Clyde WTN

Is ‘Made in China 2025’ a Threat to Global Trade?

China's industrial policy aims to quickly grow its high-tech industries and improve its manufacturing base, but President Trump and other leaders of industrial democracies regard the plan as a danger.v

The Chinese government has announced “Made in China 2025,” a state-led industrial programme aimed at making China the worldwide leader in high-tech manufacturing. The initiative intends to employ government subsidies, mobilise state-owned businesses, and seek intellectual property acquisition in order to catch up with – and ultimately surpass – Western technological supremacy in sophisticated sectors.

These measures, however, not only undercut Beijing's claimed adherence to international economic norms, but also pose a security danger to the United States and other large industrialised democracies. Meanwhile, several other nations have tightened their controls on foreign investment, escalating discussion over how to effectively respond to China's conduct.

Made in China 2025, unveiled in 2015, is the government's ten-year strategy to modernise China's manufacturing base by quickly expanding 10 high-tech industries. Electric automobiles and other new energy vehicles are among the most important, as are next-generation information technology (IT) and telecommunications, as well as sophisticated robots and artificial intelligence.

Agricultural technology, aerospace engineering, novel synthetic materials, sophisticated electrical equipment, developing bio-medicine, high-end rail infrastructure, and high-tech maritime engineering are other important industries. These industries are critical to the fourth industrial revolution, which refers to the incorporation of big data, cloud computing, and other new technologies into global manufacturing supply chains. In this sense, Chinese officials took cues from the German government's Industry 4.0 development strategy.

The ultimate objective of Beijing is to minimise China's reliance on foreign technology while also promoting Chinese high-tech businesses in the global marketplace

Semiconductors are a special focus due to their importance in almost all electrical goods. China contributes for around 60% of worldwide semiconductor demand but only generates about 13% of global supply.

Chinese officials have characterised the initiative as aspirational and unofficial in recent months. They have begun to tone down their references to it in response to Western leaders' worries. Premier Li Keqiang did not mention China 2025 at all at the opening session of the 2019 National People's Congress; it was the first time he has left the programme out of his yearly report to the congress since it was originally introduced.

In recent decades, the CCP has taken steps to transition the economy away from resource extraction and low-value-added, low-wage manufacturing—primarily mining, energy, and consumer goods such as clothing and footwear, which account for nearly half of the country's GDP—and toward a high-tech, high-productivity economy.

China 2025 aims to propel the economy through this tough transition and out of the so-called middle-income trap, in which growth plateaus as salaries begin to increase, which has plagued many other emerging countries. Subsidies and other forms of preference towards domestic industry and “indigenous” innovation have therefore long been official Chinese policy. The National Medium and Long Term Plan established the objective of China being a “world leader” in science and technology in 2006, however its targets were not as precise as China 2025.

Several other affluent countries have reacted angrily to China's trade and investment tactics. Since 2007, Australia has been the second-largest receiver of Chinese investment behind the United States. Since 2016, when Canberra rejected Chinese proposals to purchase Australian agriculture and energy grid companies, Australia has increased its scrutiny of Chinese investment.

Germany is another noteworthy example, since its high-tech industrial sector has became China's top investment destination in Europe. Chinese investment in German industrial behemoths such as Daimler, which is researching new battery technology, and Kuka, the country's largest robotics manufacturer, has aroused concerns and prompted Berlin to seek for a European Union–wide investment assessment authority.

France, too, has tightened limits on foreign investment in order to prevent what it refers to as “looting” of critical technology. Many smaller European nations, such as Greece and Portugal, are concerned that limiting foreign capital would stifle their economic progress.