From 23rd to 2nd in 20 Years: The Secret Behind China's Rapid Rise in Manufacturing Competitiveness

"Made in China 2025" Ends This Year After a Decade
China Leads in Electric Vehicles, Batteries, and Aerospace
R&D Spending Reaches 700 Trillion Won, Surpassing Korea's Annual Budget
400,000 Science and Engineering Entrants, Nearly Matching

"Made in China 2025," the initiative that transformed China into a leading advanced manufacturing powerhouse over the past decade, comes to an end this year. Until the mid-2010s, China was a customer of South Korea, but it has now emerged as a competitor. In several sectors, such as electric vehicles and batteries, China is already leading the global market and has reached a level that threatens the United States. On September 12, Shinhan Investment Corp. analyzed the secrets behind China's strengthened manufacturing competitiveness, which has established a dual hegemony with the United States, surpassing the European Union, in its report "Made in China 2025: A Decade of Change."

China Leading the Global Market in Just 20 Years

According to the United Nations Industrial Development Organization (UNIDO), China's manufacturing competitiveness ranked only 23rd when it joined the World Trade Organization (WTO) in 2001. However, by 2018, it had climbed to 2nd place. China's share of global manufacturing now exceeds 30%. In fields such as electric vehicles, batteries, shipbuilding, and aerospace, China has already reached the global forefront. Except for semiconductors, the localization rate in most industries has shown remarkable results. For solar power, high-speed rail, secondary batteries, and electric vehicles, the localization rate has surpassed 90%.

According to the Belfer Center’s "Critical and Emerging Technologies Report" at the Harvard Kennedy School, China ranks second only to the United States in advanced technology sectors such as artificial intelligence (AI), biotechnology, semiconductors, space technology, and quantum technology, outpacing Western developed countries including the European Union. The Belfer Center assessed that while the United States maintains an advantage in all areas, it does not hold absolute hegemony, and China's pursuit is emerging as a real threat.

"Made in China 2025," which concludes this year, is considered to have achieved significant results. By rapidly establishing a supply chain ecosystem under government leadership, China has greatly increased its technological self-sufficiency. The second phase (2026-2035) aims to surpass Germany and enter the ranks of advanced manufacturing powers. The goal is to secure competitiveness that can drive the global market. The third phase (2036-2049) envisions China becoming the world’s leading industrial powerhouse, overtaking the United States, in time for the 100th anniversary of the founding of the People’s Republic of China.

Securing Competitiveness Through a Massive Mobilization of Human and Material Resources

What is the secret behind China’s transformation into a technologically advanced manufacturing powerhouse? Shinhan Investment Corp. points to astronomical research and development (R&D) investments and the cultivation of a vast number of science and technology talents.

As of last year, China’s R&D expenditure reached 3.6 trillion yuan (approximately 705 trillion won), exceeding South Korea’s annual budget of 657 trillion won. A notable feature is that the private sector’s share, which remained at around 50% in the early 2000s, has now risen to nearly 80%. This is because large private companies such as Huawei, Tencent, Alibaba, and BYD have rapidly grown and led R&D investments.

The results of China’s R&D investments are evident in international patent applications (PCT). The PCT is a gateway for gaining international recognition for technological innovation and commercialization potential. In 2019, China surpassed the United States for the first time. As of last year, China filed 70,000 applications, accounting for 25.6% of the global total.

Another driving force behind China’s technological rise is its human resources. Each year, the top 3% of Gaokao (China’s national college entrance exam) examinees, totaling 400,000 students, choose science and engineering majors. This is equivalent to the entire pool of 450,000 South Korean college entrance exam takers. Last year’s survey of popular majors also showed that engineering fields such as electrical engineering, electronic engineering, mechanical engineering, and computer engineering ranked at the top.

The income gap after university graduation is a key reason for the preference for science and engineering. The top 10% of earners in the semiconductor industry receive annual salaries of 250 million won, while those in robotics earn 150 million won, both very high figures. In contrast, the top 10% of dentists and plastic surgeons earn 110 million won and 90 million won, respectively. Last year, China’s per capita GDP was $13,000 (18 million won).

Shin Seungwoong, a strategist at Shinhan Investment Corp., analyzed, "In China, the top talents are concentrated in science and technology fields, and the compensation system is also designed to favor STEM (Science, Technology, Engineering, Mathematics) based jobs. This difference in talent allocation is likely to lead to differences in national competitiveness in the future."

This content was produced with the assistance of AI translation services.