This list of priority industries in the 14th Plan pretty much looks like the industries in the Made in China 2025. Dragonomics, a consultancy, calculated that the financial support for these sectors not only attract government support, much of which through “government guided funds”, but also get leveraged many times over through the capital market and banks.

Most funding for R&D in China comes from the non-state sector, not from government budgets. More than 80% is done in industry, not in government organisations such as universities and research institutes. This balance is likely to shift somewhat as China’s emphasis is shifting to more fundamental science, not just applied R&D. One sector is of particular interest: Integrated Circuits (“chips”), the prime battleground in the US-China tech war. It has been the focus of attention for a long time in China’s technology policies and IT was featured already in the “863” technology plan of 1986.

Despite the billions of dollars spent, China has not been able to catch up with the leading producers in this area. Its most sophisticated chips are still a generation behind the cutting edge. However, this time may be different. Necessity is, after all, the mother of invention.

In 2020, the Chinese government allocated some RMB200 billion to the industry. This will be leveraged many times over by local governments and private capital. It is in the nature of innovation that much of that money will not deliver results. But some of it will. Once China has found alternatives to the Qualcomms and Intels of the world, it will not be coming back.

The 14th FYP mentions the need for international cooperation in science and technology, and such cooperation would clearly benefit China and the rest of the world. Nevertheless, China’s plans for indigenous technology development are likely to be controversial internationally. Perhaps unnecessarily so: China is one of the few countries that brings together its plans in this arena in one place, but countries around the world have their own technology policies, and a growing number have been pursuing industrial policies in light of disappointing economic performance since the global financial crisis.

The challenge for China and other countries is to keep the instruments with which they pursue such policies compatible with an open, market-based international economic system.