China will need more than 35 years to upgrade to hi-tech manufacturing industry, study finds

Study by Renmin University of China in Beijing says it will take more than 35 years to reach the government’s goal that new industries account for 30 per cent of GDP

The United States has complained that the large subsidies China, including the controversial ‘Made in China 2025’ project, have hurt American companies

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China is looking to move up the value chain away from its traditional reliance on mass production of low-end goods. Photo: AFP

Published: 8:00pm, 19 Jul 2019Updated: 10:20pm, 19 Jul 2019

China will only turn into an advanced manufacturing powerhouse in over 35 years at the current rate of progress despite the magnitude of the government’s industrial policy support for new domestic industries, according to a study by Renmin University of China in Beijing.

Excess use of industrial subsidies, particularly by local governments, as well as poor implementation of anti-pollution standards, and the inability of the government to help small, private firms deal with short term operational difficulties is stunting the innovation process necessary to upgrade the nation’s manufacturing base, the study found.

Over the last decade, the Chinese government has launched several industrial plans, including the controversial “Made in China 2025” project, aimed at development of hi-tech industries that would hope to make China the world leader in a series of cutting-edge manufacturing fields as it looks to move up the value chain away from its traditional reliance on mass production of low-end goods.

The United States has complained that the large subsidies China has used to develop these industries are examples of the country’s unfair trade practises which have hurt American companies. China has since downplayed its Made in China 2025 plan, but many of its industrial policies remain in place.

However, despite spending billions to support these ambitions, the Chinese government’s investment has yet to add significant value to the economy, according to Zhang Jie, a professor with the Institute of China’s Economic Reform & Development at Renmin University of China.

China has sought to measure the contribution of new industries such as telecommunications equipment and new energy vehicles to the nation’s gross domestic product (GDP) growth, he said. The latest available figures from the National Bureau of Statistics showed that the value-added output of new industries, new types of business and new business models accounted for 15.7 per cent of China's GDP in 2017, up only 0.4 percentage points from 2016.