Newport Wafer Fab, a microchip plant based in Wales, has a potential buyer that is making the British government nervous — the Chinese-owned semiconductor maker Nexperia. In fact, the possible sale of this small company with just 450 employees is worrisome enough for U.K. Prime Minister Boris Johnson to have ordered a review on national security grounds.

The U.K.’s concerns are the latest example of the way foreign governments have grown suspicious of Chinese companies shopping for domestic firms, particularly in sensitive sectors like semiconductor production.

“Chinese leaders are clear on the role of semiconductors as part of their quest to dominate the industries of the future,” Tom Tugendhat, chairman of a parliamentary committee that scrutinizes the government’s foreign policy, said in an emailed response to The Wire, adding that the initial decision to “let one of the U.K.’s few semiconductor fabs fall into the hands of a strategic competitor” was “surprising.”

The flap over Newport Water Fab also points to the challenges China is facing in its efforts to boost its industrial and technological capacity. That effort gained major impetus back in 2015, when Beijing set out its “Made in China 2025” national strategy with the aim of pouring billions of dollars into subsidizing and encouraging innovation by Chinese companies. It also stoked fears among its global peers that Chinese companies, backed by state resources, would seek to acquire technologies that the nation couldn’t develop quickly enough at home.

Six years on, China is not just falling behind in achieving many of the goals of the “Made in China” strategy, according to analysts, it has even stopped referring openly to the program, as foreign nations become ever more sensitive to Chinese companies buying up their homegrown technologies. 

“As a result of China’s effort to go on a strategic overseas buying spree, you’ve seen increased anxiety, followed by restrictions from the United States, as well as from Europe and elsewhere,” says Scott Kennedy, a senior advisor at the Center for Strategic and International Studies in Washington. “So increasingly, there’s a not-for-sale sign on many of these technologies and companies, when there is a Chinese buyer in mind.”

The original Made in China plan highlighted 10 industries — including next-generation information technology, robotics, aerospace, railway and biotechnology — as priorities for development. Beijing has made available more than $500 billion in financial support for these industries through the plan and other related strategies, according to estimates in a report the U.S. Trade Representative released in March.

That same report referred to Made in China 2025 as “one of the more far-reaching and harmful industrial plans,” and predicted that even if China fails to fully achieve the set goals, the outcome would still lead to significant market distortions and long-lasting damage to U.S. interests.

It’s not just the U.S. that has qualms about the strategy, even if the defensive measures other countries have taken are not always explicitly targeted at China. Germany last year tightened its rules to protect domestic companies from unwelcome takeovers by non-European Union buyers after State Grid Corporation of China almost bought a large stake in power grid operator 50Hertz. The U.K. has recently adopted a new National Security and Investment Bill which has enhanced scrutiny of foreign acquisitions. 

Pressure from Washington as well as the backlash from other countries has led Chinese officials to stop mentioning Made in China 2025 in public. Experts say that doesn’t mean the government has abandoned the pursuit of greater self-reliance — the strategy is still present in all but name in the 14^th Five-Year Plan released by Beijing last year that sets out its economic goals for 2021 to 2025.

“It has almost the exact same words in the exact same place,” says Barry Naughton, the So Kwan Lok Chair of Chinese International Affairs and an authority on China’s economy at the University of California, San Diego. “[They are] talking about China as strong as a manufacturing superpower. It tends to send a pretty strong signal if you’re reading in Chinese — yeah, we don’t call it Made in China 2025 anymore, but nothing’s changed. That’s pretty clear.”

Yet with four years to go until the plan’s original deadline, the Made in China strategy has some successes, experts say, but has mostly fallen short of the ambitious goals set in 2015 in key areas. For example, China had originally aspired to manufacture 70 percent of its semiconductors needs domestically by 2025; but it is not going to be anywhere close to that, says Stewart Black, a professor of management practice in global leadership and strategy at INSEAD, in France.

“You can’t just invest your way out of it. Real science, real sophistication takes a long time,” Black says.

Industries like aerospace and railway are among those with more achievements to show. The country has constructed the world’s longest high-speed rail system and recently debuted the world’s fastest train. China’s state-owned commercial airline maker Comac is also close to receiving approval for the passenger jet it has developed to fly commercially, although it has suffered delays and setbacks. Even if Comac makes rapid progress it would take a long time for the company to gain a major presence and truly rival the likes of Boeing and Airbus. 

“Chinese companies run fast. But they often run around in circles and are not as successful as their Western counterparts at efficiently translating their research and development into successful commercialized conceptual products and services,” says CSIS’s Kennedy.

A major question now is whether the hostility towards acquisitive and ambitious Chinese companies in Western capitals, primarily in the U.S. but increasingly elsewhere, could prove counterproductive. The U.S.’s efforts to restrict the supply of semiconductors to major Chinese companies could, some argue, unite private and state-owned Chinese companies in making still greater efforts towards self-reliance. 

“The fact that the United States has cut off certain firms, like Huawei from high tech inputs means, to a certain extent, [that China] is forced to become more self-reliant. You get to a certain point where you can’t trust your supplier and you have to develop alternatives,” says Naughton, at UC San Diego.

Still, even such a longtime expert on China’s economy as Naughton is unsure how this will all play out.

“What’s the net effect of Made in China 2025? We don’t know. They don’t know either,” he says.  “This is the frontier and nobody knows how the frontier is going to evolve, but it’s certainly changing quickly.”

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