- China is intensifying its focus on industrial self-sufficiency, led by Xi Jinping and the "Made in China 2025" initiative.
- Economists say a shift to consumption is needed, but major reforms and funding are still lacking.
- China leads in global manufacturing (29%), but lags in consumption (13%), showing economic imbalance.
Chinese President Xi Jinping has stepped up calls for industrial self-reliance, pushing for more independence in manufacturing in the face of persistent international tensions. His remarks, during a trip to a landmark ball-bearing factory in Luoyang, followed closely on the heels of a 90-day trade ceasefire inked between China and the U.S., rolling back tariffs of as much as 145% that had strained bilateral trade.
Even with indications that Beijing might turn inward toward domestic consumption, Xi reinforced that accelerating industrial production remains at the core of China's approach. Economists believe, however, that sluggish domestic demand and long-standing reliance on manufacturing and exports are worsening global economic imbalances and fueled the U.S.- China trade tensions. They warn that a structural change in direction to consumption is required for sustainable growth.
Xi said, "In the past, we relied on importing foreign fire, soap, and iron, but now we have become the world’s largest manufacturing country. We must continue to develop our manufacturing sector, insist on self-sufficiency and self-improvement, and master core technologies."
China's pursuit of industrial self-reliance started long before today's trade tensions. Xi in 2015 initiated "Made in China 2025," which aimed to expand domestic market share in high-value sectors using subsidies and policy incentives. The plan picked up steam under the previous U.S. President Donald Trump's administration, where export controls and tariffs were slapped on key technologies such as semiconductors.
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Western companies based in China have complained that industrial policies systematically favor local companies at the expense of foreign competitors. Xi remains a champion of promoting innovation through deeper interdisciplinary integration between industry and academia.
Although recent policy indications involve relaxing monetary measures, increasing the central budget deficit, and attempts to invigorate markets, economists note the lack of thorough reforms or wholesale funding to actually rebalance the economy.
Now, China provides approximately 18% of world GDP but only 13% of world consumption, reflecting relative underperformance in domestic demand. Meanwhile, it dominates world manufacturing, representing some 29% of world manufacturing value added in 2023—more than the U.S., Japan, Germany, and India combined.
In a report by Washington-based Rhodium Group stated, "Chinese firms have achieved significant successes in many products, sometimes more than doubling their domestic market share in the last decade."