China now dominates in every technology defining the modern world

A new ASPI 2025 Critical Technology Tracker and recent reporting underscore that China now leads across the bulk of technologies defining the modern economy—7 of 8 AI categories, 13 of 13 advanced materials/manufacturing, all 7 defence/space/robotics/transportation categories, 9 of 10 energy/environment areas and a majority of biotech fields—driven by a state-led “whole-of-nation” industrial strategy (from Made in China 2025 to the 14th Five-Year Plan) that marshals hundreds of billions in directed investment (including a cited $1.4 trillion infrastructure push and roughly $56 billion in AI support in 2025) to build scale in manufacturing, supply chains and critical minerals; while this model creates geopolitical leverage and exportable engineering breakthroughs (high-speed rail, maglev, drones, robotics, AI models), it also risks overcapacity and internal “involution.” The strategic consequence is a shifting global order—Washington appears to be moving toward a transactional G2 dynamic with Beijing—and investors and policymakers (notably in Australia, where a modest National AI Plan funds $30m for safety and $460m of reallocated/committed AI spending) will need to reassess exposure to China-led technology ecosystems, supply-chain dependencies and the political risks around areas such as rare earths and Taiwan.

Analysis

The Australian Strategic Policy Institute's 2025 Critical Technology Tracker and recent reporting show China leading 7 of 8 AI categories, 13 of 13 advanced materials/manufacturing areas, all 7 defence/space/robotics/transportation categories, 9 of 10 energy/environment areas and 5 of 9 biotech fields, driven by a state-directed "whole-of-nation" industrial strategy that includes Made in China 2025 and the 14th Five-Year Plan with roughly $US1.4 trillion committed to new infrastructure and reported direct AI support of about $US56 billion in 2025. China’s model coordinates government, academia and industry from basic research through commercialization, producing scale advantages in high-speed rail, robotics, drones, AI models and a near-monopoly on certain critical minerals and rare earths.

That industrial muscle gives Beijing geopolitical leverage but also creates structural risks: the article notes chronic overcapacity and "involution" (price wars, diminishing returns), and an uneasy socioeconomic balance where technological supremacy has not translated into comparable billionaire wealth growth versus the US. Policy signals include a US pivot toward transactional "G2" management with China and the prospect of increased geopolitical risk around Taiwan, while Australia’s new National AI Plan is characterized as modest ($30m for an AI safety institute and $460m of existing funding).

For investors, the combination of concentrated Chinese state support, supply-chain dominance in critical inputs and non-trivial geopolitical risk requires active repositioning and scenario planning rather than passive exposure to broad technology themes.

Key Decisions for Investors

• Reduce or hedge exposure to companies and supply chains that are highly dependent on China-controlled critical minerals and rare-earth inputs, and prioritise holdings with diversified sourcing or domestic alternatives
• Consider selective, sized exposure to sectors likely to benefit from China’s scale (industrial automation, robotics, AI infrastructure providers) while limiting position size because state-driven expansion increases overcapacity and margin-pressure risk
• Monitor geopolitical tail risks (Taiwan, G2 realignment) and implement downside protection or stress tests for portfolios with high China or Asia concentration
• For Australian-focused investors, do not assume meaningful near-term domestic policy replacement; instead track federal AI budget detail and support domestic suppliers or offshore partners that reduce dependence on Chinese ecosystems