address these challenges, Chinese Premier Li Qiang emphasized the need to combat involution in an annual government work report delivered earlier this year. This directive echoed a similar call from a high-level Politburo meeting in July last year, underscoring the government’s commitment to tackling this issue head-on.
The impact of intense competition and slowing economic growth is evident in the financial performance of many Chinese companies. A recent analysis revealed that a significant proportion of mainland China-listed companies reported losses for the first time in 2024. With nearly half of these companies experiencing financial difficulties, it is clear that the business landscape in China is facing significant challenges.
In response to these developments, China has shifted its focus towards boosting consumption as a means of driving economic growth. This marks a departure from the previous emphasis on manufacturing and highlights the government’s recognition of the need to stimulate domestic demand. However, achieving a balance between manufacturing output and consumer demand remains a key challenge for policymakers.
Efforts to enhance consumption will be for naught if manufacturing output continues to outpace market demand. As such, policymakers are working to align production levels with consumer preferences to ensure a more sustainable economic model. Addressing manufacturing overcapacity is also a key priority, with stakeholders eagerly awaiting policy interventions to address this issue.
In conclusion, the challenges facing China’s business landscape underscore the need for strategic interventions to promote sustainable growth and address the negative impacts of intense competition and involution. By aligning manufacturing capabilities with market demand and promoting consumption-led growth, China can navigate these challenges and build a more resilient and dynamic economy.
