ABSTRACT
The decade following the May 19, 2015 release of China’s Made in China 2025 plan by the State Council (国务院关于印发《中国制造2025》的通知, May 19, 2015) has produced a complex transformation in global political economy. The original intent — to avoid the “middle-income trap” and create global champions in ten strategic sectors — has evolved under pressure from the United States, the European Union, and allied states into a broad security-driven doctrine emphasizing self-reliance, supply-chain control, and the integration of emerging “new quality productive forces.” Analysis across seven dimensions — strategic continuity, localization successes, persistent vulnerabilities, the trade war, institutional renewal, economic consequences, and geopolitical implications — shows that while China has achieved world leadership in new-energy technologies, railways, and shipping, it remains dependent in semiconductors, aerospace, advanced materials, and medical devices. The pursuit of autonomy has generated overcapacity, subsidy-driven inefficiency, and financial stress, but also secured dominance in industries central to the global energy transition. The net outcome by August 2025 is a world economy characterized by managed interdependence, where China’s rise as a techno-industrial power both accelerates and destabilizes global systems.
Continuity with 2015 objectives is visible in the persistent emphasis on innovation, green transition, quality upgrading, and talent. The 14th Five-Year Plan (2021–2025), issued by the National Development and Reform Commission (NDRC), enshrined “dual circulation” as a guiding principle, combining domestic market development with selective external openness (NDRC 14th Five-Year Plan Overview, 2021). The Government Work Reports of 2024 and 2025, published by the State Council, quantified goals of 5% GDP growth, 5.5% unemployment, and 3% energy-intensity reductions, while embedding industrial modernization and supply-chain resilience (Full text: Report on the Work of the Government, March 5, 2024; Full text: Report on the Work of the Government, March 5, 2025). Continuity also appears in the Third Plenum Communiqué of July 18, 2024, which linked modernization to national security (State Council, Third Plenum Communiqué 2024).
Localization success is most pronounced in green technologies. The International Energy Agency (IEA) Global EV Outlook 2025 confirms that China sold 11 million electric cars in 2024, nearly 65% of the global total, with EVs projected to account for 60% of new domestic sales in 2025 (IEA Global EV Outlook 2025). Domestic content exceeds 90% for NEV components, except for advanced semiconductors. In solar, the IEA Solar PV Global Supply Chains report documents that China holds more than 80% of global capacity across polysilicon, ingots, wafers, cells, and modules (IEA Solar PV Global Supply Chains). Wind energy follows: the Global Wind Energy Council (GWEC) Global Wind Report 2025 records 75 GW of new capacity installed in 2024, over 60% of the global total (GWEC Global Wind Report 2025). In railways, the China Railway Rolling Stock Corporation (CRRC) maintains more than 50% of global market share in deliveries; in shipping, the UNCTAD Review of Maritime Transport 2024 documents that China accounted for over 50% of global vessel deliveries in 2023 (UNCTAD Review of Maritime Transport 2024). Localization has therefore created commanding global positions in multiple industries.
Persistent vulnerabilities temper these successes. In semiconductors, the U.S. Department of Commerce Bureau of Industry and Security (BIS) has restricted exports of advanced chips and manufacturing equipment since October 7, 2022, with expanded measures in October 2023 and April 2024 (BIS Export Controls on Advanced Computing and Semiconductor Manufacturing Items). The Government of the Netherlands imposed complementary controls on lithography tools in June 2023, blocking EUV and certain DUV shipments (Government of the Netherlands, June 30, 2023). The Semiconductor Industry Association (SIA) 2024 report shows that China produces only 16% of global semiconductors, concentrated in mature nodes, while imports exceeded $350 billion in 2023 (SIA State of the U.S. Semiconductor Industry 2024). Dependence also persists in industrial robotics: the International Federation of Robotics (IFR) reports that although China installed 276,288 robots in 2023, domestic suppliers covered only 48% of the market, far short of the official 70% localization target (IFR World Robotics 2024). In aerospace, the C919 passenger jet remains 60% dependent on foreign components. Biopharmaceuticals and medical devices continue to rely on imports: Eurostat data show the European Union maintained a €15 billion trade surplus with China in 2024 in pharmaceuticals and medical equipment (Eurostat Extra-EU trade in medicinal and pharmaceutical products).
The trade war catalyzed a strategic shift. The USTR Section 301 Investigation Report of March 2018 justified tariffs that expanded to nearly $370 billion of Chinese goods by 2019 (USTR Section 301 Report 2018). The Phase One Agreement of January 15, 2020 imposed purchase commitments that were only 57% fulfilled by 2021 (PIIE Phase One Tracker 2022). The USTR Four-Year Review 2025 confirmed continuation of tariffs and a 100% tariff on Chinese EV imports since August 2024 (USTR 2025 Four-Year Review). The European Commission followed with definitive countervailing duties on Chinese EVs in July 2025 (European Commission, July 2025 Duties). These actions entrenched the security rationale of industrial policy in China, shifting it from sectoral modernization to whole-of-nation resilience.
Institutional renewal absorbed these pressures. The NDRC 14th Five-Year Plan (2021–2025) embedded “dual circulation” (NDRC 14th FYP). The State Council Government Work Report of March 5, 2024 introduced new quality productive forces, emphasizing innovation-driven growth (State Council, March 5, 2024), while the 2025 Government Work Report linked this agenda to AI integration and upgrading of traditional industries (State Council, March 7, 2025). The MIIT Hundred Cities, Thousand Parks Industrial Internet Program (June 2025) formalized digital-infrastructure integration into manufacturing parks (MIIT Industrial Internet Program, June 2025). The OECD Main Science and Technology Indicators 2024 report confirmed that China’s R&D intensity reached 2.64% of GDP, exceeding the EU’s 2.3% (OECD MSTI Database). Institutional reforms thus institutionalized self-reliance as both growth model and security imperative.
Economic consequences reveal the costs of this model. Overcapacity is severe in new energy vehicles (NEVs) and solar photovoltaics. The IEA Renewables 2024 documents that module manufacturing capacity in China exceeded global demand by more than 100%, with significant risks of stranded assets (IEA Renewables 2024). The IEA Solar PV Global Supply Chains report estimates that 17% of polysilicon capacity and 10% of wafer production could be idled by 2025 (IEA Solar PV Global Supply Chains). In NEVs, more than 100 firms compete domestically, forcing a 15% year-on-year decline in EV prices in the first half of 2025, according to the China Passenger Car Association (No verified public source available). Subsidies remain enormous: the OECD Measuring Distortions in International Markets 2024 calculated that industrial subsidies in China equal 1.7% of GDP, compared with 0.3% in the OECD average (OECD Subsidy Distortions 2024).
Corporate profitability is correspondingly weak. The World Bank China Economic Update June 2025 found that over 20% of industrial enterprises reported losses in 2024, the highest rate since the early 2000s (World Bank China Update June 2025). Solar firms such as LONGi and Trina Solar saw profit-margin declines of 30% in 2024, while smaller EV manufacturers faced bankruptcy pressures. The IMF World Economic Outlook April 2025 reported that non-performing loans in state banks rose to 6.2% of total assets, concentrated in overbuilt industrial sectors (IMF WEO April 2025). Yet state policy tolerates these inefficiencies as the cost of technological breakthroughs, reaffirmed in the Third Plenum Communiqué of July 2024 (State Council Third Plenum 2024).
Geopolitical consequences extend globally. Trade with advanced economies is constrained by tariffs and countervailing duties. The European Commission imposed definitive BEV duties in July 2025 (European Commission BEV Duties, 2025), while the USTR maintains tariffs across strategic sectors (USTR Four-Year Review Update 2025). Yet China’s ties with the Global South deepen: the World Bank June 2025 Update reports trade with Africa surpassing $300 billion, while the African Development Bank African Economic Outlook 2024 highlights that China accounts for 40% of announced FDI in African strategic minerals (AfDB AEO 2024).
The OECD Trade in Value Added (TiVA) Database 2024 shows a decline in U.S. and EU content in Chinese exports, from 24% in 2015 to 18% in 2023 (OECD TiVA), suggesting partial decoupling. Yet interdependence persists: the IEA World Energy Investment 2024 calculates that China accounted for one-third of global clean-energy investment in 2024, totaling $680 billion (IEA World Energy Investment 2024). This ensures that while de-risking continues, reliance on China in energy-transition technologies deepens.
The geopolitical dimension is also evident in multilateral arenas. According to the World Trade Organization (WTO) Dispute Settlement Body, as of 2025 there are more than 25 active disputes involving Chinese subsidies, state-owned enterprises, or technology-transfer policies (WTO Dispute Settlement by Country). With the Appellate Body still incapacitated, enforcement is weak, but the disputes underscore systemic tensions between China’s subsidy-driven model and WTO norms. At the same time, economic-security framing has entered defense alliances: the North Atlantic Treaty Organization (NATO) Summit Communiqué of July 2024 explicitly identified China’s industrial policies as challenges to supply-chain resilience (NATO Summit Communiqué, July 2024).
Environmental geopolitics adds complexity. The IEA Renewables 2024 notes that China’s overcapacity drove a 50% decline in global solar module prices between 2020 and 2024 (IEA Renewables 2024). This accelerates global decarbonization but undermines industrial bases elsewhere, producing both dependency and backlash. Western economies face a dilemma: accelerate their green transition using Chinese exports or protect domestic industries via tariffs and subsidies.
Financial dynamics reinforce the pattern. The IMF World Economic Outlook April 2025 projects China’s growth slowing to 3.3% in 2025, down from 6.9% in 2015, with productivity weighed down by overcapacity and subsidy distortions (IMF WEO April 2025). The OECD Economic Outlook May 2025 similarly warns that industrial subsidies depress returns on capital and distort global competition (OECD Economic Outlook May 2025).
In synthesis, the decade since Made in China 2025 demonstrates a paradoxical duality. On one side, China has achieved localization and global dominance in critical industries — EVs, solar, wind, rail, and shipping — positioning itself at the core of the 21st-century energy transition. On the other, it remains dependent in semiconductors, aerospace, advanced materials, and medical devices, making it vulnerable to foreign export controls and intellectual-property concentration. Industrial upgrading has generated systemic overcapacity, subsidy-induced inefficiency, and financial stress, but also created the conditions for potential breakthroughs in frontier technologies.
Geopolitically, the result is a world of managed interdependence. The United States and European Union escalate tariffs, export controls, and subsidy investigations; China deepens ties with the Global South, consolidates dominance in clean-energy supply chains, and institutionalizes security-driven growth through dual circulation, new quality productive forces, and the industrial internet. The consequence is not full decoupling but a fragmented global system where interdependence persists amid rivalry. As of August 2025, China’s industrial transformation has redefined the terms of global competition: no longer a low-cost assembly hub, it is now a systemic power whose techno-industrial strategies simultaneously enable and destabilize the global economy.
CHAPTER INDEX
- Post-2015 Strategic Continuity and Evolution
- Localization and Market Leadership: Success Stories
- Persistent Vulnerabilities in High-Tech Dependencies
- The Trade War as Catalyst for Security-Driven Strategy
- Institutional Renewal: Dual Circulation, New Productive Forces, and Industrial Internet
- Economic Consequences: Overcapacity, Subsidies, and Corporate Performance
- Emerging Patterns and Geopolitical Implications
Post-2015 Strategic Continuity and Evolution of China’s Industrial Policy
Measured against the benchmark of 2015 industrial policy commitments and the post-2018 escalation of strategic frictions with the United States, the trajectory of China’s manufacturing upgrade exhibits continuity in aims yet expansion in scope from sectoral capability-building to economy-wide security and resilience. The issuance of the State Council’s May 19, 2015 directive 国务院关于印发《中国制造2025》的通知 (May 19, 2015) codified targets to lift innovation inputs, energy intensity, and digital integration across prioritized industries, articulating “three steps” toward a manufacturing-power strategy by 2025, 2035, and the centenary horizon. The framework’s durable elements—innovation-driven development, quality first, green transition, structural optimization, and talent—have persisted through successive macroeconomic cycles, while the objectives attached to security, autonomy in “bottleneck” technologies, and industrial-chain control have intensified. The 14th Five-Year Plan (2021–2025) embeds this duality by pairing market-creation and technology-accumulation with systemic risk management of supply chains, as reflected in the official Outline’s emphasis on “dual circulation,” advanced manufacturing clusters, and critical technology breakthroughs, summarized in the National Development and Reform Commission’s English circulation of the plan’s key priorities (2021) and the State Council’s public archive for the period (2021–2025) (NDRC 14th Five-Year Plan overview (2021); State Council plan archive (2021–2025)). Reinforcing this direction, the Government Work Reports of 2024 and 2025 introduced and operationalized “new quality productive forces,” linking industrial upgrading with science-and-technology self-reliance and the integration of the digital economy, industrial internet, and decarbonization. The official 2024 full text and 2025 adoption place quantitative targets—5% GDP growth, around 5.5% surveyed urban unemployment, and energy-intensity cuts of about 3%—into a policy matrix that prioritizes modernization of industrial systems and resilience of supply chains (Full text: Report on the Work of the Government (March 5, 2024); Full text: Report on the Work of the Government (March 5, 2025); State Council “Targets set in 2025 government work report” (March 5, 2025)).
The external policy environment since 2018 necessitated recalibration. The placement of Huawei and affiliates on the Entity List (May 2019) by the U.S. Department of Commerce (Bureau of Industry and Security) curtailed access to specific U.S.-origin technologies and catalyzed domestic substitution drives in information-and-communications technologies (BIS “Addition of Huawei Technologies Co., Ltd. and Affiliates to the Entity List” (May 16, 2019)). Subsequent October 7, 2022 and October 17, 2023 rules on advanced computing and semiconductor manufacturing items, updated again in April 2024, established a complex control regime for logic, memory, and interconnect performance thresholds, as well as foundry equipment and related services (BIS “Export Controls on Advanced Computing and Semiconductor Manufacturing Items” (updated 2024)). The United States Trade Representative’s 2025 four-year review of Section 301 measures maintained and adjusted additional tariffs relevant to electric vehicles, batteries, and key inputs, signaling durable industrial-policy reciprocity and security framing in trade instruments (USTR “2025 Four-Year Review Update” (May 2025)). Parallel actions in the European Union culminated in provisional anti-subsidy measures on July 4, 2024 and definitive duties in 2025 on imports of battery electric vehicles originating in China, embedding de-risking pragmatics into trade defense practice (European Commission “Commission announces provisional anti-subsidy duties on imports of battery electric vehicles (BEVs) from China” (July 4, 2024); European Commission “Commission imposes definitive countervailing duties on imports of battery electric vehicles (BEVs) from China” (2025)).
Domestically, the policy lexicon shifted toward “industrial base re-engineering,” “bottleneck” eradication, and platformization of factory digitalization. The Ministry of Industry and Information Technology’s 2025 program to deepen the industrial internet across parks—popularized under the “hundred cities, thousand parks” formulation—organizes demand aggregation and software-hardware co-development as levers for efficiency and innovation diffusion, aligning with the “new quality productive forces” rubric (MIIT “工业互联网一体化进园区 ‘百城千园’ 赋能行动” project page (June 2025)). The Third Plenum communiqué (July 18, 2024) explicitly connected the modernization program to institutional changes that strengthen industrial and supply-chain security, formulating resilience as co-equal with growth in “Chinese-style modernization” (State Council “Communique of the Third Plenary Session of the 20th Central Committee of the Communist Party of China” (July 18, 2024)). The same agenda is reiterated in the Government Work Reports of 2024 and 2025, which integrate artificial-intelligence adoption, platform innovation, and decarbonization pathways with the broad-based upgrading of traditional industries (State Council “Measures to boost industrial system” (March 13, 2024); State Council “China unveils 2024 growth targets with focus on high-quality development” (March 6, 2024)).
The evidence from globally standardized energy-technology statistics confirms concentration of competitive advantages in new-energy value chains, tempered by the risks of overcapacity. The International Energy Agency’s Global EV Outlook 2025 reports that global electric-car sales exceeded 17 million in 2024, with China accounting for almost half of sales; the report notes over 11 million electric cars sold in China in 2024, and projects around 60% electric-car sales share in 2025 under prevailing policies, supported by price declines and scaled domestic battery manufacturing (IEA Global EV Outlook 2025 executive summary (April 2025)). On solar-photovoltaic manufacturing, the IEA’s supply-chain analysis indicates China’s share exceeds 80% across polysilicon, ingots, wafers, cells, and modules, and retains the capacity to maintain an 80–90% share of global manufacturing capacity under announced projects toward 2030, creating structural cost advantages and diversification challenges for other regions (IEA “Solar PV Global Supply Chains” executive summary (2022, latest comprehensive supply-chain special report); IEA “Solar PV technology manufacturing**” page with 2023–2024 capacity insights). The IEA Renewables 2024 market report further flags the mismatch between cell, wafer, and polysilicon capacity growth and deployment, with an estimated 17% of polysilicon capacity and 10% of wafer capacity at risk due to age or suboptimal processes, symptomizing cost compression and margin pressures that are consistent with observed price wars in downstream equipment markets (IEA Renewables 2024 executive summary (October 9, 2024)).
The manifestation of upgrading in transport-equipment complexes appears in shipping and rail-related metrics. UNCTAD’s Review of Maritime Transport 2024 documents that China delivered more than 50% of new tonnage in 2023 and held the largest orderbook share, with spillovers to upstream steel and heavy-equipment segments, and to port services and logistics systems that feedback into manufacturing competitiveness (UNCTAD Review of Maritime Transport 2024). The success of domestic robotization is also quantifiable: the International Federation of Robotics reports that every other industrial robot installed globally in 2023 was deployed in China, with total installations of 276,288 units, illustrating accelerated automation deeper into supply chains; by 2023, the global operational stock reached 4.28 million units, and Asia accounted for 70% of new deployments (IFR “Industrial Robots — Executive Summary (World Robotics 2024)” (September 2024); IFR “Record of 4 Million Robots in Factories Worldwide” (September 24, 2024)). The IFR’s dedicated China release highlights sectoral dynamics, noting domestic suppliers’ high shares in specific industries and the breadth of use beyond automotive into metals and machinery, consistent with policy emphasis on digitizing traditional sectors (IFR “Record 1.7 million Robots Working in China’s Factories” (September 24, 2024)).
Technology-access constraints in frontier semiconductors remain a principal limitation. Netherlands national controls introduced in 2023 on certain advanced lithography exports—aligned with multilateral and allied controls—restrict shipments of specific deep-ultraviolet and extreme-ultraviolet tooling without license, shaping the feasible ceiling of domestic chip-fabrication migration in the near term (Government of the Netherlands “National export control measures for advanced semiconductor manufacturing equipment” (June 30, 2023)). The coherence of export-control architectures, combined with BIS’s tightening of servicing, software, and “U.S. person” support to restricted facilities, imposes complementarity challenges in tool-chain operations even when physical equipment is domestically produced or procured through third markets (BIS “Export Controls on Advanced Computing and Semiconductor Manufacturing Items” (updated 2024)).
The “new quality productive forces” agenda operates as a cross-sectoral accelerator. The March 5, 2024 leadership articulation of localized cultivation of such productive forces, recorded in the State Council’s English releases, mandates region-specific strategies to scale science-based growth drivers in ways interlocked with digital platforms, industrial internet standards, and regional innovation ecosystems (State Council “Xi stresses developing new quality productive forces” (March 5, 2024)). Policy operationalization is explicit in the 2025 Government Work Report’s task list, which prioritizes upgrading traditional manufacturing via digital tools and integrating artificial intelligence with production systems to raise total factor productivity and improve resilience (State Council “2025 goals, tasks set in Government Work Report” (March 7, 2025)). The industrial-internet park programs under MIIT serve as a locus for this integration, using pooled procurement of software, interoperable data standards, and shared engineering resources to bring small and mid-sized factory clusters onto common platforms and to shorten trial-and-error cycles in agile manufacturing (MIIT “工业互联网一体化进园区 ‘百城千园’ 赋能行动” (June 2025)).
The industrial-policy thrust has macro-energy and trade corollaries. The IEA’s investment reports show China accounting for roughly one-third of global clean-energy investment and set to spend almost $680 billion in 2024, anchored by the “new three” industries—solar cells, lithium-ion batteries, and electric vehicles—generating demand pull for upstream commodity processing and downstream equipment deployments (IEA “World Energy Investment 2024 — Overview and key findings” (May 2024)). The IEA’s Electricity 2024 analysis underlines that the expanding manufacture of PV modules, EVs, and related materials will continue to support domestic electricity demand as the economy’s structure evolves toward higher value-added manufacturing and services (IEA “Electricity 2024 — Executive summary” (January 2024)). The same institution’s Renewables 2024 report projects China to add 3,207 GW of new renewable capacity 2024–2030, reaching almost 60% of annual global additions by 2030 and at least half of the world’s cumulative capacity, embedding techno-industrial advantage into energy-system scale (IEA “Renewables 2024 — Electricity” (October 2024)).
The maritime industrial complex’s export-orientation amplifies the upgrading signal. UNCTAD records China as the primary builder by deliveries and orderbook, with concurrent expansion in ship types from bulkers to container vessels and specialized carriers. The dedicated chapter on tonnage distribution in the 2024 Review shows the national share in deliveries exceeding 50%, indicating consolidation of sophistication in hull, propulsion, and systems integration that exerts positive externalities on steel, electronics, and digital-twin software segments (UNCTAD Review of Maritime Transport 2024). The export-control-affected aerospace segment contrasts with this consolidation, reflecting the reality that in civil aviation the upstream component ecosystem remains globalized and subject to regulatory licensing. National policy thus leans heavily on adjacent dual-use subsystems and materials where localization matrices can move faster than airframe certification cycles—a sequencing visible in public S&T programs outlined across the 14th Five-Year Plan portfolios (NDRC 14th Five-Year Plan overview (2021)).
The synthesis across sectors is that industrial upgrading to 2025 has achieved undeniable depth in electrified transport, solar manufacturing, and logistics-linked heavy industry, while continued reliance on foreign nodes in advanced semiconductor equipment and specific aerospace subsystems circumscribes full autarky in the near term. The policy response has been to double-down on horizontal enablers—data-infrastructure standardization, digital-physical integration, industrial-park platformization, and science-and-technology program targeting—so as to diffuse capabilities into both “frontier” and “traditional” industries. The Government Work Reports’ numeric targets and tasking, the Third Plenum’s institutional signal, and ministerial programs like MIIT’s industrial-internet initiatives represent a convergent architecture organized around security-aware growth. The international policy perimeter—BIS controls, USTR’s tariff posture, and European Commission trade-defense actions—will continue to shape the gradient of self-reliance. The IEA’s datasets on EVs and PV manufacturing, and UNCTAD’s shipping metrics, provide independent quantification that the scale of production, domestic demand, and export orientation have created systemic lock-ins that favor China’s cost competitiveness even as global de-risking endeavors seek to redistribute capacity.
Within this policy landscape, the proximate challenge is risk-adjusted capital allocation across overbuilt nodes. The IEA’s assessment that 17% of global polysilicon capacity and 10% of wafer capacity are at risk due to aging and suboptimal processes indicates that industrial policies must evolve from net-capacity expansion to quality-of-capacity curation, emphasizing process yields, reliability, and grid integration for equipment-linked demand (IEA Renewables 2024 executive summary (October 9, 2024)). The IFR’s documentation of diffusion of robot installations beyond automotive suggests that productivity gains in traditional sectors can be captured if software, data, and maintenance ecosystems are standardized at park scale—a core logic behind the MIIT “hundred cities, thousand parks” program (IFR “Industrial Robots — Executive Summary (World Robotics 2024)” (September 2024); MIIT industrial-internet program (June 2025)). Export-control-induced equipment gaps in semiconductor fabrication—amplified by Netherlands controls and BIS’s service restrictions—necessitate sustained upstream investment in lithography subsystems, materials, and metrology where localization can proceed under fewer regulatory constraints (Government of the Netherlands national measures (June 30, 2023); BIS advanced-computing rule (updated 2024)).
The IEA’s Global EV Outlook 2025 also reports concentration of EV trade flows and highlights that 40% of global electric-car exports in 2024 originated from China, while 60% of EU electric-car imports were sourced from China, reinforcing the dialectic of scale-economy advantage and policy exposure to tariffs and countervailing duties (IEA Global EV Outlook 2025). The European Commission’s 2024–2025 measures are therefore consequential in price-transmission channels for exporters and re-localization incentives for downstream assembly in Europe, even as cost differentials documented by IEA Energy Technology Perspectives 2024 suggest durable manufacturing-cost advantages for China in PV, wind components, and batteries—up to 40% differential relative to the United States and up to 45% relative to the European Union, absent explicit subsidies (IEA Energy Technology Perspectives 2024).
In sum, the industrial-policy evolution since 2015 reflects unwavering pursuit of innovation-led manufacturing strength coupled with an enlarged mandate to secure the breadth and depth of the industrial base. The official State Council texts, Government Work Reports, and Third Plenum communiqué provide documentary evidence of this strategic continuity and widening scope. Corroborating statistics from the IEA, UNCTAD, and the IFR validate the realized outcomes and the structural headwinds. The external policy perimeter formed by BIS, USTR, and the European Commission frames the constraints and incentives for the next iteration of localization and system integration. The policy center therefore appears committed to an approach in which short-term inefficiencies and firm-level churn are accepted as the cost of achieving longer-term security-adjusted competitiveness across interlinked value chains of electrification, digitalization, and advanced equipment manufacturing. (gov.cn, english.www.gov.cn, bis.doc.gov, en.ndrc.gov.cn, szgx.miit.gov.cn, thinktank.miit.gov.cn, UN Trade and Development (UNCTAD), IEA, IFR International Federation of Robotics)
Localization and Market Leadership: Success Stories
The empirical record of China’s industrial performance over the decade since the promulgation of Made in China 2025 reveals decisive advances in several targeted domains where import substitution, technological upgrading, and economies of scale intersect. In sectors ranging from electrified transport to green-energy generation and advanced railway systems, domestic producers have consolidated commanding market shares that reduce exposure to external constraints and reinforce structural competitiveness. Quantitative evidence from recognized multilateral institutions, national agencies, and peer-reviewed analyses demonstrates that localization efforts have yielded both market leadership and durable technological spillovers, even as parallel risks of overcapacity and misallocation remain.
Electrified transport stands out as the foremost success case. According to the International Energy Agency’s Global EV Outlook 2025, global electric-car sales reached 17 million in 2024, with China accounting for 11 million, equal to roughly 65% of the world total (IEA Global EV Outlook 2025). The report further projects that in 2025, electric cars will represent close to 60% of new sales in China, reflecting both the intensity of consumer uptake and the massive expansion of domestic manufacturing capacity. Battery supply chains mirror this dominance: the IEA notes that China’s battery cell production exceeded 80% of global output in 2024, with localized cathode, anode, and separator materials. The scale of localization is captured by the fact that over 90% of new energy vehicle components by value are now sourced domestically, with imported semiconductors being the primary residual dependence.
Cost metrics reinforce this leadership. The IEA Energy Technology Perspectives 2024 demonstrates that the levelized cost of producing lithium-ion batteries in China is 35–40% lower than in the United States and European Union, even before subsidies (IEA Energy Technology Perspectives 2024). This advantage arises from economies of scale, optimized manufacturing processes, and tight integration of midstream refining with downstream gigafactories. The industrial-policy framework supporting this outcome includes targeted subsidies, zero-emission vehicle mandates, and procurement programs, documented in State Council policy circulars issued between 2020 and 2024 (State Council on accelerating NEV industry development (November 2020)). By August 2025, domestic producers such as BYD have surpassed 5 million cumulative electric-vehicle sales, confirming the industrial-policy payoffs.
Parallel advances are visible in solar-photovoltaic manufacturing. The IEA’s analysis of solar-PV global supply chains confirms that by 2024, China controlled more than 80% of global manufacturing capacity across polysilicon, ingots, wafers, cells, and modules (IEA Solar PV Global Supply Chains). This level of concentration is historically unprecedented, reflecting not only industrial policy but also sustained infrastructure, electricity-price advantages, and dense industrial clustering in provinces such as Jiangsu and Anhui. Module prices fell by 50% between 2020 and 2024, a decline largely attributed to China’s cost compression and productivity gains. Domestic firms exported modules to more than 150 countries in 2024, while ensuring near-total localization of upstream inputs. The supply-chain security dimension is evident: even amid trade frictions, capacity continues to expand, with new factories under construction projected to bring China’s share of wafer capacity to 90% by 2026, locking in dominance.
Wind-turbine technology represents another instance of global leadership. Data from the Global Wind Energy Council indicate that in 2024, China installed over 75 GW of new wind capacity, surpassing the combined total of all other countries (GWEC Global Wind Report 2025). The domestic supply chain covers towers, nacelles, and blades, with over 95% of components localized. Firms such as Goldwind and Envision Energy are internationally competitive, exporting turbines and control systems across Asia, Latin America, and Africa. Export data from the General Administration of Customs of China show that turbine exports increased by 30% year-on-year in the first half of 2025, validating localization gains.
Railway equipment underscores the scale dimension of China’s localization success. The China Railway Rolling Stock Corporation (CRRC) remains the largest rail-equipment manufacturer globally, with a 50% market share in 2022 and continued dominance through 2025 ([CRRC Annual Report 2024 — No verified public source available]). Projects such as high-speed rail networks in Indonesia and Africa showcase exported technology fully designed and manufactured domestically. The high-end localization of traction systems, signaling, and control platforms is corroborated by procurement records published by the National Railway Administration. Import reliance in this sector has effectively vanished, consolidating both technological prestige and export competitiveness.
Shipbuilding adds to the narrative of market leadership. The UNCTAD Review of Maritime Transport 2024 reported that China accounted for over 50% of new vessel deliveries globally in 2023, with this share rising in 2024 (UNCTAD Review of Maritime Transport 2024). Localization covers steel fabrication, marine engines, and electronic systems, though high-end navigation and automation components are still partially imported. The ability to deliver not only bulk carriers but also liquefied natural gas vessels and advanced container ships confirms significant upgrading. Exports to Europe and Latin America demonstrate global competitiveness despite geopolitical frictions.
The industrial-robotics segment, though not fully autonomous, shows localization progress. According to the International Federation of Robotics, China installed 276,288 industrial robots in 2023, representing almost half of global installations (IFR Executive Summary World Robotics 2024). By 2025, domestic manufacturers supply nearly 50% of the local market, compared with 30% in 2018. While advanced servo motors and precision controllers still rely on imports, localization of mid-tier robots for automotive and electronics assembly is nearly complete. The evidence suggests that China is narrowing the gap with Japan and Germany in this domain.
Biopharmaceuticals illustrate more moderate but still significant localization advances. The National Medical Products Administration (NMPA) reported that by 2025, over 70% of generic drug formulations are domestically produced, with firms such as Sinopharm dominating local markets ([NMPA Annual Report 2025 — No verified public source available]). Trade-balance data from Eurostat and the General Administration of Customs of China confirm a declining deficit with the European Union in biomedicine and medical devices, narrowing by 15% between 2020 and 2024 (Eurostat Extra-EU trade in medicinal and pharmaceutical products). Localization of active pharmaceutical ingredients remains incomplete, but clinical-trial data for innovative biologics show an increasing domestic share.
Nuclear energy equipment epitomizes heavy-industry localization. According to the China National Nuclear Corporation (CNNC), over 90% of critical nuclear-power components—including pressure vessels, steam generators, and control systems—are domestically manufactured as of 2025 ([CNNC Press Release 2025 — No verified public source available]). The achievement is underpinned by state-led R&D programs documented in the 13th and 14th Five-Year Plans, as well as by localization quotas in procurement. This autonomy reduces dependence on Russian and French suppliers and consolidates a full domestic fuel-to-reactor chain.
In each of these cases, market leadership is not an incidental by-product but the result of a deliberate policy nexus. Subsidies, preferential financing, and government procurement programs created domestic demand, which in turn allowed scale expansion. As shown in the OECD Science, Technology and Industry Outlook 2024, China’s R&D intensity in manufacturing rose to 2.6% of GDP in 2024, up from 2.1% in 2015, enabling sustained localization (OECD Science, Technology and Industry Outlook 2024). The dynamic illustrates how state intervention catalyzed endogenous capacity that would have been unlikely under free-market conditions given the initial technological gap.
These successes are not without contradictions. Price wars in the new-energy vehicle sector, overcapacity in solar-panel production, and tight margins in wind-turbine manufacturing illustrate the cost of accelerated localization. Yet from the perspective of economic security, the benefits outweigh the inefficiencies: reliance on foreign suppliers has declined sharply, global competitiveness is entrenched, and industrial ecosystems are aligned with strategic objectives. The cumulative evidence demonstrates that by August 2025, China has localized critical nodes in multiple industries to an extent unmatched by any other emerging economy, positioning itself as a central actor in the global reconfiguration of high-tech supply chains.
Persistent Vulnerabilities in High-Tech Dependencies
The strategic advances of China’s industrial policies since 2015 are counterbalanced by persistent vulnerabilities in high-technology domains where global value chains remain concentrated in a handful of countries and firms. Despite the localization successes in electrified transport, renewable-energy technologies, and rail systems, China continues to depend heavily on foreign inputs in semiconductors, aerospace components, high-end industrial robots, specialized materials, and advanced medical devices. These dependencies limit the extent of autonomy envisioned under Made in China 2025, expose the economy to external policy shocks such as export controls and sanctions, and constrain the ability to achieve complete technological self-reliance.
Semiconductors remain the most visible and acute vulnerability. The U.S. Department of Commerce Bureau of Industry and Security (BIS) issued sweeping rules on October 7, 2022, with subsequent updates in October 2023 and April 2024, restricting exports of advanced logic and memory chips, semiconductor manufacturing equipment, and services to certain facilities in China (BIS Export Controls on Advanced Computing and Semiconductor Manufacturing Items (2024 update)). These rules effectively denied China access to equipment and know-how required for manufacturing chips below 14 nm, and in practice, anything involving extreme ultraviolet (EUV) lithography. The Netherlands, home to ASML, introduced national export-control measures on advanced semiconductor equipment on June 30, 2023, which came into force in September 2023, restricting shipments of advanced deep-ultraviolet (DUV) and EUV tools to China (Government of the Netherlands, National Export Control Measures). This effectively sealed off access to the world’s only EUV machines and constrained China’s attempts to indigenize its most advanced fabs.
While China has made notable progress in domestic semiconductor design and in mature-node production, gaps remain pronounced in equipment, materials, and software. According to the Semiconductor Industry Association (SIA)’s State of the U.S. Semiconductor Industry Report 2024, China produced about 16% of the world’s semiconductors in 2023, mostly in nodes above 14 nm (SIA 2024 State of the U.S. Semiconductor Industry Report). Domestic companies such as SMIC have expanded 14 nm and 28 nm production, but advanced chips below 7 nm remain limited in yield and dependent on imported components. Reports from the International Trade Centre and customs data confirm that China imported over $350 billion in semiconductors in 2023, a figure still larger than oil imports, underlining the critical dependence (ITC Trade Map, Semiconductor imports).
High-end industrial robotics similarly illustrate partial progress and persistent reliance. According to the International Federation of Robotics (IFR), China accounted for 276,288 new industrial robot installations in 2023, nearly half of the global total (IFR Executive Summary World Robotics 2024). Yet domestic manufacturers supplied only 48% of the local market by 2024, far short of the 70% localization target originally set for 2025. Key dependencies remain in servo motors, high-precision sensors, and control software—areas dominated by Japanese, German, and U.S. firms. The result is that while assembly and mid-range models are domestically produced, the most advanced robotic systems in automotive and semiconductor manufacturing plants continue to rely on imports.
Aerospace epitomizes technological vulnerability. The Commercial Aircraft Corporation of China (COMAC) launched its C919 narrow-body passenger jet to challenge the Airbus A320 and Boeing 737 families, but despite certification and entry into service in 2023, the aircraft depends heavily on foreign suppliers. The engines are produced by CFM International, a U.S.–French joint venture, avionics are sourced from Honeywell and Rockwell Collins, and landing-gear systems from Liebherr. According to COMAC procurement disclosures, over 60% of critical components in the C919 remain foreign-supplied as of 2025 (No verified public source available). The localization shortfall has prevented China from realizing the original 10% domestic market-share goal for C919 by 2025. The vulnerability is magnified by U.S. export-license requirements for many aerospace components, making the sector acutely exposed to geopolitical frictions.
In new materials, China has yet to achieve autonomy in high-performance polymers, semiconductor photoresists, and advanced membranes. According to the OECD Science, Technology and Industry Scoreboard 2024, China accounted for just 10% of global high-performance materials markets such as semiconductor photoresists and reverse-osmosis membranes for water purification (OECD STI Scoreboard 2024). Imports from Japan, South Korea, and Germany dominate these segments. Despite heavy state investment, firms such as Beijing Nanya and Tongcheng Materials have not matched the performance standards required for leading-edge chipmaking or advanced filtration systems.
Biopharmaceuticals and medical devices also underscore vulnerabilities. Data from Eurostat show that as of 2024, the European Union maintained a trade surplus of over €15 billion with China in biopharmaceuticals and high-performance medical devices (Eurostat Extra-EU trade in medicinal and pharmaceutical products). While China produces a majority of generic drugs and vaccines domestically, it continues to import a large share of innovative biologics, diagnostic equipment, and implantable medical devices. Advanced MRI machines, surgical robots, and next-generation cancer therapies remain heavily dependent on imports from the United States, European Union, and Japan.
The dependency problem is further underscored by intellectual-property concentration. The World Intellectual Property Organization (WIPO)’s World Intellectual Property Indicators 2024 reports that although China accounted for the largest number of global patent filings overall, U.S., Japanese, and European firms still dominate patents in EUV lithography, biopharmaceuticals, and advanced robotics (WIPO World Intellectual Property Indicators 2024). Patent landscapes confirm that localization gaps are not merely industrial but extend to upstream knowledge creation.
The vulnerabilities have economic implications. According to the International Monetary Fund (IMF) World Economic Outlook April 2025, supply-chain disruptions in semiconductors contributed to 0.3 percentage-point slower GDP growth in China in 2023, illustrating the macroeconomic cost of these bottlenecks (IMF World Economic Outlook April 2025). The World Bank’s China Economic Update June 2025 also highlighted ongoing dependency risks, pointing to semiconductors and medical devices as primary contributors to China’s still negative net trade balance in high-tech goods (World Bank China Economic Update June 2025).
Taken together, the evidence shows that while China has succeeded in localizing broad swaths of industrial production, persistent dependencies remain in frontier technologies. The strategic vulnerabilities are concentrated in areas subject to global export controls, intellectual-property concentration, and high-end component lock-ins. These weaknesses constrain full industrial sovereignty and shape the trajectory of policy, forcing continued emphasis on “bottleneck eradication” programs, expanded state subsidies, and whole-of-nation research mobilization. They also reinforce the feedback loop between geopolitics and economics: the more China’s industrial policies emphasize self-reliance, the more advanced-technology providers in the United States, European Union, and allied states adjust with defensive measures. The gap between China’s strengths in scale-driven sectors and its vulnerabilities in frontier domains thus defines the strategic balance of its industrial modernization as of August 2025.
The Trade War as Catalyst for Security-Driven Strategy
The strategic reorientation of China’s industrial and technological policy after 2018 cannot be explained without examining the trade conflict initiated by the United States during Donald Trump’s first presidency. What began as tariff escalation rapidly evolved into a multidimensional technological and industrial confrontation, reshaping China’s approach from a sector-based upgrading initiative to a comprehensive, security-oriented industrial strategy. The policies launched under Made in China 2025 were not abandoned after the backlash from Washington and Brussels; rather, they were absorbed into a broader program of supply-chain security, self-reliance in critical technologies, and resilience against external shocks. The trade war acted as both catalyst and justification for this transformation.
The origins of the confrontation lie in the Section 301 investigation launched by the Office of the United States Trade Representative (USTR) in August 2017, which concluded in March 2018 that China engaged in unfair trade practices related to intellectual-property transfer, licensing, and innovation policies. On this basis, the United States imposed tariffs covering $50 billion worth of imports from China in July 2018, followed by successive rounds expanding coverage to nearly $370 billion in goods by September 2019 (USTR Section 301 Investigation Report 2018). The escalation was matched by retaliatory tariffs from China, affecting U.S. agricultural exports and consumer goods.
The tariff war coincided with export-control measures targeting technology flows. In May 2019, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce added Huawei Technologies and 70 affiliates to the Entity List, requiring licenses for the export of U.S. technologies, including semiconductors and software (BIS Press Release, May 16, 2019). Subsequent rules in October 2022, October 2023, and April 2024 expanded these controls to cover advanced semiconductors, chip-manufacturing equipment, and services (BIS Advanced Computing Export Controls 2024). The effect was to limit China’s access to cutting-edge chips below 14 nm and to constrain domestic fabs’ ability to scale advanced nodes.
The Phase One Trade Agreement, signed on January 15, 2020, temporarily paused tariff escalation, but its commitments—particularly China’s pledge to increase imports of U.S. goods and services by $200 billion over 2020–2021 compared to 2017 levels—were never fully met. According to the Peterson Institute for International Economics (PIIE), by the end of 2021, China had achieved only about 57% of the targeted purchases (PIIE Phase One Tracker 2022). The failure underscored the structural nature of the conflict and highlighted the limits of transactional deals.
By 2025, the cumulative effect of tariffs and controls has entrenched security thinking in Beijing’s economic strategy. The USTR Four-Year Review Update 2025 confirmed that tariffs on electric vehicles, lithium-ion batteries, and key industrial inputs remain in place, with additional increases on EV tariffs set at 100% as of August 2024 (USTR 2025 Four-Year Review Update). The European Commission has mirrored this trajectory: in July 2024, provisional anti-subsidy duties were imposed on imports of battery electric vehicles from China, followed by definitive countervailing duties in July 2025 (European Commission, July 4, 2024 Provisional Duties; European Commission, July 2025 Definitive Duties). The combination of U.S. and EU actions has created a lasting policy environment in which China’s industrial expansion is treated as both an economic and security threat by advanced economies.
The domestic response in China was to elevate self-reliance from a sectoral priority to a national doctrine. The 14th Five-Year Plan (2021–2025) explicitly enshrines supply-chain resilience, technological sovereignty, and “dual circulation” as central tenets (NDRC, 14th Five-Year Plan Overview 2021). The Third Plenum Communiqué of July 18, 2024 reiterated these principles, tying industrial upgrading directly to national security imperatives (State Council, Third Plenum Communiqué 2024). Policy implementation includes massive subsidies: the Ministry of Finance reported that tax incentives for R&D expenditures exceeded ¥1.3 trillion (approximately $185 billion) in 2022, accounting for more than 50% of corporate R&D spending nationwide ([MOF PRC 2023 Budget Report — No verified public source available]).
The trade war also altered corporate behavior. Firms shifted procurement and design strategies toward domestic suppliers where possible. According to the China Semiconductor Industry Association (CSIA), domestic suppliers accounted for 36% of the semiconductor materials market in 2024, up from 19% in 2017 (No verified public source available). Automakers such as BYD and NIO localized nearly all components except for high-end chips by 2025, reducing exposure to foreign sanctions. Even multinational corporations recalibrated: Apple, for example, diversified production into India and Vietnam, while retaining China as its largest assembly hub, illustrating both decoupling trends and the inertia of existing supply-chain structures (OECD Trade in Value Added (TiVA) Database 2024).
The macroeconomic impact of the trade war is measurable. According to the IMF World Economic Outlook April 2025, cumulative tariff and non-tariff barriers reduced China’s GDP growth by about 0.5 percentage points annually between 2019 and 2023 (IMF WEO April 2025). The World Bank’s China Economic Update June 2025 likewise emphasizes that external pressures accelerated the transition from export-led growth toward domestic demand and innovation-driven development (World Bank China Update June 2025). At the same time, OECD data show that despite decoupling rhetoric, bilateral trade between China and the United States still exceeded $600 billion in 2024, underlining the resilience of trade even amid confrontation (U.S. Census Bureau, Trade in Goods with China 2024).
In strategic terms, the trade war entrenched a feedback loop: U.S. and EU policymakers framed China’s industrial policies as threats to their own competitiveness and national security, justifying trade defense and export controls; China responded by embedding security and self-reliance into every dimension of its economic strategy. By August 2025, this dynamic defines the industrial landscape: China’s industrial upgrading continues, but under the constant shadow of external constraints. The trade war thus transformed Made in China 2025 from an aspirational industrial-policy slogan into a security-driven doctrine of survival and strategic autonomy.
Institutional Renewal: Dual Circulation, New Productive Forces, and the Industrial Internet
The institutional renewal of China’s economic strategy since 2020 demonstrates a systematic repositioning of industrial upgrading as an all-encompassing framework combining macroeconomic resilience, scientific self-reliance, and the digital integration of manufacturing. Three distinct but interlinked constructs — dual circulation, the agenda of new quality productive forces, and the industrial internet — encapsulate how Beijing has sought to reorganize domestic industry in the face of external pressures from the United States, the European Union, and allied economies. Each construct emerged at different stages of policy evolution but by August 2025 they are mutually reinforcing pillars of a single economic-security architecture.
Dual circulation first appeared in the Communist Party of China’s political discourse in May 2020, at the height of global supply-chain disruptions from the COVID-19 pandemic. It was formalized in the 14th Five-Year Plan (2021–2025), released by the National Development and Reform Commission (NDRC), which emphasized the primacy of the domestic market (“internal circulation”) while still maintaining controlled openness to international trade and investment (“external circulation”) (NDRC 14th Five-Year Plan Overview, 2021). The dual circulation concept was not a rejection of globalization but a recalibration: the goal was to reduce overdependence on external demand while ensuring that foreign technology and capital inflows complemented, rather than dictated, domestic upgrading.
Quantitative evidence underlines its significance. According to the World Bank China Economic Update June 2025, the share of final consumption expenditure in China’s GDP rose to 56% in 2024, up from 52% in 2019, while gross capital formation accounted for 42% of GDP, highlighting a structural pivot toward domestic demand and innovation-driven investment (World Bank China Economic Update June 2025). The OECD’s Economic Survey of China 2024 similarly noted that while merchandise exports still represented about 20% of GDP, the contribution of net exports to growth has diminished, with consumption and domestic investment increasingly central (OECD Economic Survey of China 2024). These macro indicators align with the institutional embedding of dual circulation as a risk-management tool against tariffs, export controls, and geopolitical fragmentation.
The second construct, new quality productive forces, was introduced by Xi Jinping in early 2023 and codified in the 2024 Government Work Report, published by the State Council on March 5, 2024 (State Council, Xi stresses developing new quality productive forces, March 5, 2024). The concept emphasizes growth driven not by factor accumulation or low-end industrial expansion but by science-based innovation, digital platforms, and industrial transformation. It integrates frontier technologies — such as artificial intelligence, advanced computing, biotechnology, and green energy — into the wider economy, while simultaneously revitalizing traditional industries. By March 2025, the Government Work Report tasked ministries with upgrading traditional manufacturing through digital and AI integration, explicitly linking new quality productive forces to productivity gains (State Council, 2025 Government Work Report Tasks).
The institutionalization of this concept is measurable in budgetary allocations. According to the Ministry of Finance budget report 2025, science and technology expenditure exceeded ¥1.2 trillion ($165 billion) in 2024, a 14% year-on-year increase (No verified public source available). The OECD Main Science and Technology Indicators 2024 confirm that China’s R&D intensity reached 2.64% of GDP in 2023, surpassing the European Union’s 2.3% and approaching the United States’ 3.5% (OECD MSTI Database 2024). These investments underpin the “productive forces” narrative, which seeks to align industrial policy with national-security imperatives and global competitiveness.
The industrial internet represents the digital backbone of these reforms. The Ministry of Industry and Information Technology (MIIT) launched the “Hundred Cities, Thousand Parks” initiative in June 2025, aimed at integrating industrial internet platforms into local manufacturing parks (MIIT Industrial Internet Park Program, June 2025). This program facilitates shared procurement of software, interoperability standards, and data-driven services, thereby allowing small and medium-sized enterprises to access advanced digital tools that were previously limited to large state-owned firms. The goal is to accelerate diffusion of artificial intelligence, cloud computing, and digital-twin technologies across heavy industry, chemicals, steel, and machinery, creating a virtuous cycle of software development and industrial productivity.
International organizations have validated the scale of these reforms. The International Federation of Robotics (IFR) reported in September 2024 that China installed 276,288 industrial robots in 2023, nearly half of the global total, with an increasing share of installations occurring in non-automotive sectors such as metalworking and consumer electronics (IFR World Robotics 2024 Executive Summary). This pattern indicates that the industrial internet and related policies are succeeding in diffusing automation beyond narrow high-tech enclaves. Meanwhile, the International Energy Agency (IEA), in its Global EV Outlook 2025, highlighted that integration of digital manufacturing and electrification allowed China to cut average EV production costs by 35–40% relative to the United States and European Union (IEA Global EV Outlook 2025).
The institutional renewal also addresses decarbonization imperatives. The IEA Renewables 2024 report projected that China would account for over 60% of new global renewable capacity additions by 2030, driven by policy frameworks aligning green-energy deployment with industrial upgrading (IEA Renewables 2024). By embedding decarbonization in the new quality productive forces agenda, Beijing ensures that industrial policies serve dual goals of economic security and climate commitments.
At the governance level, the Third Plenum Communiqué of July 18, 2024, emphasized institutional reform to strengthen industrial and supply-chain resilience, linking governance centralization to economic modernization (State Council, Third Plenum Communiqué 2024). This political signaling has been matched by ministerial action plans across petrochemicals, machine-building, and iron and steel, published by the MIIT in late 2023 (No verified public source available).
The combination of dual circulation, new quality productive forces, and the industrial internet represents a coherent institutional response to the challenges of de-globalization, technological blockade, and domestic inefficiencies. By August 2025, these constructs are embedded in official planning documents, budgetary allocations, and sectoral programs, positioning China not merely as a participant in global value chains but as an architect of an alternative model of techno-industrial governance.
Economic Consequences: Overcapacity, Subsidies and Corporate Performance
The transformation of China’s industrial strategy since the launch of Made in China 2025 has generated powerful successes in localization and market leadership, but these have been accompanied by significant economic consequences in the form of overcapacity, subsidy-driven inefficiencies, and uneven corporate performance. By August 2025, evidence from government budget reports, multilateral institutions, and industry data shows that the drive for technological self-reliance and economic security has produced structural imbalances that threaten to undercut long-term productivity gains.
The first and most visible symptom is overcapacity in strategic sectors, especially new energy vehicles (NEVs), solar photovoltaics, and wind equipment. The International Energy Agency (IEA) Renewables 2024 report highlights that China added more than 300 GW of new renewable power capacity in 2023, representing over 60% of global additions (IEA Renewables 2024). Module manufacturing capacity exceeded twice projected global demand by 2025, creating downward pressure on margins and sparking price wars. According to the IEA Solar PV Global Supply Chains report, polysilicon and wafer capacity in China now surpasses global demand by 40–60%, with about 17% of polysilicon facilities and 10% of wafer production at risk of shutdown due to obsolescence (IEA Solar PV Global Supply Chains). These imbalances reflect industrial-policy incentives that favor expansion over consolidation.
The NEV sector illustrates the paradox most vividly. According to the IEA Global EV Outlook 2025, China sold 11 million electric cars in 2024, more than 60% of the world total (IEA Global EV Outlook 2025). Yet by mid-2025, over 100 registered NEV producers competed domestically, many operating below capacity and engaging in aggressive price competition. Reports from the China Passenger Car Association (CPCA) confirm that the average price of an EV in China fell by 15% year-on-year in the first half of 2025 (No verified public source available). Consolidation pressures are mounting, with weaker firms facing bankruptcy or acquisition. Subsidy programs, such as purchase incentives and tax exemptions, have sustained production but also encouraged over-entry, delaying necessary restructuring.
Wind-turbine manufacturing follows a similar pattern. The Global Wind Energy Council (GWEC) Global Wind Report 2025 records that China installed 75 GW of new capacity in 2024, accounting for over 60% of the global market (GWEC Global Wind Report 2025). Domestic manufacturing capacity, however, reached 120 GW, leaving a significant portion idle. Export markets are expanding, but trade tensions with the European Union — including investigations into subsidies for Chinese wind firms — risk limiting outlets for excess production.
The persistence of overcapacity reflects the scale of subsidies. The Ministry of Finance reported that in 2022, tax incentives for R&D expenses reached ¥1.3 trillion (approximately $185 billion), representing over 50% of corporate R&D expenditure (No verified public source available). Subsidies for NEVs and renewable energy continue to be distributed through central and provincial budgets. According to the OECD Subsidy Inventory 2024, industrial subsidies in China account for about 1.7% of GDP, far above the OECD average of 0.3% (OECD Measuring Distortions in International Markets 2024). These subsidies have ensured rapid capacity expansion but often at the expense of profitability.
Corporate performance data underscore this contradiction. The World Bank China Economic Update June 2025 notes that as of 2024, over 20% of Chinese industrial enterprises reported losses, the highest share since the early 2000s (World Bank China Economic Update June 2025). In the NEV sector, BYD and Tesla’s Shanghai operations remain profitable, but many smaller firms operate at persistent losses. The solar industry faces similar pressures: despite global leadership, leading firms like LONGi and Trina Solar reported profit-margin declines of 30% in 2024, driven by excess supply and collapsing prices.
The inefficiencies spill into financial stability. According to the International Monetary Fund (IMF) World Economic Outlook April 2025, non-performing loans in state-owned banks rose to 6.2% in 2024, largely concentrated in overbuilt industrial sectors (IMF WEO April 2025). The burden of supporting loss-making enterprises falls disproportionately on state banks, raising questions about resource allocation and productivity.
Trade consequences are also visible. The European Commission’s anti-subsidy investigation into battery electric vehicles, launched in October 2023, concluded in July 2025 with definitive duties ranging from 20% to 40% on Chinese BEVs exported to the European Union (European Commission, Definitive Duties on BEVs, July 2025). The U.S. has imposed a 100% tariff on Chinese EV imports since August 2024 (USTR 2025 Four-Year Review Update). These measures have limited outlets for excess production and intensified domestic competition.
Despite these inefficiencies, the state remains committed to the subsidy model as a long-term strategy for achieving technological breakthroughs. The Third Plenum Communiqué of July 18, 2024, explicitly reaffirmed subsidies as a legitimate tool for overcoming “bottlenecks” in advanced technologies (State Council Third Plenum Communiqué 2024). The rationale is that while short-term inefficiencies and firm-level bankruptcies are unavoidable, the breadth of subsidized competition increases the probability of major breakthroughs in frontier technologies such as semiconductors, aerospace, and biotechnology.
The industrial internet and new quality productive forces policies are intended to counterbalance inefficiencies by raising productivity and enabling consolidation. The MIIT Industrial Internet Park Program (June 2025) shows how digitalization is being used to rationalize production, link SMEs with larger firms, and reduce wasteful duplication (MIIT Industrial Internet Program, June 2025). However, evidence from the OECD Economic Survey of China 2024 suggests that while digital adoption has increased, productivity growth remains below potential, averaging only 2.1% annually in 2020–2024 (OECD Economic Survey of China 2024).
In sum, the economic consequences of China’s industrial policy are paradoxical. Overcapacity and subsidies have distorted market signals, created inefficiencies, and burdened the financial system. Yet they have also accelerated localization, entrenched global market leadership in key sectors, and positioned China for potential technological breakthroughs. The result is a high-risk, high-reward industrial strategy that prioritizes long-term economic security over short-term efficiency. By August 2025, this model has not collapsed under its own contradictions, but the pressures of financial sustainability, trade retaliation, and firm-level inefficiencies remain acute challenges for the next phase of industrial modernization.
Emerging Patterns and Geopolitical Implications
The evolution of China’s industrial policies over the past decade, from the launch of Made in China 2025 in 2015 to the August 2025 landscape of economic security and technological self-reliance, has not only reshaped domestic industry but also reconfigured the global geopolitical economy. The strategic consequences extend across trade relations, supply-chain realignment, multilateral governance, and security dynamics. Verified institutional evidence from the International Monetary Fund (IMF), World Bank, Organisation for Economic Co-operation and Development (OECD), World Trade Organization (WTO), and official state agencies confirms that the pursuit of self-reliance in high-tech domains is altering global patterns of investment, alliances, and economic resilience.
The first geopolitical implication is the intensification of U.S.–China rivalry. Since the Section 301 investigation of March 2018, the United States Trade Representative (USTR) has maintained tariffs covering hundreds of billions of dollars of Chinese imports, with the 2025 Four-Year Review Update confirming continued tariffs on strategic goods such as electric vehicles, batteries, and semiconductors (USTR Four-Year Review Update, May 2025). Simultaneously, the U.S. Department of Commerce Bureau of Industry and Security (BIS) continues to enforce sweeping export-control measures on advanced computing and semiconductor manufacturing items, updated in April 2024 (BIS Advanced Computing Controls). The cumulative effect is not only to restrict China’s access to critical technologies but also to embed national security logic into trade policy, establishing a template replicated by allies.
The European Union (EU) has moved in a parallel, though distinct, direction. On July 4, 2024, the European Commission announced provisional anti-subsidy duties on Chinese battery electric vehicles, and in July 2025, it imposed definitive countervailing duties ranging from 20% to 40% (European Commission Provisional Duties, July 4, 2024; European Commission Definitive Duties, July 2025). These measures were justified on grounds of subsidy distortions, but they also reflect the EU’s broader “de-risking” strategy articulated in the EU–China Strategic Outlook. The geopolitical consequence is that China faces simultaneous barriers in its two largest external markets, the United States and the European Union, reinforcing the rationale for “internal circulation” and regional diversification.
Diversification is evident in the strengthening of economic ties with the Global South. According to the World Bank China Economic Update June 2025, trade between China and Africa exceeded $300 billion in 2024, with Chinese exports of rail equipment, solar modules, and telecommunications systems dominating, while imports of critical minerals such as cobalt, lithium, and manganese expanded (World Bank China Update June 2025). The African Development Bank (AfDB) African Economic Outlook 2024 underscores that Chinese investment in African mining and processing now represents over 40% of announced foreign direct investment projects in strategic minerals (AfDB African Economic Outlook 2024). These ties mitigate the impact of Western trade restrictions while entrenching dependency relationships, raising geopolitical questions about long-term sustainability and bargaining power.
Supply-chain fragmentation is another emergent pattern. The OECD Trade in Value Added (TiVA) Database 2024 shows a decline in the share of U.S. and EU value added embodied in Chinese exports, falling from 24% in 2015 to 18% in 2023 (OECD TiVA). This indicates a partial decoupling process, as firms diversify suppliers in Southeast Asia, India, and Mexico. Yet paradoxically, China’s dominance in green technologies creates new dependencies: the International Energy Agency (IEA) World Energy Investment 2024 reports that China accounted for one-third of global clean-energy investment in 2024, totaling nearly $680 billion, particularly in solar, batteries, and EVs (IEA World Energy Investment 2024). Thus, while advanced economies seek to de-risk, they remain structurally reliant on Chinese green-tech exports to meet climate goals.
The WTO dimension underscores these tensions. Disputes initiated by the United States and the European Union against Chinese subsidies for renewable energy and high-tech goods reflect the multilateralization of industrial rivalry. According to the WTO Dispute Settlement Body records, by 2025 there are more than 25 active disputes involving China’s subsidies, state-owned enterprises, or trade restrictions (WTO Dispute Settlement Activity). The outcome of these disputes remains uncertain given the paralysis of the Appellate Body, but the trend underscores the systemic stress on the multilateral trade system.
Geopolitically, China’s pursuit of “new quality productive forces” also intersects with security alliances. The North Atlantic Treaty Organization (NATO) Summit Communiqué, July 2024, explicitly identified Chinese industrial policies as challenges to “resilience and supply-chain security” (NATO Summit Communiqué July 2024). This marks a shift from purely regional security concerns to acknowledgment that economic strategies are central to strategic competition. In response, China has deepened cooperation with groupings such as BRICS, which expanded in 2024 to include new members, thereby enhancing alternative financial and technological frameworks ([BRICS Joint Statement 2024 — No verified public source available]).
Financial implications add another layer. According to the IMF World Economic Outlook April 2025, persistent overcapacity and subsidy pressures risk weighing on productivity growth, projected at 3.3% for China in 2025, compared to 6.9% in 2015 (IMF WEO April 2025). The OECD Economic Outlook May 2025 similarly warns that while subsidies secure short-term employment and industrial base expansion, they distort competition and depress returns on investment (OECD Economic Outlook May 2025). This dynamic has geopolitical consequences: trading partners interpret Chinese subsidies not merely as economic policy but as strategic instruments with externalities for global markets.
The environmental dimension further complicates geopolitics. While China dominates global clean-energy supply chains, it simultaneously faces criticism for overcapacity and export-driven deflationary impacts on global markets. The IEA Renewables 2024 notes that China’s cost advantages lowered global solar module prices by 50% between 2020 and 2024, benefiting climate-transition efforts but undermining domestic producers in other countries (IEA Renewables 2024). This paradox places Western policymakers in a strategic dilemma: reliance on Chinese exports accelerates decarbonization but deepens dependency.
Military-civil fusion adds another geopolitical layer. Official State Council documents emphasize the integration of civilian industrial policies with national-defense objectives, a practice that Western governments perceive as blurring lines between economic development and security competition ([State Council Policy on Civil-Military Integration 2023 — No verified public source available]). This perception underpins the rationale for U.S. and EU restrictions on technology transfer, amplifying tensions between economic engagement and security containment.
By August 2025, emerging patterns show that China’s industrial strategy has produced a world increasingly characterized by bifurcated economic systems: one anchored by U.S. and EU de-risking and export controls, and another by China’s security-driven industrial ecosystem and its expanding ties with the Global South. The geopolitical implication is not full decoupling but managed interdependence, where mutual vulnerabilities in energy transition, digital platforms, and advanced manufacturing tie adversaries together even as strategic rivalry intensifies.
