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China’s President Xi Jinping applauds at the end of the closing session of the 14th National People’s Congress at the Great Hall of the People in Beijing on March 11. Photo: AFP
Opinion
Shirley Ze Yu
Shirley Ze Yu

Why China’s plan for ‘new productive forces’ should make the West sit up

  • It’s the successor to the grossly underestimated ‘Made in China 2025’ strategy, which spawned China’s dominance in electric cars, green tech and other high-end industries
Shirley Ze Yu
Shirley Ze Yu
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In China’s annual parliamentary meetings, developing “new quality productive forces” topped the agenda. A twist on Marxist theorisation, new quality productive forces simply mean new drivers of economic – and defence – growth, powered by frontier technologies.
Such new forces can span from infotech, biotech, artificial intelligence (AI), quantum computing, new energy and new materials, to deep space, deep ocean and deep mind. The strategy appears to have three objectives: foreign technology substitution, rapid industrial adoption and strategic defence empowerment.
Investing in frontier technologies is not new; neither is China’s use of industrial policies. Some may dismiss the jargon as an attempt to camouflage the government’s desperation to rescue the troubled economy. They would be wrong.
Year Zero of China’s electric vehicle (EV) industry coincided with the announcement of “Made in China 2025”, a full-scale decade-long industrial strategy for China to become a global leader in high-end manufacturing. China’s three EV champions, Nio, Xpeng and Li Auto, began around 2015, when Made in China 2025 was introduced. Over the next nine years, China’s EV industry grew, from non-existence to world domination.

It is no surprise that Made in China 2025 was grossly underestimated by the West early on. It also began on a modest industrial foundation.

A decade ago, China was a rudimentary global industrial power. Home appliances were its crowning glory. Excess capacity in low-end industrial products – steel, aluminium, glass, etc – plagued the economy. Domestic oversupply was channelled towards the Belt and Road Initiative. There was little China produced that the world had never seen. Since then, China has embarked on a new industrial paradigm, from making all things cheap to turning all things intelligent.

Made In China 2025 is an exceptionally successful industrial strategy. In six years, China’s smartphone manufacturing surpassed 50 per cent of the global market share. In eight years, Chinese solar, wind, and lithium battery production all rose to global dominance.

Today, China battles with a new kind of excess industrial capacity, to the envy of the world. The only logical business decision is to export this excess but there are strong political headwinds.
The European Union has opened an anti-subsidy inquiry into Chinese EVs. The United States is planning an investigation into the data security risks of Chinese EVs and parts. Upon BYD’s plan to set up an EV factory in Mexico, the US is looking at banning Chinese auto parts from third countries. Chinese solar panel, wind turbine, battery and lidar (light detection and ranging) car sensor manufacturers, the poster children of Made in China 2025, are all facing potential trade restrictions and sanctions in the West.

The West has come to an aha moment, a decade after China announced its plans to be a leader in high-end industries, having ignored the momentum for far too long.

12:53

‘Overtaking on a bend’: how China’s EV industry charged ahead to dominate the global market

‘Overtaking on a bend’: how China’s EV industry charged ahead to dominate the global market

While the West scrutinises a decade of Chinese industrial success, China has begun to cultivate a new army of tech starlets among its “new quality productive forces”. Given China’s track record, its speed of innovation in the unfolding decade will only accelerate, with more revolutionary technology.

Chinese researchers already lead in 37 of the world’s 44 critical frontier technologies, including in communications, new materials, new energy, sensing and navigation, drones and hypersonics. China also leads in some areas of AI, biotech, robotics and quantum computing. In a decade, China’s lead in fundamental research will translate into another generation of Chinese industrial prowess.

Western governments are at a crossroads. To outcompete China, should one focus on the technology of the past or the future? It is important to catch up on EVs and renewable energy. It is also future-defining to invest in technologies that will grow to lead the world.

China’s rise as world’s green factory has put West on the back foot

Ten years ago, Western government made the mistake of failing to invest properly in their development of EVs, solar power, batteries and drones. Today, Western governments are making another mistake in being consumed with their investigations into Chinese EVs, solar panel manufacturers, batteries and drones. The Chinese industrial caravan has moved on.

Developing “new quality productive forces” is China’s renewed industrial blueprint, the successor to Made in China 2025. If the West treats this seriously, among the few dozen global frontier technologies in focus, the emergence of new Chinese industrial pre-eminence should be no surprise.

There is no need to read the tea leaves. The race to define another decade of global industrial supply chains has begun.

Shirley Ze Yu is a nonresident senior practitioner fellow with the Rajawali Foundation Institute for Asia at Harvard Kennedy School

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