After reviewing the existing literature and data, it emerged that the greatest challenge in this project would be to create a credible dataset that examined China’s progress in the high-tech sectors listed in Beijing’s Made In China 2025 (MIC 2025) policy. The existing data published by China’s National Bureau of Statistics and the World Bank lacked detail and looked to be flattered by the inclusion of non-high-tech sectors, while another (much lower) measure, published by China’s Ministry of Science and Technology, had been discontinued.

A better-targeted dataset was clearly needed, and so, amid concern over the accuracy of China’s official statistics, we opted to use trade data to build our own proprietary dataset. We had greater confidence in these data because they are available and detailed, with mirror data from the importing country providing a source of independent verification. In addition, trade data are comparable for all countries, enabling us to examine who would suffer if China made progress – a key part of the client’s question.

Once our approach was agreed, Fathom whittled down data on more than 1800 different types of goods, focusing only on those specifically targeted by MIC 2025 and grouping them according to the nine sectors prioritised in China’s plan.

Countries vulnerable to China's diversification

Delivery

Fathom built its proprietary RiCArdo database and dashboard tool to house this wealth of data, with calculations on  high-tech export shares, global market shares and revealed comparative advantage (RCA), from 2001 onward in relation to more than 200 countries, regions or territories as well as China. The dashboard also allows the user to rank each of these countries and regions by, for example, their market share in each of the nine industries, mapping the distribution of high-tech expertise around the globe.

Fathom presented its findings and handed over the tool to the client in early 2018, six months after we began the project. We now update the dataset and analysis on an annual basis; and the unique insights they provide enhance Fathom’s wider research and consultancy output. Fathom’s research clients benefit from this work through our regular cycle of research notes, although direct access to the underlying dataset and dashboard remains restricted to RiCArdo subscribers. To subscribe, please contact us.

Impact

Thanks to Fathom’s work, the client gained the ability to assess with greater accuracy and detail how China has been increasing its global market share in high-tech sectors, as well as its degree of specialisation. A key takeaway from the tool was that:

• China has advanced in each sector
• The US has lost out in all but one

However, the tool also showed that much of China’s progress predated MIC 2025, which was launched in 2015. In recent years China has made only limited progress in increasing high-tech exports as a share of its total goods exports, and still lags well behind Japan, Germany and the US on this measure. In summary, China’s progress has waned but its ambitions have not.

Key calls

• “In targeting the Made in China industries Donald Trump has gifted China’s policymakers the perfect excuse for the plan’s loss of momentum, paving the way for China to throw in the towel.” This has been borne out.
• “Targeting the Made in China industries will have little impact on the US’s yawning trade deficit, with high-tech sectors accounting for only a small proportion of the total”. We were right, with the US trade deficit at similar levels now as it was in 2017 when Donald Trump became president.