Strip away the talking points and what remains at China's Two Sessions this week is a fundamental question about technological sovereignty in an era of strategic competition. Premier Li Qiang emphasised "the need to accelerate self-reliance in high-level science and technology," citing "unilateralism and protectionism escalating abruptly." The message was unmistakable: China intends to reduce its dependence on imported semiconductors and AI systems before American export controls tighten further.
The political theatre of rubber-stamp approval masks something more substantial. China's output of integrated circuits rose by 10.9 percent last year, and the ratio of domestically developed semiconductor equipment surged to 35 per cent by the year's end, up from 25 per cent in 2024. These are not rhetorical flourishes. Progress had been particularly evident in critical segments such as etching and thin-film deposition, where adoption of local equipment had surpassed 40 per cent.
Consider the tangible wins. China developed its first domestically produced tandem-type high-energy hydrogen ion implanter (POWER-750H) under the China National Nuclear Corp, ending China's long-standing reliance on foreign equipment for high-energy ion implantation. This is not cutting-edge silicon design; it is the unglamorous infrastructure that enables modern chip manufacturing. Yet it matters. Equipment producers like Naura have expanded so rapidly that the company's order backlog now extended into the first quarter of 2027.
The counter-argument deserves serious consideration: China remains years behind the West in advanced chip production. China still lags US high tech in several areas, including semiconductors, and sources say the country has assembled a prototype EUV machine using components sourced from older ASML systems, with the Chinese government aiming to produce functional chips with the prototype by 2028, although 2030 is considered a more realistic timeline. This is not imminent victory; it is a long struggle.
What Beijing has done differently this time is embed supply-chain decoupling into structural policy. China's chipmakers expanding new production capacity are required to source more than 50% of their equipment domestically. The 15th Five-Year Plan should prioritise breakthroughs in six technological chokepoints, including overcoming semiconductor manufacturing constraints in equipment, materials, and software; localising at least 90% of core components in industrial machinery; and closing gaps in high-end scientific instruments.
Here is where the genuine complexity surfaces. China's control of the supply chain for rare earths gives it leverage in trade talks, while the USA's control of semiconductors balances that out to create "mutually assured supply chain disruption." Neither side can afford to fully decouple. Yet both are building hedges against the other. One analyst noted that "if the last Five-Year Plan's innovation policy was largely defensive, this one is much more proactive. The focus is on achieving breakthroughs in key technologies and accelerating the integration of technology and industry."
The realistic assessment sits between triumphalism and dismissal. China is investing massively in semiconductor independence because geopolitical tension has made it rational to do so. Washington's export controls are not theoretical threats; they are operational policy. Beijing's response is not ideology but calculus. U.S. sanctions have become a key catalyst behind this shift, and facing repeated risks of supply chain disruptions stemming from Washington's restrictions, China is stepping up efforts to achieve what it describes as "self-controlled" development of its semiconductor industry.
Yet investors and policymakers should understand what China is actually claiming. The goal is not to match ASML's lithography machines tomorrow. It is to reduce vulnerability in the supply chain over the next decade, to localise production of mature-node chips, and to develop indigenous alternatives in areas where Western dominance has become a strategic liability. This is neither impossible nor inevitable.
Reasonable people can disagree on how quickly China will close the technology gap, and on whether Western export controls will accelerate or retard that progress. What the Two Sessions revealed this week is that Beijing intends to treat this as a national priority with patient, sustained funding. That is not rhetoric. That is a commitment backed by concrete industrial policy and validated by recent technical breakthroughs. Western governments ignoring that fact do so at their peril.