Until recently, Chinese consumers and companies did not shy away from foreign brands when buying high-performance cars and trucks for their own use.
Windrose Technology is part of a wave of Chinese startups that is starting to change this. Last month, the vehicle maker started delivering its next-generation heavy-duty electric trucks to Chinese customers, led by a subsidiary of SF Holding, the country’s largest logistics group. Windrose has another 5,000 orders on its books from US customers, as well as hundreds from other Chinese and European clients.
Backed by investors including municipal authorities in the Chinese cities of Hefei and Suzhou, Windrose has benefitted from preferential deals for land and proximity to the sprawling electric vehicle supply chain around its headquarters in Hefei. This has enabled it to source all parts for its trucks locally, according to Han Wen, the company’s 34-year-old founder, chairman, and CEO.
“We redesigned every component and never relied on imports,” said Han, a Stanford University graduate and veteran of two US-based investment companies. “We have the best technology by far.”
The rise of Windrose exemplifies how many of the ambitious goals that Beijing set out nearly a decade ago in its “Made in China 2025” policy blueprint for reducing reliance on foreign technology imports and upgrading the nation’s manufacturing sector are coming to fruition.
In nearly all ten main industries targeted under the plan, China has notched up notable achievements, emerging as the global leader in sectors such as EVs and solar energy systems.
It has been a costly endeavor, however.
The trillions of yuan that Beijing has poured into subsidies and other financial support for companies taking part in Made in China has aggravated imbalances in the economy between production and consumption. Moreover, the blueprint’s aggressive goals for slashing technology imports helped set the stage for the trade war now raging between the US and China. As trade balances with other countries around the world shift further in Beijing’s favor due to Made in China’s industrial upgrades, tensions have been spreading to more partners.
Yet, for Chinese President Xi Jinping, the freedom of action that Beijing has gained through this self-reliance drive is worth all the trouble and ructions it has brought.
“A nation thrives when its science and technology thrive, and a robust science and technology sector is the cornerstone of a strong nation,” said Xi in a June 2024 speech. “Chinese modernization hinges on sci-tech advancement, and the nation’s high-quality development depends on building new momentum of growth through innovation in science and technology.”
Publicly, Xi does not reference the goals set for Made in China back in 2015, nor does any official assessment of the initiative appear to be forthcoming. Talking out loud about numerical targets for pushing out foreign products proved counterproductive to Beijing’s trade diplomacy. Yet, under one guise or another, the spirit of Made in China 2025 persists, pushing officials across the country to put further time, energy and resources into the national pursuit of technological self-reliance.
“Some officials thought the slogan doesn’t fully capture the intention of China’s industrial policy, and wanted to avoid causing misunderstanding from abroad,” said Xiang Songzuo, head of the Greater Bay Area Financial Research Institute in Shenzhen.
A former official with the People’s Bank of China who advised policymakers on the initiative, Xiang added that it has achieved “good results” in terms of closing technology gaps with developed countries and establishing China’s leadership in global manufacturing.
“A Chinese leadership perspective … doesn’t always include the need to have a leading edge in all these technologies, but the need to be good enough in order to have a Chinese alternative,” said Max Zenglein, chief economist at the Mercator Institute for China Studies in Berlin. “They’ve made tremendous progress across all areas.”
Chinese spending on R&D is fast approaching the average level of the 38 developed countries in the Organisation for Economic Co-operation and Development. By value, China now accounts for 34% of global manufacturing output, up from 19% in 2010, according to Jeongmin Seong, a partner at the McKinsey Global Institute. In 2023, China installed more industrial robots than the rest of the world combined.
Reflecting a key objective of Made in China, Beijing has made visible progress in replacing foreign industrial components with local versions. Manufacturing imports, which accounted for around 10% of gross domestic product between 2016 and 2021, have declined to 8.5%, according to research company Gavekal Dragonomics.
As with the example of Windrose, the winds of change have had a particularly visible impact on the automotive market.
In 2020, China exported 1.08 million vehicles, about as many as it imported and barely half as many as South Korea exported then. But since that time, China has not just overtaken South Korea, but also Japan, Germany, and the US to become the world’s top vehicle exporter. 2024 shipments are expected to be close to 6 million.
The Made in China plan included a 2025 sales target of 3 million domestically made renewable energy vehicles. In fact, nearly 9.5 million EVs were sold in China in 2023. Local EV makers like BYD are now exporting around the world and competing head-to-head with Tesla and other leading Western and Japanese brands.
The makeover of the global solar energy equipment market under Made in China has been even more dramatic, thanks to a massive investment of public and private capital that last year alone amounted to more than USD 130 billion, according to energy industry research group Wood Mackenzie. It calculates that China now accounts for more than 80% of total manufacturing capacity across the solar power supply chain, meeting a target set under Made in China for renewable energy equipment.
“Some of these industries feel a little bit more like winner take all,” said Kyle Chan, a sociology lecturer at Princeton University who studies Chinese industrial policy. Now, he added, “China has a solar industry and, essentially, the rest of the world doesn’t.”
Other Made in China targets remain a work in progress.
For example, the initiative set a goal of bringing the market share of domestically made industrial robots up to 70% by 2025. That target looks set to be missed, although local brands accounted for a majority of sales for the first time in 2023, according to market information company Shenzhen Gaogong Industry Research.
Those figures, though, exclude the sales of Kuka, a leading German robot maker owned by Chinese appliance manufacturer Midea. With a boost from Kuka, China is well on track to meet a target set by the 15 government agencies of doubling its 2020 industrial robot deployment rate of 246 per 10,000 factory workers by 2025, having already reached the level of 470 in 2023.
In the case of shipbuilding, China now far outproduces any rival, but has yet to live up to lofty Made in China goal of capturing half the world market for specialized vessels like liquefied natural gas carriers, which remain a South Korean specialty.
Similarly, while the strategy set a target for commencing domestic production of wide-body passenger jets by 2025, Chinese airlines are only just beginning to put the country’s first homegrown narrow-body jet, the COMAC C919, into service.
Policymakers in 2015 laid out the goal of meeting 49% of local demand for semiconductors with domestic production by 2020, and raising that proportion to 75% by 2030. The actual rate in 2020 was 16.6% and few think the 2030 target can be hit, either.
“The targets should be taken seriously but not literally,” said Dan Wang, a Gavekal technology analyst and a fellow with the Paul Tsai China Center at Yale Law School. What really matters to the Chinese leadership, he said, is the success that has been achieved in improving self-reliance and reducing technology gaps.
The cost of this success, though, has been staggering. Two estimates put the allocation for industrial subsidies—not all linked to Made in China—in 2019 alone at around USD 231 billion. Just in the area of chip development, China provided more than USD 123 billion in financial support through 2021, according to the US-based Semiconductor Industry Association.
It is clear that a large share of that money went to waste. Hongxin Semiconductor Manufacturing, for example, was allotted nearly USD 20 billion in support but collapsed in 2020 without selling a chip. Last year, the former head of chip group Tsinghua Unigroup pleaded guilty to charges of embezzling RMB 470 million (USD 64.5 million) in state assets.
In the eyes of some economists, such funding might have been better used to build a stronger social safety net, which could help persuade Chinese citizens to save less and spend more.
Instead of building out private consumption as a powerful engine of economic growth, Made in China’s trillions have made the country’s economy even more production-centered. In 2019, Lou Jiwei, who previously served as finance minister, was ousted from his position as chairman of the National Council for Social Security Fund after calling Made in China a “waste of taxpayer money.”
Yet, rather than change course, officials continue to direct capital to supporting companies producing ever more wind turbines, EVs, and other tech-related goods.
While some producers such as BYD have become ruthlessly efficient, a study of 1,100 listed companies that received Made in China support found no evidence of a resultant increase in levels of patenting of innovations, profitability or labor productivity. 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. “It’s not like China has an infinite amount of time to improve this before tens of millions of workers retire from the labor force.”
Meanwhile, China’s often-unprofitable output of goods like solar panels has aggravated trade tensions with the US, the European Union, India, and others.
Officials who served in the first presidential administration of Donald Trump such as Peter Navarro, who is to return as senior counselor for trade, pointed to Made in China’s “discriminatory practices related to the targeting of America’s technology base” as justification for launching a full-fledged trade war then. In recent months, even fellow developing countries like Turkey and Brazil have imposed tariffs on EVs and other Chinese tech products.
Yet there are few signs pushback from trading partners will nudge Beijing off its obsession with beefing up its industrial muscle, particularly as the US steps up measures to restrict Chinese access to advanced technologies in areas like semiconductors and artificial intelligence.
“It is pretty clear that Xi is trying to turn the country into one that dominates advanced manufacturing,” Gavekal’s Wang said. “Every action the US government has made to slow China down has only increased their resolve to build its technology base.”
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.