As China drafts its 15th five-year plan – the next entry in a line of expansive blueprints that have set the tone for the country’s development over more than seven decades – we examine how these documents inform and reflect high-level policy priorities, what to expect in the coming iteration and how fine-tuning supply chains would work to China’s advantage.
On paper, when Apple unveiled its latest flagship smartphone earlier this month, all US-bound models of the iPhone 17 were said to be produced in India – a headline-grabbing announcement that reportedly reflected fraught China-US trade ties while amping up the decoupling rhetoric.
Yet, a “made-in-India” iPhone often only means that the final screws are tightened there, while the guts of the device – including batteries, displays and camera modules – still flow from a Chinese supply chain that is second to none, Patrick McGee, author of Apple in China: The Capture of the World’s Greatest Company, said in a media interview in May.
This highlights China’s manufacturing ecosystem, which, after decades of refinement, has cemented itself as the world’s most complete and resilient across numerous industries – an achievement that is often a point of national pride.
As Beijing mulls the country’s 15th five-year plan – a development blueprint that will shape its policy trajectory for the rest of the decade, over what looks to remain a period of domestic economic transformation and heightened external uncertainty – analysts expect policymakers to solidify what the nation has achieved in terms of supply-chain resilience and to move further up the value chain while addressing more chokepoints in hi-tech areas.
“China has very successfully expanded its production and manufacturing capabilities, particularly in the downstream and midstream segments of the tech industry, including semiconductor fabrication,” said Nick Marro, principal economist for Asia and lead for global trade at the Economist Intelligence Unit (EIU). “But when it comes to upstream processes, it is still very reliant on overseas partners.
“These are things that China has long identified as strategic priorities but [in which it] has really struggled to make breakthroughs, just given the dominance of existing incumbents.”
In the past five years, China has taken considerable strides after making supply‐chain strength and security a central plank of its economic strategy. The 14th five-year plan (2021-2025) explicitly called for “accelerating the development of a modern industrial system” and “developing a more secure and reliable industrial and supply chain”.
As a result, China now hosts the world’s most comprehensive manufacturing system while boasting the world’s largest manufacturing scale for 15 consecutive years, with the output of most of the 504 major industrial products topping global rankings, according to Industry and Information Technology Minister Li Lecheng.
China’s manufacturing, value added, is set to have risen by 8 trillion yuan (US$1.13 trillion) during the entire 14th five-year period, driving more than 30 per cent of global manufacturing growth, and accounting for nearly 30 per cent of global value-added manufacturing, up from 6 per cent in 2000.
In the case of Apple’s supply chain, according to a 2024 Post analysis, mainland China remains the firm’s main manufacturing base, home to more than a third of the factories run by its 187 disclosed suppliers. A total of 157 contractors conducted manufacturing in mainland China that year, representing 98 per cent of Apple’s direct spending on materials, manufacturing and assembly of its products worldwide.
Behind the progress is increased spending in research and development. The scale of China’s total R&D funding investment rose nearly 50 per cent between 2020 and 2024, increasing by 1.2 trillion yuan, according to comments in July by Zheng Shanjie, chairman of the National Development and Reform Commission. This rise helped deepen support for strategic emerging industries, from semiconductors to new-energy vehicles.
Analysts pointed out that, in the next five years, China is expected to continue its policy focus on achieving breakthroughs, particularly in advanced technology, as limits remain in areas such as high-end semiconductors, precision machinery and industrial software – vulnerabilities made ever more apparent amid the intensifying China-US rivalry as Washington has tightened restrictions in critical advanced-tech sectors.
Lin Xueping, visiting researcher at the China Institute for Quality Research at Shanghai Jiao Tong University, was quoted as saying in Enterprise Management magazine in August that “the weak point in China’s supply chain lies in its fragility – there are gaps in certain critical technology links”.
When the US restricted China’s access to advanced semiconductors and electronic design automation (EDA) tools in May, leading global suppliers such as Synopsys, Cadence and Siemens were barred from providing their top-end software to China.
Although the supply has since resumed, Lin pointed out that it highlights a vulnerability that could easily be exploited again. “How to fix the supply-chain vulnerability as soon as possible is a key question we need to acknowledge and actively address,” he noted.
In China’s transformation over the past decade – from producing low-cost, labour-intensive goods to becoming a global leader in sectors ranging from automobiles and shipbuilding to aerospace, robotics and biotech – its critical supply-chain chokepoints have been laid bare amid rising tensions with the US, and such vulnerabilities have contributed to Beijing doubling down on self-reliance.
Vice-Minister of Industry and Information Technology Xin Guobin recently acknowledged as much, noting that “shortcomings remain in areas such as advanced automotive chips with high computing power, while irrational competition in some sectors is still prominent”.
At a press conference on September 9, he said that Beijing would refine its policy support, push for breakthroughs in core technologies, and tighten oversight to foster healthier, higher-quality industrial growth.
Liu Yao, an assistant professor with the Lee Kuan Yew School of Public Policy at the National University of Singapore, said Beijing should continue to “emphasise deeper chain-chief governance, expanding support for [firms known as] ‘little giants’, and accelerating the digital transformation of supply chains to improve traceability and flexibility”.
The “chain-chief system”, which China is now utilising to shore up its supply chain, involves appointing senior officials or local leaders to oversee entire industrial chains, from raw materials to finished products.
In parallel, it has poured resources into cultivating thousands of specialised small and medium-sized enterprises – those “little giants” – to plug bottlenecks in areas such as advanced materials, sensors and industrial software. These efforts have gradually tilted China’s industrial mix towards hi-tech manufacturing, highlighting a shift from sheer scale to depth and sophistication.
But chokepoint problems have not been fundamentally addressed, according to an August article by a think tank under the Zhejiang Institute of Industry and Information Technology that listed critical choke points. These include lithography equipment – advanced machines for chipmaking that are dominated by Dutch company ASML’s DUV and EUV lithography systems.
In the race for tech supremacy, Washington has also pressured its ally, the Netherlands, to restrict ASML from selling its most advanced technologies to Chinese buyers, through restrictions adopted by the Dutch government.
Experts have stressed that, in an increasingly fractured global landscape, supply-chain security has replaced efficiency as the guiding logic, with “de-risking” emerging as the new trend.
Moves by major economies to “de-China” critical sectors such as semiconductors and energy have heightened the risk of isolation for Chinese manufacturing, driving up both costs and security vulnerabilities across its supply chains, they added.
“Structurally, the supply-chain trend will be towards ‘de-Americanisation’ and greater localisation,” said Zhuang Bo, a global macro strategist at Loomis Sayles Investment Asia. “In the future, China may build a more complete domestic ecosystem, albeit one that could be relatively inefficient at the outset.”
Against this backdrop, analysts said China will be looking into areas where it could make inroads or get a leg up on the competition.
“Chinese policymakers over the last 10 years have demonstrated their ability to be quite forward-looking, as well as innovative, when it comes to capturing the industries of the future,” Marro from the EIU said. “We’re expecting to see a similar exercise whereby policymakers are looking at what’s possible for Chinese firms to establish or dominate it. And that’s going to include frontier technologies like 6G, quantum computing – things that are really featuring in existing policy documents but will likely capture a lot more urgency and attention as geopolitical considerations intensify.”
However, he warned that policy remains disproportionately focused on production and supply, with not enough attention given to demand, which could result in an unbalanced industrial landscape.
And Zhuang echoed that sentiment: “The more severe issue is that, while breakthroughs in advanced technologies remain elusive, the problem of excess capacity in the mid- to low-end segments could become further amplified in the future.” -- SOUTH CHINA MORNING POST
