MNI INTERVIEW: China To Stabilise Manufacturing's Share Of GDP

China is likely to emphasise the need to stabilise manufacturing value-added as a proportion of GDP in its next five-year plan, as it works on an updated version of its “Made in China 2025” campaign to boost high-end output, including semiconductors and artificial intelligence, over the next decade, a policy advisor told MNI.

The original "Made in China 2025" initiative, launched in 2015, was successful in turning China into a more technology-intensive manufacturing powerhouse but caused disquiet in the West, and its next iteration is likely to be launched with less fanfare, said Jiao Xinwang, president of China Manufacturing Think Tank.

“The new plan may not be as high-profile as the previous one which was signed by the Premier and released by the State Council,” said Jiao, noting how the U.S. is pushing for China to rebalance its economy towards consumption. (See MNI: China Sees 10% Tariffs As Realistic, May Offer UST Deal)

"Made in China 2025" positioned China in the second camp of high-tech manufacturing capacity but still behind the U.S., and the goal for 2035 should be surpassing current peers Germany and Japan, he said.

Priorities for the new plan will include high-end chips, quantum technology, artificial intelligence and biomedicine, all areas in which the U.S. is aiming to decouple from China, Jiao said. While China has taken a leading position in electric vehicles, energy and power generation, shipbuilding, and high-speed rail as well as in industrial robots, it still lags in large aircraft engines and high-end chips, he noted. 

NEXT FIVE-YEAR PLAN

China’s 15th Five-Year Plan, covering the nation’s key goals for 2026-2030, will emphasise the need to stabilise the proportion of manufacturing value-added in GDP, while debate continues over whether to specify a numerical target for consumption as a share of output, according to the advisor.

“Increasing the proportion of consumption in GDP is a must, and expanded domestic demand will help to keep manufacturing activities afloat especially amid rising trade barriers,” said Jiao, arguing that these two goals are complementary.

China still has to fully tap its potential for domestic demand, especially in the countryside, as a result of its long-term focus on exports, he continued, adding that economic stimulus and reforms to build a fully-unified national market would help to address some manufacturing overcapacity by increasing the ability of rural populations to consume.

“Policymakers are rethinking the marginalisation of manufacturing in the past few years, as it remains the key to national security and job creation,” said Jiao, noting that the proportion of manufacturing to GDP fell continuously to 26.2% in 2023 from a peak of 32.1% in 2011. “The desirable level should be 27%,” he said, adding that last year’s Party third plenum, which called for the establishment of a mechanism to support manufacturing’s share of output, provides a guide for formulating the 15th Five-Year Plan.

Meeting China’s manufacturing objectives will require support from fiscal and taxation policy, as well as from the financial system and distribution networks, he said, noting that industry made up 70-80% of the country’s real economy.