"An industrial plan China rolled out a decade ago that was criticized by the U.S. as protectionist has been highly successful in narrowing China's technological gap with the West, a new study finds.
The study, commissioned by the U.S. Chamber of Commerce, a business-lobbying force in Washington, is set to intensify the debate over how to counter China's strategies to bolster its competitiveness.
To placate President Trump during his first-term trade war with China, Beijing dropped mentions of the "Made in China 2025" plan, leader Xi Jinping's signature industrial strategy, from public discourse. But the policy stayed in place.
The study, released Monday, shows that enormous state support has enabled China to eliminate or reduce its dependence on imports such as rail and power equipment, medical devices and renewable-energy products.
In addition, Chinese companies have become more competitive globally, gaining market share in sectors including shipbuilding and robotics.
"China today is very different from China in 2015, and that has a lot to do with an industrial policy that has been predicated upon unprecedented state funding," said lead author Camille Boullenois, an associate director at Rhodium Group, the economic consulting firm that conducted the study. "There is no doubt that China will continue to narrow the gap and increase its competitiveness."
Beijing unveiled the "Made in China 2025" plan about two years after Xi came to power.
During the previous U.S.-China trade conflict, in 2018 and 2019, Washington tried to get Beijing to change the policy, saying it distorted competition. But a 2020 trade deal instead focused on Chinese commitment to more purchases of American products.
The new study highlights fresh challenges posed by Beijing's state-led policy as the Trump team prepares for potential negotiations.
Trump has said a trade deal with China has to be fair. However, people close to the administration say it is unclear whether he will attempt to confront Beijing over measures that give Chinese companies an edge over foreign rivals.
The new study details how government support for the policy has intensified.
Tax benefits to companies in favored sectors surged by an average annual rate of nearly 29% between 2018 and 2022 and reached 1.3 trillion yuan, equivalent to about $185 billion, in 2022 -- more than half of overall corporate spending on research and development.
The proportion of companies enjoying tax deductions and other benefits more than quadrupled between 2015 and 2023, according to the study.
In addition, based on available government data, it finds that investment through state-directed funds soared more than fivefold between 2015 and 2020, to $52 billion.
Meanwhile, according to the report, authorities have used access to the Chinese market to compel foreign companies to set up production and research in China, helping the country build supply chains.
As a result, every sector targeted by Made in China 2025, including information technology, high-end machine and medical tools and new materials, has experienced a "substantial reduction" in import dependencies, the study found. For instance, imports as a share of the market for medical devices dropped to 14% in 2023 from 24% in 2015.
According to the report, commercial aircraft is one of a few sectors where Chinese companies still lag behind. China's homegrown plane maker, Comac, remains reliant on foreign parts to produce domestic equivalents of commercial planes from Boeing and Europe's Airbus.
But that might change in the coming years, the study predicts, as China makes progress on producing aviation engines.
Daniel Rosen, a partner at Rhodium and a co-author of the study, said that Beijing's bias toward supporting manufacturing over households has created an imbalance between domestic supply and demand, leading to subsidized Chinese products' flooding global markets, raising trade frictions.
The Trump administration has said it intends to use tariff talks with other countries to isolate China, though it isn't yet clear what specific demands Washington has put forward.
China's advantage is the scale of its market and its ability to commercialize products quickly, Rosen said.
"There are opportunities for the U.S. to match that scale if the U.S. works in tandem with other economies."" [2]
What about the ability to commercialize products quickly? No chances.
1. China's rapid transition to wind, solar, and battery-powered energy sources is driving down electricity costs significantly, making them more affordable than traditional fossil fuel-based systems. This shift is leading to lower energy costs for consumers and businesses.
China's Renewable Energy Boom:
China is a global leader in renewable energy deployment, particularly in wind and solar power.
In 2023, China installed more solar capacity than the rest of the world combined and doubled that level in 2024.
China's wind power capacity also grew significantly, accounting for nearly 65% of global wind power additions in 2023.
This rapid expansion is leading to a significant decline in the cost of renewable energy.
Cost Advantages of Renewable Energy:
Solar and wind energy are becoming increasingly cost-competitive with traditional fossil fuels, including coal and gas.
Studies show that solar plus battery storage can be cheaper than new coal-fired power plants for meeting growing electricity demand.
China's ability to produce low-cost solar panels and batteries is also contributing to this cost advantage.
Impact on Electricity Costs:
The decreasing cost of renewable energy is leading to lower electricity prices for consumers.
This can benefit businesses by reducing their operating costs, making them more competitive.
Lower electricity costs can also stimulate economic growth and investment.
Overall, China's renewable energy transition is not only addressing climate change but also creating a more affordable and sustainable energy system, benefiting its citizens and the global economy.
2. World News: Beijing Narrows Tech Gap --- Enormous state support is making China less reliant, more competitive. Wei, Lingling. Wall Street Journal, Eastern edition; New York, N.Y.. 06 May 2025: A8.
