Indian Council of World Affairs

Abstract: The technological evolution of China has drawn attention from global powers who are concerned about its rapid development and strategic ambitions. This scrutiny has intensified significantly with the onset of the US-China trade war. 

Introduction

On 15 May 2025, the Trump administration blacklisted several Chinese chip making companies (the “entity list”).^[i] The trade war, which initially began as a dispute over trade imbalances and tariffs, has evolved into a broader confrontation encompassing technology, intellectual property, and national security. This paper delves into the evolution of China’s technological policy over the years.

Central Planning and Self-Reliance (1949-76)

Since 1949, China has witnessed several waves of technology-centric economic development. During the Mao era (1949-76), with the help of Soviet aid, China focused on adopting a robust technological approach and, in its pursuit of self-reliance, developed its basic infrastructure, notably steel industries, to boost its export-driven economy within a centrally planned economy. The emphasis was on Soviet-style science and technology development and limited international cooperation. With this approach, some successes were experienced, particularly in military technology, like nuclear weapons and satellites; however, civilian technology and innovation fell behind.^[ii]

Opening and Modernisation (1978-90s)

Over time, the limitations of centralised planning prompted a strategic shift towards modernisation and global integration, thus Deng Xiaoping’s era (1978-90s) marked a reform in China’s technological approach. The mid-1970s saw the launch of the “Four Modernisations”, which focused on four areas, such as agriculture, industry, science and technology and national defence. ^[iii]The shortage of hard cash made this strategy unfeasible, even though it proposed to import entire factories and capital goods to speed up economic development.^[iv] China also made a shift in its economic policy under the “Reform and Opening” which emphasised export-driven manufacturing, supported by foreign direct investments, along with a more restricted state intervention and reliance on market forces. Although the slogans of both these reforms continued to echo in the 1980s, Reform and Opening eventually became the guiding principle. This era also marked the introduction of special economic zones and encouraged foreign investment and technology transfer.^[v] For the development of advanced technologies, a total of 10 billion RMB was allocated, which was 5 per cent of the total government spending. By 1991, China’s R&D spending had increased to 0.72 per cent of its GDP, which was not seen in previous years. This resulted in a rapid improvement in industrial and technological capacity, albeit heavily dependent on foreign technology.^[vi]

Catch Up and Indigenous Innovation (late 1990s -2010)

During the subsequent years, China adopted technology-acquisition plans and industrial policies, most notably the 863 and 973 Programs. These national initiatives were launched to boost China’s capabilities in high-tech innovation (863)^[vii] and basic scientific research (973)^[viii], the “Golden Projects” that fueled the deployment of IT networks, and the building of the “Great Firewall” to protect the domestic internet from external influences. This era marked the transition from being a technology follower to actively seeking technological independence and leadership.^[ix]

By 2006, China shifted its economic policy similar to the Mao era and focused on technological advancement with the introduction of the Medium- and Long-Term Plan for the Development of Science and Technology (2006-2020). The vision was to transform China into an “innovation-oriented society” by 2020 and become a global leader in science and technology by 2050. Central to this was the concept of indigenous innovation (zizhu chuangxin), emphasising the development of domestic technologies within China to avoid a reliance on imports or adaptations.^[x] While Chinese analysts saw this approach as a means to stimulate domestic economic activities, Western observers interpreted this as a cover for coercive technology-transfer policies. The plan set ambitious goals, including increasing gross expenditure on research and development (R&D) to 2.5 per cent of GDP by 2020, enhancing self-reliance in key sectors, such as biotechnology, information technology, aerospace, environmental protection, and reducing dependence on imported technology to no more than 30 per cent.^[xi]

In 2013, Xi Jinping took charge as the President of China, and during his term to date, he has increasingly focused on technological self-reliance, national security and strengthening state control over strategic industries like AI, quantum computing, semiconductors and biotechnology. He is also responsible for innovation-driven development, which is seen in the introduction of Made in China 2025 (MIC 2025) in 2015, which hoped to elevate China from just a manufacturing hub to a serious tech contender and set the stage for a geopolitical competition over tech leadership, especially with the United States.^[xii]

By 2015, China’s R&D spending increased to 2.06 per cent of its GDP. This transition was aided particularly by government policies. For example, China’s 12th Five-Year Plan (2010-2015) set a target for R&D spending of 2.2 per cent of GDP by 2015, which it nearly missed by 0.14 per cent. Beijing maintained its support for R&D through the 13th Five-Year Plan (2015-2020), which aimed to spend 2.5 per cent of GDP on R&D by 2020. ^[xiii]

This has enabled the rise of firms like Huawei, ZTE, Lenovo and Baidu as leaders in telecommunications, computing and internet services. This was heavily supported by the state through preferential access to funding, R&D subsidies and protection from foreign competition in strategic sectors. Resultantly, a spike in internet and digital expansion was witnessed with massive growth in e-commerce, mobile payments, social media platforms, online services and digital infrastructure. The Chinese government also invested in higher education and R&D, even sponsoring study abroad programmes where students would go abroad to study and return to put their knowledge into use in China’s growth.^[xiv]

The R&D spending grew rapidly from 1 per cent of GDP in 2000 to 2.1 per cent by 2018. Local governments incentivised tech startups with funding, land, and tax breaks. There was a growing focus on strategic sectors where China prioritised investment in telecommunications (3G/4G development), high-speed rail, aerospace, and renewable energy. Foreign firms were encouraged (or required) to transfer technology in exchange for market access. Intellectual Property (IP) became a major point of contention with Western countries. Tech transfer mechanisms included joint ventures, licensing agreements and local content requirements. ^[xv]

Strategic Tech Leadership (2010s)

China’s acquired technological prowess was initiated by the launch of MIC 2025. MIC 2025 is an initiative that strives to secure China’s position as a global powerhouse in high-tech industries. The aim was to reduce China’s reliance on foreign technology imports and invest heavily in its innovations to create Chinese companies that can compete both domestically and globally.^[xvi] MIC 2025 is an ambitious industrial policy to upgrade China’s manufacturing in 10 key sectors, expansion of digital infrastructure like 5G, AI and smart cities and investment in domestic chip production and strategic emerging industries. This not only has increased global competitiveness but also triggered international backlash and trade tensions, particularly with the US Over recent years, there have been reports of the Chinese government toning down the rhetoric on MIC 2025, and thus it does not appear in media or official documents anymore. One can argue that the US-China trade war was partially responsible for change in tone on MIC 2025; it does seem like a strategy to pacify the US and divert media attention from the overall goals of the policy.^[xvii]

Analysis

Since its introduction to global markets, China has focused on being the manufacturer of technology and goods that they can sell at cheaper price points in the developing world. This, along with the lack of any global Chinese brands, has reinforced Western understanding of China as a “factory floor” rather than a hotbed of innovation, thus their sceptical attitude towards China’s technological capabilities.

China’s “indigenous innovation” policies hope to reduce the dependence on foreign technology to promote domestic industries; however, this strategy does not necessarily mean a rejection of all foreign influence. Chinese firms have moved beyond just assembling foreign-made components to manufacturing their cutting-edge technology that can compete with foreign production. Despite making relatively fewer contributions to groundbreaking scientific research, China has outperformed the US in an increasing number of important technologies by utilising its process knowledge, which allows it to scale up entire new sectors. These successes challenge the popular notion that scientific leadership inevitably contribute to industrial leadership.^[xviii]

China continues to lag behind Western nations in key high-tech sectors like semiconductors and aerospace. While it has advanced in memory and mobile chip design, it remains at least five years behind global leaders such as Taiwan's TSMC in logic chip manufacturing and still relies heavily on imported tools like chip design software and lithography equipment.^[xix]

Efforts to build domestic capacity have often involved reverse engineering and recruiting talent from firms like TSMC, Intel, and Samsung et el. Huawei, for instance, was accused in a 2003 Cisco lawsuit of copying router software and design. Although now a global 5G leader, Huawei’s rise was fueled by aggressive acquisition of Western IP and state subsidies that helped it outcompete foreign rivals.^[xx]

China’s innovation drives were further fuelled by state-backed initiatives such as the Thousand Talents Plan, which incentivised Chinese scientists and engineers abroad to return home, often bringing proprietary technologies or research with them. In many cases, these activities were not disclosed to their host institutions. This has triggered multiple investigations across US universities and federal agencies, particularly in sensitive fields like quantum computing and biomedical engineering, where the theft of intellectual property poses significant national security and economic concerns.^[xxi]

Conclusion

China's journey from Mao-era planning to tech leadership reflects a strategic blend of innovation, collaboration, and self-reliance. As geopolitical tensions deepen, its pursuit of tech sovereignty continues to reshape global innovation and power dynamics. There are lessons to be learnt from China’s technology development trajectory, including on technology diffusion and transfer and intellectual property controls and their dynamics in alternating eras of friendship and hostility between countries such as between China and the US and China and former Soviet Union/Russia.

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*Angel Rean George, Research Intern, Indian Council of World Affairs, New Delhi
Disclaimer: Views expressed are personal.

Endnotes

^[i] Financial Times. "Trump Administration Split on Timing of Adding Chinese Chipmakers to Export Blacklist." Financial Times, May 15, 2025. Accessed May 16, 2025. https://www.fxstreet.com/news/trump-administration-split-on-timing-of-adding-chinese-chipmakers-to-export-blacklist-ft-202505152338.

^[ii] UWE Economics Society. "The Great Leap Sideways: Chinese Industrialization under Mao Zedong." UWE Economics Society, n.d. Accessed May 13, 2025. https://uweconsoc.com/the-great-leap-sideways-chinese-industrialization-under-mao-zedong/.

^[iii] Encyclopaedia Britannica. "Four Modernizations." Encyclopaedia Britannica, n.d. Accessed May 15, 2025. https://www.britannica.com/topic/Four-Modernizations.

^[iv] Nolan, Peter. "China’s Development Path, 1949–2022." Global Discourse 14, no. 2–3 (2024): 316–340. Accessed May 14, 2025. https://bristoluniversitypressdigital.com/view/journals/gd/14/2-3/article-p316.xml.

^[v] Perkins, Dwight H. "Trade and Foreign Direct Investment in China's Development Strategies." The National Bureau of Asian Research, November 1, 1996. Accessed May 14, 2025. https://www.nbr.org/publication/trade-and-foreign-direct-investment-in-chinas-development-strategies/.

^[vi] ChinaPower Project. "Is China a Global Leader in Research and Development?" Center for Strategic and International Studies, n.d. Accessed May 14, 2025. https://chinapower.csis.org/china-research-and-development-rnd/.

^[vii] Ministry of Science and Technology of the People's Republic of China. "National High-tech R&D Program (863 Program)." Accessed May 15, 2025. https://en.most.gov.cn/programmes1/

^[viii] Ministry of Science and Technology of the People's Republic of China. "National Basic Research Program of China (973 Program)." Accessed May 15, 2025. https://en.most.gov.cn/programmes1/200610/t20061009_36223.htm.

^[ix] Brookings Institution. "Unleashing 'New Quality Productive Forces': China's Strategy for Technology-Led Growth." Accessed May 15, 2025. https://www.brookings.edu/articles/unleashing-new-quality-productive-forces-chinas-strategy-for-technology-led-growth/.

^[x] Waldie, Bradford. "Lexicon: Indigenous Innovation or Independent Innovation (自主创新, Zìzhǔ Chuàngxīn)." DigiChina, March 7, 2022. Accessed May 14, 2025. https://digichina.stanford.edu/work/lexicon-indigenous-innovation-or-independent-innovation-zizhu-chuangxin/.

^[xi] State Council of the People's Republic of China. National Medium- and Long-Term Program for Science and Technology Development (2006–2020). Beijing, 2006. Accessed May 14, 2025. https://www.itu.int/en/ITU-D/Cybersecurity/Documents/National_Strategies_Repository/China_2006.pdf.

^[xii] Center for Security and Emerging Technology. "Xi Pushes to Accelerate China's Scientific 'Self-Reliance'." Georgetown University, October 20, 2022. Accessed May 16, 2025. https://cset.georgetown.edu/article/xi-pushes-to-accelerate-chinas-scientific-self-reliance/.

^[xiii] Center for Strategic and International Studies. "Is China a Global Leader in Research and Development?" ChinaPower, n.d. Accessed May 14, 2025. https://chinapower.csis.org/china-research-and-development-rnd/.

^[xiv] Mercator Institute for China Studies. "China's Digital Rise." MERICS, n.d. Accessed May 15, 2025. https://merics.org/en/report/chinas-digital-rise.

^[xv] Science|Business. "How Much Does China Actually Spend on R&D?" Science|Business, April 9, 2024. Accessed May 13, 2025. https://sciencebusiness.net/news/international-news/puzzle-stumps-statisticians-how-much-does-china-actually-spend-rd.

^[xvi] Institute for Strategic Dialogue. "Made in China: Backgrounder." ISDP, June 2018. Accessed May 16, 2025. https://www.isdp.eu/wp-content/uploads/2018/06/Made-in-China-Backgrounder.pdf.

^[xvii] Institute of Chinese Studies. "Made in China 2025: Dead in Letters, Alive in Spirit." ICS, September 6, 2020. Accessed May 14, 2025. https://icsin.org/blogs/2020/09/06/made-in-china-2025-dead-in-letters-alive-in-spirit/.

^[xviii] World Trade Scanner. "China’s Hidden Tech Revolution." World Trade Scanner, Accessed May 19, 2025. https://worldtradescanner.com/China%20Hidden%20Tech%20Revolution.htm#:~:text=In%20its%20growing%20rivalry%20with%20Beijing%2C%20the,Western%20chip%20technology%20to%20Chinese%20firms%20while.

^[xix] Information Technology and Innovation Foundation. "How Innovative Is China in Semiconductors?" ITIF, August 19, 2024. Accessed May 13, 2025. https://itif.org/publications/2024/08/19/how-innovative-is-china-in-semiconductors/.

^[xx] EDN Network. "Cisco Claims IP Piracy." EDN, June 15, 2023. Accessed May 14, 2025. https://www.edn.com/cisco-claims-ip-piracy/.

^[xxi] Federal Bureau of Investigation. "The China Threat: Chinese Talent Plans." FBI, n.d. Accessed May 14, 2025. https://www.fbi.gov/investigate/counterintelligence/the-china-threat/chinese-talent-plans.