Source: Blog – Alliance for American Manufacturing

Visitors take pictures of a humanoid robot at the World Intelligent Manufacturing Expo 2024 in Nanjing, China in December 2024. Getty Images

The United States must play both offense and defense as China moves into the next phase of its plans to cement its global industrial dominance, experts testify.

This past month, Chinese artificial intelligence (AI) start-up DeepSeek shook the global market with a sophisticated chatbot that rivaled that of OpenAI and Google despite United States export restrictions on next-generation semiconductor chips. DeepSeek’s reveal not only pointed to China’s competitiveness in the AI space, but also the nation’s progress in achieving the advanced technology goals it laid out in its “Made in China 2025” program, which the U.S.-China Economic and Security Review Commission examined in a hearing last week.

Before we dive into key takeaways from the commission’s hearing, some background:

Announced ten years ago, “Made in China 2025” aimed to launch and cement Chinese dominance in advanced manufacturing. The initiative channeled Beijing’s massive government subsidies and other non-market forces into supercharging 10 key sectors in China: 1) advanced information technology; 2) robotics; 3) aerospace equipment; 4) maritime equipment; 5) rail equipment; 6) electric vehicles; 7) power equipment; 8) agricultural equipment; 9) new materials; and 10) biotech.

Take a quick glance at China’s current manufacturing landscape, and you’ll see how much Beijing has achieved of its “Made in China 2025” goals. China unquestionably dominates the global electric vehicle market; is deeply entrenched in biotech, which it could easily leverage to advantage its military; dwarfs U.S. shipbuilding capacity; has wheedled its way into U.S. rail projects funded by taxpayer dollars; and more.

“The experience of the past 10 years demonstrates the immensity of the resources Chinese leaders are willing to deploy towards these objectives. And there’s little reason to suspect China’s practices will change,” Commission Vice Chair Randall G. Schriver said in his opening remarks for the Feb. 6 hearing. “The [Chinese Communist Party] aims to make China a leader in technological innovation and manufacturing in key industries in the future. These are policies not just to achieve domestic growth and self-sufficiency. They are designed to ensure dominance and global dependency on China.”

In her testimony before the Commission, Emily de La Bruyère, Horizon Advisory co-founder and Foundation for Defense of Democracies senior fellow, cautioned that “Made in China 2025” is just the first stage in Beijing’s campaign to establish China as the world’s dominant industrial power with two subsequent ten-year programs ahead. And, if Beijing’s plans are fulfilled, “U.S. industrial and defense industrial bases will find themselves entirely dependent on China,” de La Bruyère told the commission.

She added:

“Should that happen, Beijing will control the prosperity and security that depend on those bases. Beijing will be able to decide which companies win or lose; which have access to critical technology, for example, or inputs and markets. This power will grant the CCP influence over U.S. politics and society, because those depend on and are shaped by markets. And in a modern technological environment, China’s control over American industry will also grant it control over American information.”

However, it’s important to note that though China has gained invaluable advantages through its “Made in China 2025” program, it has also paid a toll. As The Wall Street Journal notes, the nation has built self-sufficiency in a number of sectors but at an astronomical cost and with failures in other industries:

“China is racing to make itself less reliant on the outside world’s products and technology—part of a yearslong effort by leader Xi Jinping to make China more self-sufficient and impervious to Western pressure as tensions with the U.S. rise. Beijing has poured hundreds of billions of dollars into favored industries, especially in high-end manufacturing, while exhorting business leaders to fall in line with the government’s priorities. … Beneath those wins, however, Xi’s industrial policy is hugely expensive, eating up state resources as government revenues are stagnating. One estimate by the Washington-based Center for Strategic and International Studies put China’s annual spending on industrial policy at around $250 billion as of 2019.”

Though Beijing’s subversion of market forces is unsustainable, the U.S. must counter the damage that China’s cheating would otherwise inflict, and that can begin with the revocation of China’s Permanent Normal Trade Relations status. The Alliance for American Manufacturing has advocated for this measure, along with the House Select Committee on the Chinese Communist Party, and the U.S.-China Economic and Security Review Commission.

There’s plenty more that the U.S. must do to ensure global industrial competitiveness. Here’s the policy roadmap to get there.

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