“Made in China 2025” is a strategic plan that was initiated in 2015 to reduce China’s dependence on foreign technology and promote Chinese technological manufacturers in the global market. The goal is to reach this objective by the year 2025, a decade from the year when the plan first took root.
Developing innovation is a clear priority under the current Chinese administration and “Made in China 2025” is an integral part of achieving this priority. Below, we discuss the Made in China 2025 initiative and controversies that have surrounded it since its inception.
Purpose of Made in China 2025
The purpose of “Made in China 2025” is to change its perception as a low-end manufacturer to a high-end producer. The plan is only a small portion of a larger directive to develop innovation-driven technology and networks that the current administration is pushing as part of a comprehensive agenda.
By taking advantage of the opportunity to achieve new sources of growth, Chinese administrators hope to boost manufacturing capabilities to put them in line with other industrialized nations. By increasing the country’s technological capabilities, China will not be as dependent on other nations for advanced technology and can improve its trajectory in a manner commensurate with its overall objectives.
The administration wants to take advantage of its large and powerful consumer base, as well as position itself as a value-added global source.
Influence of Made in China 2025
The Made in China objectives are referential to Germany’s “Industry 4.0” initiative. Policymakers studied this plan and created a unique plan for China. If Made in China 2025 is successful, China will enhance its reputation even further as a world superpower in manufacturing.
The Made in China 2025 initiative highlights ten priority sectors, including:
- New generation information technology
- Advanced numerical control machine tools and robotics
- Aerospace technology, including aircraft engines and airborne equipment
- High-performance medical equipment
- Electrical equipment
- Farming machines
- Railway equipment
- Energy-saving and new energy vehicles
- Ocean engineering
By focusing on these emerging industries, China is concentrating its development on these areas of growth so that the country has greater sustainability and less interdependence with other countries.
To accomplish the goals of Made in China 2025, the government has encouraged growth in these technological and innovation-driven sectors, including clean energy, IT, and robotics. The government is providing more support for producing specialized goods and making investments in research and development.
Additionally, China provides subsidies and finances state-owned enterprises to achieve these ambitious objectives. Historically, part of the MIC 2025 plan was to provide direct and indirect state support in hi-tech manufacturing segments.
Controversies Surrounding MIC 2025
The Made in China 2025 initiative has received some global criticism because it sought to dismount world leaders from their powerful positions in certain industries. It had certain quotas that it wished to fulfill, including core components and materials manufacturing of 40% by 2020 and 70% by 2025.
The plan also provided detailed instructions based on how much of the country’s technology market would be controlled by Chinese companies and how many individual parts in products had to be manufactured in China. This was seen by some to be against free trade principles that seek to level the playing field.
Additionally, if China becomes self-sufficient, this would enable it to become a larger provider in the global market. This has rightfully instilled fears in manufacturers in other countries since this momentum could disrupt the marketplace that other countries have had and depended on for decades.
The MIC 2025 plan has also been a source of contention during the US-China trade war. US politicians have claimed that forced technology transfers by China is a large part of the problem.
Some Changes under Consideration
Due to the international backlash, policy makers are considering making changes to the MIC 2025 plan that would encourage investment from other countries and would eradicate provisions that targeted certain percentages that MIC components had to meet.
Another potential change that is being considered by policymakers is delaying the anticipated timeline so that all of the goals are not expected by the year 2025.
However, even if these changes are made, China will still continue its mission toward developing advanced technology and trying to reduce its reliance on western knowledge. Policymakers tout the important economic and strategic advantages of this model.
Additionally, new industrial goals may still be established. However, they may be more subtle in nature or not released in a public forum. For example, region-specific or sector-specific policies could attract investments while not providing the publicity of a national ambition.
Larger areas like Beijing may embrace fair competition norms for foreign, state-owned, and private enterprises, which could attract additional financial investment from foreigners and make China more friendly when dealing with foreign companies.
This double-pronged approach of developing technology to ease reliance on western knowledge and reform policies so that foreign investment is more accessible could allow China to maintain strong trade policies while insulating itself from additional punitive measures from the United States.
Chinese policies are currently being adopted to advance lawmakers objectives, including:
- Reducing the burden on the social insurance system
- Opening market access to foreign firms
- Boosting participation by the private sector
- Strengthening intellectual property protection
- Facilitating foreign and domestic business capabilities
These new policies could have a dramatic impact on foreign investment over the next few years.
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