On June 26, Shin Young Securities released a report titled "Preview of China's Medium- to Long-Term Roadmap: '15·5' Plan/'Manufacturing 2035'," forecasting that the Chinese government will focus on fostering AI+ (industrial AI), humanoids, semiconductors, and the bio industry over the medium to long term.
The second half of this year is a crucial period for the Chinese government as it formulates its medium- to long-term industrial policy roadmap. This is because the final announcements of the "15th Five-Year Plan (2026?2030)" and "Manufacturing 2035 (2026?2035)" are scheduled for March and May of next year, respectively. Currently, the Chinese economy faces significant uncertainty due to the US-China tariff war. This situation is forcing a shift from an investment- and export-driven model to one led by consumption and advanced technology industries. The Chinese government is expected to continue expanding investment in advanced technologies to survive the ongoing power struggle.
Sung Yeonju, an analyst at Shin Young Securities, stated, "The 'AI·Humanoid Robot' theme, which was included for the first time in the government work report at the National People's Congress in March and is rapidly increasing its global market share, remains positive." She added, "Although the previous industrial policy failed to meet its targets, it is important to pay attention to 'semiconductors and pharmaceuticals (innovative new drugs),' which are sensitive to the US-China tariff war and are growing rapidly under government leadership, as well as to the construction of 'ESS and nuclear power plants' aimed at achieving carbon neutrality."
'15·5' Plan: AI+ and Humanoids
The Chinese government's "15th Five-Year" industrial policy is expected to focus on industries sensitive to the US-China tariff war, even though the previous (2021?2025) policy failed to meet its targets. In particular, attention should be paid to industries included for the first time in the government work report at the National People's Congress in March, namely "AI+" and "embodied intelligence."
"AI+" refers to a policy that expands artificial intelligence across various industries, including healthcare, robotics, and electric vehicles. According to the global AI model contribution rankings released by Stanford University in the US in April, out of 15 companies, 9 were American and 5 were Chinese (Alibaba, ByteDance, DeepSeek, Tencent, Zhipu AI). Chinese AI models have already reached the second position globally.
"Embodied intelligence" refers to artificial intelligence with a physical form, with humanoid robots being the representative example. The rapid progress of Chinese humanoid robot technology is demonstrated by successive achievements such as Unitree's "H1," which drew attention for its dance performance at the Lunar New Year Gala in February, and "Tiangong," the winner of the robot marathon in April from the Beijing Humanoid Robot Innovation Center. In February, Morgan Stanley predicted that the Chinese humanoid robot market would grow to 6 trillion yuan by 2050, with sales reaching 60 million units. The US market is expected to grow to a scale of 1 trillion dollars by 2050.
In addition, the Chinese government is expected to enhance the flexibility of its energy system and expand nuclear power capacity to increase the consumption and generation of non-fossil energy. First, it appears that the government will expand energy storage systems (ESS).
Manufacturing 2025: High-End Semiconductors and Bio
In "Manufacturing 2025," the Chinese government failed to meet localization targets in certain industries. Therefore, "Manufacturing 2035 (2026?2035)" is expected to focus on these sectors. Industries that fell short of localization targets include high-end semiconductor chips, bio and pharmaceuticals, NC machine tools, aircraft, advanced technology vessels, and advanced materials. Among these, attention should be given to semiconductors and the bio industry (new drug development), which have recently shown rapid growth and are likely to achieve future targets.
As of last year, the localization rate of semiconductor equipment and chips in China was about 23.3%. The main issue is that most of these are low-end semiconductor chips. The production share of chips below 14 nanometers by SMIC, China's leading foundry, is less than 2% globally. Nevertheless, according to a Trend Force report in May, the market shares of leading Chinese companies?CXMT, YMTC, SMIC, and Hua Hong Semiconductor?in DRAM, NAND flash, and foundry segments are expected to increase significantly this year. In addition, the localization rate for Chinese AI semiconductor chips is projected to reach about 40% this year. The share of overseas semiconductor chip purchases from companies like Nvidia and AMD fell from 63% last year to 42% this year, while Chinese semiconductor production, including by Huawei, is accelerating due to expanded government support for semiconductor chips.
In the bio sector, it was announced at the Drug Information Association (DIA) meeting held in Shanghai in May that China ranked second globally in innovative new drugs. Clinical trial service markets are essential for new drug development. As of last year, the US accounted for 35% of the 5,300 global clinical trials, while China accounted for 30%. With its large population and government support, as well as the use of AI, China has secured a competitive edge in clinical trial infrastructure. As a result, the global market share of Chinese companies in CRO (clinical trial outsourcing services) and CDMO (contract development and manufacturing for bio) has risen from less than 10% a decade ago to 20% as of last year. Based on this, the global market share for innovative new drugs from China increased to 14.7% last year and continues to rise. The rapid increase in innovative new drug license deals between Chinese and global companies last year has accelerated the development of China's pharmaceutical industry.
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