Chinese leader Xi Jinping issued a stark warning this year to the ruling elites of his party. He emphasized that failing to grasp emerging technologies could result in China losing its competitive edge in the global economy. In a speech published in Qiushi, the Communist Party’s official theoretical journal, Xi highlighted the necessity for leaders at all levels to deepen their understanding of cutting-edge science and technology. He urged them to improve their professional skills and make informed decisions within the realms of science and technology industries.
Xi underscored the importance of promoting innovations like quantum technology, biomanufacturing, hydrogen and nuclear fusion energy, brain-computer interfaces, embodied AI, and 6G as catalysts for economic growth. He stressed the significance of nurturing future industry giants to secure China’s technological dominance. This strategy involves pinpointing key industries and control points that have previously enabled China to excel in green technology and dominate the supply of rare earth metals and essential raw materials.
Upgrading China’s Manufacturing Capabilities
Over the past two decades, Beijing has invested trillions in state funding to establish a global dependence on Chinese manufacturing. The government has allocated land, allowing subsidized local companies to circumvent fiscal and environmental standards that Western democracies struggle to maintain. Chinese industrial policies have supported strategic sectors, creating powerful corporations that now lead global markets, from electric vehicles to information technology, often at the expense of Western competitors and those in the Global South.
For example, electric vehicle manufacturer BYD benefits from below-market loans, tax advantages, and vertically integrated supply chains, enabling competitive pricing worldwide. BYD surpassed Elon Musk’s Tesla as the top EV seller by 2025. In Europe, BYD ranks as the third best-selling EV brand, following Volkswagen and BMW, based on a March report from the European Commission. Meanwhile, the U.S. has banned Chinese-made electric cars domestically, and the European Union is considering shifting from tariffs to price controls.
China’s Cyber Revolution and AI Ambitions
China aims to spearhead a cyber revolution characterized by advancements in artificial intelligence, robotics, and smart household devices. Through scientific breakthroughs, it plans to replace the United States as the primary provider of online services and connected hardware, starting with AI. To support this vision, China is constructing vast infrastructure, including new power grids for AI research spanning decades. However, achieving parity with the U.S. in computing power remains uncertain.
The plan could help China address long-term economic challenges like its aging population and global pushback against deindustrialization policies. Nevertheless, an unlevel playing field exists. The Organization for Economic Cooperation and Development (OECD) recently reported record levels of industrial subsidies in 15 key sectors, reminiscent of the 2008 financial crisis when governments bailed out banks and car manufacturers.
China received 52 percent of the $108 billion in global subsidies provided in 2024, according to the Paris-based OECD. Their analysis showed that approximately 22 percent of growth for over 500 large firms from 2005 to 2023 stemmed from subsidies, including government grants, tax breaks, and low-interest loans. For Chinese firms, nearly 60 percent of their market share gains were credited to subsidies. Chinese firms received substantially more subsidies than their OECD counterparts.
“Similar to doping in sports, subsidies pose the risk of rewarding unproductive players unfairly over more innovative and efficient ones,” the report noted. “Although consumers may enjoy short-term benefits from lower prices, this could eventually lead to diminished innovation, product quality, and competition, imposing long-term costs on the global economy.”
The Chinese government attributes its dominance in strategic industries to its products’ competitiveness.