Made in China 2025: Are You On The List?

By Debra Tan 16 June, 2015

How does Made in China 2025 fit with other 'Future China' plans? Tan on industries which made the various lists

Made in China 2025; Circular Economy; Water Ten; Internet Plus; One Road, One Belt … These new buzzwords of “Future China” have one thing in common – they are all necessities arising from limited water resources to ensure a water, energy, food and economic secure China. They form key components of China’s march to its goal of “ecological civilization” – to transform the economy so that it can continue to achieve economic development despite limited resources.
Basically when your per capita renewable water resources are nowhere close to those of the US or Europe, there is no choice but to do things differently or to make different things. Enter the ‘Made in China 2025 Action Plan’.
The plan is touted by the Chinese press to be the first 10 year action designed to transform China from a manufacturing  giant  into  a  world manufacturing power. Many also point out that it was “authorized by Li Keqiang”, so rubber stamped from the top. Chinese news also has the Ministry of Industry & Information Technology (MIIT) extolling that the plan will embrace the fourth industrial revolution concept — what some call “Industry 4.0” — while opening itself to advanced ideas from countries such as the United States and Britain.
Germany and Japan are also cited by Miao Wei, the Minister of MIIT as examples to follow. Incidentally, Germany and Japan are the only two other countries that have legislated a policy move towards a circular economy (more here). China as the new Germany … imagine that.

Achtung! All change in Industry 4.0

The Economist in March argued that Made in China will endure, citing that China’s share has gone up from less than 3% in 1990 to nearly a quarter of global manufacturing output value now. It also has China producing about 80% of the world’s air-conditioners, 70% of its mobile phones and 60% of its shoes. The list goes on. Yes, China may well still be the world’s factory in 2025 but an “Industry 4.0” upgrade could spell out an “all change” to some existing Chinese industries.
Made in China 2025 promotes 10 key industries to facilitate the grand transformation. When looking at who’s in and who’s out, we compared this list to other “future industry lists”. There are two key points worth noting:

1. The Made in China 2025 Ten clearly overlap the seven 12FYP Strategic Emerging Industries (SEIs). We read this as affirmation of the direction set out in 2011 – China is still proceeding according to plan. Made in China 2025 is an expansion of the 12FYP SEIs and we expect more plans to come detailing more action in each industry.

2. The Made in China 2025 Ten are not the same as Circular Economy Ten. A mistake in the multiple action plans for China’s future? No. We read this as complementary; it’s a two-prong approach to China’s industrial restructuring:

• • Develop industrial capacity in high-tech and high-value sectors with the Made in China 2025 Action Plan; and
  • Consolidate and improve low-end and resource intensive sectors with the Circular Economy Plan.

Given China’s push to “Industry 4.0”, the Circular Economy Ten had better adapt quickly if they don’t want to be left behind and ultimately phased out (more here on how).

Not on the list and most-at-risk – Fashion et al.

Now enter the Water Ten, the sectors singled out by this action plan are those identified in the Circular Economy Ten. In short, the Water Ten is an action plan to carry China some of the way towards a circular economy. In “Comply or Else”, we also pointed out that the textile sector was the sector most targeted by the Water Ten. If you are not convinced, check out “Water Ten & Fashion: 8 Reasons to Leap or Fall”.
While the industries highlighted in Made in China 2025 are not new, clothes and shoes are glaringly absent from list; they are in the close-the-loop list. That said, it’s not all doom and gloom – there is “New Materials” … does this mean we are wearing recycled cotton and sustainable viscose soon? Will be wearing lace grown from strawberries? Too far-fetched? Maybe not… Stella McCartney has made a commitment “to ensuring that all [our] cellulose fabrics meet strict sustainability standards by 2017”. But if all brands moved towards this, would our forests be able to support the demand? Or will we have to start recycling or up-cycling waste – see how Redress CEO is “Putting Waste Back into Fashion”.
Good news for reshoring? But hang on, inputs still come from China. Fine let’s say those are reshored too, what about raw material exposure? The cashmere goats, sheep and cows will also all have to be “reshored” – more difficult. Pay attention to the China’s agriculture policy – the Water Ten revamps large livestock breeding and in turn fashion. Ultimately, fashion has to go circular.
It is clear from initiatives on the ground like NRDC’s Clean by Design and Solidaridad’s Better Mill Initiative that the circular movement has started. But both NGOs lament that more action could be done. We say be warned, a tea-leaves reading of these future plans for China’s all point to one thing for the textile industry – revamp or move out. Given fashion’s exposure to China (be it textiles or raw materials) doubly be warned – you are not on the “right list”.

Global trade also poised to shift in the new paradigm

We have been saying limited water would change global trade since 2011 and again with HSBC in 2014. China has also laid out another “paradigm shift policy” here: “One Road, One Belt”. Introduced in November 2014, it is supposed to be the centerpiece of both China’s foreign policy and domestic economic strategy. Envisaged enhanced networks across Asia include infrastructure expansion, financial integration, trade liberalization and so on (more here).
The new silk route not only opens up access to China for exports but for imports also. Let’s also not forget that due to limited resources, China will continue to advocate Chinese companies to “go global”. This is expected to play a more concrete role in the upcoming 13FYP (2016-2020).
To be honest, Made in China 2025 is a big ask. Can China leapfrog a couple of versions? Only time will tell. Multiple things need to happen for this to work – better IP protection, fostering innovation, access to capital/technology, competitive marketplace to start.. the list is endless. But apparently “to shore up the plan, China will introduce a slew of policies to deepen institutional reforms and strengthen financial support.” It’s happening. Make sure you are invested in the “right list”. For those exposed to the Circular Economy Ten, it’s time to cover all bases: upgrade to Industry 4.0 and go circular or move out.