This Is China's Plan To Be A Technology Powerhouse By The Year 2025

Joe Weisenthal (0:08)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:14)

And I'm Tracy Alloway.

Joe Weisenthal (0:16)

So Tracy, I think, you know, we're obviously in the midst of this ongoing trade dispute between the US and China. Lots of big questions about what's gonna happen there.

We talked with Brad Setzer a few weeks ago about this topic, but it's such a big topic. I feel like there's a lot more to cover.

Tracy Alloway (0:38)

Yeah, I totally agree with you. I remember when we spoke to Brad, there was one section in particular of U.S.-China trade relations that you were quite interested in, which was the intellectual property proportion. And the US is always accusing China of trying to steal its technological expertise or its intellectual property.

And meanwhile, China is always saying that it's trying to cultivate its own homegrown expertise.

Joe Weisenthal (1:04)

Yeah, and I think that this trade dispute is probably one of the first times that the American public, to the extent that the American public is paying attention to trade disputes, is really learning about the full extent of China's ambitions to be a real global leader in many high-tech industries. And that there is a very extensive plan in place to really get ahead from at least where they are right now.

Tracy Alloway (1:31)

Well, I guess to be fair, you wouldn't expect much else from a centrally planned economy, right? I mean, people talk about China liberalizing, but at its heart, it's still very much a sort of command economy with a huge degree of power coming from the ruling class, I guess.

Joe Weisenthal (1:48)

Yeah, and I think that's exactly right. And of course, there are gonna be a lot of people who question whether a centrally planned economy really can be an innovative leader. I think in technologies, we often sort of, I think we sort of associate innovation with free market capitalism quite a bit.

And China is perhaps trying to show that there is another model for how you can get there.

Tracy Alloway (2:15)

Well, not just free market capitalism. You think of technological innovation, you think sort of of the Silicon Valley model, right? A bunch of guys sort of sat in a garage somewhere coming up with brilliant ideas.

And because of the way our economy is structured, they're allowed to act on those ideas and eventually build successful businesses. So it's almost a cultural difference, I guess.

Joe Weisenthal (2:37)

Yeah, I think that's well put.

So anyway, today we're going to be talking to someone who is actually one of the first people to introduce me to this idea. And so I'm very excited to talk to him. He's Dan Wang. He is a analyst at Gavekal Dragonomics. He's a technology analyst based in Hong Kong there. And he has been following China's ambitions to really grow its own homegrown technology sector for a while. And he joined us now.

Hey, Dan, thanks for joining us.

Dan Wang (3:12)

Hey, guys, thanks for having me on.

Joe Weisenthal (3:14)

So let's start with the big picture. What is the Made In China 2025 initiative?

Dan Wang (3:21)

Sure thing. So Made In China 2025 is a comprehensive industrial upgrading plan that the government unveiled three years ago. It targets about 20 different technologies for broad technological leadership. These include things like semiconductors, telecom equipment, robotics, electric vehicles, medical devices and pharmaceuticals, aviation equipment, and a whole bunch of other things.

To make it happen, the Chinese government is offering an enormous amount of credit subsidies and policy support to make it all work.

Joe Weisenthal (3:58)

So just to be clear, we think of a lot of high-tech manufacturing already happening in China. US tech giants like Apple obviously work with big Chinese tech companies to assemble their iPhones.

But I guess the idea is that a lot of that is still pretty low on the value chain labor type stuff and that the real innovative stuff on things like semiconductors that you mentioned, that's still not really happening in China.

Dan Wang (4:28)

Yeah, that's right. So basically, the further downstream you go, the more that China looks pretty innovative. So Chinese companies have become pretty good at making consumer goods and offering fun retail experiences.

China is also the only country aside from the US to have built big internet companies, namely Tencent and Alibaba. I used to work in Silicon Valley, and the level of dynamism I observe in the tech scenes of Beijing and Shenzhen are just as impressive as what I saw when I worked in California.

But basically, if you look a little bit more upstream at the more upstream segments of China's technology foundations, it's really quite weak. China is pretty heavily dependent on other countries for semiconductors, airplanes, machinery goods, and many other things.