Until recently, Chinese consumers and businesses did not shy away from foreign brands when purchasing high-performance cars and trucks for their own use.
Windrose Technology is part of a wave of Chinese startups that are starting to change that. Last month, the company began delivering next-generation heavy-duty electric trucks to Chinese customers, led by a subsidiary of SF Holding, China’s largest logistics group. Windrose has another 5,000 orders from U.S. customers and hundreds more from other customers in China and Europe.
Windrose is backed by investors including local governments in China’s Hefei and Suzhou cities, and has benefited from preferential land deals and proximity to the electric vehicle supply chain that stretches around its headquarters in Hefei. Ta. According to Han Wen, 34, the company’s founder, chairman and CEO, this allows the company to source all parts for its trucks locally.
“We redesigned every component and never relied on imports,” says Han, a Stanford University graduate and veteran of two U.S.-based investment firms. “We have the best technology ever.”
Windrose’s rise reflects the Chinese government’s ambitious goals set out nearly a decade ago in its “Made in China 2025” policy blueprint to reduce dependence on foreign technology imports and upgrade domestic manufacturing. This is an example of how much is happening.
In almost all of the 10 major industries covered by the plan, China has made remarkable achievements, emerging as a world leader in areas such as electric vehicles and solar energy systems.
But it was an expensive endeavor.
The Chinese government has poured trillions of yuan into subsidies and other financial support for companies participating in Chinese manufacturing, exacerbating the economy’s imbalance between production and consumption. Additionally, the blueprint’s aggressive goals to reduce technology imports helped set the stage for the current escalating trade war between the United States and China. Tensions are spreading to more partners as Chinese-made industrial improvements further shift the balance of trade with other countries around the world in Beijing’s favor.
But for Chinese President Xi Jinping, the freedom of action his government has gained through this self-reliance drive is worth all the hardship and disruption it has caused.
In a speech in June 2024, President Xi said, “If science and technology develop, the nation will also prosper. A robust science and technology sector is the basis of a strong nation.” “China’s modernization depends on scientific and technological progress, and the country’s high-quality development depends on building new growth momentum through scientific and technological innovation.”
President Xi has not publicly mentioned the goals he set for manufacturing in China in 2015, and no official evaluation of the initiative is expected to be released. Talking loudly about numerical targets to drive out foreign goods has proven counterproductive to Beijing’s trade diplomacy. But under various names, the Made in China 2025 ethos persists, prompting officials across the country to devote more time, energy and resources to the nation’s pursuit of technological independence.
Xiang Songzuo, director of the Greater Bay Area Financial Research Institute in Shenzhen, said, “Some officials believed that the slogan did not fully capture the intent of China’s industrial policy and wanted to avoid misleading foreigners. ” he said.
Xiang, a former People’s Bank of China official who advised policymakers on the initiative, said it had “good results” in narrowing the technology gap with developed countries and establishing China’s leadership in global manufacturing. He added that he had achieved it.
“China’s leaders’ perspective doesn’t necessarily include the need to be at the cutting edge of all of these technologies, but it’s important to consider Chinese alternatives,” said Max Zengren, chief economist at the Mercator Institute. It involves the need to be good enough to have.” Studying China in Berlin. “They have made remarkable progress in all areas.”
China’s R&D spending is rapidly approaching the average level of the 38 developed countries that are members of the Organization for Economic Co-operation and Development. By value, China now accounts for 34% of global manufacturing output, up from 19% in 2010, said Jeongmin Song, a partner at McKinsey Global Institute. In 2023, China installed more industrial robots than the rest of the world combined.
Reflecting the important goal of Made in China, the Chinese government has made tangible progress in replacing foreign-made industrial components with local versions. According to research firm Gabekal Dragonomics, from 2016 to 2021, manufacturing imports, which accounted for about 10% of gross domestic product, declined to 8.5%.
As with the Windrose example, the winds of change are having a particularly visible impact on the automotive market.
In 2020, China exported 1.08 million cars, about the same number as it imported, and only half of South Korea’s exports at the time. Since then, however, China has become the world’s largest automobile exporter, overtaking not only South Korea but also Japan, Germany, and the United States. Shipments in 2024 are expected to reach nearly 6 million units.
The Made in China plan included a sales target of 3 million domestically produced renewable energy vehicles in 2025. In fact, nearly 9.5 million EVs were sold in China in 2023. Local EV manufacturers like BYD are now exporting around the world and competing head-on with Tesla and other major Western and Japanese brands.
According to energy industry research group Wood Mackenzie, China’s transformation of the global solar energy equipment market has become even more dramatic thanks to massive public and private capital investment of more than $130 billion last year alone. We estimate that China currently accounts for more than 80% of the total manufacturing capacity of the entire solar power supply chain, achieving the goals set for China manufacturing of renewable energy equipment.
“There’s a sense of a winner-take-all atmosphere in some of these industries,” said Kyle Chan, a sociology lecturer at Princeton University who studies China’s industrial policy. He added: “China has a solar power industry, but basically the rest of the world doesn’t have a solar power industry.”
Other Made in China targets are still in progress.
For example, this initiative has set a goal of increasing the market share of domestic industrial robots to up to 70% by 2025. Local brands will account for the majority of sales for the first time in 2023, but this goal is unlikely to be achieved. Market information company Shenzhen high public industry research.
However, these figures do not include sales from Kuka, a major German robot maker owned by Chinese home appliance maker Midea. With Kuka’s help, China is on track to achieve the goal set by 15 government agencies to double its 2020 industrial robot adoption rate by 2025 (246 robots per 10,000 factory workers). , it has already reached the level of 470 units by 2023.
In the case of shipbuilding, China is now well ahead of its rivals, but it still has not yet achieved Manufacturer in China’s lofty goal of capturing half of the global market for specialized vessels such as liquefied natural gas carriers, a specialty of South Korea. do not have.
Similarly, the strategy sets a goal of starting domestic production of wide-body airliners by 2025, although Chinese airlines have just begun operating the country’s first domestically produced narrow-body jet, the COMAC C919. It is.
Policymakers in 2015 set a goal of meeting 49% of local semiconductor demand through domestic production by 2020, and increasing that share to 75% by 2030. The actual rate in 2020 was 16.6%, and few people think the 2030 goal will be achieved. Either.
“The goals should not be taken literally, they should be taken seriously,” said Dan Wang, a technology analyst at Gabekal and a fellow at the Paul Tsai China Center at Yale Law School. What really matters to China’s leadership, he said, is the success achieved in increasing independence and narrowing the technology gap.
But the cost of this success was staggering. According to two estimates, the allocation of industrial subsidies, not all of which are related to Chinese manufacturing, will be approximately USD 231 billion in 2019 alone. In the area of chip development alone, China has provided more than $123 billion in financial assistance through 2021, according to the US-based Semiconductor Industry Association.
It is clear that most of that money was wasted. For example, Hongshin Semiconductor Manufacturing was allocated nearly $20 billion in aid, but went bankrupt in 2020 without selling any chips. Last year, the former head of chip group Tsinghua Unification Group pleaded guilty to embezzling RMB 470 million (US$64.5 million) in state assets.
In the eyes of some economists, those funds could have been better used to build stronger social safety nets. That could help persuade Chinese citizens to save less and spend more.
Instead of building on consumer spending as a powerful engine of economic growth, trillions of dollars in Chinese-made goods have made the country’s economy even more production-centric. In 2019, former Finance Minister Lu Zhiwei was ousted from his post as chairman of the National Council of Social Security Funds after calling Chinese-made products a “waste of taxpayers’ money.”
But authorities have not changed course, continuing to direct more money to supported companies producing wind turbines, electric vehicles and other technology-related products.
While some manufacturing companies, such as BYD, have become relentlessly efficient, a study of 1,100 publicly traded companies that received Made in China support found that this resulted in lower levels of innovation patenting, profitability, and labor productivity. No evidence of improvement was found. The study was co-led by Lee Branstetter, a professor of economics at Carnegie Mellon University in Pittsburgh, Pennsylvania.
“A lot of money has been spent, but it doesn’t seem to be doing anything to close the productivity gap,” Branstetter said. “China does not have infinite time to remedy this problem before tens of millions of workers retire from the workforce.”
Meanwhile, China produces unprofitable products such as solar panels, exacerbating trade tensions with countries such as the United States, the European Union and India.
Officials who worked in President Donald Trump’s administration, including Peter Navarro, who is returning as senior trade adviser, have accused Chinese-made “discriminatory practices related to the targeting of U.S. technology infrastructure.” , cited as a justification for launching a full trade agreement. Then a trade war broke out. In recent months, even fellow developing countries like Turkey and Brazil have imposed tariffs on EVs and other Chinese high-tech products.
But pushback from trading partners has prompted Beijing’s obsession with strengthening its industrial power, especially as the United States has stepped up measures to restrict access to China’s cutting-edge technology in areas such as semiconductors and artificial intelligence. There are few signs.
“It’s clear that Mr. Xi wants to transform this country into one dominated by advanced manufacturing,” Gabekal’s Wang said. “Every action the U.S. government has taken to slow China has only strengthened their resolve to build their technology base.”
This article was first published in Nikkei Asia. Republished here as part of 36Kr’s ongoing partnership with Nikkei Shimbun.
