This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.theguardian.com/world/2018/apr/04/made-in-china-policy-at-centre-of-tariff-war-with-us

The article has changed 2 times. There is an RSS feed of changes available.

Version 0 Version 1
Made in China policy at centre of tariff war with US Made in China policy at centre of tariff war with US
(35 minutes later)
A key Chinese industrial policy is at the centre of a tit-for-tat tariff war that threatens to turn into a full-blown trade war between the world’s two largest economies.A key Chinese industrial policy is at the centre of a tit-for-tat tariff war that threatens to turn into a full-blown trade war between the world’s two largest economies.
Just hours after the Trump administration unveiled a list of $50bn of Chinese goods on which the White House plans to impose 25% tariffs, China hit back with its own list of 106 US items, including soybeans, corn, cars and aircrafts that it would also target with tariffs of 25% if the US does not back down.Just hours after the Trump administration unveiled a list of $50bn of Chinese goods on which the White House plans to impose 25% tariffs, China hit back with its own list of 106 US items, including soybeans, corn, cars and aircrafts that it would also target with tariffs of 25% if the US does not back down.
The US’s itemised list of 1,333 imports – which ranges from aerospace equipment to industrial robots, satellites, semiconductor parts and machinery for everything from railways to biscuit ovens – specifically targets a key Chinese campaign to upgrade its economy called “Made in China 2025”.The US’s itemised list of 1,333 imports – which ranges from aerospace equipment to industrial robots, satellites, semiconductor parts and machinery for everything from railways to biscuit ovens – specifically targets a key Chinese campaign to upgrade its economy called “Made in China 2025”.
The US insists the tariffs are a response to policies that force American companies to transfer their intellectual property to Chinese businesses. Those transfers, say US officials, are part of “China’s stated intention of seizing economic leadership in advanced technology as set forth in its industrial plans, such as ‘Made in China 2025’.”The US insists the tariffs are a response to policies that force American companies to transfer their intellectual property to Chinese businesses. Those transfers, say US officials, are part of “China’s stated intention of seizing economic leadership in advanced technology as set forth in its industrial plans, such as ‘Made in China 2025’.”
That Made in China national plan – designed to turn China into a “manufacturing superpower” by investing in sectors such as IT, new energy vehicles, robotics and other forms of smart manufacturing – may be the real sticking point in a potential trade war between China and the US.That Made in China national plan – designed to turn China into a “manufacturing superpower” by investing in sectors such as IT, new energy vehicles, robotics and other forms of smart manufacturing – may be the real sticking point in a potential trade war between China and the US.
“Made in China 2025 is a must for China,” said Ye Tan, an independent economist based in Shanghai. “Thus it will be China’s bottom line. We can negotiate, we can bargain on this, we can impose small punishments on each other but if the US touches on the foundation of Made in China 2025, there will definitely be a large trade war,” she said.“Made in China 2025 is a must for China,” said Ye Tan, an independent economist based in Shanghai. “Thus it will be China’s bottom line. We can negotiate, we can bargain on this, we can impose small punishments on each other but if the US touches on the foundation of Made in China 2025, there will definitely be a large trade war,” she said.
Beijing describes Made in China, first introduced by a Chinese thinktank in 2013 and adopted by the Chinese government in 2015, as an effort to avoid the middle-income trap that developing countries can fall into, and encourage home-grown innovation.Beijing describes Made in China, first introduced by a Chinese thinktank in 2013 and adopted by the Chinese government in 2015, as an effort to avoid the middle-income trap that developing countries can fall into, and encourage home-grown innovation.
To achieve this, China wants to replace most of the foreign technology it imports with locally made components. Like Germany’s Industrie 4.0 plan, China’s 2025 campaign is billed as a way to get the country on par with industrial heavyweights, alongside Germany, South Korea, Japan and the US.To achieve this, China wants to replace most of the foreign technology it imports with locally made components. Like Germany’s Industrie 4.0 plan, China’s 2025 campaign is billed as a way to get the country on par with industrial heavyweights, alongside Germany, South Korea, Japan and the US.
The US and other critics do not see it so benignly. In the conclusion of the US trade office investigation into Chinese trade practices, which was the basis of president Trump’s initial announcement of the tariffs in March, the Made in China policy is mentioned more than 100 times.The US and other critics do not see it so benignly. In the conclusion of the US trade office investigation into Chinese trade practices, which was the basis of president Trump’s initial announcement of the tariffs in March, the Made in China policy is mentioned more than 100 times.
The US secretary of commerce has called the Chinese programme an “attack on American genius”. The White House trade adviser Peter Navarro has described it as a brazen announcement that China plans to “dominate every single emerging industry of the future.”.The US secretary of commerce has called the Chinese programme an “attack on American genius”. The White House trade adviser Peter Navarro has described it as a brazen announcement that China plans to “dominate every single emerging industry of the future.”.
One of the chief concerns is that the scale and opacity of China’s government-directed economy will give select Chinese companies, supported by loans from state-owned banks and other subsidies, a huge advantage over their rivals.One of the chief concerns is that the scale and opacity of China’s government-directed economy will give select Chinese companies, supported by loans from state-owned banks and other subsidies, a huge advantage over their rivals.
“If Chinese ‘national champions’ dominate the Chinese market, they’ll have a leg up abroad and in many cases will replace or outlast foreign competitors by virtue of their market size,” said Lorand Laskai, a research associate in the Asia studies programme at the Council on Foreign Relations in New York.“If Chinese ‘national champions’ dominate the Chinese market, they’ll have a leg up abroad and in many cases will replace or outlast foreign competitors by virtue of their market size,” said Lorand Laskai, a research associate in the Asia studies programme at the Council on Foreign Relations in New York.
Beijing’s targets for local suppliers to provide 70% of “basic core components and important basic materials” by 2025 could effectively bar foreign companies from China. Semi-official and internal documents have laid out other quotas: 40% of mobile phone chips, 70% of parts in industrial robots, and 80% of those in renewable energy equipment should be made in China by 2025. Beijing’s targets for local suppliers to provide 70% of “basic core components and important basic materials” by 2025 could effectively bar foreign companies from China. Semi-official and internal documents have laid out other quotas: 40% of mobile phone chips, 70% of parts in industrial robots and 80% of those in renewable energy equipment should be made in China by 2025.
Chinese officials say these are not official targets, but critics say these unofficial guidelines are a way to bypass World Trade Organization rules against import substitutions. Chinese officials say these are not official targets, but critics say these unofficial guidelines are a way to bypass World Trade Organisation rules against import substitutions.
“Foreign firms will need to grapple with being closed out of the world’s largest market while competing with well-capitalised Chinese companies abroad,” said Laskai.“Foreign firms will need to grapple with being closed out of the world’s largest market while competing with well-capitalised Chinese companies abroad,” said Laskai.
Some say the Made in China policy doesn’t represent a huge departure from China’s policies over the last three decades, after the country’s reform and opening, according to Paul Triolo of the Eurasia Group, in Washington. Some say the Made in China policy doesn’t represent a huge departure from China’s policies over the past three decades, after the country’s reform and opening, according to Laskai.
“Most of the complaints we’re hearing about Made in China 2025 – forced technology transfers, discriminatory trade practices, subsidies and informal quotas for local enterprises – did not start in 2015,” he said.“Most of the complaints we’re hearing about Made in China 2025 – forced technology transfers, discriminatory trade practices, subsidies and informal quotas for local enterprises – did not start in 2015,” he said.
Made in China appears to be getting more support and traction than past national plans. Total funds for it are expected to exceed 10 billion yuan ($1.5bn), not including pledges from local authorities of more than 10 billion yuan, according to China’s state news agency, Xinhua. Made in China appears to be getting more support and traction than previous national plans. Total funds for it are expected to exceed 10bn yuan ($1.5bn), not including pledges from local authorities of more than 10bn yuan, according to China’s state news agency, Xinhua.
At least 70 provinces, cities, or counties had released strategic plans for following Made in China, according to a report in late 2016 by the Mercator Institute for China studies in Germany. At least 70 provinces, cities, or counties have released strategic plans for following Made in China, according to a report in late 2016 by the Mercator Institute for China studies in Germany.
But there are limits to how much the Made in China policy can transform China’s economy. Analysts say the country still lags in artificial intelligence, semiconductor production, software development, and talent. Maintaining social stability and jobs as manufacturing becomes more automated will be another challenge. But there are limits to how much the policy can transform China’s economy. Analysts say the country still lags in artificial intelligence, semiconductor production, software development and talent. Maintaining social stability and jobs as manufacturing becomes more automated will be another challenge.
China’s top-down approach to economic planning could also stand in the way. State support encourages companies and local officials to chase subsidies, eventually creating overcapacity, according to Jude Blanchette, senior advisor and China practice lead at the Crumpton Group, an advisory group in Washington. China’s top-down approach to economic planning could also stand in the way. State support encourages companies and local officials to chase subsidies, eventually creating overcapacity, according to Jude Blanchette, senior adviser and China practice lead at the Crumpton Group, an advisory group in Washington.
“Central planning often gets you a lot of waste,” he said. Still, he believes what can be achieved will have a critical impact. “Made in China 2025 is going to drastically change global value chains and how industries operate … If China gets half of the way, that’s going to have profound repercussions.”“Central planning often gets you a lot of waste,” he said. Still, he believes what can be achieved will have a critical impact. “Made in China 2025 is going to drastically change global value chains and how industries operate … If China gets half of the way, that’s going to have profound repercussions.”
ChinaChina
Asia PacificAsia Pacific
newsnews
Share on FacebookShare on Facebook
Share on TwitterShare on Twitter
Share via EmailShare via Email
Share on LinkedInShare on LinkedIn
Share on PinterestShare on Pinterest
Share on Google+Share on Google+
Share on WhatsAppShare on WhatsApp
Share on MessengerShare on Messenger
Reuse this contentReuse this content