Nimbleness amid global turbulence is rooted in the decade-old 'Made in China 2025' initiative

As the global economic environment becomes increasingly defined by instability, geopolitical friction and a resurgence of protectionism, China's long years of carefully plotting its national strategies and industrial policies have paid off.

US President Donald Trump's sweeping tariffs on trading partners – with 145 percent duties on Chinese imports – caught many by surprise. The robustness of China's response is not merely a function of its vast domestic market or the long arm of the state; it stems rather from a more profound, structural metamorphosis of its economy.

The ambitions laid out in the "Made in China 2025" initiative, launched nearly a decade ago against the backdrop of a previous trade war, are no longer distant aspirations but increasingly reflect the industrial landscape. China has moved well beyond the "cheap manufacturer" stereotype to become a leading player in global industry and technology chains.

"Made in China 2025" explicitly targeted crucial high-technology sectors – robotics, information technology, aerospace, electric vehicles and advanced industrial materials – with the aim of boosting domestic content, enhancing quality and fostering innovation. Its fundamental objectives continue to shape policy and investment.

The outcomes are palpable: China has emerged as a global pacesetter or formidable contender in fields such as 5G telecommunications, electric vehicles, renewable energy technologies, high-speed rail and applications of artificial intelligence.

Historical patterns

This ascent echoes historical patterns of technological advancement. As Harvard Professor Alfred Chandler once observed in his studies of Western enterprise, technology transcends mere invention; it is an organizational capability distinguished by continuous application, refinement and adaptation.

China embodies this principle. It has adroitly leveraged its immense domestic market as both a proving ground and a platform for scaling up novel technologies. This, coupled with substantial investment in relevant education, has cultivated a technical talent pool capable of driving this application-focused innovation.

This demand-driven approach, prioritizing practical application over purely theoretical breakthroughs, has proven remarkably effective.

Thus, when tariffs were imposed, China wasn't threatened with the loss of low-margin assembly contracts from abroad. It had built an influential role in advanced manufacturing, component supply and, increasingly, the establishment of technological standards. Its economy had developed a depth and complexity.

China's innovation model has also undergone a significant transformation. While state-directed research and funding remain important, the primary engine of innovation has increasingly shifted toward the private sector. Decades of market-oriented reforms have nurtured a corporate environment keenly attuned to market trends and competitive pressures.

China now spends about 2.5 percent of gross domestic product on research and development, second only to the US. Leading companies illustrate this trend. Huawei's research and development budget last year was 179.7 billion yuan (US$24.6 billion), accounting for over 20 percent of its annual revenue. The company now holds over 140,000 active patents.

Electric carmaker BYD's ramped up its research and development funding to 54.2 billion, underpinning its rise as a world leader in new-energy vehicles and batteries. Home appliance giant Haier invested 10.7 billion yuan in research in 2024.

These are not isolated instances. They represent a broader trend of large, established Chinese enterprises leveraging their scale, market access and accumulated capital to propel technological advancement, which has underpinned China's economic resilience.

The Information Technology and Innovation Foundation, an American think tank, has detailed how Chinese companies are becoming global innovation powerhouses, while Western counterparts appear to be lagging.

Cyclical process

The Chinese government and companies now understand that innovation is not a linear progression from laboratory to market but rather a cyclical process. Market feedback directly informs research and development priorities. Successful products generate revenue, which is then reinvested into further research to create a virtuous cycle of continuous progress.

A key indicator of a nation's industrial maturity is its ability to cultivate globally recognized brands and shape industry standards. China is increasingly achieving this by moving beyond its former role as contractor for part assembly to a nation that is creating new products and brands, and marketing them overseas.

This is particularly apparent in consumer electronics segments. Shenzhen-based DJI owns the lion's share of the consumer drone market worldwide. Its easy-to-fly aerial cameras have become the industry standard.

In the smartphone arena, upstart Transsion has become "the king of Africa," capturing about 48 percent of Africa's mobile phone market by late 2024 and shipping 28.2 million units in one quarter alone.

Insta360, with a 67 percent global market share, has carved out a significant niche in the action camera market with its pioneering 360-degree camera technology. Anker Innovations has become a globally recognized leader in mobile-charging accessories and is rapidly expanding into smart home devices and audio products.

Beyond price

These firms illustrate a larger pattern. Chinese companies are moving from price-based competition to product and technology leadership, shaping whole market segments. Where global brand recognition was once a weakness, today multiple Chinese brands are household names. This brand strength further insulates China's economy from tariffs because it allows companies easier entry into more friendly markets.

Underpinning much of China's manufacturing prowess is its mastery over fundamental industrial processes, particularly the processing of raw materials. Often overlooked, this capability forms a critical "infrastructure" layer for many advanced industries.

China stands as the world's largest importer and processor of numerous key metals and materials, transforming raw inputs into the semi-finished and finished goods demanded by global manufacturing.

This dominance is not accidental. It is fueled by enormous domestic demand from China's own manufacturing base and supported by essential production needs like availability of reliable and competitively priced electricity. Decades of investment and accumulated expertise have led to the development of world-leading processing technologies in metals, chemical engineering and advanced materials science.

The ability to refine metals, produce complex alloys, synthesize advanced polymers and manufacture basic and specialty chemicals at scale and cost-effectively is a fundamental enabler for industries ranging from construction and automotive to electronics and renewable energy.

A significant marker of industrial advancement is the transition from primarily using technology and equipment to producing and exporting it. China is making substantial strides in this direction, evolving from being the "gold miner" to also being a significant "shovel seller."

This is clearly evident in the construction-machinery sector. Chinese companies such as Sany, XCMG and ZPMC have become global giants that competing head-to-head with established players from the US, Europe and Japan, with their equipment deployed in infrastructure projects worldwide.

The industrial robot, crucial for automating and upgrading manufacturing processes, is another area of rapid growth.

China installed more industrial robots than rest of the world combined in 2023. The upshot is that Chinese factories have both abundant automation and the capability to produce it, reducing reliance on imported German or Japanese robots.

Chipmaking breakthrough

Perhaps the most striking progress has come in semiconductor-equipment. For decades, the manufacture of chips depended on foreign suppliers such as ASML, Applied Materials and Tokyo Electron. In early 2025 at a Beijing annual semiconductor fair, Shenzhen-based SiCarrier unveiled a full lineup of "made-in-China" lithography, deposition and etch machines to make advanced chips. While still playing catch-up in extreme-UV lithography, these breakthroughs in chip equipment mark a turning point and a hedge against US sanctions.

Beyond immediate industrial applications and market demands, Chinese institutions and individuals are also investing significantly in frontier technologies such as commercial aerospace, quantum technology AI foundational models, and humanoid robotics.

Engaging in these challenging domains, even without immediate commercial returns, serves multiple purposes. It hones research teams, fosters interdisciplinary collaboration and accumulates new knowledge and expertise.

By investing heavily now in basic science and radical innovation, China is laying the groundwork for the future in areas such as lunar bases or quantum networks.

"Made in China 2025" is less about a specific deadline and more about a profound, ongoing transformation. China's ability to withstand global economic turbulence, including targeted tariffs, is not a temporary act of defiance but a consequence of fundamental shifts in its industrial structure, innovation ecosystem and technological capabilities.

Whether through the growth of global brands, the dominance of domestic machinery and robots, or frontier projects in aerospace and AI, China's approach is multi-layered.

Challenges including geopolitical tensions, demographic shifts and the complexities of navigating the next stages of technological development may persist, but China is well-armed to navigate them because it planned ahead and didn't look back.

(The author is founder of WisePromise, a boutique advisory agency specializing in the international expansion of Chinese tech companies in the advanced hardware and energy sectors. He also serves as a geo-economic expert for several think tanks in Beijing.)