Made in China 2025
With headlines constantly reading of a trade war between the United States and China and accusations of unfair trade practices being tossed wildly and freely, it might cross the minds of many Americans what the validity or basis for these claims is. Arguments made by the current administration stem from the trade imbalance between the two world powers, where the U.S. imports in excess from China and has maintained relatively open trade practices while China sustains a trade surplus and offers asymmetric access to its market. One such difference in trade access is the forcing of foreign firms to give up key technological intellectual property, or previously form joint ventures with Chinese firms, in order to do business in China.
Many of the suspicions that drive current policy decisions have been corroborated in continued strategic initiatives by China, such as the now famed “Made in China 2025”. This initiative, believed to be modeled after Germany’s “Industry 4.0” plan, comes in the form of a lengthy report written up by the Chinese Ministry of Industry and Information Technology in 2015 that laid a framework for the following ten years. The mission behind this strategy derives from the Chinese government’s continued interest in advancing its economy and manufacturing industry with particular focus on enhancing domestic technologies and infrastructure.
Formerly, similar plans have been introduced by Beijing, with many noting that the past government pushed its “Strategic Emerging Industries,” which includes seven industries it felt would be central to the modernization of Chinese enterprise. “Made in China 2025” alternatively identifies ten industries that will allow the country to lift itself from low-cost manufacturing of clothing and consumer goods to high-technological manufacturing and advanced industries, including biotechnology, aerospace equipment, automation, and renewable energy vehicles.
While competitiveness in markets is inevitable, pundits raise concerns over China’s means to implement these changes; these will requisite greater preference for domestic industry and continued acquisition of foreign technology, in exchange for access to the largest single country market. Additionally, this strategic plan notes specific targets for advancement, such as 70% self-reliance in core industries by 2025. These targets come in violation of World Trade Organization policies and have been the cause for distress among modern political powers like the United States under the Obama and Trump administrations.
A judgement against such a plan can be difficult to evaluate when one considers historical context. The United States was able to benefit from protectionist policy through its development as were many Western powers during the Industrial Revolution, often attributed to the present-day divergence between the developed world and emerging markets. While some may disparage Beijing’s actions, China remains the most populated country in the world with an average per capita income that is only 1/7th that of the United States.
However, others will argue that the Chinese government directly intervenes unfairly in business acquisitions and investments abroad. In addition, one can attribute many of the gains seen in that region to the inflows of foreign multinationals and investment based on the Deng reforms that opened up the country following the end of the reign of Mao Zedong. Ultimately, regardless of one’s personal views on the matter, the authoritarian model of governance that is mixed with certain free market principles have allowed China, and especially Chinese policy, to move very nimbly in a highly competitive globalized market. Likely, the steps taken by the United States that are anti-trade will not bear the fruit that the current administration seeks in bringing China to agree to fairer trade terms. The United States can and should succeed through enhanced competitive advantages, investment in our infrastructure and human capital, and the reinstitution of global cooperation and alliances to curb unequal trade terms like those China proposes. Until that time, the retreat of the United States will come to the detriment of America alone while China can largely fill that void and move out of its low-cost manufacturing phase into a truly developed economy.