<p>China’s economic and technological success continues to stoke a sense of awe and envy. Its indomitable presence in global manufacturing is perplexing. Its share of global manufacturing output by value is slated to increase from around 30% currently to 45% by 2030. Even more impressive is China’s takeover of new-age industries, especially EVs, solar, and batteries.</p>.<p>For China, achieving scientific and technological self-reliance in core technologies — integrated circuits, industrial machine tools, high-end equipment, basic software, advanced materials and biomanufacturing — is a key priority. </p><p>There are also upcoming segments China seeks to dominate. The 15th Five-Year Plan instructs China to sustain its lead in ‘emerging and strategic’ industries such as new energy, new materials, aviation and aerospace, and the low-altitude economy, while establishing dominance in ‘industries of the future’, including quantum technology, biomanufacturing, hydrogen and nuclear fusion power, brain-computer interfaces, embodied artificial intelligence and 6G mobile communications.</p>.<p>China’s successes in strategically important industries have inflated concerns around similar triumphs in upcoming sectors. Amid growing belligerence, countries increasingly wonder: will China’s plans to conquer these frontiers succeed even as it becomes gradually secluded from the Western innovation ecosystem?</p>.<p><strong>Tricks up its sleeve</strong></p>.<p>The Chinese system has certain strengths it can rely on. Its governing model — widely credited for past successes — continues to inspire confidence in its ability to deliver future outcomes.</p>.<p>But what does this model entail? Some describe it as a top-down, centralised governance structure, while others point to its decentralised spirit that enables quality at scale. Both views hold merit. What stands out is how a system that is centralised at its core still combines features of a decentralised polity to ensure delivery and performance.</p>.<p>China’s highly centralised government machinery ensures that once strategic goals are set, the central leadership enforces strict adherence across all levels of government — from provinces to townships. This is achieved through political and fiscal oversight.</p>.<p>Political oversight is maintained through the appointment of a party secretary at each level of local government. These secretaries, appointed by superior party committees, submit periodic reports upward, creating a feedback chain reaching the central leadership. Under President Xi Jinping, this oversight has become more stringent. Unfavourable reviews often trigger disciplinary action, including inquiry and dismissal.</p>.<p>If failure to adhere to party directives risks dismissal, compliance improves promotion prospects. This carrot-and-stick approach fosters both fear and competition among local governments.</p>.<p>Fiscal oversight reinforces this system. For over three decades, the central leadership has exercised tight control over local finances. While local governments account for around 85% of national general budget expenditure, they receive just over 50% of revenue, creating a persistent shortfall. This dependence has intensified after the property sector crisis.</p>.<p>Competition among local governments for transfer payments and subsidies enforces alignment with central priorities. The party’s control over financial institutions further strengthens this mechanism, as projects aligned with central directives enjoy easier access to credit. These levers enhance the centre’s ability to guide local investment decisions.</p>.<p>At the same time, this centralised structure incorporates a decentralised dynamic — competition among local governments to outperform peers. While this often leads to duplication and overcapacity, it also drives process innovation and enables quality at scale.</p>.<p>China’s vast pool of investable capital is another critical strength. Its investment-heavy model allows it to sustain levels comparable to the combined investment of the US and Germany. High savings and subdued consumption ensure a steady supply of excess capital for deployment.</p>.<p>China’s system allows the state — rather than the market — to direct capital into strategically important sectors, enabling a focused and coordinated approach. However, this also raises the risk of wasteful expenditure. The leadership attempts to mitigate this by prioritising technologies that can be rapidly commercialised and scaled. Finally, China’s manufacturing workforce provides it with an enduring advantage. At the turn of the century, China boasted a manufacturing workforce of 110 million. In 2024, it continues to host above 104 million. India (63 million) and the US (12.5 million) trail behind.</p>.<p>Sustaining a 100 million-plus workforce for over a quarter century has enabled massive diffusion of talent and the development of transferable skills across sectors. This helps explain why scaling and building from scratch are far easier in China than elsewhere.</p>.<p>China is not only set to retain this advantage but is also augmenting it through automation. It now accounts for over 50% of global industrial robot installations and operates the largest fleet of industrial robots (2,207K), ahead of Japan (450K) and South Korea (350K). These factors collectively give China a formidable edge. Whether the West and others can mount a challenge will depend on their ability to pool resources and distribute costs effectively.</p>.<p><em>(The writer is a researcher with the Takshashila Institution)</em> </p>
<p>China’s economic and technological success continues to stoke a sense of awe and envy. Its indomitable presence in global manufacturing is perplexing. Its share of global manufacturing output by value is slated to increase from around 30% currently to 45% by 2030. Even more impressive is China’s takeover of new-age industries, especially EVs, solar, and batteries.</p>.<p>For China, achieving scientific and technological self-reliance in core technologies — integrated circuits, industrial machine tools, high-end equipment, basic software, advanced materials and biomanufacturing — is a key priority. </p><p>There are also upcoming segments China seeks to dominate. The 15th Five-Year Plan instructs China to sustain its lead in ‘emerging and strategic’ industries such as new energy, new materials, aviation and aerospace, and the low-altitude economy, while establishing dominance in ‘industries of the future’, including quantum technology, biomanufacturing, hydrogen and nuclear fusion power, brain-computer interfaces, embodied artificial intelligence and 6G mobile communications.</p>.<p>China’s successes in strategically important industries have inflated concerns around similar triumphs in upcoming sectors. Amid growing belligerence, countries increasingly wonder: will China’s plans to conquer these frontiers succeed even as it becomes gradually secluded from the Western innovation ecosystem?</p>.<p><strong>Tricks up its sleeve</strong></p>.<p>The Chinese system has certain strengths it can rely on. Its governing model — widely credited for past successes — continues to inspire confidence in its ability to deliver future outcomes.</p>.<p>But what does this model entail? Some describe it as a top-down, centralised governance structure, while others point to its decentralised spirit that enables quality at scale. Both views hold merit. What stands out is how a system that is centralised at its core still combines features of a decentralised polity to ensure delivery and performance.</p>.<p>China’s highly centralised government machinery ensures that once strategic goals are set, the central leadership enforces strict adherence across all levels of government — from provinces to townships. This is achieved through political and fiscal oversight.</p>.<p>Political oversight is maintained through the appointment of a party secretary at each level of local government. These secretaries, appointed by superior party committees, submit periodic reports upward, creating a feedback chain reaching the central leadership. Under President Xi Jinping, this oversight has become more stringent. Unfavourable reviews often trigger disciplinary action, including inquiry and dismissal.</p>.<p>If failure to adhere to party directives risks dismissal, compliance improves promotion prospects. This carrot-and-stick approach fosters both fear and competition among local governments.</p>.<p>Fiscal oversight reinforces this system. For over three decades, the central leadership has exercised tight control over local finances. While local governments account for around 85% of national general budget expenditure, they receive just over 50% of revenue, creating a persistent shortfall. This dependence has intensified after the property sector crisis.</p>.<p>Competition among local governments for transfer payments and subsidies enforces alignment with central priorities. The party’s control over financial institutions further strengthens this mechanism, as projects aligned with central directives enjoy easier access to credit. These levers enhance the centre’s ability to guide local investment decisions.</p>.<p>At the same time, this centralised structure incorporates a decentralised dynamic — competition among local governments to outperform peers. While this often leads to duplication and overcapacity, it also drives process innovation and enables quality at scale.</p>.<p>China’s vast pool of investable capital is another critical strength. Its investment-heavy model allows it to sustain levels comparable to the combined investment of the US and Germany. High savings and subdued consumption ensure a steady supply of excess capital for deployment.</p>.<p>China’s system allows the state — rather than the market — to direct capital into strategically important sectors, enabling a focused and coordinated approach. However, this also raises the risk of wasteful expenditure. The leadership attempts to mitigate this by prioritising technologies that can be rapidly commercialised and scaled. Finally, China’s manufacturing workforce provides it with an enduring advantage. At the turn of the century, China boasted a manufacturing workforce of 110 million. In 2024, it continues to host above 104 million. India (63 million) and the US (12.5 million) trail behind.</p>.<p>Sustaining a 100 million-plus workforce for over a quarter century has enabled massive diffusion of talent and the development of transferable skills across sectors. This helps explain why scaling and building from scratch are far easier in China than elsewhere.</p>.<p>China is not only set to retain this advantage but is also augmenting it through automation. It now accounts for over 50% of global industrial robot installations and operates the largest fleet of industrial robots (2,207K), ahead of Japan (450K) and South Korea (350K). These factors collectively give China a formidable edge. Whether the West and others can mount a challenge will depend on their ability to pool resources and distribute costs effectively.</p>.<p><em>(The writer is a researcher with the Takshashila Institution)</em> </p>
