Why ‘Made in China 2025’ triggered the wrath of President Trump

September 11, 2018


by Alice
Tse

Julianna
Wu
‘Made in China’ is often associated with cheap and poor quality goods, but Beijing has ambitious plans to transform itself into an innovative hi-tech powerhouse by 2025

The Chinese government announced the ‘Made in China 2025’ strategic plan in 2015. Aimed at closing the gap with Western hi-tech prowess and lessening China’s dependency on imported technology, it specified 10 areas where the country should take the lead. But as the trade war between the US and China heated up in mutual rounds of punitive tariffs, the plan became a focus of Washington’s discontent with Beijing

the first of three phrases, ‘Made in China 2025’ is a ten-year plan

The reality

After the meteoric rise of recent years, China’s economy now faces a number of potential issues. Maligned as ‘big, but not powerful’, the manufacturing sector in particular has reached a bottleneck, with a slowdown in sales of cheap exports like shoes and toys. Many of these products have reached market saturation and it is hard to keep sales buoyant in sectors requiring little innovation or hi-tech development. What is more, the country’s working-age population is expected to fall sharply by 2030 as a result of the ‘one-child’ policy

‘MADE IN CHINA’ CHANGES
China travelled a long and hard road to establish itself as the world’s largest export economy, and the ‘made in China’ tag is now assigned to more sophisticated products than was the case two decades ago. In 1996, Chinese exports were largely textiles and footwear. But by 2016, computers, telephones and other electrical devices began to dominate the export list

Top ten products China exported
China's exports in categories

* “Animal hides” and “Mineral products” are combined into one category
** “Others” includes foodstuffs, vegetable products, animal products, stone and glass, wood products, paper goods, animal and vegetable bi-products, weapons, precious metals

Strategy

To realise the plan, the Ministry of Industry and Information Technology has set up ‘five principles, five major tasks’, focusing on improving 10 key manufacturing sectors

TEN KEY SECTORS
The plan highlights 10 key prioritised industries including robotics, new energy and green vehicles. China sets the targets as follows:

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INDICATORS
The results of ‘Made in China 2025’ will be evaluated by 12 indicators in the four following areas. Here we list one example for each category:

Long way to go

SATELLITES IN ORBIT
The first Chinese satellite, ‘Dong Fang Hong’, was launched In 1970. Today, there are 311 Chinese satellites in orbit, about one-fifth of the US, but China aspires to increase long-term and stable spatial information services like satellite remote sensing, communication and navigation

ROBOTICS SUPPLY
In 2016, 74 per cent of robot sales were represented by five markets, with China accounting for the lion’s share at 30 per cent of the total. Beijing aims to boost technology production and sales by achieving automation and digitisation in the manufacturing sectors by producing 100,000 of its own industrial robots by 2020

INDUSTRIAL ROBOTS
China is banking on automation and digitisation to improve productivity and set it on a trajectory to become one of the world’s 10 most automated nations. The country ranked well below the world average for industrial robot density in 2016, but Beijing aims to have 150 units per 10,000 employees by 2020

Challenges

TRADE SURPLUS AND DEFICIT
China’s exports of hi-tech goods increased steadily after reform policies began and by 2004 their value had already already exceeded US exports. The Trump administration argues the trade deficit between China and the US is a result of unfair competition. The ‘Section 301 investigation’ also accuses China of stealing intellectual property from American companies

Challenges

TRADE SURPLUS AND DEFICIT
China’s exports of hi-tech goods increased steadily after reform policies began and by 2004 their value had already already exceeded US exports. The Trump administration argues the trade deficit between China and the US is a result of unfair competition. The ‘Section 301 investigation’ also accuses China of stealing intellectual property from American companies

HEAVY RELIANCE ON OTHER COUNTRIES
China currently lacks the ability to make many key electronic components and relies on other countries to supply many hi-tech parts. ‘Made in China 2025’ aims to have 70 per cent of essential spare parts manufactured domestically to resolve the issue

TRADE WAR
On July 6, 2018, the US started implementing 25 per cent tariffs on $34 billion worth of Chinese goods. It is targeting 818 products central to Beijing’s ‘Made in China 2025’ initiative, particularly technological parts. The table below illustrates how China’s prioritised sectors are being hit:

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