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09:56 am | April 14, 2020

What Happened to "Made in China 2025"?

China’s grand plan for industrial restructuring caused concern in Europe following its announcement in 2015. Liang Shixin reviews the policy and its development, and notes current signs to look for.

By Liang Shixin

The Made in China 2025 (MIC 2025) strategic plan for China’s industrial development was first introduced in the 2015 Government Work Report delivered by Premier Li Keqiang on March 5, 2015. The goal of the plan was to promote the modernization of Chinese industry, as Li’s report made clear:

Manufacturing is traditionally a strong industry for China. We will implement the ‘Made in China 2025’ strategy; seek innovation-driven development; apply smart technologies; strengthen foundations; pursue green development; and redouble our efforts to upgrade China from a manufacturer of quantity to one of quality.

On May 19, more than two months after Li’s government work report, the State Council issued its ten-year action plan for Made in China 2025 (Chinese version of the “Notice” here). The plan proposed a “three step” strategy of transforming China into a leading global manufacturing power by 2049. Specifically, it promoted breakthroughs in the following 10 key sectors:

1. New information technology
2. High-end numerically controlled machine tools and robots
3. Aerospace equipment
4. Ocean engineering equipment and high-end vessels
5. High-end rail transportation equipment
6. Energy-saving cars and new energy cars
7. Electrical equipment
8. Farming machine
9. New materials (such as polymers
10. Bio-medicine and high-end medical equipment.

In keeping with the expansion in recent years of the role of so-called “leading small groups,” or LSGs, as coordination bodies for concrete policy areas, the State Council announced the establishment on June 24, 2015, of the Leading Group for Creating a Strong Manufacturing Country, tasked with directing China’s strategy to become a world manufacturing power. While the literal meaning of this small leading group in Chinese made it clear that the goal in upgrading the country’s manufacturing capabilities was to advance China as a powerful nation (强国), this aspect of the strategy was not so visible in English-language sources from the government.

As many sources noted in 2015, Made in China 2025 drew inspiration from Germany’s “Industry 4.0” plan, first introduced in 2013. During a press briefing on March 27, 2015, not long after Premier Li Keqiang’s work report, Su Bo, the deputy minister of China’s Ministry of Industry and Information Technology (MIIT), the office in charge of industrial policy, outlined the similarities and differences between Made in China 2025 and “Industry 4.0”  The similarities, he said, came in the in-depth integration of information technology and manufacturing technology. The difference was that while Germany already had advanced technology integrated with its manufacturing, enabling it to jump-start “Industry 4.0” directly, China had to play catch-up, pushing all at once for the development of Industry 2.0, 3.0 and 4.0 – meaning that it had to both upgrade traditional industries and develop high-tech and emerging industries (full Chinese transcript here).

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The state-run China Daily reports on the “1+X” initiative, which outlines concrete guidelines for implementation of Made in China 2025 in 11 sub-sectors.

Further steps for the implementation of MIC 2025 were unveiled on January 23, 2017, as the MIIT and the China Federation of Industrial Economics, an official joint organization of national industrial associations, publicly announced its initial list of 104 industrial champions, all domestic Chinese enterprises.

The next month, China followed up by releasing specific guidelines for 11 sub-sectors, an initiative known as “1+X” – “1” referring to MIC 2025, and “X” to the sub-sector guidelines. State media noted that the guidelines were "suggestions instead of administrative requirements." They included such measures as giving a greater role to the market in resource allocation, encouraging joint efforts by the state along with enterprises, research institutes, universities and financial institutions.

In November 23, 2017, the State Council issued a circular directing the establishment of “demonstration zones” for MIC 2025 across the country. A final decision for implementation was slated for 2018, but since the initial circular there have been no related announcements. Moreover, the official online site of MIC 2025, subdomain on the MIIT website, has been largely inactive since the first half of 2018 – the last official document appearing in April 2018.

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Screenshot of the official MIC 2025 subdomain on the MIIT website, showing no updates since 2018.

By the end of 2015, media and business groups from the United States and across Europe turned greater attention to Made in China 2025, voicing concern that the policy, which involves the spending of billions of dollars to bolster China’s domestic enterprises, did not conform to the principles of the market economy and represented a threat to the interests of non-Chinese enterprises. In March 2017, the European Chamber of Commerce responded with a report cautioning against the “negative aspects” of MIC 2025, expressing concern that the plan could encourage discrimination against foreign firms and force them to relinquish their own technologies to Chinese competitors. “Under recently passed legislation in the new energy vehicle industry, for example, European business is facing intense pressure to turn over advanced technology in exchange for near-term market access,” the report said.

A localization target established by the policy for domestic supply of basic core components and materials seemed to clear the way for the worsening of an uneven playing field for foreign companies. In the railway sector, for example, defined as number five on the list of key sectors, foreign players complained that the emphasis on government-supported Chinese rivals under MIC 2025 risked shutting them out. Germany’s Knorr-Bremse, a manufacturer of brakes for trains and subways, told the Reuters news agency that tender documents from at least 11 cities in China in 2015 had set new rules that scored down foreign-invested firms.

In June 2017, China revised its Catalogue of Industries for Guiding Foreign Investment, supporting in principle the participation of foreign investment in Made in China 2025. In an interview with the state-run China Daily shortly after, Xie Guobin of the Ministry of Industry and Information Technology defended the MIC 2025 plan, saying that state support for the high-tech sector was a “common global practice,” and that policies were not exclusive to Chinese firms. "Policies and measures under 'Made in China 2025' are applicable to both domestic and foreign businesses,” Xie said, “and all companies will be treated equally."

Despite China’s reassurances, concerns have persisted about MIC 2025, particularly in light of the US-China trade war, and since 2017 China has largely dropped open mention of the industrial development plan.

Where is MIC 2025 Now?

Five years on from the initial announcement of MIC 2025, no comprehensive list of benefitting companies has yet been made public. Late last year, however, Chinese media reported the creation of the so-called “National Manufacturing Transformation and Upgrade Fund (国家制造业转型升级基金), a limited company registered on November 18, 2019 with a capital injection of 147.2 billion RMB (21 billion USD) , which appears to be related to the MIC 2025 strategy.

The company’s legal representative is Wang Zhanfu (王占甫), director of the finance department at the Ministry of Industry and Information Technology. With more than a 15 percent share, the Ministry of Finance is the fund's largest shareholder and the actual controller, followed by the China Development Bank Capital Corporation Ltd, a wholly-owned subsidiary of the China Development Bank. Shareholders in the fund also include a number of companies that have previously claimed close ties with Made in China 2025, such as CRRC Corporation Limited, now the world’s largest rail transit supplier, and Zhengzhou’s Yutong Bus, one of the world’s largest commercial vehicle manufacturers.

Coverage of the establishment of the fund by the Beijing News noted that Yutong Bus and CRRC have been “closely involved” in Made in China 2025. The recent establishment of the National Manufacturing Transformation and Upgrade Fund, which merits further observation, suggests that while open discussion of “Made in China” has faded from the official discourse, China has not relinquished its vision of industrial in order to advance its development as a powerful industrial nation.

April 14, 2020
Liang Shixin

Liang Shixin is a graduate student in China Studies at the University of Heidelberg.