China doesn’t want to catch up with the US in tech. It aims to lead

By John Liu, CNN

Hong Kong (CNN) — In an era marked by US overseas military actions and trade turbulence, Chinese leader Xi Jinping is counting on a plan to shield his country from the storm: driving innovation to transform China into the world’s leading tech superpower.

Over the next five years, China seeks to upgrade its already powerful industrial sector, strengthen tech “self-sufficiency” and incubate sectors that will help accelerate the country’s tech supremacy, from artificial intelligence and robotics to aerospace and quantum computing.

“For the first time, China wants to lead in a number of technologies. Previously, the focus was always catching up with the West,” said Dan Wang, China director at political risk consultancy Eurasia Group.

Details of Xi’s gambit for the future were approved on Thursday by China’s rubber-stamp legislature in Beijing as the week-long annual assembly drew to a close. The policy document, known as the Five-Year Plan, has been hashed out behind closed doors by Xi’s inner circle for months and serves as a North Star for the country’s development into the next half-decade.

“Strive to achieve new breakthroughs in advancing original innovation, tackling key core technologies, and seizing the strategic high ground in science and technology,” Xi told local officials in a meeting discussing the new plan last week.

As China’s economy contends with deep-rooted structural challenges, including a persistent real estate crisis and low consumer confidence, Xi is zeroing in on bolstering its tech sector, betting proactively on emerging technologies to power the country’s growth in the decades ahead. Last week, China set its lowest-ever economic growth target since it began adopting such figures.

“In the face of tumultuous international dynamics and a range of risks and challenges,” the policy document reads, “we must concentrate on doing our own work well… consolidate and expand our strengths, remove bottlenecks and constraints, and shore up weaknesses.”

Although Xi is expected to host US President Donald Trump in Beijing later this month to discuss extending a trade truce and narrowing their differences, experts said relations between the world’s two biggest economies will continue to center on competition in the next five years.

“Collaboration will drop in every aspect from academia to industries. Both sides want to reduce reliance on the other side and thus decoupling is mutual,” Wang of Eurasia Group said, warning that bilateral tensions could flare up again after a period of calm brought by the trade truce.

In an uncertain world, China is positioning itself as a “stabilizing anchor for the global economy,” said Henry Huiyao Wang, president of the Beijing-based research group Center for China and Globalization.

“The China the US is dealing with today is a highly organized country, one that is still driven by strong vitality and growth momentum, and moving forward with clear strategic resolve through successive five-year plans,” said the analyst, who previously served as an adviser to China’s cabinet, the State Council.

The long game

China’s state-led model is helping the country rapidly narrow the gap in research and development spending with the US.

Beijing has committed to a 10% increase in annual budget for science and technology – in line with the pace of growth over the past two years. The plan also set a goal of expanding annual research and development investment by at least 7%.

“China now leads the world in research and development and application in fields such as artificial intelligence, biomedicine, robotics, and quantum technology, and new breakthroughs were made in the independent research and development of chips,” a separate government report released last week read.

The term “artificial intelligence” was mentioned in the plan more than 50 times – and it’s a field where China has already proven itself a top player, dominating open-source large language models and raising huge sums in market debuts.

Beyond chatbots, Beijing’s ambitions extend from AI-powered robots to “agentic AI,” or systems that can handle tasks beyond conversation. The plan also promises to build hyperscale computing clusters to address shortages in advanced AI computer capacity.

Together, the initiatives aim to expand China’s AI-related industry to more than 10 trillion yuan ($1.45 trillion) in value by the end of 2030, officials said last week.

Unsolved obstacles

Beijing’s decision to double down on self-reliance underscores the urgency of weaning itself off Western technology. Despite highlighting progress in homegrown technologies, the plan called for “extraordinary measures” to achieve “decisive breakthroughs” in core sectors, particularly advanced chips.

Export controls Trump imposed during his first term, and the Biden administration subsequently tightened, have put a chokehold on the country’s semiconductor sectors and industries that depend on it, including development of cutting-edge AI models.

Kendra Schaefer, a partner focusing on tech policy at Beijing-based policy consultancy Trivium China, said Beijing views “getting out from under a perceived US boot heel as the immediate strategic necessity” in AI chips, though it does not appear to be “under any illusions” that the country will be able to produce a chip on par with those from US champion Nvidia in the next five years.

Instead, Beijing set its sights on “parts of the semiconductor supply chain or future semiconductor technologies that haven’t fully matured yet,” seeking to gain advantage in those areas, Schaefer said.

A commentary from state-run media Xinhua spelled out Beijing’s ambition. “China’s quest for tech sovereignty stretches beyond today’s chokehold, as it is no mere game of catch-up,” it wrote.

But the inward focus also reflects China’s economic reality. The country has for decades relied on its role as the world’s factory and its exports to drive growth, though its widening trade surpluses have increasingly drawn ire from trading partners. Meanwhile, China’s economy has in recent years grappled with a prolonged property crisis, weak domestic demand, and industrial overcapacity that resulted in deflationary pressures.

Lynn Song, chief economist of Greater China at Dutch bank ING, said the strong domestic focus in the plan signals both rising pushback to China’s trade imbalances and Beijing’s recognition of heightened external risks.

It “can be seen as China ensuring the foundations for its growth can be controlled internally rather than relying on a constructive external environment remaining in place,” he said.

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CNN’s Rae Wang contributed to this report.