Chinese Communist Party (CCP) leader Xi Jinping has made matters clear. He wants to reduce China’s economic vulnerability to the rest of the world. He has set out to do this by reducing the need for Chinese industry, especially technology, to source abroad.
No doubt, part of his motivation stems from the action of former President Joe Biden, who cut off sales of advanced semiconductors and chipmaking equipment to China. Xi seems, however, to have missed an important point. Even if China can make everything for itself, its economy remains highly export-dependent, making it highly vulnerable to what happens abroad. Unless China can consume everything it produces—a highly unlikely event—the easy independence Xi seeks will elude his country.
The parameters for this effort come out of the “Made in China 2025” plan. The program, first released in 2015, earmarks billions in state funds for investments in what the planners believe are the technologies of the future. These include electric vehicles (EVs), batteries, aerospace, shipbuilding, artificial intelligence (AI), robotics, medical devices, windmills, solar panels, and medical devices.
Investments in these areas ramped up suddenly in 2023, with Beijing pouring the equivalent of some $45 billion into these sectors, a huge jump from the $15 billion it invested in these ways in 2019. Because of these investments, China has made huge strides in some of these areas. In others, however, it has had less success and generated only a great waste of resources.
The greatest seeming success has emerged in EVs. China now produces over half the world’s EVs. Almost half the car sales in China last year were domestic-made plug-ins or hybrids, and the country sold around 31.4 million vehicles in 2024, either at home or abroad, according to the China Association of Automobile Manufacturers.
Chemical production, too, has advanced. Until recently, China had to meet many of its chemical needs with imports. In 2020, it ran a $40 billion trade deficit in the sector. The investment surge has changed that. The country now meets all its chemical needs with domestic production and actually exports chemicals, so China ran a $34 billion trade surplus in the area last year.
Huawei also seems to have made strides in electronic device production. Its Mate 60 smartphone still cannot compete head-to-head with Apple’s iPhone. Still, the company has already upgraded its operating system to make up for the restrictions imposed on it by Google’s Android system.
Other areas have not worked out so well. “Made in China 2025” does not mention food dominance, and with good reason, given China’s lack of arable land and paucity of water. Indeed, China’s dependency on food imports has soared, and 5 percent of its cereals now come from overseas.
Aerospace is targeted in the plan, and the results there have been mixed. The Commercial Aircraft Corporation of China (CORMAC)’s C919 jetliner, its answer to Boeing and Airbus, has become operational. Still, 40 percent of the imported parts are from Germany, France, and the United States.
In the crucial area of technology, reality has, in many ways, fallen significantly behind plan. “Made in China 2025” sought domestic semiconductor production to cover some 70 percent of the nation’s needs, but as of 2024, it only managed to supply 24 percent of the need. The DeepSeek AI breakthrough certainly fits with the plan, but it nonetheless irks Beijing, since the whole development occurred outside the government-controlled effort.
Even if all the “Made in China 2025” plans were to work perfectly, which is highly unlikely, Chinese invulnerability to the rest of the world would remain an illusion. The story of chemicals and EVs is indicative. There, production ramped up beyond China’s needs, making China dependent on exports to make the investment worthwhile.
Without the exports, much of the investment would have been wasted. However, exports require a buyer, making the Chinese economy vulnerable to foreign circumstances and policies. The United States, for instance, has imposed a huge tariff on Chinese-made EVs, as has Europe.
Solar panels and windmills face the same need for foreign buyers to make China’s investment effort pay. Even if the C919 jetliner were to use only domestically made parts, buyers from abroad would still need to make the investment worthwhile.
The only way to make China completely invulnerable is to create an economy that relies entirely on domestic consumption, importing nothing—but that is unlikely. Under the existing circumstances, it’s difficult for Xi to keep the economy growing.
