Made in China 2025 and the Remaking of Global Supply Lines

Last month, Shaanxi Ligeance Mineral Resources, a Chinese rhenium producer, bought Gardner Aerospace, a UK-based aerospace component manufacturer. The move may seem insignificant at £326 million, but the deal offers an illuminating perspective into China’s new industrial policy, Made in China 2025.

Made in China 2025 is focused on developing ten strategic manufacturing sectors such as aerospace and robotics.  A key piece of the plan is to bring component manufacturers to its shores to ensure entire supply lines are developed in country.

China already has a tremendous advantage for building supply lines domestically due to its domination of the production and processing of numerous rare metals from cobalt to rare earths. It’s now adding foreign know-how through acquisitions like SLMR’s to achieve a simple goal: to produce the next generation of trains, planes and advanced green technologies, solely within the country.

The Chinese government no longer wants to use foreign components that can be made domestically. Instead of importing most of the components it needs, they want to find domestic sources for 70% of the components by 2025. If achieved, this would drastically remake global supply lines.

This move by SLMR is just the beginning for the company. As Lizhi Wang, SLMR vice president, said, “With the management team at Gardner together with our advisers – we intend to further consolidate the global aerospace supply chain through careful strategic acquisitions."

And to make clear the rationale for the move, Wang added, "The acquisition of Gardner will allow us to serve our customers better – in China and the rest of the world – for decades to come.”

SLMR's strategic acquisition is a clear indication that a new strategy is afoot. It’s a sign that China’s metals industry will soon be less about supplying the materials to global consumers and more about domestic supply line development in China.

Author:

David Abraham is a senior fellow in the Resource Security program at New America.