China is upgrading its traditional industrial base while cultivating new sectors that could shape future competitiveness, seeking to move beyond scale and cost advantages toward a more innovation-driven industrial model, and inject new impetus into the country's high-quality development.

In the first half of 2026, the world's manufacturing powerhouse saw its value-added industrial output rise 5.4 percent year on year, with the industrial sector contributing more than 35 percent to overall economic growth.

The country's 15th Five-Year Plan (2026-2030) underscores the development of a modernized industrial system with advanced manufacturing as its backbone. Across factories and industrial clusters, a dual transformation is underway - modernizing established industries while cultivating new engines of growth.

Modernizing traditional industries

Traditional industries remain an important part of China's industrial strength, and they are increasingly being reshaped by technology and innovation.

Major industrial enterprises recorded an 18.8-percent year-on-year increase in profits in the first five months, while key sectors continued to support overall industrial growth.

Equipment manufacturing has emerged as one of the strongest contributors. The sector contributed 23.5 percent to the total growth in industrial value-added output in the first half of the year, supported by strong performance in areas such as shipbuilding, automobiles and advanced equipment.

China's shipbuilding industry illustrates this transformation. As the world's largest shipbuilder, the country is rapidly transforming its shipbuilding sector to enhance global competitiveness.

At shipyards in Nantong, Jiangsu province, production lines are operating at full capacity, with some orders extending through 2030. Exports account for more than 90 percent of China's total ship completions, new orders and existing order backlog, highlighting the country's growing competitiveness in high-end manufacturing.

The upgrading trend extends across the broader industrial landscape. Of the 41 major industrial categories, 32 recorded growth in the first half of the year. Industries including electronics, specialized equipment, general machinery, automobiles and electrical equipment together contributed more than half of industrial growth.

Digital and intelligent technologies are also reshaping the real economy, unlocking new sources of industrial growth.

AI-driven visual inspection systems can detect micron-level defects automatically, significantly boosting efficiency. Industrial large language models are also speeding up antibody and small-molecule drug discovery, cutting preclinical development timelines for targeted cancer therapies and other new medicines by 40 percent. Through practical industrial applications, China is accelerating the rollout of its AI Plus Initiative across the real economy.

China has built more than 56,000 basic-level smart factories, over 9,000 advanced-level smart factories and more than 500 leading-level smart factories, while AI adoption among manufacturing enterprises above designated size has exceeded 30 percent.