China revealed its plan to become a “world manufacturing power” by 2025 on Tuesday. According to Xinhua, the “Made in China 2025” plan, endorsed by Premier Li Keqiang, “is the country’s first action plan focusing on promoting manufacturing.”
It may sound odd that China, often called the “world’s factory” is focusing such high-level attention on strengthening its manufacturing capabilities. But China’s leaders effectively want to move up the supply chain – they want China to become known as a leader in manufacturing innovative technologies. In Li’s words, Beijing wants to go from “Made in China” to “Created in China.”
It will come as no surprise, then, that the plan includes a heavy focus on innovation and technology, two themes that have been heavily promoted by current leadership. Li emphasized the important of fostering innovation in his recent visit to China’s “Silicon Valley.” For Beijing, cutting bureaucratic red tape is one key to unlocking China’s creativity – Li has made this into a personal quest, repeatedly promising to eliminate unnecessary government approvals and streamline the remaining processes.
The action plan also calls for “restructuring of the manufacturing sector,” likely to remove overcapacity that exists in key industries like steel. Here, China faces a dilemma, though: the only surefire way to eliminate the issue is to shut factories down, which would result in a spike in unemployment (something Beijing tries its hardest to avoid).
While China is shifting away from certain industries, Beijing wants to move toward others. The ten-year plan calls for “promoting breakthroughs in 10 key sectors.” Those key sectors (and their relationship to broader strategic goals) are:
- Information technology: Beijing has emphasized the need to wean China off a reliance on foreign technology, and for China to become a “cyber power” in its own right
- Numerical control tools and robotics: Becoming a leader in numerical control machines and robotics will help China keeps its manufacturing industry strong even as labor costs rise relative to other developing countries
- Aerospace equipment: is a prestige symbol for China, as well as having security implications. China is striving to become a leader in satellite technology and is hoping to test out its first domestically-made passenger jet later this year (although the project is reportedly plagued by delays).
- Ocean engineering equipment and high-tech ships: China’s push into the maritime field is well known when it comes to its security implications for the South China Sea and elsewhere, but China is also hoping to become a technological leader in this field.
- Railway equipment: China has made a name for itself by building astonishing numbers of railways, both at home and abroad. Beijing clearly wants to keep its competitiveness in this area as it continues to push infrastructure construction through the “One Belt, One Road” initiative.
- Energy saving and new energy vehicles: Here, China’s “war on pollution” meshes well with a long-standing ambition to win global recognition for Chinese-made cars. Beijing is betting that energy efficient and clean energy vehicles will be the wave of the future – if Chinese manufacturers can carve out a niche here, it will pay long-term dividends for China’s share of the auto market.
- Power equipment: Although not made explicit, here again energy efficiency is the key goal. China is actively pursuing smart grid and smart city technology.
- New materials: The holy grail of advanced manufacturing technologies as well as strong research and development capabilities. If China can become a leader in developing new materials into useful products, it will have arrived on the innovation stage in a big way.
- Medicine and medical devices: Another area where China seeks international prestige, plus less reliance on foreign companies for necessary equipment and supplies.
- Agricultural machinery: In addition to the potential for exports, agricultural machinery is of crucial importance to China itself as its seek to maximize efficiency in its agricultural sector.
The plan calls for financial support for these industries as well as “institutional reforms” – what that means, exactly, will be determined later, when new policies designed to advance the plan are rolled out in the coming years.
Experts interviewed by Xinhua acknowledged China has an uphill road to achieving its goal. An official at China’s Ministry of Industry and Information Technology told Xinhua that the country faces pressure both from developed and developing rivals:
Advanced economies such as the United States, Germany, and Japan have all formulated policies supporting further development of their own manufacturing. At the same time, emerging economies such as India and Brazil are also catching up with their own advantages.
Another MITT official, Li Beiguang, told Xinhua China’s manufacturing industry is “far from strong.”
Even if all goes according to plan, “Made in China 2025” will see China “basically realize industrialization nearly equal to the manufacturing abilities of Germany and Japan at their early stages of industrialization,” according to Chinese Minister of Industry and Information Technology Miao Wei. In other words, China will still have a lot of catching up to do.