China’s efforts and investment in advanced industries has paid off as it continues to gain market share from the rest of the world in sectors including computers and electronics, chemicals, basic metals and motor vehicles, according to a report by the U.S.-based Information Technology & Innovation Foundation (ITIF). As of 2020, China was the world’s leading producer in seven of the 10 industries covered by the report, entitled “China Is Running Away With Strategic Industries”. China was the world’s leading producer in computers and electronics; chemicals; machinery and equipment; motor vehicles; basic metals; fabricated metals; and electrical equipment. The United States, meanwhile, was the world’s leading producer in pharmaceuticals, IT and information technology services and other transportation. Butt dominance in those three sectors might not be sustainable as the Chinese government has targeted biopharmaceuticals and artificial intelligence as key industries for development.
“China now dominates the strategically important industries in ITIF’s Hamilton Index, producing more than any other nation in absolute terms and more than all but a few others in relative terms,” the ITIF said. The Hamilton Index ranks 40 countries on their performance in 10 advanced and strategically important industries, which made up for more than USD10 trillion in global production in 2020. The 10 industries accounted for 11.8% of the global economy in 2020, compared to 11.9% in 1995, “underscoring the zero-sum nature of the competition between nations for global market share,” the ITIF said. In 2020, China produced 47% more than the global average based on the size of its economy in the 10 industries, while the U.S. produced 13% less than the average, the ITIF said. To match the advanced-industry share of China’s economy, U.S. output would have to expand by USD1.5 trillion, or by 69%, which would require doubling output from all 10 industries except for IT and information technology services.
“China’s rapid growth in market share across the 10 industries in the Hamilton Index mirrored rapid declines for the United States and for G7 and Organization for Economic Co-operation and Development (OESO) nations as blocs,” the ITIF said. The U.S.-based think tank has been advizing Washington to adopt a national industry strategy to ensure better competition with China. “But notwithstanding the passage of the Chips Act, the political will in the United States to implement and fully fund such an agenda appears to be relatively low, especially as neither political party wants to address the massive budget deficit to free up needed funding for such a strategy,” the ITIF said. In July 2022, the U.S. Congress passed the Chips and Science Act, which provides USD52.7 billion for American semiconductor research, development, manufacturing and workforce development.
Despite strong competition from mainland China, Taiwan maintains a substantial lead and high growth rate in semiconductor manufacturing due to the presence of the Taiwan Semiconductor Manufacturing Co, the ITIF report said. Taiwan’s lead, though, would likely narrow as the Chips Act is spurring reshoring opportunities, the report said. Meanwhile, China’s hefty investment in electric vehicles is also paying off, ranking as the world leader in the global production of motor vehicles, with 24.3% in 2020, ahead of the 14% in the U.S., 12.6% in Germany, and Japan’s 10%, the South China Morning Post reports.
