Since its launch in 2015, China's strategic plan Made in China 2025 has gathered attention around the globe. It represents China's ambition to shift from the world's factory for cheap and low-quality products to the world's provider of higher-value-added products and services. At Lux, we heard a lot of interest and concerns from chemicals and materials companies who wonder what this strategic plan is all about, how it will influence the chemical and material industry, and what global companies should do about it.
The goals and material coverage of Made in China 2025
Made in China 2025 set up a three-phase road-map for China to become a global leading manufacturing country with the following goals:
- By 2020, China will realize industrialization and digitization in manufacturing while lowering resource consumption (energy and materials) and minimizing pollution.
- By 2035, China will complete industrialization, significantly improve its ability to cultivate and commercialize manufacturing innovations, and make technical breakthroughs to establish global leadership in certain fields.
- By 2050, China will become one of the global leaders in advanced manufacturing, with strong innovation capability and competitive advantages in the major manufacturing fields, as well as established technology and industrialization systems.
Like China's AI development plan, Made in China 2025 targets the country's global leadership in the future and will be supported with government funding for fundamental research, investment for start-ups, and financial incentives (like tax rebates) for industrial companies. Compared with the country's AI plan, Made in China 2025 covers a broader range of physical industries, including IT (chips/processors, telecommunication equipment, and industrial software), robotics, aerospace, advanced trail transportation, new energy vehicles, new materials, and biopharma and medical devices.
The coverage for the new materials in Made in China 2025 is specified by China's 13th Five-Year Plan for the material industry (Material 13FYP) issued in April 2017, which highlights key technologies ranging from fundamental materials (like nonferrous metals) and advanced electronic materials (like new display technologies) to nanomaterials (like graphene) and advanced structural materials (like fiber reinforced polymers).
How Made in China 2025 and Material 13FPY will influence the global chemical and material industry
Made in China 2025, Material 13FYP, and China's upcoming Five-Year Plans for the material industry in the next two to three decades will bring business opportunities to the global chemical and material companies, given that the country has strong demand for the material technologies highlighted in the policies and is willing to get access to these technologies and products. Specifically, clients have three types of opportunities:
- Sales of materials, products, and equipment,
- Technology transfer (licensing and selling), and
- R&D collaboration.
In the long term, Made in China 2025 will accelerate China's innovations and commercialization for chemicals and materials and challenge to the global leading companies, potentially by dragging down the cost and profit of existing products or facilitating the emergence of new alternatives. Made in China 2025 may also create new Chinese chemical and material companies that are strong in both innovations and market development.
What you should and shouldn’t do
It's a bad idea to do nothing and hope that China will move slowly in advanced chemical and material R&D and commercialization. You will miss business opportunities from the large Chinese market, as China will gain access to the cutting-edge technologies and products from other global companies that want to benefit from working with China. In the worst possible case, when China cannot access these technologies through global players, it will mobilize its R&D capability to create technical breakthroughs itself (though this may make take some time for certain technologies), thus leaving very limited or no opportunities for global companies, just like the current situation in carbon fiber (see our report "China Carbon Fiber") and AI chips (see our insight "China becomes the innovation hotbed for AI chips"). China has the resources at its disposal through its government, academic, and private sectors to meet its Made in China 2025 goals, and it has a strong track record of becoming a technology leader in areas like solar, telecom, and electronics.
To reap the benefits from the Chinese chemical and material market, clients should leverage at least one of the three types of opportunities identified above. Among these three opportunities:
- Sales of materials, products, and equipment
- Technology transfer (licensing or selling)
- Joint R&D
Made in China 2025 and Material 13FYP, as well as other upcoming policies carrying the same theme and goals, will accelerate China's advanced chemical and material R&D and commercialization and bring tremendous business opportunities for global leading chemical and material companies. Companies should choose the right opportunities based on their own business case, reaping both short-term and long-term business benefits from the Chinese market.