Page 28 - 2019 White Paper on the Business Environment in China
P. 28
9 White Paper on the Business Environment in China
“Our exporters would be disadvantaged. Our farmers Made in China 2025
would lose some sales. Import prices would go up
for US companies,” said Mark Perry, scholar at The If some Western news headlines are anything to go
American Enterprise Institute and professor of finance by, the China’s “Made in China 2025” policy may have
and business economics at the University of Michigan- sparked the current US-China trade conflict. Some of
Flint. “U.S consumers would be negatively affected with the outside fear and anxiety is justified. Given China’s
higher prices, and the US workers could see some job track record in intellectual property protection, and
losses” (Shen). widely held beliefs in Beijing’s unfair trade practice, it is
not surprising that the prospect of China dominating
The stock market tumble to bear market territory in industries of the future has set off alarm bells. This
late 2018 likely has provided a wake-up call to Trump. In has not been helped by a recent surge in patriotic
September of that year, JP Morgan analysts wrote that propaganda in China that has been criticized by some
the strong economy and stock market could “embolden Chinese observers as Boxer-style nationalism (Pan).
the president on all geopolitical fronts” and create risk
of “a major miscalculation”. A China trade deal may well The Chinese government’s “Made in China 2025”
be in reach, but it’s very unlikely to resolve all subjects, plan aims to use government subsidies, mobilize state-
areas, and points of dispute. Robert Lighthizer, Trump’s owned enterprises, and pursue intellectual property
top trade negotiator, is reportedly underwhelmed by acquisition to catch up with and then surpass Western
Beijing’s commitments to seal a China trade deal. He technological prowess in advanced industries. For
reportedly thinks that more Trump tariffs are needed the US and other major industrialized democracies,
to get China to do more than buy more soybeans and however, these tactics not only undermine Beijing’s
make empty promises to stop requiring US companies stated adherence to international trade rules but also
to hand over intellectual property to access the Chinese pose a security risk. Washington argues that the policy
market. The tariffs, though potentially damaging for relies on discriminatory treatment of foreign investment,
both economies, have become a sideshow in the US- forced technology transfers, intellectual property theft,
China trade war. The real fight is over global leadership and cyber espionage. Meanwhile, many other countries
in advanced technology industries. For now, the have tightened their oversight of foreign investment,
dependency of China’s high-tech sector on American intensifying debate over how best to respond to
technology has left China highly vulnerable and in China’s behavior. Released in 2015, Made in China 2025
desperate need of a trade deal. But Xi will only go so far. is the government’s ten-year plan to update China’s
China is hardly without leverage, having the ability to manufacturing base by rapidly developing ten high-
complicate technology supply chains and dent market tech industries. These sectors are central to the so-called
prospects for companies like Apple and Boeing. Yet even fourth industrial revolution that refers to the integration
with a China trade deal, the risk is rising that the global of big data, cloud computing, and other emerging
economy — especially high-tech sectors — will become technologies into global manufacturing supply chains.
divided between spheres of influence in a technological Beijing’s ultimate goal is to reduce China’s dependence
US-China cold war. The US wants to keep China’s Huawei on foreign technology and promote Chinese high-
out of 5G next-generation mobile networks, citing tech manufacturers in the global marketplace.
security risks. US allies are imposing bans or severely Semiconductors are an area of particular emphasis,
restricting the use of Huawei gear. China, through given their centrality to nearly all electronic products.
funding Belt and Road infrastructure projects in Asia, the China accounts for about 60 percent of global demand
Middle East and Africa, is working to expand its sphere for semiconductors, but only produces some 13 percent
of influence. Given the ever-growing geopolitical rivalry, of global supply. China 2025 sets specific targets: By
a China trade deal would amount to a cease-fire, but 2025, China aims to achieve 70 percent “self-sufficiency”
probably not a lasting truce. That would avert a near- in high-tech industries, and by 2049—the hundredth
term blow to a shaky global economy, but it would leave anniversary of the People’s Republic of China—it seeks
a cloud hanging over US companies that depend on a “dominant” position in global markets. Made in China
China as a manufacturing base and key global market. 2025 reflects Beijing’s longstanding development goals.
UBS economists estimate that a full-fledged China trade In recent decades, the CCP has taken steps to shift the
war plus imposing global auto tariffs would grind U.S. economy away from resource extraction and low value–
economic growth to a halt in 2019 (Graham). added, low wage manufacturing to a high-tech, high-
28
“Our exporters would be disadvantaged. Our farmers Made in China 2025
would lose some sales. Import prices would go up
for US companies,” said Mark Perry, scholar at The If some Western news headlines are anything to go
American Enterprise Institute and professor of finance by, the China’s “Made in China 2025” policy may have
and business economics at the University of Michigan- sparked the current US-China trade conflict. Some of
Flint. “U.S consumers would be negatively affected with the outside fear and anxiety is justified. Given China’s
higher prices, and the US workers could see some job track record in intellectual property protection, and
losses” (Shen). widely held beliefs in Beijing’s unfair trade practice, it is
not surprising that the prospect of China dominating
The stock market tumble to bear market territory in industries of the future has set off alarm bells. This
late 2018 likely has provided a wake-up call to Trump. In has not been helped by a recent surge in patriotic
September of that year, JP Morgan analysts wrote that propaganda in China that has been criticized by some
the strong economy and stock market could “embolden Chinese observers as Boxer-style nationalism (Pan).
the president on all geopolitical fronts” and create risk
of “a major miscalculation”. A China trade deal may well The Chinese government’s “Made in China 2025”
be in reach, but it’s very unlikely to resolve all subjects, plan aims to use government subsidies, mobilize state-
areas, and points of dispute. Robert Lighthizer, Trump’s owned enterprises, and pursue intellectual property
top trade negotiator, is reportedly underwhelmed by acquisition to catch up with and then surpass Western
Beijing’s commitments to seal a China trade deal. He technological prowess in advanced industries. For
reportedly thinks that more Trump tariffs are needed the US and other major industrialized democracies,
to get China to do more than buy more soybeans and however, these tactics not only undermine Beijing’s
make empty promises to stop requiring US companies stated adherence to international trade rules but also
to hand over intellectual property to access the Chinese pose a security risk. Washington argues that the policy
market. The tariffs, though potentially damaging for relies on discriminatory treatment of foreign investment,
both economies, have become a sideshow in the US- forced technology transfers, intellectual property theft,
China trade war. The real fight is over global leadership and cyber espionage. Meanwhile, many other countries
in advanced technology industries. For now, the have tightened their oversight of foreign investment,
dependency of China’s high-tech sector on American intensifying debate over how best to respond to
technology has left China highly vulnerable and in China’s behavior. Released in 2015, Made in China 2025
desperate need of a trade deal. But Xi will only go so far. is the government’s ten-year plan to update China’s
China is hardly without leverage, having the ability to manufacturing base by rapidly developing ten high-
complicate technology supply chains and dent market tech industries. These sectors are central to the so-called
prospects for companies like Apple and Boeing. Yet even fourth industrial revolution that refers to the integration
with a China trade deal, the risk is rising that the global of big data, cloud computing, and other emerging
economy — especially high-tech sectors — will become technologies into global manufacturing supply chains.
divided between spheres of influence in a technological Beijing’s ultimate goal is to reduce China’s dependence
US-China cold war. The US wants to keep China’s Huawei on foreign technology and promote Chinese high-
out of 5G next-generation mobile networks, citing tech manufacturers in the global marketplace.
security risks. US allies are imposing bans or severely Semiconductors are an area of particular emphasis,
restricting the use of Huawei gear. China, through given their centrality to nearly all electronic products.
funding Belt and Road infrastructure projects in Asia, the China accounts for about 60 percent of global demand
Middle East and Africa, is working to expand its sphere for semiconductors, but only produces some 13 percent
of influence. Given the ever-growing geopolitical rivalry, of global supply. China 2025 sets specific targets: By
a China trade deal would amount to a cease-fire, but 2025, China aims to achieve 70 percent “self-sufficiency”
probably not a lasting truce. That would avert a near- in high-tech industries, and by 2049—the hundredth
term blow to a shaky global economy, but it would leave anniversary of the People’s Republic of China—it seeks
a cloud hanging over US companies that depend on a “dominant” position in global markets. Made in China
China as a manufacturing base and key global market. 2025 reflects Beijing’s longstanding development goals.
UBS economists estimate that a full-fledged China trade In recent decades, the CCP has taken steps to shift the
war plus imposing global auto tariffs would grind U.S. economy away from resource extraction and low value–
economic growth to a halt in 2019 (Graham). added, low wage manufacturing to a high-tech, high-
28
