How ‘Made in China 2025’ Frames Trump's Trade Gripes
(Bloomberg) -- The Chinese government’s “Made in China 2025” plan was introduced as a blueprint for transforming the country into an advanced manufacturing economy. It’s come to represent what international competitors, notably the U.S. under President Donald Trump, dislike about how China plays in the global marketplace. Tariffs imposed by Trump took aim at many of the industries highlighted in the plan. It appears China may be willing to amend the plan, perhaps even postponing some of it by a decade, if that helps bring an end to the trade war.
1. What does ‘Made in China 2025’ seek to do?
The plan, released in 2015, identified 10 industries in which China aspired to become globally competitive by 2025 and globally dominant during this century. Those industries: robotics, new-energy vehicles, biotechnology, aerospace, high-end shipping, advanced rail equipment, electric power equipment, agricultural machinery, new materials (such as those used in screens and solar cells) and new generation information technology and software (including integrated circuits and telecommunications devices). There’s also a separate development strategy for Artificial Intelligence, published in 2017; China wants to become the world’s primary AI innovation center by 2030.
2. How does China measure success?
The blueprint envisions warp-speed expansion and domination in the so-called “fourth industrial revolution,” a catch-all term for the rapid technological progress that’s seen transforming services and professions. Although the official blueprint has no numerical targets for Chinese companies to seize domestic and global market share, a crucial unofficial document is full of goals, such as having Chinese new-energy vehicles take up 90 percent of the domestic market by 2025.
3. What is China’s rationale?
As its economy transitions away from labor-intensive industries -- like clothing and footwear manufacture -- China views its shift into higher-tech manufacturing as a crucial part of its development. Labor costs are surging as the rapidly aging population causes the workforce to shrink, undermining competitiveness in sweatshop industries that underpinned its rise. To thrive, China must shift into industries now dominated by developed economies.
4. What’s wrong with China’s plan?
U.S. companies have long argued that China uses a range of tactics to force them to transfer intellectual property such as industrial designs and patents, and that Chinese entities engage in widespread theft of U.S. trade secrets. Plus, U.S. and other non-Chinese companies fear they won’t be able to compete against Chinese rivals in advanced manufacturing when they are backed by massive state investment and subsidies. A report released in November by U.S. Trade Representative Robert Lighthizer’s office accused China of continuing a state-backed campaign of intellectual property and technology theft, downplaying its moves to ease foreign investment restrictions and reiterating alarm about “Made in China 2025.”
5. Does the U.S. have a point?
Even Chinese President Xi Jinping has acknowledged that China must improve enforcement of intellectual property rights. It’s also easy to see why the U.S. is anxious about China’s emerging competitive threat in industries where it still has an advantage. China ended Japan’s dominance of Asia’s high-technology exports in 2014, according to the Asian Development Bank, accounting for 44 percent of shipments of high-tech goods such as medical instruments, aircraft and telecommunications equipment that year -- up from 9.4 percent in 2000. China is quickly developing as a force in areas from renewable energy to electric cars, and is moving closer to mass-producing its own airliners.
6. What’s China’s response?
China’s attitude has shifted. Earlier this year, China said it wouldn’t accept U.S. preconditions for negotiations including abandoning the 2025 plan. As tensions escalated, officials in Beijing downplayed the plan’s significance. Just days after Trump and Xi dined at the Group of 20 summit at the start of December, China announced an array of punishments for IP theft.
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