Updated August 11, 2020
“Made in China 2025” Industrial Policies: Issues for Congress
China aims to advance its national development goals and
MIC 2025 sets goals for each sector to increase the share of
future global economic position through industrial policies
production by Chinese firms. (Figure 2). China seeks to
that seek global civilian and military leadership in advanced
lead at each point in the value chain. In semiconductors, for
and emerging technologies. China’s policies feature a heavy
example, China seeks to build a globally competitive
government role in directing and funding Chinese firms to
industry in design, operating systems, manufacturing,
obtain foreign expertise and intellectual property (IP) in
packaging, testing, equipment and materials.
areas where the United States has strong comparative
advantages (e.g., aerospace, semiconductors,
Figure 2: Select MIC 2025 Domestic Content Goals
microelectronics and pharmaceuticals.)
MIC 2025
Made in China 2025 (MIC 2025)—a broad umbrella
industrial plan China introduced in 2015—seeks to boost
China’s economic competitiveness by advancing China’s
position in the global manufacturing value chain,
leapfrogging into emerging technologies, and reducing
reliance on foreign firms. MIC 2025 emphasizes technology
advancement and innovation as drivers of growth and
productivity, although the strategy looks to obtain foreign
Source: U.S.-China Business Council.
expertise to fill key technology gaps. The plan promotes
Note: Dates for domestic content goals range from 2020 to 2030.
diverse forms of state ownership and control and allows
Chinese firms flexibility to access global markets,
China seeks to upgrade its economy from one that largely
potentially obscuring the full extent of the role of the state.
assembles goods for foreign firms to one that increasingly
MIC 2025 calls for breakthroughs in 10 sectors and
invents the products it makes. MIC 2025 notes that
supports a range of sector-specific plans. (Figure 1)
“China’s manufacturing sector is large but not strong.” The
plan prioritizes upgrading manufacturing through advances
Figure 1: China’s Industrial Priorities (2015-2025)
in technology innovation (smart manufacturing) and
manufacturing-tied services. Specifically, China aims to:
By 2025. Boost manufacturing quality, innovation, and
labor productivity; obtain an advanced level of technology
integration; reduce energy and resource consumption; and
develop globally competitive firms and industrial centers.
By 2035. Reach parity with global industry at intermediate
levels, improve innovation, make major breakthroughs, lead
innovation in specific industries, and set global standards.
By 2049. Lead global manufacturing and innovation with a
competitive position in advanced technology and industrial
systems. (This date coincides with the 100th anniversary of
the founding of the People’s Republic of China.)
China’s Approaches to Implement MIC 2025
Tax, trade, and investment measures. China uses tax
preferences to incentivize foreign firms to shift production
and research and development (R&D) to China. The
government also uses domestic standards, IP, competition,
and procurement policies, and other market access terms
that seek to transfer foreign know-how to Chinese entities
and use Chinese suppliers for key components.
Forced joint ventures (JVs) & partnerships. China’s
Source: “Notice of the State Council on Issuing Made in China
formal regulations and informal certifications that require a
2025, May 8, 2015, Guofa [2015] No. 28.”
Chinese partner drive multinational firms into JVs. In many
sectors, such as aerospace, China leverages its role as a
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“Made in China 2025” Industrial Policies: Issues for Congress
major purchaser to press for joint ventures and technology
advantaging Chinese firms, distorting global trade and
transfer in order to develop indigenous capabilities.
investment patterns, advancing China’s influence overseas,
Government subsidies. Chinese government guidance
and strengthening China’s technological and military
funds (GGFs) channel state funding to Chinese companies
capabilities. In 2018, the Administration invoked Section
in support of domestic R&D and overseas acquisitions. As
301 authorities and, since that time, has imposed tariffs on
of March 2018, an estimated 1,800 GGFs linked to MIC
MIC 2025 products and other imports in response to
2025 were collectively valued at $426 billion. GGFs often
findings that China’s IP, innovation, and technology
take a stake or board seat in firms they fund and can
policies were unfair and harmed U.S. stakeholders. A
influence corporate decision-making.
phase-one deal, signed in January 2020, aimed to boost
U.S. exports, but prospects for talks on China’s industrial
Foreign acquisitions. GGFs target and fund strategic
policies—pushed to phase two— remain uncertain.
acquisitions that appear to build Chinese capabilities
through control of foreign corporate expertise, IP, talent
The United States has tightened technology transfer to
pools, and ties to suppliers and customers.
China through scrutiny of academic exchanges and
Technology licensing & equipment. Foreign technology
strengthened foreign investment review (P.L. 116-801) and
and equipment fill key gaps in China’s current capabilities.
export control authorities (P.L. 115-232). The Department
Chinese firms are active in U.S.-led open source technology
of Justice has ramped up law enforcement to counter
platforms (e.g., RISC-V, the Open Compute Project, and
China’s theft of U.S. technology and know-how. Since May
the ORAN Alliance). Since 2014, U.S. semiconductor
2019, the Administration has tightened control over dual-
machinery exports to China have increased three-fold as
use exports to China’s telecom firm Huawei, restricted the
China seeks to make its own integrated circuits.
use of universal funds to purchase Huawei equipment, and
sought to dissuade foreign governments from using Huawei
Talent recruitment. China encourages the return of
products in their 5G networks. To implement export control
Chinese expatriates, the hiring and exchange of foreign
reforms and counter China’s military-civil fusion
talent. Many Chinese technology firms (e.g., Alibaba,
program—that seeks to leverage commercial gains for
Baidu, Tencent, and TikTok) have U.S. R&D centers that
military development—the Administration is moving to
partner with universities and leverage U.S. talent.
cancel civilian end-user license exemptions for national
U.S. and International Concerns
security items, and require more detail on end-users and a
second U.S. license for technology re-exports from Hong
MIC 2025 has been a major U.S. policy focus because of
Kong to mainland China. To bolster U.S. capabilities, the
the tactics it has intensified, including technology transfer,
U.S. government negotiated with Taiwan’s leading chip
licensing and joint venture requirements, state-directed IP
fabricator, Semiconductor Manufacturing Company
theft, and government-funded acquisitions of companies in
(TSMC), to build a $12 billion 5-nanometer chip foundry in
strategic sectors. Chinese officials contend that the MIC
Arizona. Congress is considering related provisions to boost
2025 plan is transparent, open, and nondiscriminatory, and
U.S. industry in the National Defense Authorization Act for
that domestic content goals are not mandates. Many in the
FY2021 (S. 4049).
U.S. and foreign business and academic communities assess
the potential risks and distortions differently.
Issues for Congress
Congress may wish to explore the effectiveness of U.S.
- A 2017 study by the U.S. Chamber of Commerce concluded
“MIC 2025 aims to leverage the power of the state to alter
authorities and global rules in addressing Chinese industrial
competitive dynamics in global markets in industries core to
policies that include state control of companies, subsidies,
economic competitiveness. By targeting and channeling capital to
and technology transfer. Congress could press for
specific technologies and industries, MIC 2025 risks precipitating
meaningful progress in U.S.-Europe-Japan talks on these
market inefficiencies and overcapacity, globally.”
issues in advancing new rules, approaches, and joint action.
- A 2016 study by the Mercator Institute for China Studies warned
Congress also may wish to more closely examine the
that China’s acquisitions aim “to systematically acquire cutting-
economic benefits and risks in current U.S. technology ties
edge technology and generate large-scale technology transfer. In
with China over a longer-term trajectory. China still
the long term, China wants to obtain control over the most
depends on U.S. technology, IP, and expertise, giving the
profitable segments of global supply chains and production
United States leverage and policy choices about whether
networks.”
and how to counter or advance China’s industrial policies.
- A 2019 study by the Organisation for Economic Co-operation
While some aspects of technology cooperation with China
and Development (OECD) found that Chinese semiconductor
are currently commercially significant for U.S. companies,
firms overwhelmingly benefitted from below-market government
many experts assess that the transfer of U.S. technology,
equity injections as compared to other global firms. The OECD
capabilities, and tools to China could undermine the
concluded that the state role is more pervasive in China’s industry
competitiveness of U.S. firms over time.
than formal ownership reflects because of the opaque nature of
government shareholding and funding.
Karen M. Sutter, Specialist in Asian Trade and Finance
U.S. Policy Response
IF10964
The Trump Administration has moved to address MIC 2025
and other Chinese policies that it sees as unfairly
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“Made in China 2025” Industrial Policies: Issues for Congress
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https://crsreports.congress.gov | IF10964 · VERSION 5 · UPDATED