Made in China 2025: Another CCP Dream Dashed

September 29, 2021 Updated: September 30, 2021

News Analysis

From the beginning of his reign, Xi Jinping has been preaching China’s need to end U.S. world dominance, create Chinese independence, and rewrite the global social order.

The Chinese Communist Party (CCP) ascribes names to the various plans and initiatives that it hopes will culminate in Chinese global domination, including “Made in China 2025” (MIC 25), the “Belt and Road Initiative” (BRI), “common prosperity,” “dual circulation,” and a host of other initiatives. Recently, Xi has stepped up the nationalist rhetoric, but it seems that MIC 25 and the BRI have fallen victims to China’s zero-tolerance COVID-19 policy and Xi’s crackdown on everything.

Now, Xi is promoting an intensified version of his earlier independence and global conquest narratives, but he appears to believe China will achieve world domination by cracking down internally, rather than expanding abroad.

When MIC 2025 was announced in May 2015, the goal was to invest heavily in domestic technology development in order to end Chinese dependence on foreign technology, transforming China into a global powerhouse of high-tech industries. In this way, the CCP hoped that Chinese companies would be able to compete globally, moving China up the value chain from low-end manufacturing to high-end innovation. As each of these named goals is part of a larger government strategy, MIC 2025 is a significant component to Xi’s goal of China becoming a fully industrialized nation by 2035.

Epoch Times Photo
A screen shows news coverage of Chinese leader Xi Jinping delivering a speech during a Communist Party of China and World Political Parties summit, as people walk outside a shopping mall in Beijing on July 7, 2021. (Jade Gai/AFP via Getty Images)

The CCP planned to improve China’s financial, education, healthcare, and manufacturing sectors, creating Chinese innovation, and improving manufacturing of both essential components and final products. Areas such as machine learning, which are difficult to reverse engineer, were a particular focus of these programs.

Other areas to be emphasized included wireless-sensor networks, 3D printing, industrial e-commerce, cloud computing, and big data. State banks and financial institutions made funds available to companies conducting research, particularly in the area of semiconductors. The specific target was to move China from its current level of 16 percent semiconductor self-sufficiency to a target of 70 percent.

Financial support from Beijing included grants, tax incentives, research subsidies, low-interest loans, and bonds. State funding and state plans led to a favoring of state-owned and state-controlled entities, as well as companies close to the regime. This already began to drive a wedge between the public and private sectors, which exacerbated over the intervening years.

Experts outside of China believed that, even before the pandemic economy and Xi’s recent crackdowns, MIC 2025 was not going to succeed. Basically, China’s objective was to pump money into research and development in order to reach a level of development, which the United States, Germany, and Japan had already attained. That in itself would be very expensive, and in the end, would only level the playing field, not necessarily give China an advantage. Next, the United States, Germany, and Japan not only have the advanced technology already, but also have access to manufacturing in India, where labor costs are about half of what they are in China. Beijing’s goal, conversely, was to develop the technology and then manufacture in China. So it seems China still would not have had an advantage.

Now, it seems that MIC 2025 and some of the earlier programs have been completely abandoned. Before, Xi had been pumping money into technology research; now, he is demanding that technology giants give away large portions of their profits.

Under the new “common prosperity” plan, Alibaba, for example pledged to invest $15.5 billion in economic and social development. Tencent similarly pledged $100 billion toward various social initiatives, as have Pinduoduo, Meituan, and Xiaomi.

Xiaomi
Chinese electronics company Xiaomi’s new smartphone Mi MIX3 5G is displayed at the Mobile World Congress in Barcelona on Feb. 24, 2019. (Lluis Gene/AFP)

Shifting from promoting and encouraging private sector technology firms to nurture and develop domestic technology, Xi is now cracking down on firms such as Alibaba, Tencent, Meituan, and Didi. The last-minute cancellation of Ant Group’s IPO is one of the largest examples of the CCP’s crackdown on big tech. Xi is regulating the behavior of tech giants, while demanding that they give money away. This does not seem the best strategy toward developing domestic technology and innovation. Understandably, the markets are reacting negatively with the Hang Seng Tech Index dropping by 40 percent since February.

Xi’s quest for semiconductors, in particular, has gone completely off the rails. About nine miles outside of the Shandong Provincial capital of Jinan, a semiconductor plant was being built by Quanxin Integrated Circuit Manufacturing, funded by government money. A year later, the factory is still not complete, construction has halted, and the company is out of money. The high-quality talent that Quanxin recruited are all abandoning ship after the firm was unable to meet payroll.

Another company, Hongxin in Wuhan, similarly took initial government money but failed to produce anything in the end. Tacoma Nanjing Semiconductor Technology in Jiangsu and Kuntong Semiconductor Technology in Shaanxi Province were other examples of public-private partnerships that ran out of money and went bankrupt, before producing a final product. Solar cells and electric cars are other areas where companies have taken government money, but declared bankruptcy before completing their projects.

With a lack of government funding and support, it seems unlikely that Chinese technology companies can help the CCP realize the goals of Made in China 2025 or the goal of becoming a fully industrialized nation by 2035. Meanwhile, the crackdown on tech firms, the insistence that they maintain Party cells and Party members on their boards of directors, and that they redistribute their wealth according to government edicts all seem like policies that would move them away from achieving the regime’s technological development goals.

Some experts believe that with increased government controls, these high-tech companies will become like quasi-state-owned enterprises, working toward the “common prosperity” and the “greater good” rather than toward technological independence.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

Antonio Graceffo, Ph.D., has spent over 20 years in Asia. He is a graduate of Shanghai University of Sport and holds a China-MBA from Shanghai Jiaotong University. Antonio works as an economics professor and China economic analyst, writing for various international media. Some of his books on China include "Beyond the Belt and Road: China’s Global Economic Expansion" and "A Short Course on the Chinese Economy."