Since the launch of the Made in China 2025 plan a decade ago to foster industrial upgrading, it has been widely depicted in the West as a state-led market distortion and doomed to fail. Yet the outcome is far from failure.
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State-led efforts under the 10-year plan have provided a solid foundation for advancements, especially in the information technology realm. While exogenous shocks have caused significant disruptions, the plan has fostered self-sufficiency and contributed to China’s long-term technological ambition.
For years, the West saw China as nothing more than the “world’s factory” with cheap, if specialised, labour and low-end manufacturing. But China was aware of the danger hidden in such models – emerging markets are vulnerable to the so-called middle-income trap when wages rise but economic investment fails to keep up.
Accordingly, Beijing implemented Made in China 2025 as a national plan and an industrial policy to transform the nation into a tech-intensive powerhouse.
Information technology stands out as the first key industry listed in the plan. At the time of its launch, China’s huge digitally savvy population already exhibited a big demand for IT products. It would have been an exaggeration to claim China was both a leading consumer and manufacturer of IT products. Instead, it was a hardworking follower, considering its limited hi-tech innovation capacity and focus on low-tech products.
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But the plan provided a layered and institutionalised approach to addressing these structural weaknesses. With the leadership of the central ministries, central policy guidance was coordinated with flexible local implementation, backed by major state funds and overseas investments.