Made in China 2025: What this Means for the Global Economy
Updated: Dec 21, 2021
Made in China 2025 (MIC 2025) is the Chinese government’s ten-year strategic plan that was released in 2015 to advance China’s global position in the manufacturing and technological industries. It is the first stage in China’s three-stage plan aimed at making China the global manufacturing and technological power by 2049.
The MIC 2025 plan targets ten sectors: electrical equipment, farming machines, new materials, new energy vehicles, artificial intelligence and robotics, information technology, aerospace equipment, railway equipment, ocean engineering equipment, and medical devices. China’s end goal is to be technologically self-sufficient, become an economic powerhouse, and become the global leader of high-tech manufacturing.
The plan received western concerns and blowback for numerous reasons. But why? What does MIC 2025 mean for global manufacturing and economy, and what do the negative reactions and the plan itself mean for China? To answer these questions, we need to first look into the US-China trade war that brought MIC 2025 under a bigger spotlight.
The US-China Trade War
After receiving major attention from the West, China started “downplaying” the plan by presenting it as aspirational. It was downplayed to the point where Premier Li Keqiang left MIC 2025 out of the 2019 National People’s Congress opening session. In 2018, former US President Donald Trump threatened to impose tariffs on up to $450 billion on Chinese imports. As of July 20, 2018, there were an estimated $500 billion in Chinese imports in the US. This marked the start of a tariff war between China and the US. With each Chinese retaliation, the US further increased tariffs on imported Chinese goods.
The tariffs on Chinese goods have remained under the Biden administration, with an estimated 66% of Chinese exports being affected by the tariffs, and an estimated 58% of American exports to China having tariffs imposed. Lifting those tariffs seems unlikely in the near future because of the recent heated diplomatic exchange between US Secretary of State Antony Blinken and Chinese top diplomat Yang Jiechi. The topics discussed that led to this heated exchange ranged from Chinese aggression and human rights abuses in Xinjiang to its economic practices. One incident involved the American side criticising China’s human rights practices, while their Chinese counterpart questioned theirs.
As of today, the tariffs imposed on Chinese goods have cost American importers $82 billion dollars. In addition, they have cost 300,000 jobs and 0.3% of US GDP during the first year of the trade war. Trump’s continuous threats to impose more tariffs created an unstable environment for trade and investment. However, these tariffs helped narrow the American goods deficit with China to $311 billion in 2020 as opposed to $419 billion in 2018.
MIC 2025 Threats to the US
The main concerns regarding China’s ambitions for being the leader of global markets are security, intellectual property theft, and distortion of the global economy. In 2017, government-led Chinese investments in US companies working on facial-recognition software, 3-D printing, virtual reality, and autonomous vehicles were classified as a national security threat. The Pentagon had warned that these investments didn’t have a clear distinction between being investments on civilian or military technologies.
The Chinese economic model has been criticised for prioritising political goals as opposed to worldwide economic benefits. The model is infamous for encouraging overproduction and placing cheap products in the global market. This dumping of cheap products results in a distorted global economy. In addition, many US, European, and other companies have complained about the one-sided investment opportunities created by China, where China is free to invest in foreign countries with manageable requirements, but other countries have a hard time doing the same in China due to the constraints created by cumbersome requirements and regulations.
MIC 2025 Threats to other Countries
China’s multiple attempts at acquiring different foreign sectors were pushed back. In 2016, there were Chinese bids to buy Australia’s agricultural business and electricity grid operators. However, Australia rejected the bids. In Germany, China is invested in a new battery developing technologies company Daimler, as well as Germany’s largest robotics producer Kuka. This led to Berlin calling for a European Union investment in their technologies to minimise China’s control over European technologies. France is another nation that has been complaining about China’s economic practices, causing them to increase restrictions on foreign investment to stop sensitive technology “looting”.
Overall, the West is unsatisfied with China’s growing control and ownership over their technologies and companies. This dissatisfaction has led most Western countries to develop different strategies to counter China’s advances, but what has MIC 2025 been doing for China and its position in the global economy?
China and the Global Economy
MIC 2025 has the necessary elements to leap China into the top spot of global economic leadership. By being involved in emerging technologies, China has found itself with a competitive advantage by advancing their technologies and relying less on foreign companies. The plan will also help fill technological gaps in the market by introducing new technologies in different sectors. Finally, the plan offers flexibility for Chinese companies to enter and control the global market, which would lead to more control from the state over the global economy.
The diversification created by MIC 2025 will pose a threat to the current power dynamic in the global economy. The plan has created an economic competitiveness that could give China a powerful leverage over other nations as it expands its control over the global economy. In addition, China’s acquisition of “cutting-edge” technology in countries like Germany could give China control over the most profitable segments of global supply chains and production networks, a 2016 study by the Mercator Institute for China Studies said.
China wants to become self-sufficient in the future. It wants to rely less on foreign companies and investments by creating plans that advance China’s position in the technological and manufacturing worlds both domestically and globally. Since the global economy is involved in these plans, the world, more notably the West, has reacted in a negative way towards those ambitions. The negative reactions stem from fear towards the shift of power dynamics in the global economy that would jeopardise economic powerhouses like the US to lose some of the dominance they have.
The US and European nations fear that China’s plans would put their security at risk as China is working on high-tech products that could be used as military technologies. China’s acquisition of major global companies and investment in global high-technology businesses establish grounds for technological looting and intellectual property theft from which all other nations would suffer.
Since China relies on many US technologies, it is still difficult to predict whether or not China will become the global economic powerhouse and rule the global economy, especially with the US-China trade relations not thawing anytime soon.