China's Drive to Overcome Industrial 'Choke Points'

China is intensifying efforts to overcome critical industrial vulnerabilities, commonly referred to as "choke points," that impede its self-sufficiency in key sectors. These vulnerabilities include advanced semiconductor manufacturing, high-end ball bearings, carbon fiber components, and specialized manufacturing materials, areas predominantly controlled by Western, Japanese, and European companies.

President Xi Jinping has prioritized closing these gaps, emphasizing their importance for both economic growth and national security, especially amid escalating U.S. export controls and trade tensions. Chinese companies are making strides in overcoming these choke points. For instance, DeepVision has utilized artificial intelligence to enhance quality control in ball bearing production. Additionally, firms like Huawei, CATL, and BYD have successfully addressed vulnerabilities in battery and lidar technologies. However, challenges persist in areas such as photolithography machines and carbon fiber cascades. Experts suggest that China's broader goal is not global technological dominance but achieving domestic self-reliance and increased productivity, which are crucial for the ruling Communist Party's legitimacy.

This development is part of China's broader "Made in China 2025" initiative, launched in 2015, aiming to upgrade its manufacturing capabilities and reduce reliance on foreign technology.

Despite being the world's second-largest economy and a military superpower, China faces dependencies in key industrial sectors that challenge its self-sufficiency. These "choke points" include:

• Semiconductors: China accounts for about 60% of global demand for semiconductors but produces only approximately 13% of the global supply.

• High-End Ball Bearings: Essential for various machinery, these are primarily produced by foreign companies, limiting China's domestic capabilities.

• Carbon Fiber Components: Critical for aerospace and other high-tech industries, with production dominated by non-Chinese firms.

• Specialized Manufacturing Materials: Including photolithography machines necessary for semiconductor fabrication, which are largely sourced from companies like ASML in the Netherlands.

President Xi Jinping has prioritized closing these industrial gaps, emphasizing their importance for both economic growth and national security, especially amid escalating U.S. export controls and trade tensions. This initiative aligns with the broader "Made in China 2025" strategy, launched in 2015, aiming to upgrade China's manufacturing capabilities and reduce reliance on foreign technology.

Chinese companies are making strides in overcoming these choke points:

• DeepVision: Utilizes artificial intelligence to enhance quality control in ball bearing production.

• Huawei, CATL, and BYD: Have successfully addressed vulnerabilities in battery and lidar technologies.

However, challenges persist in areas such as photolithography machines and carbon fiber cascades. To address these, China is redirecting its $50 billion Big Fund III to focus on domestic development in semiconductor manufacturing tools and electronic design automation software, supporting firms like Shanghai Micro Electronics Equipment (SMEE) and Empyrean Technology.

Achieving self-sufficiency in these critical sectors is crucial for China's economic resilience and national security. Reducing reliance on foreign technology can mitigate risks associated with international trade tensions and export controls. Moreover, enhancing domestic capabilities aligns with China's goal of transitioning from a manufacturing-driven to a consumer-led economy, as emphasized by Premier Li Qiang.

The "Made in China 2025" initiative aims to transform China into a global leader in high-tech industries by 2025, with objectives such as achieving 70% self-sufficiency in core components and materials within targeted sectors. While progress has been made, some studies suggest that the initiative has not fully met its goals, indicating ongoing challenges in reducing dependencies on foreign technology.

By addressing these industrial vulnerabilities, China aims to bolster its economic independence and strengthen its position in the global market, though significant challenges remain in achieving full self-sufficiency.