Welcome to this brave new world with Chinese characteristics
‘Made in China 2025’ is breathtaking in scale, but Beijing faces daunting challenges as the technological arms race increases trade tensions
Isaac Asimov was a visionary. The American writer and professor of biochemistry at Boston University was one of the “Big Three” science fiction writers of his generation along with Robert A. Heinlein and Arthur C. Clarke.
His seminal works were the Foundation, Galactic Empire and the Robot series. When asked about his views on technology, he simply quipped: “I do not fear computers. I fear a lack of them.”
Asimov’s comments illustrate in two, tight sentences President Xi Jinping’s “Made in China 2025” policy, which is geared to turning the world’s second-largest economy into a technological superpower.
Breathtaking in scale, it was rolled out 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. Hardly a single sector in China’s economy will escape the effects of this multibillion-dollar project.
Renewables, railways and robotics are other vital areas earmarked, as well as the Internet of Things, and interconnected smart technology linked through artificial intelligence, or AI, for the biopharmaceutical sector. Fintech is yet another crucial component of the program.
Technological arms race
But this is just part of the “Made in China 2025” model, which has called for at least 70% of related high-tech materials and products, such as semiconductors, to be made domestically by 2030.
Indeed, the sheer depth of the scheme has triggered a technological arms race, with US President Donald Trump insisting that China’s state subsidies for these industries must be curtailed amid rising trade tensions between the world’s two leading economies.
“The current trade war between the United States and China is not about trade,” Yukon Huang, a senior fellow at the Carnegie Endowment for International Peace and author of Cracking the China Conundrum: Why Conventional Economic Wisdom Is Wrong, wrote in an opinion piece for Caixin.
“This war is about protecting the technological edge that has made the United States the world’s dominant economic power,” the former World Bank director for China added on the Beijing-based media website.
Still, there are other concerns at play here. China’s 1.37 billion population is aging, despite the decision to relax the ‘one-child policy.’ Spiraling wages are also decimating low-tech factories, forcing them to relocate across South and Southeast Asia.
Last year, a report released by China’s National Development and Reform Commission, which was formerly the State Planning body, highlighted the implications.
By 2030, a quarter of China’s population will be aged over 60, roughly 10% higher than the current level.
This, in turn, will strain state funding on retirement and healthcare costs. A shrinking labor force will only magnify the problem with a predicted drop of 80 million people between the ages of 15 and 59 in the next 12 years.
“As two sources of growth – labor force expansion and heavy capital investment – fade, innovation will need to contribute up to half of GDP growth by 2025, or $3 trillion to $5 trillion in value per year,” a report entitled The China Effect on Global Innovation by McKinsey & Company, the global management consultancy, stated.
“The government’s push to raise R&D [research and development] spending, train scientists and file for patents has yet to give China a lead in science-based innovation. Today, Chinese companies are developing their own approaches to catch up,” the report added. “[But ] in the next 10 years the ‘China effect’ on innovation will be felt around the world.”
Three years after that report was published, it has a prophetic ring as “Made in China 2025” revs up the pace of “innovation.”
In 2017, total spending on R&D was 1.76 trillion yuan (US$279 billion), a 14% jump compared to the same period 12 months ago, according to Wan Gang, the Chinese Minister of Science and Technology.
While comparisons vary, this puts the country just behind the United States and Japan in research and development funding. “Basic research and frontier exploration is the big lesson that must be done now,” Wan told the media.
Renewable energy sector
To make that happen, Beijing has established numerous high-tech industrial parks and incubators aimed at promoting technologies such as artificial intelligence, which now reportedly employ more than 50,000 people, robotics, face recognition and big data.
The administration has also invested billions of dollars in the renewable energy sector, as well as high-speed trains and electric vehicles.
“In its quest for scientific achievement, China’s research and development spending has grown rapidly over the past two decades. It’s now second only to the United States,” Richard P. Suttmeier, a Professor Emeritus of Political Science at the University of Oregon, said in an article for The Conversation last month.
“China has become a leading contributor to the world’s science and engineering [community], with Chinese papers in selected fields attracting an increasing number of citations,” he added.
“Generous government science budgets have allowed China to build world-class facilities in a number of fields. And China is home to one of the world’s largest research communities, now enriched by high-quality domestic university programs, as well as scientists returning from abroad with advanced degrees from the world’s leading universities.”
The speed of development has pushed the boundaries in genetic engineering, the search for dark matter, quantum computing and communications and AI, Suttmeier pointed out.
“Increasingly, the notable achievements in these fields are coming not from the great centers of science in the West, but Beijing, Shanghai, Hefei, Shenzhen and a number of other Chinese cities that make up [the country’s] extensive research system.”
If Asimov was still alive, I wonder what he would have said about this brave new world with Chinese characteristics.