Lee Wang-hwi, professor of political science and diplomacy at Ajou University
SEOUL, December 22 (AJP) - The year 2025 is likely to stand as a watershed in U.S.-China relations. After nearly a decade of confrontation, the Trump administration has effectively acknowledged the limits of its strategy to contain China — a campaign pursued in earnest since 2017.
The contrast between two tariff battles tells the story. In the trade war launched in 2018, President Donald Trump pressured President Xi Jinping and extracted a Phase One trade deal in early 2020. But in the tariff confrontation of 2025, China proved far more resilient.
This time, Beijing weathered U.S. pressure and secured a key concession: the easing of export controls on advanced semiconductors used in artificial intelligence.
Washington’s broader Indo-Pacific strategy has also shown signs of strain. In an apparent bid to smooth the path toward a U.S.-China summit expected in April next year, Trump stopped short of strongly backing Japanese Prime Minister Sanae Takaichi, who had publicly discussed Japan’s potential military role in a Taiwan contingency.
Secretary of State Marco Rubio — long regarded as one of Washington’s most outspoken China hawks — has likewise stressed the need for cooperation with Beijing while avoiding damage to relations with U.S. allies such as South Korea and Japan.
How did China manage to withstand sustained U.S. pressure? The central answer lies in technological self-reliance built on a steadily upgraded manufacturing base.
That effort was formalized a decade ago. In March 2015, then-Premier Li Keqiang introduced “Made in China 2025” in his work report to the National People’s Congress. The industrial strategy sought to shift growth from factor-driven expansion to innovation-led development; to move China’s competitive edge from low costs to quality and efficiency; to transition manufacturing from resource-intensive, high-pollution production toward greener processes; and to pivot from pure production to services.
The plan set ambitious benchmarks: raising the domestic share of core components and basic materials to 40 percent by 2020 and 70 percent by 2025. It identified 10 priority sectors, ranging from next-generation information technology and advanced machine tools to aerospace, high-speed rail, electric vehicles, new materials and biomedicine. Progress was tracked through 12 indicators across four categories, including innovation capacity, productivity, digital integration and environmental performance.
According to a report by Renmin University’s Central Institute for Financial Studies, more than 86 percent of the plan’s more than 260 quantitative indicators had been achieved and were likely to be completed by the end of 2025. Despite mounting U.S. pressure, China increased both manufacturing value-added and research and development spending, improved its position in global value chains, and partially offset export controls imposed by the United States and the European Union — a phenomenon often described as the “weaponization of interdependence.”
Yet Beijing has been careful not to celebrate too loudly. After the trade war erupted in 2018 and Washington demanded the plan’s abandonment, Chinese leaders largely stopped referring to “Made in China 2025” in official documents, beginning with Li’s government work report in March 2019.
Nor were all targets met. Studies by the Rhodium Group and the U.S.-China Economic and Security Review Commission conclude that China achieved world-leading competitiveness in sectors such as power equipment, electric vehicles, solar energy and high-speed rail. At the same time, the country remains heavily dependent on foreign technology in semiconductors, aircraft, advanced manufacturing equipment and biopharmaceuticals.
To address those shortcomings, Beijing has rolled out successor frameworks, including policies promoting “new quality productive forces” — emphasizing efficiency and quality — and the “China Standards 2035 Vision,” which aims to position China as a leader in setting international technical standards.
Rubio himself anticipated much of this trajectory. In 2019, as chairman of the Senate Small Business Committee, he warned that “Made in China 2025” was a state-led strategy to dominate global technology sectors and challenge U.S. economic and military primacy.
Five years later, in a report titled A World Made in China, Rubio acknowledged China’s substantial gains across nine of the 10 priority sectors. “If President Xi were a fund manager,” he wrote, “he would have ample reason to be satisfied with this portfolio’s performance.”
The achievements, however, have come at a price. Central and local governments mobilized vast fiscal resources — subsidies, special funds, tax incentives and state-backed financing — often amplified by state-owned enterprises. The result has been overcapacity, brutal price competition and a spreading phenomenon known as neijuan, or involution, in which investment fails to generate commensurate productivity gains.
As deflation deepens and domestic demand remains weak, many firms have turned to exports, intensifying trade friction not only with the United States but also with the European Union. In that context, even a goods trade surplus exceeding US$1 trillion for the first time this year has proven difficult for Beijing to celebrate.
“Made in China 2025” has also reshaped China’s economic relationship with South Korea. As China upgraded its manufacturing base, the two economies shifted from a vertical, complementary relationship to a more horizontal and competitive one.
South Korea’s exports to China have declined while imports have remained resilient, reversing a trade surplus that lasted three decades after diplomatic ties were established in 1992. Since 2023, that balance has turned into a structural deficit — one that Seoul is unlikely to escape in the short term without a sharp rebound in exports.
The lesson is clear. To compete with China’s rapidly advancing manufacturing sector, South Korea needs a more coherent and long-term industrial strategy. Beijing pursued its approach consistently for a decade despite intense U.S. pressure. By contrast, five-year plans that shift with each change of administration in Seoul are unlikely to suffice.
Without a bipartisan, public-private strategy extending at least 10 years, South Korea risks seeing its manufacturing base reduced to little more than a subcontracting hub for China’s industrial machine.
About the author
Lee Wang-hwi is a professor in the Department of Diplomacy at Seoul National University and director of the Ajou Institute for Unification.
* This article, published by Aju Business Daily, was translated by AI and edited by AJP.
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