China Team Executive Summary

The China Team elected to structure its research for the Spring 2021 semester around an interdisciplinary topic that incorporated economic, financial, political, and technological considerations. While the Team was initially interested in analyzing the Chinese military-industrial complex, this became a subsection of the overall topic of interest, Made in China 2025. Made in China 2025 is an initiative spearheaded by the Chinese government that seeks to bolster the country’s domestic manufacturing and defense-critical industries in order to reduce Chinese dependence on foreign intelligence and production. With such a controversial topic at the forefront of China’s foreign and domestic policy goals, the Team was intrigued and chose to focus its research on the ambitious plan. The final research question chosen was “Will China meet its Made in China 2025 defense-critical manufacturing goals on time?

In order to create and calculate the base rate, a number of considerations had to be made. Firstly, the chances of a successful realization of Made in China 2025 could be predicted by analyzing past central planning initiatives created by the Chinese government. Given their role in China’s political, economic, and social development over the past few decades, five-year plans received by far the largest weighting (55 percent) among elements of the base rate. Five-year plans were broken down into measurements of overall economic performance and more specific factors such as manufacturing, infrastructure, urbanization, healthcare, education, and technology. These indicators were each scored through deliberations that sought to affix quantitative values to qualitative factors. Next, the parallel between the military-industrial complex in the United States and its counterpart in China was given a 35 percent sway over the base rate. The industrial, political, and diplomatic elements of the American military-industrial complex were equally weighted and scored relative to the expected success possible in the corresponding Chinese model. Finally, other East Asian countries (South Korea, Taiwan, and Japan) received 15 percent of the total base rate’s weight. Since these countries underwent rapid growth with noticeable government intervention, appropriate parallels were drawn to examine potential successes that could be adopted by the Chinese government. This portion of the base rate had the lowest influence on the overall score given these countries’ general lack of overlap with the previous characteristics examined in the American military-industrial complex and past Chinese government central planning efforts. After a mathematical assessment of these subdivisions, the preliminary base rate was 62.7 percent or 0.627.

The Fermi-ization process was ultimately reflected by a framework with seven hypotheses that each characterized relevant elements of Made in China 2025. First, the Team hypothesized that China’s current manufacturing capacity and sophistication are sufficient to meet surging manufacturing demand. This prediction, while positive in theory, merely suggests that China’s manufacturing capabilities are able to meet a basic standard rather than exceeding expectations significantly. As a result, this division only improved the base rate by 0.1 percent. The next hypothesis concluded that the military-industrial complex is not an incubator for the Chinese military’s defense-critical technology needs. This more pessimistic assessment of the military-industrial complex will dock the base rate by 0.3 percent. Regarding technology, the Team predicted that the nature of China’s domestic semiconductor manufacturing is insufficient to satisfy technological development objectives. Technology is by far China’s largest deficiency in its efforts to meet its goals, meaning that the base rate suffers a decrease of 0.7 percent. International responses are not predicted to cross a threshold that will inhibit China’s domestic manufacturing, though they will blunt China’s technological development goals. This outlook corresponds to a 0.2 percent decrease in the base rate. Regarding Chinese foreign policy itself, the design process seeking to maximize the Communist Party’s chances of meeting its manufacturing goals is evident, but the use of questionable diplomatic strategies such as wolf-warrior diplomacy, a controversial Belt and Road Initiative, and heavily protectionist policies means the base rate will fall another tenth of a percent. However, the Communist Party does have the legitimacy and political capital to implement Made in China 2025 while facing negligible domestic resistance, allowing for an increase to the base rate of 0.2 percent. Finally, the base rate grows by another 0.2 percent when COVID-19 considerations are noted, as the Team inferred that China’s general ability to meet their manufacturing goals will not be compromised by the economic effects of the COVID-19 pandemic, even though some industries may struggle more than others. The aggregate effect of the framework reduced the base rate by 0.8 percent, making the final base rate 61.9 percent or 0.619.

While this rate does provide a useful probability (a 61.9 percent chance) of China’s success in meeting its Made in China 2025 goals, there is some nuance that needs to be examined. The technological factors at play are particularly damning in their impact on China’s chances of success, given that the lack of development in the semiconductor industry presents a significant setback that is almost impossible to overcome before 2025. Thus, the Team’s consensus is that besides the technological component, all Made in China 2025 goals are likely to be achieved on time. Were China to enjoy a more advanced high-tech sector, the overall probability of success would be significantly higher, but the fact that Chinese semiconductors are multiple generations behind those produced by developed economies is a crushing blow to the Communist Party’s ambitions over the next few years.

To verify this prediction, careful attention to Chinese politics (including domestic and foreign affairs), economic indicators, and technological progress over the next four years will be crucial. Future China Teams will have excellent opportunities to re-examine the state of affairs in China and how new developments have influenced Made in China 2025’s potential for success; perhaps time will show that there is far more or less promise than we have observed over the past few months. After all, this is one initiative in a decades-long quest by the Chinese government for power in the international system on a scale that rivals that of the United States. Come 2025, the incumbent members of the China Team will be fascinated to learn whether their forecast was correct or not.