Inside Made in China 2025: Hits, Misses, and Economic Myths | Digging into China

Hi, I'm Dong Shong. Welcome to Digging into China, where we explore China in depth to reveal unique perspectives. In 2015, the Chinese Communist Party launched the Made in China 2025, a decade long initiative to revolutionize the nation's manufacturing sector. Now, as we are reached 2025, how much progress has this ambitious plan achieved? How does China's technological landscape compare to that of Western nations? Today we will explore the journey of Made in China 2025. So where does Made in China 2025 stand today? I believe we can assess it through three key perspectives. Its overarching goals, progress in specific industries, and its contributions to the economy. Let's begin with the overarching goals. Discussions about the Made in China 2025 often center on individual industries with debates about whether China's technological advancements have surpassed those of the United States. However, many overlook that the 2015 made in China 2025 announcement outlined 12 systemic metrics to gauge success. How many of these have been met? In truth, very few. Only two matrix have been achieved. Broadband penetration and the manufacturing quality competitiveness index. The rest have fallen short with the four metrics related to green development particularly far from their targets. Speaking of green development, made in China 2025 includes environmental requirements which may come as a surprise. Environmental concerns are often viewed skeptically by some nationalist groups, not as a priority for the Communist Party. As a result, these metrics are rarely used to judge the initiative success as they feel somewhat outdated. To truly evaluate whether Made in China 2025 has succeeded, we must turn to the industries themselves. the primary focus for most observers. The Communist Party identified 10 key industries for made in China 2025, setting measurable goals to close the gap with global leaders. So, how are these industries fairing? I categorize them into three groups. Those exceeding expectations, those with mixed outcomes, and those falling significantly short. Let's start with the successes industries that have exceeded expectations. Two stand out power equipment and advanced rail transport in power equipment which primarily refers to electricity generation. China has established remarkable dominance. Take renewable energy for instance. China's solar industry is unquestionably a global leader. Approximately 70% of the world's solar products are manufactured in China and the country's solar production capacity outstrips global demand. China also controls entire supply chain from raw materials to finish the products in nuclear power. While not yet worldleading, China has achieved selfsufficiency. The domestically developed Hua Long reactor for example has a localization rate exceeding 90% and the China is even exporting it to Pakistan. A commendable achievement across the power sector. The one notable weakness is wind power. Certain components for large wind turbines such as gear boxes, bearings, converters, and control systems still face technical hurdles and rely on foreign imports. However, wind power constitutes only about 10% of China's total electricity generation. So, it's not a critical issue. Overall, the power sector has not only achieved self-reliance, but has surpassed Made in China 2025's expectations. Then there is advanced rail transport, high-speed rail. While not as dominant as power equipment, it's still impressive. China's most advanced high-speed rail models boast a localization rate of 97%. The only critical component still sourced from foreign suppliers such as Japan's Seiko is ball bearings. Like nuclear power, high-speed rail has achieved self-sufficiency but fails short of global dominance. Nevertheless, it has exceeded the benchmarks set by made in China 2025. Now, let's turn to industries with mixed outcomes. First, automotive sector. Why isn't this considered a clear success? Made in China 2025's automotive goals encompass not only electric vehicles but also energy saving vehicles meaning traditional cars with enhanced efficiency. China's remarkable progress in electric vehicles has largely overshadowed this energy saving category. China's achievements in electric vehicles are undeniable. In 2015, Chinese electric vehicles accounted for 37.7% of global sales. By 2024, that figure had surged to 70%. And beyond the Tesla, BYD leads the pack, far exceeding the original expectations. However, in traditional internal combustion engine vehicles, China remains far behind. As of 2024, foreign automakers still command 65% of China's gasoline car market, well short of the goal for state-owned enterprises to hold 50% by 2025. Emission reduction technologies also lag significantly behind companies like Toyota. Even in electric vehicles, China isn't fully self-reliant in core technologies. While Chinese automakers increasingly depend on domestic supplies for components like interiors, glass, and sensors, resulting in noticeably improved interiors. Key technologies such as engines, control systems, and braking safety system remain dominated by multinational firms. For instance, ABS anti-lock braking systems still heavily rely on foreign suppliers. Thus the automotive sector encompassing electric and energy saving vehicles warrants a mixed outcomes assessment. Another industry with mixed result is next generation information technology which spans software development semiconductors and communication equipment. Let's start with software not consumer apps like a Tik Tok or Tao but industrial software. The most tangible metric here is the market share of domestically developed industrial software. The original plan aimed for Chinese industrial software to capture over 50% of the domestic market by 2025. Yet today over 90% of China's industrial software still comes from foreign companies. For example, the computer aided design software market is led by firms like a doalt systems and seammens which hold over 50% of the market while Chinese companies account for less than 10% far from the 50% target. Then there is semiconductors an area of stark contrast in high-end chip manufacturing China faces severe constraints. Made in China 2025 aimed for China to independently produce EUV lithography machines by 2025 to 2030 and the key materials like EUV photoresist by 2025. But today EUV lithography machines remains a distant aspiration. On the other hand, China has made progress in low-end chips thanks to cost advantages. China now holds about the 34% of the global low-end chip market in memory chips such as flash storage. China has also advanced. In 2015, China was entirely dependent on foreign companies like Samsung, SK Highix and Micron. Now companies like Yangz Memory and SMIC have made strides particularly in pricing. This category earns a mixed outcomes labeled largely due to mobile communication equipment primarily smartphones. China's progress here is a strong. The plan called for Chinese companies to hold 80% of the domestic phone market and 40% of the global market by 2025. Domestically, including Apple, which manufacturers in China, the share is 87%. Excluding Apple, it's 72%. Globally, even without Apple, China phones reached 41% in 2024 with the Xiaomi, Transang and Oppo alone accounted for 31%. Overall, this category narrowly qualifies as mixed outcomes. Now, we come to the industries that have significantly underperformed news that some may find difficult to hear. First, aerospace. While space exploration has seen some progress, aviation is a different story with virtually no advancement. Made in China 2025's road map aimed for Chinese made plans to account for 5% of domestic routes by 2020 and 10% by 2025 with domestic companies holding 30% of the passenger aircraft equipment and parts market and 50% of the general aviation market by 2025. In reality, progress is far behind. China's domestically produced C919 aircraft didn't complete its first commercial flight until 2023. To date, only 16 have been built with just 14 in service, well short of the targets. Moreover, the C919 relies heavily on foreign technology with only the airframe achieving a high localization rate. A prominent aviation consultancy, the Aerodynamic Advisory, once described the C919 as essentially a western plane assembled in China, merely encased in Chinese metal. This assessment is accurate. China's aviation industry has comprehensively failed to meet made in China 2025 goal, a resounding defeat. Another significant shortfall is in the medical industry. China has gained some ground in low-end pharmaceuticals account for nearly half of global antibiotic exports and 90% of global antibiotic production capacity. A reflection of the country's heavy antibiotic use. But why isn't this a mixed outcome story like semiconductors? Because made in China 2025 targeted high-end pharmaceuticals and advanced medical devices where progress is lackluster. The plan called for China's drug quality to align with international standards by 2025 with five to 10 independently developed new drugs gaining FDA or EU approval for global markets. Yet progress remains limited. Chinese drugs still lack widespread international acceptance. It wasn't until 2019 that a Chinese drug received FDA approval. By 2025, seven drugs have gained FDA or EU approval. But this feels more like fulfilling a quota. Only two have been commercialized overseas with a modest sales far from truly penetrating global markets. Aligning drug quality with international standards remains an even greater challenge. High-end medical devices are even further behind. The plan aimed for 70% self-sufficiency in advanced medical devices by 2020 and a full production capacity for core components by 2025. But today, China's localization rate for high-end medical devices at just 30%. For example, CT scanners with 64 slices or more was supposed to be domestically produced by 2025, but the localization rate is only 28.7%. Well below the expectations. The high-end medical industry is another clear failure. Then there is industrial robots and high-end machine tools made in China 2025 set ambitious target 50% self-sufficiency industrial robots by 2020 and 70% by 2025. But by 2021, China's self-sufficiency in heavy sixaxis robots, light sixaxis robots, and the SCARA robots were only 18% 34% and 17% respectively. Far from the goals, only one type of a robot surpassed the target. The high-end machine tool industry faces similar challenges. The plan called for Chinese companies to hold 70% of the domestic market by 2020 and 80% by 2025. While companies like high TM position have succeeded in low and mid-end markets, high-end markets remain elusive. Low-end machine tools are fully self-sufficient and mid-end ones have a 73 and a half% localization rate. But in high-end machine tools, Chinese companies hold just 15% of the market, far from the target. This is another undeniable failure. There are also emerging industries like drones where China has achieved global leadership. But since drones weren't part of Made in China 2025, we won't delve into them here. That concludes the narrow evaluation of Made in China 2025's progress. Of the 10 key industries, two exceeded expectations, power equipment, and advanced rail transport. Two have mixed outcomes, next generation information technology and energy saving EV. Three are outright failures. Aerospace, high-end medical and high-end machine tools, robots. The remaining three new materials, agriculture, machinery, and marine engineering, high-tech shipping are less pivotal and weren't addressed here. What's your verdict? Has made in China 2025 stalled or is it still on course? Everyone will have their own perspective. But beyond this narrow assessment, let's consider the broader implications. First, we must recognize that made in China 2025 is a tool, not the ultimate goal. Technological innovation must serve a purpose. It's not about innovating for its own sake. So, has made in China 2025 fulfilled its broader objectives. Has it succeeded? That depends on who you ask. As success carries different meanings for different stakeholders. The Communist Party often equates itself with the Chinese people suggesting they are one and the same. But we must distinguish between the two. The party and the Chinese people have distinct visions of success for made in China 2025. From the people's perspective, broad success would mean leveraging made in China 2025 to drive technological innovation, overcome China's middle income trap, move beyond being the world's lowcost factory, and enhance the quality of life, higher incomes, shorter working hours, and a better living standard. That's the essence of success. For the Communist Party, success is defined differently. reducing reliance on foreign technology, strengthening China's ability to counter the West, shielding itself from Western influence, and solidifying its rule. That's their measure of achievement. Evident from a broader perspective, Made in China 2025 has not delivered for the Chinese people, but for the Communist Party, it's a triumph. While the party fell short of many of made in China 2025 specific targets, it has accomplished its underlying goal reducing foreign dependency through alternative strategies. For instance, even when Chinese companies lack self-sufficiency, the party has encouraged the foreign firms to establish factories in China, effectively achieving self-reliance indirectly. Consider Samsung. Its largest memory chip factory is in Shian, accounting for 40% of its related production. SK Highix produces half its memory chips in Wu Sheepi. Even if Chinese companies can't fully produce these products, this arrangement reduces dependence on foreign supply chains. Coupled with the areas where made in China 2025 has succeeded, China's reliance on imports has significantly decreased across most industries except high-end medical and strategic sectors like semiconductors. Meanwhile, China's industrial capacity has expanded rapidly. This reduced import dependency and enhanced manufacturing prowess mean that even if relations with the EU or EU deteriorate, China could nationalize Western companies asset and achieve selfsufficiency. This emboldens the party to engage in trade disputes or even broader conflicts with the west. More critically, this makes it harder for other nations to interfere with or challenge the party's authority. From the party's perspective, Made in China 2025 is a success, but for the Chinese people, it's a profound disappointment. Even the initiative success have failed to bolster the economy. Consider the three strongest sectors, solar, high-speed rail, and electric vehicles. They've contributed little to the broader economy. Arguably, they've been a burden. In the electric vehicle industry, only three of the 112 Chinese EV manufacturers are profitable. The path to prominence has been paved with enormous waste funded by government subsidies, taxpayer money, and resources that could have supported health care or pensions. The solar industry, while globally dominant, suffers from over capacity. China's solar sector holds a near monopoly, but it's incurring massive losses. Financial reports from the top Chinese solar companies reveal that none were profitable in 2024. With the industry losing billions annually, the entire supply chain is in the red. As for high-speed rail, it's widespread, underutilized, and waste have been discussed previously, so I won't elaborate here. On a larger scale, made in China 2025 has not driven industrial transformation. China's low-end manufacturing persists. In recent years, as high-end manufacturing exports have grown, low-end manufacturing exports have surged even faster, outpacing high-end growth. Industrial transformation hasn't materialized alongside a technological innovation. On one hand, there are technological breakthroughs. Electric vehicles and solar appear impressive, but on the other, Chinese workers face longer hours with no improvements in wages or benefits. Typically, technological innovation should fuel industrial upgrades, which then enhance living standards. But made in China 2025 has distorted this process. It hasn't translated innovation into better lives for ordinary people. Instead, it has fueled over capacity and economic deflation. Two formidable challenges. To draw a smaller scale comparison, made in China 2025 resembles China's zero COVID policy. Did zero COVID reduce infections? Indeed, it did. But the goal of epidemic control isn't solely to eliminate the cases. It's to minimize death and improve safety and quality of life. Yet those outcomes didn't materialize. Zero COVID caused a widespread hardship, sparking the white paper revolution that ultimately ended the policy. The same applies to made in China 2025. Its intended purpose was to develop a high-tech industries to improve Chinese people's lives. While there have been some technological gains, they haven't translated into better living conditions for the people. On a grander scale, made in China 2025 echoes China's pursuit of nuclear weapons during the great famine. Was developing the bomb aid widespread starvation about benefiting the people? Certainly not. The people gained only a sense of national pride, feeling they had stood up, while their material lives saw no improvements and in fact suffered greatly. But for the Communist Party, the bomb was a triumph, cementing its power and deterring threats to its rule. Made in China 2025 follows a similar path today. It hasn't enhanced the Chinese people's lived experience, offering only symbolic victories, but for the Communist Party, it's a significant achievement, equipping them with an economic super weapon to challenge the United States and the world's democracies. That's why in the broader sense, Made in China 2025 represents a victory for the party, but a loss for the Chinese people. Thank you so much for watching. If you find this video helpful, please like it, drop a comment below, and hit the subscribe button right here. It really helps YouTube suggest my video to others. I'll be back with more content soon. Until then, be well.