"Made in China 2025"

Introduction

In March 2015, China's Premier Li Keqiang 李克强 (b. 1955) first launched the "Made in China 2025" initiative (Zhongguo zhizao 中国制造２０２５) during the 3rd session of the 12th National People's Congress (Di ershi jie Quanguo Renmin Daibiao dahui 第十二届全国人民代表大会) in Beijing. The strategy aims to sustainably improve the quality of the Chinese industry by 2025 and establish an advanced industry standard by 2035 and 2049, respectively. Reasons are fairly easy to analyze: For the past few decades, China has been the world's workbench that owed its international competitiveness to low wage levels. However, this has changed and China's industry is already suffering from lower competitiveness due to a rise in wage levels of over 60% since 2002 (Kunze & Windels 2018: 10). "Made in China 2025" was introduced to overcome this weakness and gain competitiveness through high added value in production.

The strategy aims at strengthening China's international competitiveness in high-tech industries such as robotics, aviation and new energy sources. The plan is to reduce China's dependence on foreign technology imports through its own innovations and catapult domestic companies to the forefront of the international economy. Special focus is therefore on the development of new technologies such as Huawei's (Huawei Jishu Gongsi 华为技术公司) 5G technology, combined with machine learning and smart manufacturing. If successful, China would move up the value chain, moving from a low-cost producer to a direct competitor of countries such as South Korea, Japan and Germany. From Beijing's perspective, this step is overdue, as otherwise there is a risk of getting stuck in the middle income trap.

Goals

Essentially, two main goals for "Made in China 2025" can be identified. First, Beijing intends to transform the People's Republic of China into a manufacturing superpower (zhizao qiangguo 制造强国), achieved through the promotion of domestic innovation and competitiveness as well as localization of large parts of global production. Second, it seeks to defend its status as the world's factory over emerging countries such as Vietnam. Wage increases have not yet caused a major off-shoring, but the Chinese government sees the relocation of factories to Southeast Asian neighbors as a threat in the long term. Beijing therefore wants to keep the production of e.g. textiles through the help of smart manufacturing competitively cheap.

Ten key sectors (miaozhun shi da zhongdian lingyu 瞄准十大重点领域) were identified by the government, which together already account for nearly 40% of total industrial value added production. These are the following:

It is already becoming apparent that a highly competitive group of manufacturers and technology providers, so-called national champions (guanjun qiye 冠军企业) will emerge from "Made in China 2025". In the long term, it will also be important for medium and small businesses to modernize as well. For this "Made in China 2025" is already providing good incentives, but overall Beijing is hoping for a spill-over effect by the created national champions.

Implementation

"Made in China 2025" is supported by Beijing through various political campaigns, e.g. integration into the 5-year plans. The strategy builds on the industrial policy of recent years, but is much larger, more resource-rich and one of Beijing's most ambitious long-term projects ever. "Made in China 2025" plans far ahead and outlines China's development until the 100th anniversary of the founding of the People's Republic in 2049, whereby the eponymous year 2025 actually represents only an intermediate step (Wübbeke & al. 2016: 17).

Step One: to be achieved by 2025

Step Two: to be achieved by 2035

Step Three: to be achieved by 2049

The implementation of "Made in China 2025" is being led by the Ministry of Industry and Information Technology (MIIT, Gongye he xinxihua bu 工业和信息化部) which already launched five major nationwide initiatives with the following objectives (China-Britain Business Council, & UK Trade & Investment. 2016: 8):

In addition, various policies and goals have been established for companies. Including an increase in R&D expenditures from 0.95% to 1.68% of company sales, an increase in labor productivity by 7.5% by 2020 and a reduction of energy and water consumption by 35% by 2025 (Wübbeke & al. 2016: 19). Beijing also implemented various standardization laws as well as testing and certificate systems that aim at improving the quality of products to meet international benchmarks across all industries, e.g. in the Traditional Chinese Medicine industry (Institute for Security & Development Policy 2018: 5). Furthermore, they have also begun to expand overseas investments of Chinese companies. The government views international partnerships and acquisition of foreign intellectual property as an important tool for improving the domestic economy. In the long term however, these are to be reduced. Made in China 2025 after all serves the purpose of relocating production chains to China herself.

To achieve these goals, the government is providing huge funds for "Made in China 2025". Examples are the Advanced Manufacturing Fund (Guojia xianjin zhizao chanye touzi jijin 国家先进制造产业投资基金) amounting to 2.7 billion Euro and the National Integrated Circuit Fund (Guojia jicheng dianlu chanye touzi jijin 国家集成电路产业投资基金) even containing 19 billion Euro. These funds are complemented by a variety of provincial funding instruments. China's state-owned banks, for example, have already begun issuing low-interest loans and bonds, especially to small and medium-sized private enterprises, where bank loans used to be a rarity.

The only bottom line seems to be lending to purely domestic companies and tying the use of money to Chinese intellectual property. The financial resources provided are enormous. In comparison: the German federal government only provides a total of 200 million Euro in total for their development plan Industry 4.0, which can be understood as a role model for "Made in China 2025", although on a much smaller scale.