News in Charts: China’s high-tech ambitions – all just a pipe dream?

Made in China 2025 (MIC) is a strategic plan created by the People’s Republic of China that aims to transform China into a high-tech powerhouse. First created by President Xi in 2015, the goal of the plan is that China should become more self-sufficient in high-tech industry, which include sectors such as IT and maritime engineering. The initiative also encourages movement in China’s export market away from low-cost, low-skilled goods, and towards diversification into more advanced technology. Currently, 15% of China’s exports are comprised of this high-tech sector.

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Fathom Consulting has recently updated its database that monitors China’s MIC progress; it shows that China’s success in leapfrogging up the high-tech value chain has been limited. This is supported by both the World Bank and the National Bureau of Statistics’ (NBS) measures of high-tech exports. All three measures in the chart below agree that progress in recent years has plateaued. This is despite the differences in value terms, which originates from the definition of high-tech. Fathom has painstakingly characterised the data that are specifically targeted by President Xi’s Made in China 2025 plan, whereas the World Bank and the NBS employ a broader measure.

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On average, according to Fathom’s newly updated database, China is actually in a weaker position in 2019, relative to 2018. Although China’s average global market share across high-tech industries has largely increased since 2006, this trend has not continued into 2019. Similarly, China’s specialisms relative to the rest of the world in these high-tech industries, as measured by Revealed Comparative Advantage (RCA), fell quite sharply in 2019. This downtick unwinds some of the efforts made to increase their high-tech specialisation after  the 2015/16 slowdown.

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Fathom Consulting’s RiCArdo database also allows users to analyse the performance of each of the nine individual high-tech sectors. Within each sector, users can rank China’s performance in terms of market share and RCA and monitor the progress up the value chain in each of the industries. The dataset reveals that IT makes up the biggest share of China’s high-tech exports.

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Analysing the IT sector is particularly relevant considering that in recent months China has increased its rhetoric about a digital transformation, and its goal to be the world’s leading provider of technology. Despite already having a large proportion of the market, China wants to enhance its dominance. A keynote speech by President Xi at the annual National People’s Conference illustrated this. He set out a strategy to increase investment in industries such as big data over the coming year, and to improve the 5G network. In transitioning to be the global leader in technology, China has encouraged foreign enterprises to utilise Chinese technology. However, in an era of trade tensions and Chinese technology being shut out of international markets due to security concerns, we anticipate little progress towards these international aims.

Furthermore, with the current global pandemic depleting medical supplies, such as PPE, analysing the composition of the global medical industry trade can also prove valuable. Over the years China has made gains in this sector, however, with a global market share of just 3.6% in 2019, it is lagging behind some of the other global players. For example, China’s rival, the US, boasts a global market share of 11.4% in the medical industry.

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To see Fathom Consulting’s extended dataset, in which users can compare China to over 200 countries and regions, please contact Fathom.

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