Doubt Builds Over China's Retreat From Industrial Dominance Plan
(Bloomberg) -- In Washington and Beijing, the idea that China is willing to water down its plans for high-tech industrial dominance to appease President Donald Trump is already meeting with skepticism.
Faced with tariffs on some $250 billion in Chinese exports to the U.S. and threats from Trump of more to come, Chinese officials are now working on plans to extend the targets in the Made in China 2025 strategy by another decade and open sectors up to further foreign participation to try and satisfy U.S. demands, according to people familiar with the discussions.
That effort may in fact be little more than a cosmetic exercise, according to officials in both administrations.
Were China to make fundamental changes to an idea that has been a cornerstone of recent economic policy it would go a long way toward meeting U.S. demands and could help bring an end to the trade war that has consumed the world’s two largest economies and unsettled financial markets.
Two senior Trump advisers expressed skepticism about the Chinese plans to at the very least de-emphasize the industrial policy and said the U.S. was looking for more than a simple rebranding.
In an interview with CNBC, Wilbur Ross said Chinese officials had clearly stopped mentioning Made in China 2025. But “that doesn’t mean they’ve dropped it,” Ross said, adding that it remained in China’s economic interest to pursue the goals.
“They clearly are going to move up the technology value-added spectrum. They have to because they’re no longer the world’s cheapest place to manufacture,” Ross said.
Clete Willems, the deputy head of Trump’s National Economic Council and a key player in the administration’s China policy, separately told a Washington audience that the administration was focused less on “the nomenclature” of Made in China 2025 than the underlying policies.
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“It’s important not to look at what they say about Made in China 2025 but we need to look at whether these policies actually change. And the focus of our conversation is on many of those underlying policies,” Willems said.
Any cosmetic shift by Beijing was unlikely to satisfy hawks in the Trump administration such as Robert Lighthizer, the U.S. trade representative, who has been designated by the president as his lead negotiator with China. Administration officials including Lighthizer and Peter Navarro, a White House trade adviser, have repeatedly warned that past U.S. administrations were duped by Beijing and promises that China failed to live up to.
On the other side, there’s also recognition that little has changed. One Chinese trade official described plans to revise the Made-in-China 2025 program as an easy concession for Beijing. The government believes its industrial policy has been a proven success and altering the name on the document won’t change the nature of the country’s political economy, said the official, who asked not to be identified discussing internal deliberations.
The official said the government believed its trade war with the U.S. wasn’t going to end anytime soon, because the U.S. hasn’t yet begun to whittle down its list of several dozen demands or start the technical discussions necessary to reach solutions. The Chinese side doesn’t view all of the American positions as serious, the official said.
The trade war remains a sensitive political issue in China, with President Xi Jinping trying to contain an economic slowdown as he prepares to celebrate the 40th anniversary of the Communist Party’s decision to embrace capitalist markets.
Several Chinese trade officials who attempted to share news of the 90-day trade truce on their WeChat social media accounts before that part of the agreement was announced by China received automated notices that their posts violated the platform’s policies, the official said.
Mark Tinker, head of Framlington Equities Asia at AXA Investment Managers in Hong Kong, told Bloomberg Television on Thursday that China had “maybe pretended to blink” on the policy.
“This story is going to dominate investment for many years, I think -- the ongoing tension between the two biggest economies in the world and how they fight over this fourth industrial revolution,” Tinker said. China is “not going to role back on its ambitions. It might be a little more quiet about them,” he said.
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