European firms wary as China pursues tech dominance

[WORLD] With Beijing spending the last decade looking for ways to strengthen the country's technological independence through its "Made in China 2025" (MIC2025) initiative, European companies with a stake in the world's second-largest economy have watched with growing concern, fearing further marginalization.

The initiative's ripple effects are already visible across global supply chains. In sectors like semiconductor manufacturing, where China previously relied heavily on imports, domestic producers now account for over 15% of the domestic market, up from just 5% a decade ago. This rapid advancement has forced many European tech suppliers to reconsider their China strategies, with some shifting focus to alternative Asian markets.

The MIC2025 plan, announced in 2015, aims for domination in high-tech areas like as semiconductors, artificial intelligence, and electric cars. China intends to transform itself from a manufacturing hub to a global digital powerhouse by focusing on indigenous innovation and minimizing reliance on foreign technology. However, this shift has sparked concern among overseas corporations that historically played a critical role in China's industrial growth but are now facing increased competition from domestic champions.

Industry analysts note a growing pattern of "innovation nationalism" in China's policy framework. Recent amendments to the Science and Technology Progress Law explicitly prioritize domestic entities in government procurement, while new cybersecurity rules require "secure and controllable" technologies - standards that often favor local providers. These measures have created what some executives describe as an "invisible ceiling" for foreign firms in key sectors.

Foreign enterprises are sometimes viewed as a valuable bridge to more sophisticated technology in China's pursuit of technical advances, with the goal of becoming a worldwide leader in some fields, as detailed in the MIC2025 goals. However, China's quick growth has raised concerns that foreign enterprises may be excluded once that complementary advantage is lost, according to the European Union Chamber of Commerce in China in a paper titled "Made in China 2025: The Cost of Technological Leadership".

Recent legislative changes, including as subsidies for domestic corporations and stronger data-security requirements, have shifted the playing field further in favor of Chinese businesses. European CEOs report increasing difficulty in obtaining contracts or preserving intellectual property protections as Beijing strives for more self-sufficiency. These issues occur alongside greater geopolitical pressures.

The automotive sector provides a telling case study. While European carmakers initially benefited from China's electric vehicle boom, domestic brands now command nearly 80% of the NEV market. "We're seeing a complete ecosystem shift," noted a German auto executive who requested anonymity. "The technology transfer requirements of the past have given way to domestic substitution targets that leave little room for foreign suppliers."

"Once Chinese companies have comparable technology, market-access restrictions or an inability to compete can lead to a significant loss of market share for foreign companies," according to the chamber's research, which was issued Wednesday.

Despite these challenges, some international corporations remain cautiously optimistic, relying on joint ventures and partnerships with Chinese companies to maintain market access. However, the long-term viability of such alliances is dubious, as Beijing continues to favor domestic innovation through its dual-circulation strategy, which prioritizes both national demand and technological autonomy.