Abstract: This paper examines the content and driving forces of the “Made in China 2025” plan adopted by China’s State Council in 2015, discusses the key goals of the plan and the main factors influencing its implementation, and elucidates the areas and stages of development of the industrial technology base. It also shows the status of the participation of military-industrial corporations in the implementation of the plan and gives examples of specific achievements of industrial and technological leaders in competition with developed countries on international markets.
This paper also provides evidence of how military-civilian integration under the leadership of Chinese President Xi Jinping has accelerated the technological development of both civilian and defense industries of the PRC and serves as an important stimulus for industrial development in China.
The author examines specifics of the implementation of the plan in 10 major areas, such as robotics, aerospace, shipbuilding, information technology, rail transport, industries related to energy conservation, biotechnology, medicine, etc.
This paper also offers an analysis of the reasons behind the achievements of Chinese corporations, as well as opportunities for further growth. It highlights the issues of competition between Chinese manufacturers and American companies, the use of sanctions against Chinese corporations, as well as differences in the approaches of Russia and the US to cooperation with China; assesses the prospects for China’s global industrial and technological leadership; and concludes that there is a high probability of Chinese industrialists achieving the goals of the Made in China 2025 plan.
Development of Civilian and Defense Industries
For a long time, Chinese goods in Russia were associated with cheap or low-quality products. Today, this perception is outdated and does not correspond to reality. The Chinese leadership has sought to improve the quality of Chinese products, which has changed the attitude toward Chinese goods on international markets.
In this regard, the “Made in China 2025” plan (hereinafter referred to as MIC 2025 or the Plan), implemented in China since 2015, deserves attention. It pursues far-reaching modernization of the manufacturing industry and China’s transformation into an innovative high-tech superpower.1 The Plan was originally divided into three phases, each lasting 10 years. During the first stage (2015-2025), China aims to reach the level of states with advanced economies and technologies; during the second stage (2025-2035), to reach an average level of production comparable to the leaders, which will allow for participation in global production chains; and during the third stage (2036-2049), based on the success achieved, to reach the level of a global power. The plan has accumulated public and private investment of $300 billion. The main goal is to be achieved by 2049, the 100th anniversary of the founding of [Communist] China. The government has adjusted the Plan during its implementation, adding the goal of China’s top brands becoming among the top 100 global brands.
The year 2015 marked the beginning of defense industry reform, a new stage in the integration of the civilian and military economies, and the reform of the People’s Liberation Army of China. In accordance with the 2015 National Military Strategy and in consideration of the Plan under the personal leadership of Xi Jinping, the Central Commission for the Development of Military-Civilian Integration was established, the transition from state-owned enterprises of the military industrial sector to a mixed participation form was implemented, securitization has increased, and a system of granting shares of military industrial sector enterprises to their employees was introduced (the employees’ share was increased to 30%, and the state’s share was decreased to no less than 34%).2 Conditions were created to continue to address the problems of public sector reform and the mutual use of the achievements of military and civilian industries. In particular, the capital of civilian companies was legally allowed to be used in the development of military products, and military technologies were permitted in the civilian sector. In 2017, China’s Ministry of Defense declassified more than 3,000 patents related to dual-use technologies, 2,346 of which were published.3
Thus, since 2015, China’s MIC 2025 qualitative growth plan and reform of the military-industrial sector have been closely intertwined. Under these conditions, China’s military-industrial corporations have successfully combined the tasks of conversion, technology development, implementation of information technology modeled on Western countries, and refurbishment of the civilian industrial sector. In the 1990s, China had the most developed defense industry among developing countries while still lagging far behind NATO countries, the USSR, and some East European states, but by the end of the first decade of the 21st century, thanks to conversion, rapid development, and favorable internal and external factors, China’s defense industry has steadily narrowed the gap and became one of the five largest weapons manufacturers.
It is important to note that Chinese manufacturers are building an independent technological and material base. Since 1979, China’s civilian industry has become a global factory. At the present stage, to move industry to a new technological level, the MIC 2025 plan considers both China’s relative advantages (labor costs, huge domestic market, surging demand, the need for dynamic long-term development, and significant human resources) and disadvantages (low product quality, lack of quality competition, limited resources, lack of systematic investment in innovation, a cumbersome public sector structure, and lack of transnational corporations). China’s transformation from big industry to strong industry is influenced by technology and smart manufacturing. For example, in 2015, the Law on State Support for Innovation, Technical Reconstruction, Targeted Investment, and Reform of Educational Institutions for Modern Technology came into force.
China’s civilian and defense industries are also developing thanks to the training of Chinese scientists and engineers in Western countries (mainly in the US, where between 2010 and 2020, 100,000 Chinese students studied) and China’s active use of WTO membership for science and technology cooperation with developed countries and access to the latest technologies. Beijing has managed to adopt an advanced system of industrial standards and specifics of industrial development, as well as gain access to Western industrial chains and innovative areas. Based on the experience gained, China adopted several state programs for the development of applied research, technology, innovation, and artificial intelligence, and later, during the 2015-2020 phase, increased funding for science by 6% to 8% annually. An important factor that helped accelerate the modernization of the Chinese military-industrial complex and its participation in the implementation of the Plan was the policy of public-private partnership of science funding (30% by the state and about 70% by private high-tech companies).
To implement the MIC 2025 plan from 2015 to 2025, the focus is on the introduction of digital networking in manufacturing, big data, network integration, and process intelligence; industry transformation in 10 areas is also planned. In 2023, not only are the goals of the Plan not perceived as utopian, but they are constantly being reaffirmed as feasible. Specialists note the achievements of Huawei, Xiaomi, Hisense, and other enterprises, which have a noticeable presence on international markets and point to their active participation in the struggle for technological leadership. Following the 13th Five-Year Plan (2016-2020) and the 14th Five-Year Plan (2021-2025), the authorities focused on internal and external security and took measures to expand and deepen military-civilian industrial integration.4 As the 2015-2019 period shows, military-industrial companies play a leading role in several industries at once.
Goals and Progress in 10 Key Areas of the MIC 2025 Plan
Robotics. Automated robotic complexes in China are expected to meet up to 70% of China’s domestic demand. Chinese companies producing next-generation robots are expected to be among the world’s top five. A qualitative change in China’s labor market, rising incomes, and advances in technology have accelerated the replacement of unskilled labor with machines and robots. This was the result of a prolonged economic boom, regular wage increases, rising labor costs, and a decline in the competitiveness of Chinese goods. Demographic factors have also had an impact: Between 2015 and 2020, China’s working-age population between the ages of 16 and 64 declined by an average of 5 million people per year.5 As early as 2013, the Chinese market for industrial robots was the largest in the world due to imports and borrowings. In 2014, this figure grew by more than 50%, reaching a level of 57,000 robots, which at that time represented one-fourth of the world’s total use of industrial robots. Experts note that while the global robotics market grew by at least 20% annually from 2015 to 2019, growth in China was between 20% and 25% per year in 2018-2019. Most robots are used in electronics and automotive manufacturing, with a quarter of robots for these industries produced domestically. By the end of 2025, the plan is to double the level of robotic automation compared to the same period of the last five-year plan – namely, to increase the number of industrial robots to 150 units/kits per 10,000 jobs, but given the global economic downturn, this figure will be reached later.
Industrial robotic automation has so far been developing mainly through borrowing. For example, in 2010 and 2016, Chinese companies bought world leaders in robotics: automobile manufacturer Volvo and industrial robot manufacturer Kuka. Experts call these deals classic: The Chinese give companies autonomy in production management but gain access to technology and innovation.
In China itself, industrial robotization is becoming widespread. For example, at Everwin Precision Technology’s electronic components plant in Shenzhen, robotization has cut 620 jobs and production automation has reached 80%: A total of 30 operators work on 10 automated conveyors, and a staff of 62 people maintains a fleet of 1,000 robots. By 2020, China was becoming a leading industrial robot manufacturer, capturing more than 30% of the global market, amounting to more than 88,000 robots per year. However, given the scale, it will take a lot of effort for the national economy to achieve a noticeable change in robotization. Currently, China produces about 180,000 industrial robots annually, accounting for about 25% of global production. New pilot lines are being created where robots produce robots, and products are produced by automated factories. Nevertheless, while the world has an average of 76 robots and intelligent production machines per 10,000 workers, China has only 71. China is not yet able to approach the level of robotization in Japan and Germany, where there are 318 and 311 robots per 10,000 workers, respectively. The leaders in this respect are Singapore and South Korea, which use a record 483 and 637 robots in industrial production.
In the military industry, robotization is most widespread in the production of small arms and electronics, and the use of robots in applications and research is developing. More and more manufacturers of military products are involved in the production of exoskeletons, unmanned vehicles, mobile special-purpose robots, robotic sappers, autonomous weapons, multi-medium robotic platforms, and robots for the production of armored vehicles, electronics, chemical and medical products, as well as for extreme environments, rescue operations, etc.
The object of information technology development is to transition to the use of 14-20 nanometer design technologies in industry. Chinese hardware and mobile communications are to seize 80% of the Chinese market and 40% of the international market. For the development of information technology, China annually invests from $30 billion to $36 billion in the development and production of hardware.
The IT market leader is China Tower Corporation, a key shareholder of three major operators: China Mobile with a 38%, stake and China Unicom and China Telecom with 28% each. The number of China Mobile’s network users in 2016 exceeded that of former global cellular market leaders Vodafone Europe and America’s AT&T, and the number of China Mobile’s mobile subscribers could exceed 1 billion in 2024. The leader in the provision of Internet services in China is Tencent, founded in 1997. It owns the QQ and WeChat messaging systems used in the country to provide a wide range of services to the public, including payments, government services, trade, the financial market, and others. The company is trusted by the public and has a capitalization of more than $111 billion.
Given the importance of IT technology for the country’s security, China is increasing the volume of closed, secure, automated, and mixed communication and information networks as part of the MIC 2025 plan. The automation of military networks and the production of military electronic products are carried out with the help of research and development of the China Electronics Technology Group Corporation (CETC). Much attention is paid to participation in the global process of industry standardization and in the promotion of the flagship product of the telecommunications market, 5G networks. At the same time, Chinese companies recognize the superiority of the US in terms of global market coverage: “The eBayInternet industry is a shark in the ocean, and we are a crocodile in the Yangtze River. If we fight in the ocean, we will lose.” In this regard, Beijing carries out comprehensive protection of the domestic telecommunications sector. For example, China’s Internet is protected by the Chinese firewall Golden Shield; Google, Facebook, and Instagram are banned in the country; and the use of Twitter, WhatsApp, etc. is restricted. The capitalization of such companies and corporations within China is practically zero.
Measures are also being taken to strengthen the public safety of the IT industry. According to the Social Credit System Plan (2014-2020), adopted by China’s State Council in June 2014 and currently being actively implemented, every company and individual in China can be tracked and evaluated by the global system in real time, and banks have tied individuals’ trust rating to an internal passport linked to this system. Individuals with a high rating enjoy social and economic benefits, while those with a low rating face restrictions.6
Baidu, Google’s Chinese counterpart, is the fourth-largest search engine in the world and handles about 83% of searches on the Chinese Internet. New smartphones initially have exclusively Chinese services installed − there is no Google Play or Gmail. The absence of foreign competitors allows the state to control the development of the IT sector, act as a guarantor of public safety, and at the same time create internationally competitive industrial companies using its own resources. For example, take the formation of the world-famousHuawei Corporation, which was founded in 1987 by Ren Zhengfei, an engineer, senior civil engineering officer, and delegate to the 12th CPC Congress (1982). The company initially focused on the production of telecommunications equipment. In 1994, Ren said that “a state without industrial equipment production is like a state without an army.” Within three years, Huawei entered the international market; the company released its first phone in 2004 and a smartphone in 2010. Today, the flagship models of Huawei are in the premium segment of mobile communications, and the company ranks third among the world’s smartphone manufacturers, behind only Apple and Samsung.7 In addition, China’s Oppo and Vivo are approaching the top five manufacturers. Subsequent spots in the rankings are also held by Chinese companies – already half of the top 10. Their conquest of the top began with the domestic market, where in 2018-2019, America’s Apple was displaced by Xiaomi, a Chinese manufacturer that is also popular in Russia.
The key to the new success was the transformation from an IT goods factory to a knowledge producer. Since 2010, the number of researchers and scientists in China has almost tripled, reaching 3.7 million, and nine Chinese universities are on the list of the world’s top 100 universities. China has topped the World Intellectual Property Organization’s ranking of registered discoveries and patented knowledge for 10 consecutive years. China files twice as many patent applications as the US. As of the beginning of 2020, China ranks fourth in the world in terms of IT industry development.8
Integrated Circuits. Several Chinese chip makers are expected to be among the world leaders by 2030.9 Although more than half of global chip production is sold on the Chinese market, the percentage of products labeled “Made in China” is small and only beginning to grow. For example, there is an increased demand for Xiaomi products everywhere, but chips from Beijing-based Spreadtrum Communications began to be installed only in the third generation Xiaomi smartphones.
Chinese authorities are supporting the industry by financing and easing taxation. Experts estimate that by the end of 2022, financial support for integrated circuit manufacturers in the country has already reached a total of $20 billion.
Huawei’s next-generation Kirin 970 processor is the world’s first neuromorphic processor capable of working with neural networks. Xiaomi has become a leading global manufacturer of smart products capable of synchronizing with controls, phones, and other devices.
Since 2020, Chinese chip makers have increased their global market share from 10% to 14%. More than 1,500 companies are developing chips, 150% more than in 2015. Over the same period, the number of chip companies in Taiwan has not changed (only about 100). Thanks to China, the production and consumption of advanced chips and electronic components in Asia is growing, while in the US, it is decreasing.
Semiconductors. China’s State Council has set a goal for the semiconductor industry to create a new technology base and increase production to $305 billion by 2030, which would meet 80% of domestic demand for semiconductors. This is where China faces the most competition. Because of the international division of labor, the global design process is still concentrated in the US and South Korea (e.g., integrated device manufacturers, IDM, fabless manufacturing), while outsourced semiconductor assembly and testing (OSAT) work is concentrated in Asia, including China. With investment and a large market, it is only a matter of time before the dominant heights in semiconductors are seized, even in spite of US bans and sanctions. In particular, bans are being ignored by the Japanese at Spansion, who have taught the Chinese how to produce multi-layer 3D NAND flash memory, build micro-assembly plants, and test microcells without human intervention. The Israeli company TowerJazz became an investor and technology source for the Chinese company Tacoma Semiconductor Technology. Chinese companies have joint ventures with the largest manufacturers and developers of electronic components − Global Foundries, AMD, Qualcomm, and many others. Taiwanese developers − Powerchip Technology Corp., United Microelectronics Corp., and TSMC – have manufacturing facilities in China.
In addition, Beijing requires manufacturers to locate plants in China, provides subsidies, and for those who refuse, threatens to ban the purchase of their products under the pretext of cybersecurity. Qualcomm, which has long fought the Chinese authorities, had to pay a $1 billion fine, incur heavy losses, and eventually localize production in China’s Guizhou Province. In storage technology, such as 3D NAND technology, Beijing has focused on state-owned Tsinghua Unigroup Ltd., which has invested more than $24 billion in building factories and plans to meet 70% of China’s semiconductor manufacturing needs by 2025.
China’s semiconductor industry is also represented by CETC products. CETC research institutes develop civilian and military electronic products using only Chinese-made chips and other elements; the emphasis is on the production of military products. The corporation’s revenues increased significantly after mass cross-border sales of semiconductors and the electronic component base began in 2018, including to Russia.
Impact of US Sanctions. In general, the IT situation is complicated by Washington’s sanctions, which in part have forced Beijing to resort to a policy of borrowing foreign technology. The sanctions were repeatedly supplemented and expanded due to accusations against trade organizations of ties to the Chinese military-industrial complex.
In the 1990s, Washington imposed an arms embargo on China and a ban on the launch of [Chinese] space satellites from US territory. At the same time, the Bill Clinton administration proposed that the Pentagon buy electronics on the world market. As a result, a scandal broke out in the US in 2011 when it was learned that US military equipment was filled with Chinese electronics. Congress banned NASA from cooperating with Chinese companies. In 2013, Washington banned government agencies from purchasing products and technology, in particular, from Huawei and ZTE. The restrictions had the opposite effect and led to further development of the defense and aerospace industries in China. Chinese businesses tried to buy US chip manufacturers, but US authorities did not approve the billion-dollar deals. For example, the Barack Obama administration blocked the purchase of Aixtron semiconductors by China’s Fujian Grand Chip Investment Fund in 2016. The US was followed by Taiwan, Canada, several European countries, and then South Korea and Japan. As a result, the US managed to form an entire anti-Chinese technological front.10 In 2020, the US imposed restrictions on SMIC, China’s largest semiconductor company. US companies are prohibited from cooperating with it, allegedly because of its activities in the interests of the Chinese Ministry of National Defense.
As of January 1, 2021, a total of 275 Chinese companies had been blacklisted by the US. The new bans “affect the very foundation of China’s ability to be autonomous in technology.” The bilateral trade wars have extended to the technology sector but have failed to stop China’s growth in semiconductor manufacturing.
Aerospace and Rocket Industry
The Chinese aerospace industry expects to occupy 10% of the Chinese and international market for commercial aircraft deliveries and up to 20% of the global market for regional turboprop planes. This industry, like the information technology sector, has developed in China through cooperation with Western countries, joint ventures, additional training, and direct purchases of high-tech assets.
According to the Plan, the Aviation Industry Corporation of China, Ltd. (AVIC) has become an industry-forming corporation for the creation of competitive end aviation products. The ARJ21 short-haul aircraft was developed and put into series production and operation. The C919 medium-range aircraft project was a new breakthrough. Under the project, AVIC established 16 joint ventures and introduced more than 6,000 patents and technologies in 20 specialties in five sectors of the aviation industry. The aircraft was commissioned in 2017 and currently has about 30 Chinese and foreign customers. The aircraft has been delivered to airlines since 2022, and more than 200 enterprises from 22 provinces are involved in cooperation on production of the C919.11 Importantly, AVIC plans to build military versions of the C919 by 2025. The Plan’s other project, the wide-body and long-range C929 aircraft, follows a similar pattern. The corporation has mastered production of a number of military aircraft platforms, the main ones being the Jian-16, Jian-20, and Jian-31 fighters, and the Yun-8, Yun-9, and Yun-20 military transport aircraft. In total, the corporation is advancing 67 projects for final aircraft models.
China National Aero-Technology Import & Export Corporation (CATIC) also conducts extensive research and development for overseas markets and imports and exports aircraft. The following aircraft have been developed and delivered for export: the FC-20E fighter (based on the fourth generation J-10 fighter); the L-15AFT modernized training aircraft (Yak-130 analogue); the JF-17M fighter; the FTC-2000G light fighter; the Y-9E medium military transport aircraft; helicopters based on the Z-9, Z-l1, Z-10, and Z-19 models; WL-I/II reconnaissance and attack drones; and U8AW series helicopters.
In the aircraft engine industry, China still cannot get rid of the “heart defect,” as Zhou Enlai, premier of the State Council of China, called the backlog in aircraft engine production back in the 1960s. In 2016, Chinese President Xi Jinping announced the creation of the Aero Engine Corporation of China (AECC) and outlined its goals. According to experts, by 2025, results of the industry’s development will be visible, given that, after the introduction of IT technologies, the 10- to 15-year cycle of aircraft engine development from the start of design to prototyping can be reduced to six to eight years.
Since 2015, China’s engine and gas turbine construction industry has implemented a technological reform program under the leadership and funding of AVIC and AECC. Under the 863 program, the achievements of the industrial period of the 1980s and 1990s have been digitized and transferred to a new element base and new materials.
In the space sector, the China Academy of Space Technology (CAST) (rocket technology), the China Aerospace Science and Technology Corporation (CASC) (equipment, controls, communications, etc.), and the China Aerospace Science and Industry Corporation (CASIC) (satellite manufacturing and launching) are responsible for promoting the Plan. By 2025, it is planned to form a satellite constellation based on the BeiDou-3 satellite navigation system, which is to replace the US GPS on the world market. There are currently more than 60 navigation satellites deployed in space.
According to Chinese sources, the space industry has grown tenfold since 2000 (from 32 to 318 different satellites in orbit), thanks to domestic achievements and international cooperation. The spacecraft project has become the quintessence of military-civilian integration. The Shenzhou spacecraft launch, docking, and operation program has been successfully functioning since September 2021. In 2022, after a six-month mission by the Shenzhou-14 crew, it was successfully replaced and returned to Earth. The Tiangong orbital stations have been launched and put into operation, and the world’s first quantum communications satellite was launched. These projects are ahead of schedule and involve China’s own communications, navigation, telemetry, and payloads.
China aims to become a world leader in this area: The PRC already accounts for up to 40% of the global ship market and up to 50% of the global marine equipment market. At the 2018-2020 stage, China become the world’s largest manufacturer of marine equipment for various purposes and now has the largest marine fleet.12 It has subsequently entered the world markets of container ships, cruise ships, research vessels, etc.
With the development of the Haidou underwater bathyscaphe, China became the third country in the world capable of conducting research at depths of up to 10,000 meters. The design and construction of ships and submarines is carried out by 20 science and production enterprises and research institutes, with an emphasis on the development of aircraft carrier group ships, submarines, unmanned ships, icebreakers, etc. China built the Xuelong 1 (Snow Dragon 1) and Xuelong 2 icebreakers based on Soviet technology. New warships are also being built based on borrowed technology. Each year, the corporations launch more than 10 frigates and destroyers and up to six corvettes; these new ships use stealth technology and are equipped with modern navigation equipment, propulsion systems, and armament.
In addition to building ships, the China State Shipbuilding Corporation, created on the basis of two former corporations (China Shipbuilding Industry Corporation, or CSIC, and China State Shipbuilding Corporation, or CSSC), is developing new equipment and C4ISR control and communication systems. Their installation began with Type 052D missile frigates and Type 041 submarines. Closed networks, satellite communications, and reconnaissance systems for the Navy are being built jointly with CASIC.
China claims 40% of the global rail transport market and seeks to become a defining link in the value chain in the production and operation of rail transport around the world. High-speed trains are being developed on a new technological basis and operate at speeds as high as 350 to 400 km/h. They are already operating in 33 of China’s 34 provinces and connect 556 cities. The Beijing-Shanghai train covers a distance of 1,318 km in less than four hours. The total length of high-speed railroads exceeds 30,000 km; the longest in the world, the Beijing-Hong Kong railway, is 2,440 km.
In 2012, the industry was privatized; since 2015, work has been under way to conquer foreign markets; the main emphasis is on integrated design, the quality of materials, and the informatization of equipment and services. The participation of Chinese companies in the reconstruction and construction of railroads in the southern US, Latin America, South Asia, and Africa has been a major breakthrough in this regard. In Russia, a subsidiary of China Poly Group Corporation is involved in the construction of the Moscow Metro and the Moscow-Kazan-Beijing high-speed railroad. If the Chinese can continue to rely on the principles of quality and innovation, they could win up to 40% of world exports in 2024.
Renewable Energy Sources (RES)
Since 2015, China has become the largest investor in renewable energy. This happened despite a downturn in the industry in 2019 due to the coronavirus pandemic.13 The share of renewable energy in the national energy mix reached 43.5% in early 2022, up 10.2% from the end of 2015. The connection of industrial facilities to the network of wind and solar power plants is being implemented on a planned basis. The environmental friendliness and ease of operation of renewable energy allow it to be used in many remote and hard-to-reach areas.
Exports are also developing. In November 2022, China sent the first batch of eight 108-meter blades for wind turbines to Europe.14 In 2019-2020, hydropower capacity growth was 8.54 GW, and total hydropower resources increased to 352 GW.15 Floating solar power plants have developed due to their use in coastal areas. New consumers include coastal cities, naval bases, industrial and agricultural facilities, coast guard forces, and contingents recently deployed on islands. The world leaders, France’s Ciel et Terre and China’s Sungrow, own 90% of all capacity, and they have built more than 200 plants around the world.
Automakers are closely related to the defense industry, with many defense industry enterprises still occupying leading positions in the industry and actively cooperating with foreigners. For example, China North Industries Group Corporation (NORINCO) owns Beifang Benchi Heavy-Duty Trucks, one of China’s largest factories. In the late 1980s, this plant solved the problem of the country’s heavy vehicle shortage, and now Beifang Benchi trucks (translated from Chinese as North Benz) are made using Mercedes Benz technology and widely exported to Arab countries, Pakistan, Nigeria, Bolivia, Turkmenistan, Kazakhstan, etc.
The Chinese are rapidly narrowing the gap with the leaders, and to do so, they have dramatically increased product quality and performance requirements and strengthened export measures. Between 2014 and 2020, China’s electric car industry took a leap forward. The government created favorable conditions for the purchase of “green cars” and attracted investments in joint projects between Chinese companies and world leaders such as Tesla and BMW. Energy-efficient locally produced cars must meet at least 50% of domestic market demand. Fuel consumption of passenger cars must not exceed four liters per 100 kilometers.
China also plans to provide up to 20% of global exports of commercial vehicles. Domestic self-sufficiency in key components must be at least 60%. Technological growth is achieved through preparedness of the domestic market. Many countries are lagging and, in the future, will only be able to rely on products with the “Made in China” label.
Production of Large Equipment for Thermal, Hydropower, and Nuclear Power Generation
Energy equipment with original intellectual property rights must account for up to 80% of the market and $440 billion. In early 2022, thermal power plants accounted for 54.5% of the energy sector. Hydropower plants produce 16.4% of electricity, nuclear power plants produce 2.2%, wind power plants produce 13.8%, and solar power plants produce 12.9%.16 Under the Plan, the emphasis is on nuclear power and the development of solar and wind energy consumption. There is strong competition in foreign markets for power equipment, and China is among the seven largest technological countries in the world with the technology to design and build nuclear power plants, but the development of the industry does not match China’s status as a nuclear power. Since 2009-2010, there have been 10 projects to build 28 nuclear facilities, and China has become the leader in the number of nuclear power facilities under construction.
The volume of industrial production in this area is expected to exceed $118 billion, and China is to become the largest producer of agricultural equipment, meeting 95% of domestic demand. The Plan implements measures to increase crop yields, reduce soil contamination, restore ecosystems, ensure food independence from import supplies, and conserve and increase water and forest resources. Notable results in the creation of new modern models have been achieved through the development of the Research Institute of Applied Mechanics of the China Precision Machinery Import-Export Company. Military patents, digital technology, and artificial intelligence are used in the production of new agricultural equipment. The plan has boosted investment, integration, and company alignment. Mechanization rates for plowing, planting, and harvesting increased from 63% in 2015 to 76% in mid-2022. Strongly influenced by the coronavirus pandemic, overseas sales of farm machinery declined 26% in 2020, but there was a 7% to 9% increase in farm machinery exports in 2021 and 2022. China also remains a large market. It is expected to grow between 26% and 28% from 2020 to 2024, with an average annual growth rate of 5%.17
New materials produced in China must meet 90% of domestic demand and are the backbone of the Plan. This is where China faces its greatest challenges. New materials are intended to be a source of technological growth under conditions of limited resources. Of greatest interest are magnesium alloys, which are used in the production of energy-efficient and environmentally friendly machines and 3C (Computer, Communication, Consumer Electronics) products. In the area of phones and mobile devices, following the iPhone and Samsung products, use of magnesium alloy has increased, allowing new models to be thinner and lighter. Nanomaterials are used in products such as nanowiring materials, carbon nanotubes, nanoceramics, nanocomposites, and ultra-high-density materials for information storage; the development and synthesis of nanocoatings; and the development of single-electron transistors, nanolasers, and nanoswitches. China has invested a lot in graphene, a new material for the 21st century, but its development still requires time. However, the production of high-strength and high-modulus M40J carbon fiber, which had previously been imported, has already been established. The production of new materials will grow in China by up to 20% per year, but China is not expected to become a world leader until the middle of the 21st century.18
Biotechnology and Medicine
The volume of medical equipment production must reach $260 billion, and 85% of medical equipment components must be produced locally. Commercialization of innovative medicines, including traditional medicine, is under way.
Despite enormous efforts to preserve and develop Chinese traditional medicine, Western medicine in China is developing much faster. Between 2015 and 2020, many patents on biotech products in Europe and the US expired. A period of “patent discovery” is coming, which many countries are actively capitalizing on, but overall China is unlikely to gain significant market share due to patent barriers. Shengfa, a major biotechnology company in Tianjin, believes that innovation, training a new generation of biotechnologists, and targeted investment are needed to change the situation. China National Pharmaceutical Group Corp. (CNPGC), known as Sinopharm, has more than 50 biofactories and research institutes, and it has developed and shipped COVID-19 vaccines overseas with an annual output of 600 million units and a plan to increase that to 1.2 billion units. China’s medical device market is growing 20% annually, with more than half of the volume coming from the domestic market. New drugs are being developed within the country, but there is still a lag behind Western medicine.19
Opinions and Assessments
The ambitious objectives and lofty goals of the MIC 2025plan reflect an observation that experts periodically reiterate: The Chinese will do all they can to achieve victory or a clear advantage in peacetime but will not bring conflict into open confrontation. By persistently promoting quality and technology, as well as products and brands, the PRC as a rising power seeks to shield national manufacturers as much as possible from uncontrolled foreign competition, and through technological growth, to create conditions for a suitable presence on global and regional markets.
In all 10 areas discussed above, Chinese companies and defense corporations play an active role. By participating in the Plan, these companies create new products and select technologies that can be used in the military-industrial sphere. On the other hand, the scientific and technological base of the military-industrial complex increases the competitiveness and quality of civilian products and reduces dependence on Western technology. Thus, strategies to “achieve victory in peacetime” are being implemented: energy security, technological independence, and seizing the initiative from the Western world. This is an attempt to prove China’s right to be a leader.
The reform and modernization of the country’s Armed Forces, the automation and digitalization of command processes, and the rearmament of military formations from third generation weapons and military equipment to fourth generation weapons has played a major role in the implementation of the Plan. In some areas, modern technologies and materials have made it possible to begin creating fifth generation weapon systems. Given the importance of this process, the Armament Development Directorate of China’s Central Military Council is pursuing a policy of the centralized procurement of dual-use and military products and the placement of orders with enterprises. The preparation of relevant decisions was entrusted to special commissions, which included, in particular, representatives of the military-industrial complex and customers of units of branches and services of the Armed Forces. Communications, control, and other systems have been automated, and since 2015, a procurement mechanism has been successfully implemented through a closed Internet resource. Both the Army and the military-industrial complex managed to pass the stage of reforms and modernization and reach new frontiers, which opens the path to achieving world leadership by 2049.
Reports from the US Chamber of Commerce and the Department of Commerce for 2019-2021 and later expressed concern about China’s growing aggregate power and laid out evidence of deep, concerted, and sustained efforts by PRC authorities to implement the Made in China 2025 plan; moreover, the reports claimed that the plan created unequal business conditions in the PRC for Americans, and there were risks of forced disclosure of trade secrets of American developers to Chinese competitors.20 The US claims were accepted de facto by China. In the first half of the 2020 bilateral trade dialogue, China made trade concessions, agreeing to increase its purchases of goods from the US by $1 trillion over five years, and thus went along with a number of reciprocal claims. Nevertheless, Beijing has bought both time and relative “peace of mind” to further reduce its dependence on the US for technology and intellectual property, and it continues to implement the Plan.
Overall, the Western economic community perceives the Plan rather harshly, seeing it as a threat, as it implies achieving the self-sufficiency of Chinese industry through the substitution of Western technologies.21 On the contrary, Russian high-tech enterprises, in particular enterprises and holdings of the Rostec State Corporation, positively assess China’s achievements in implementing its reform and openness policy and the MIC 2025 plan itself. In 2017, Rostec executives noted that “certain areas put forward in the Plan are fully consistent with the priority areas that define Rostec’s development strategy until 2025.” Large enterprises in Russia and China are following the same development path. The implementation of the MIC 2025 plan benefits not only Beijing, but also its key trade and economic partners, including Russia.22 For example, since 2015, Rostec State Corporation’s Roselectronics and NEDI Technology Co., LTD (a division of CETC) have been implementing an agreement on organizing the production of semiconductor devices.
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The principles of military-civilian integration and commercialization of the military industry applied in the Made in China 2025 plan have led to the expansion of military and dual-use industry production capabilities, the exchange of technology and expertise, and the complementarity and development of civilian and defense industries.
The training of specialists in Western universities and research institutes; trade and industrial activities as part of the WTO; and the policy of borrowing technologies, including by creating conditions for their application in China, continue to play an important role. The dual-use technologies that Beijing has received from abroad cover such areas as shipbuilding, avionics, optoelectronics, radio and satellite technologies, information, communications, and cyber security. They are used for digitalization, network integration, and smart manufacturing. In all 10 areas presented above, China is already one of the world’s leading industrial platforms and successfully competes with the world’s leading companies. According to experts, “China could become the second largest industrial manufacturer in 2025.”23
Given the current level of stability of China’s socioeconomic development and the technological growth of its corporations, it seems possible to predict that during the second stage, from 2026 to 2035, Beijing may become one of the largest producers of high-tech products, and during the third stage, between 2036 and 2049, China will be able to “actively compete.” Nevertheless, for China it remains important not only to achieve world leadership in production but also to maintain the “peaceful coexistence” of world economies, technological leaders, and production centers.
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