China’s Great Industrial Challenge: How AI and Self-Reliance Are Rewiring the World’s Factory
Inside Xi Jinping’s quest to eliminate China’s “industrial choke points” and achieve technological independence.
In the early 1950s, China’s founding leader Mao Zedong uttered a sentence that reflected the harsh industrial reality of his young nation:
“We can make tables and teapots, but we cannot make a single car, airplane, tank, or tractor.”
That brutally honest admission captured the complete absence of modern industry in post-war China. After decades of civil war, foreign invasion, and internal turmoil, the country had virtually zero industrial base. The China of that era had no machines, no technology, and no production capacity to compete globally.
Fast forward seven decades, and China now stands as the world’s second-largest economy, the leading manufacturing power, and home to over 4 million factories. It has earned the global nickname: “The World’s Factory.”
Yet, beneath this industrial giant’s surface lies a hidden vulnerability — a network of “industrial choke points” that threatens China’s dream of total technological self-reliance.
From Mao’s First Tractor to Xi’s Technological Revolution
China’s journey from zero to the world’s largest manufacturing nation began in 1955 with the construction of its first major industrial project — the Luoyang Tractor Factory in Henan Province.
Three years later, it produced China’s first domestic tractor, proudly named Dongfanghong — meaning “The East is Red.”
The symbolism was clear: industrial independence was not just economic policy; it was a declaration of national destiny.
Decades later, that same city of Luoyang would again host a historic visit — this time from President Xi Jinping, in May 2024. Xi toured the Luoyang Bearing Group, a state-owned manufacturer specializing in high-precision ball bearings — a critical yet often overlooked component of modern machinery.
Standing before engineers, Xi delivered a message steeped in symbolism:
“We once imported everything, from steel to soap. Today we are the world’s largest manufacturing nation, but we must persist in self-reliance and master our core technologies.”
Xi’s words were a direct continuation of Mao’s vision — but updated for the 21st century, where industrial strength is measured not by tractors and steel output, but by semiconductors, AI algorithms, and advanced materials.
Understanding “Industrial Choke Points”
The term “industrial choke points” refers to critical technologies, materials, or components that China cannot yet produce at a world-class level — forcing it to rely on foreign imports.
These are areas where Western, Japanese, or Korean firms dominate, and where China faces technological barriers, intellectual property restrictions, or export controls.
In 2018, China’s Science and Technology Daily (a state-run publication) published a landmark series of 35 reports identifying the country’s most severe weaknesses.
American researchers at Georgetown University’s Center for Security and Emerging Technology (CSET) later analyzed and condensed them into 14 key areas.
These weaknesses fall into three major categories:
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Dependence on foreign-controlled technologies, especially from the U.S., Europe, and Japan.
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Limited domestic innovation, with too few Chinese firms developing truly original core technologies.
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A preference for importing proven foreign solutions rather than relying on local alternatives — a legacy of China’s fast-growth but dependency-heavy industrial model.
Among these choke points, the most strategic are:
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Advanced semiconductors and lithography equipment
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Carbon fiber and composite materials for aerospace
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High-precision ball bearings
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AI-driven design software and robotics
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Industrial control systems and advanced sensors
The Case of the Ball Bearing: Small Component, Massive Problem
It might seem surprising that something as simple as a ball bearing could limit the ambitions of an industrial superpower.
But high-performance bearings are the hidden foundation of modern industry — essential for reducing friction and ensuring precise motion in machines.
They are used in:
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Electric vehicles and high-speed trains
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Wind turbines and aircraft engines
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Robotics and drones
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Tunneling machines and factory automation systems
The global bearing industry is worth over $53 billion, and is dominated by just six major companies:
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Sweden’s SKF
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Germany’s Schaeffler
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America’s Timken
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Japan’s NSK, NTN, and JTEKT
These six firms control more than 55% of the global market, while Chinese manufacturers hold only about 25%, and most of their output consists of low to medium-grade bearings.
A 2020 study from Wuhan University of Science and Technology confirmed that Chinese firms lag behind in microstructural precision, defect control, and dimensional accuracy — especially in aerospace-grade bearings.
Even by 2024, China’s own Kaiyuan Securities admitted that “most domestic bearing manufacturers remain within the traditional segment, with only limited breakthroughs in high-end applications.”
AI to the Rescue: China’s Smart Path to Closing the Gap
But where traditional methods have failed, AI may offer China a shortcut.
Near the city of Hangzhou, engineers at a startup called DeepVision Technology, led by Wang Shuo-lin, are pioneering a new approach to bearing manufacturing using computer vision and artificial intelligence.
By integrating AI-powered image processing with microscopic inspection, their system can detect flaws as small as two micrometers — a level of precision once exclusive to Japan and Germany.
More importantly, as Wang notes:
“When it comes to AI-driven inspection, everyone starts from the same line.”
That levels the playing field. If China can integrate AI, robotics, and material science, it could leapfrog decades of Western dominance in certain manufacturing niches.
This strategy — using AI as a technological equalizer — is now being replicated across multiple sectors, from chip design to autonomous vehicles to robotic assembly lines.
Huawei and the Battle for Semiconductor Independence
No discussion of Chinese self-reliance is complete without mentioning Huawei, the tech giant that has become both a national hero and a geopolitical lightning rod.
In February 2025, Huawei founder Ren Zhengfei revealed that his company now leads an alliance of over 2,000 Chinese firms working toward semiconductor self-sufficiency.
The goal: achieve 70% domestic supply of critical chip components by 2028.
This was a direct response to the U.S. export bans targeting advanced chips and manufacturing tools — restrictions intended to slow China’s technological rise.
Ironically, those same sanctions have accelerated China’s innovation drive.
By cutting off access to Western technology, Washington has forced Chinese firms to invest massively in R&D, domestic fabs, and chip design ecosystems.
Huawei’s latest smartphones, powered by its homegrown Kirin chips, demonstrate how far the company has come despite years of U.S. sanctions.
Analysts now believe that China’s semiconductor independence, once thought impossible before 2040, could arrive a decade earlier.
Why Xi Jinping’s Strategy Is Different
Xi Jinping’s industrial philosophy blends Maoist nationalism with technocratic pragmatism.
After studying the collapse of the Soviet Union in the 1990s, Xi concluded that technological stagnation was one of the root causes of the USSR’s downfall.
Since taking power in 2013, he has turned “self-reliance” (zili gengsheng) into a national doctrine — one that extends from agriculture and energy to AI, robotics, and semiconductors.
Under his leadership, China launched the “Made in China 2025” initiative, followed by the Dual Circulation Strategy, which emphasizes domestic innovation while maintaining selective engagement with global markets.
Xi’s visits to factories like Luoyang Bearing Group or Huawei’s chip labs are not mere photo opportunities.
They signal a systematic, state-coordinated effort to identify, fund, and eliminate every remaining foreign dependency that could threaten China’s industrial security.
Not All Choke Points Are Equal
Despite rapid progress, not every weakness can be fixed quickly.
Some technologies — particularly carbon fiber, used in jet engines and spacecraft — remain almost impossible to replicate at scale.
One Japanese company, Toray Industries, still controls 90% of the global carbon fiber market, and its manufacturing process is so complex that China has failed to duplicate it for over 40 years.
Other examples include:
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Extreme ultraviolet (EUV) lithography machines, monopolized by the Dutch firm ASML.
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Aerospace-grade titanium alloys, dominated by U.S. and Russian suppliers.
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High-precision optical sensors, controlled by Germany and Japan.
These are not problems money alone can solve. They require decades of experience, supply-chain maturity, and cross-disciplinary expertise that can’t be built overnight.
The Cost of Independence
China is spending over half a trillion dollars annually on research and development (R&D) — second only to the United States.
The gap between the two countries is narrowing quickly, as China’s government channels funds toward AI, new materials, robotics, and advanced manufacturing tools.
But self-reliance comes at a cost.
Local firms face duplicated research, inefficient spending, and sometimes political pressure to prioritize domestic suppliers over better foreign alternatives.
Nevertheless, the momentum is unmistakable: the more the U.S. restricts China, the faster Beijing innovates.
As Xi himself declared in 2018:
“China must never be forced to beg for technology. Through our own efforts, we will secure the foundations of our national economy.”
A Delicate Dance with the United States
The paradox is striking: the U.S. and China are both competing and cooperating in technology.
In July 2025, former President Donald Trump partially lifted restrictions on NVIDIA, allowing it to resume limited sales of its H20 AI chips to China.
The decision was driven by a mix of economic and strategic factors:
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Pressure from NVIDIA, which feared losing the lucrative Chinese market.
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Desire to maintain leverage over China through controlled technology flows.
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U.S. interest in reopening China’s rare earth exports, which are critical for American defense and green industries.
This illustrates a new phase of “competitive coexistence” — where both powers realize they cannot completely decouple without severe global repercussions.
AI: China’s New Industrial Weapon
AI is the common thread running through nearly every Chinese effort to close its industrial gaps.
From smart factories in Shenzhen to autonomous logistics hubs in Shanghai, AI systems are optimizing design, production, and quality control at a scale unseen anywhere else.
Beijing’s strategy is clear:
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Use AI and automation to offset weaknesses in traditional engineering.
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Leverage data from massive state-owned enterprises to train industrial models.
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Build sovereign AI ecosystems independent of Western software platforms.
In fields like AI-driven material science, robotics, and predictive manufacturing, China is already outpacing many Western competitors — not by copying, but by redefining how industries evolve in the age of machine intelligence.
Conclusion: The Unfinished Factory
China’s rise as the “world’s factory” is one of the greatest economic transformations in human history.
But the next stage — becoming the world’s innovation engine — will be far harder.
The country has already shown that sanctions can’t stop progress.
Instead, they have forged a new generation of engineers, scientists, and entrepreneurs determined to make China technologically sovereign.
As the global balance of power shifts, one thing is certain:
China’s factory floor is no longer just a place of mass production — it’s the front line of a silent technological revolution, powered by AI, ambition, and the unrelenting pursuit of independence.
