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Context

The Made in China 2025 (MIC2025) initiative aims to transform China into a global manufacturing superpower through technological advancement and reduced reliance on foreign innovation. As India accelerates its own manufacturing growth under the "Make in India" initiative, MIC2025's experience becomes essential.

What is the Made in China 2025 (MIC2025) initiative?

It is a national strategic plan launched by the Chinese government in May 2015 to transform its manufacturing sector. 

Objectives and Goals

• To shift from being a producer of low-tech goods to a technologically advanced manufacturing powerhouse with reduced reliance on foreign innovation. 
• To become a global leader in advanced manufacturing and high-tech industries.
• It prioritizes the development of 10 key industries, including Information Technology, High-end Automated Machinery and Robotics, Aerospace and Aviation Equipment, New Energy and Electric Vehicles, and Biopharmaceuticals and High-End Medical Devices.
• It targets achieving 70% self-sufficiency in core components and basic materials in high-tech industries by 2025.
• Outlines a three-step strategy to transform China into a global manufacturing superpower by 2049: 
• By 2025: Become a strong manufacturing country.
• By 2035: Become competitive with other manufacturing rivals.
• By 2049: Become a manufacturing superpower.

Successes and achievements of Make in China Policy

Electric Vehicles (EVs) and battery technology => World leader in electric vehicle production and sales, having the largest EV market globally.  

• China's market share in global EV production is more than 70%.
• China accounts for 65% of global public charging points.

Renewable energy and equipment => China controls 80% of the world's solar cell exports and houses the top 10 solar panel manufacturing equipment suppliers globally.

• China has the world's largest solar farm in Urumqi.
• Renewable energy contributed over 10% of China's GDP in 2024.  

High-Speed Rail (HSR) => China has the world's largest high-speed rail network and has established itself as a leader in HSR technology.

• China has developed high-speed maglev trains, with the Shanghai maglev being the first commercial high-speed maglev line. The latest maglev technology achieving speeds exceeding 600 km/h.

Drone technology => China controls close to 90% of the global commercial drone market.

• DJI, the leading Chinese manufacturer, holds an estimated 70% share of the global drone market.

Robotics and industrial automation => China has become the world's largest market for industrial robots, with installations surpassing traditional leaders like Japan and Germany. 

• China dominates global manufacturing with approximately 31.6% of the total world manufacturing output. The United States follows with 15.9%, and then Japan at 6.5%.

Telecommunications (5G) => China has achieved a leading position in 5G innovation and infrastructure deployment, with Huawei playing a key role.

Biopharmaceuticals => Cities like Shanghai are emerging as global hubs for biomedical research and development.

• MIC2025 goals, such as bringing 20-30 innovative drugs to market by 2025 and increasing the usage of local products in hospitals, are met. 

What are the Challenges and Criticisms of Made in China 2025?

Market Distortion and Protectionism => Accused by the US, EU, and others for massive state subsidies, cheap credit, and preferential treatment to domestic firms.

Intellectual Property Theft and Forced Technology Transfer => Allegations that China has used coercive tactics, cyber espionage, and discriminatory regulations to acquire foreign technology and intellectual property.

WTO Compatibility => Concerns that MIC2025 violates WTO principles of non-discrimination and fair competition through industrial subsidies and local content requirements.

Exacerbating Trade Imbalances => Aggressive export push in high-tech sectors could worsen trade imbalances with major trading partners.

• The U.S. goods trade deficit with China was $295.4 billion in 2024.
• India's trade deficit with China widens to $99.2 billion in 2024-25.

What initiatives India has taken to boost manufacturing?

Make in India (2014) to transform India into a global manufacturing hub by encouraging both domestic and foreign investment.

• India's manufacturing sector's share in GDP has stagnated around 15-17% for decades, falling short of the National Manufacturing Policy's target of 25% by 2022.

Atmanirbhar Bharat Abhiyan (2020) emphasizes economic self-reliance across five pillars: economy, infrastructure, system, demography, and demand.

Production Linked Incentive (PLI) Schemes for 14 sectors (e.g., mobile manufacturing, pharmaceuticals, automobiles, electronics, textiles), to boost domestic manufacturing, attract investment, and create jobs.

• The PLI scheme for mobile manufacturing had led to an increase in domestic production, with India becoming the second-largest mobile phone manufacturer globally.

Skill India Mission to focus on skilling, reskilling, and upskilling the workforce to meet the demands of modern industries.

Startup India to promote entrepreneurship and innovation, crucial for developing indigenous technological capabilities.

Challenges for India in Learning from and Responding to MIC2025?

Scale and Ecosystem Deficit => India lacks the massive manufacturing scale, integrated supply chains, and mature industrial ecosystem that China possesses.

R&D and Innovation Gap => Underinvestment in R&D, limited industry-academia collaboration, and a relatively nascent innovation ecosystem hinder India's ability to compete in high-tech manufacturing.

• China's expenditure on research and development (R&D) was 2.68% of its GDP, while India's investment was around 0.7%. 
• China's annual R&D expenditure is estimated at $496 billion, compared to India's investment of less than $100 billion.

Skill Gap => A shortage of skilled labor, especially in advanced manufacturing techniques, automation, and AI, poses a critical challenge.

• The World Bank reported in 2022 that 75% of Indian workers do not possess AI-related competencies.
• The India Skills Report indicates that only 45% of graduates are considered employable.

Ease of Doing Business and Bureaucracy => Despite improvements, regulatory hurdles, complex land acquisition, and slow dispute resolution can deter large-scale manufacturing investments.

Infrastructure Deficit => While improving, gaps in logistics, power, and connectivity still inflate manufacturing costs.

• India's logistics costs are estimated at 13% of its GDP, while China's are at 8% and developed economies' around 7%.

Fragmented Approach => India's policies, while well-intentioned, are sometimes fragmented, lacking the singular, long-term strategic focus and coordination seen in China's MIC2025.

What India can learn from MIC2025's successes?

Strategic Sector Focus => Instead of broad-based manufacturing, India should identify and focus on a few sunrise sectors where it has a comparative advantage or strategic necessity (e.g., electronics, semiconductors, renewable energy components, advanced materials, defense manufacturing, medical devices).

Boost R&D and Innovation => Increase public and private R&D spending to at least 2% of GDP. Develop an innovation ecosystem through academic-industrial partnerships, incubators, venture capital, and tax incentives for R&D.

Skill Development for Industry 4.0 => Revamp vocational training and higher education to prepare a workforce for advanced manufacturing, robotics, AI, and data analytics. 

Ease of Doing Business and Regulatory Certainty => Streamline regulations, simplify permits, ensure contract enforcement, and improve land availability and labor law flexibility to attract and retain investments.

Infrastructure and Logistics => Investment in world-class infrastructure, including industrial corridors, logistics parks, dedicated freight corridors, and reliable power supply, to reduce manufacturing costs.

Integrated Industrial Policy => Develop a comprehensive, long-term industrial policy that integrates manufacturing, technology, skill development, and trade policies, ensuring coherence and predictability.

Diversify Global Supply Chains => Promoting India as a reliable alternative to China in global supply chains

• The ongoing geopolitical shifts and increasing vulnerabilities of global supply chains have prompted multinational corporations to diversify their sourcing and manufacturing hubs, seeking alternatives to China.   
• India offers a cost advantage, manufacturing wages in India are lower than in China, making it an appealing option for labor-intensive industries like textiles, electronics, and automotive components.

Source: THE DIPLOMAT