China’s Industrial and Technological Developments

Aerospace and Aviation

On March 5, during his presentation of the government’s work report to the National People’s Congress (NPC), Chinese Premier Li Qiang stated that China will “promote safe and sound development of the commercial space sector, the low-altitude economy, and other emerging industries.”

His work report outlined several key initiatives in the aerospace sector. In addition to the government work report, the Chinese macroeconomic planning agency National Development and Reform Commission announced that it plans to accelerate the development of the domestic aviation industry and expand the international market presence of domestically produced aircraft. This would likely include enhancing production for COMAC’s C919 narrow-body passenger jet and ARJ21 regional jet as well as pushing for their approval for use in international markets.

China’s push to increase the global presences of its domestically produced aircraft could intensify competition for Western companies. The CEO of Airbus recently stated that the rise of COMAC could lead to the Boeing and Airbus commercial aircraft duopoly becoming a triopoly. COMAC is currently still reliant on foreign parts for its aircraft, which could create opportunities for foreign suppliers. However, as COMAC’s production matures it could become increasingly difficult for Boeing and Airbus to compete in China’s domestic market.

Artificial Intelligence

The development of China’s digital economy was another highlight of Premier Li Qiang’s government work report. 

The report outlined initiatives such as the “AI+” action to implement AI to boost real economy efficiency and build a digital industry cluster with international competitiveness. The “AI+” initiative emphasizes the importance Beijing places on its goals to promote and expand AI capabilities, along with fostering AI innovations across various sectors. By heavily investing in AI and applying this technology to support Beijing’s industrial strategies, these efforts could impact global markets and supply chains, and advance China’s effort to achieve self-reliance.

Quantum Technology

Chinese researchers have developed a single-photon source with 71.2% efficiency, surpassing the threshold needed for scalable photonic quantum computing. 

The system, based on a quantum dot in a tunable microcavity, minimizes photon loss while maintaining high purity and indistinguishability. This advancement addresses a key challenge in quantum computing, bringing it closer to practical, large-scale applications. However, challenges remain, including the need for cryogenic operation and improved detector efficiency. The technology could also be used in quantum communication and cryptography.

The development of a high-efficiency single-photon source represents a crucial step toward overcoming long-standing technical barriers that have hindered the scalability of photonic quantum computers. This breakthrough marks a step closer to real-world applications, potentially leading to innovations in quantum communication, encryption, and computing. This breakthrough also further bolsters China’s leading role in the global development of quantum technology.

The advancement of quantum communication and cryptography could alter the security landscape, and U.S. companies may face greater risks of unauthorized data access, especially if Chinese technologies become the global encryption standards. U.S. companies should bolster their cybersecurity infrastructure to defend against increasingly sophisticated threats arising from advancements in quantum computing.

Telecommunications

The Chinese Ministry of Industry and Information Technology (MIIT) reportedly approved pilot operations for 13 foreign-invested companies in Beijing, Shanghai, Hainan, and Shenzhen. 

The selected companies are invited to engage in value-added telecommunication services, including online data and transaction processing, and are permitted to operate wholly owned data centers in China. According to various sources, the list of approved companies includes Deutsche Telekom affiliate T-Systems P.R. China, Siemens Digital Technology (Shenzhen), and Hong-Kong based operator HKT. Initial announcements of the pilot program in late 2024 stated that HSBC fintech subsidiary Trafigura and Tesla were also among the approved entities.

The European origins of several selected entities may reflect a desire by Beijing to tighten cooperation with Europe during a period of diplomatic tensions between the U.S. and the EU. International participation in a semi-open Chinese telecommunications sector bolstered by significant jumps in AI presents the potential for significant Chinese innovations. The exclusion of most U.S. companies from this environment could place U.S. companies at a significant competitive disadvantage and reduce their access to key innovations. U.S. companies are advised to consider seeking strengthened ties with unsanctioned international players to ensure continued collaboration and access to innovations.