There was a time in 2017 when news of President Xi Jinping’s high-tech policy used to be just a smartphone alert away.
Nearly three years later, Made in China 2025 has become the program “that must not be named.”
In 2019, it barely received a mention in Premier Li Keqiang’s state-of-the-union style address to the National People’s Congress apart from a throwaway line about “smart plus” technology.
Last month, “new infrastructure” was the buzz phrase at the annual NPC gathering of China’s rubber-stamp parliament.
“Chinese officials, wary of international blowback, have increasingly framed the plan as aspirational and unofficial. They have begun to reduce their allusions to it as Western leaders have voiced concerns,” James McBride and Andrew Chatzky, of the Council on Foreign Relations, said.
“In the opening session of the 2019 National People’s Congress, Premier Li did not mention [Made in] China 2025 at all; it was the first time he left the program out of his annual report to the Congress since it was first introduced,” they wrote in a commentary on the New York-based think tank’s website.
Breathtaking in scale, the plan was conceived in 2015, four years after Germany’s Industrie 4.0 initiative, which was launched at the influential Hanover Fair.
The blueprint encompasses an array of industries, from chips, computers and the cloud to smart cars and smart cookers. In fact, hardly a single sector in China’s economy will escape the effects of this multi-trillion-dollar project.
Renewables, railways and robotics are other vital areas earmarked, along with the Internet of Things, and interconnected smart technology linked through artificial intelligence, or AI, for the biopharmaceutical and manufacturing sectors.
“Although the goal of MIC 2025 is to upgrade industry writ large, the plan targets 10 strategic industries in which China intends to foster the development of not only national champions but global champions,” Bonnie S Glaser, of the Center for Strategic and International Studies, said in a statement to a United States Senate Committee last year.
Rising trade tensions between the US and China in 2018 have since morphed into a technological arms race and the early stages of a New Cold War.
The diplomatic discourse between Beijing and Washington now resembles Stone Age grunts.
But the Made in China 2025 dream still exists. It has simply had a makeover after a host of Chinese high-tech companies, such as telecom giant Huawei, AI-backed surveillance leader NetPosa and cybersecurity firm Qihoo360, were placed on a US blacklist.
Indeed, the program has accelerated under the guise of “new infrastructure” after the economic fallout from the Covid-19 crisis.
“Discussions among China’s technology industry and policymakers have been awash since the beginning of March with mentions of one buzzword: Beijing has positioned ‘new infrastructure’ construction as a key policy pillar of its post-pandemic economic recovery,” Caroline Meinhardt, of the Mercator Institute for China Studies in Berlin, said last month.
“Beijing wants to see big investments in the building blocks of China’s digital future – everything from 5G and data centers to artificial intelligence (AI) and electric vehicle (EV) charging stations,” she wrote in a commentary.
Up to 17.5 trillion yuan, or US$2.47 trillion, will be pumped into ramping up infrastructure spending in the high-tech sector during the next six years, the Shanghai Securities News reported in May.
A research note by Haitong Securities revealed that 3 trillion yuan, or $423 billion, has been designated for this year alone. Priority funding will go to 5G base stations, EV charging outlets, big data centers, artificial intelligence and the industrial internet, such as robotics.
Also, unlike previous rounds of traditional infrastructure spending on roads, bridges and high-speed rail networks, private companies will be heavily involved in the mix.
“This new economic stimulus will rely on a more diverse set of players. Whereas state-owned enterprises (SOEs) play the predominant role in bridge or railway construction projects, the construction of digital infrastructure will, at least in part, have to be driven by private Chinese technology companies,” Meinhardt, of the Mercator Institute for China Studies, said.
“Premier Li Keqiang has insisted that private investment will be key and that the market will have the biggest say in creating new digital applications. Success will, therefore, depend to a large extent on the willingness of private technology companies to align their goals with government directives,” she added.
In part, this is already starting to happen. The BAT grouping of Baidu, Alibaba and Tencent have invested heavily in AI and Big Data. That will continue in the years ahead.
But, of course, the private sector will “only jump on the bandwagon” if there are long-term financial benefits. On top of that, is the sheer cost of this “digital future.”
The last time Beijing unveiled wide-ranging infrastructure projects during the height of the global financial crisis in 2008, it left a trail of local government debt.
“It remains to be seen whether China’s ‘new infrastructure’ push can avoid the mistakes of its infrastructure spending spree following the global financial crisis, which landed local governments and state-owned enterprises in massive debt for projects with minimal or negative returns,” Meinhardt said.
“Hundreds of thousands of new 5G base stations or EV charging points will bring minimal returns if 5G phone and EV demand do not increase at the same rate. Second-guessing future demand is always a high-risk venture, and nowhere more so than in the area of new technology,” she added.
If that worst-case scenario materialized, it would at least be Made in China debt.