China should fur­ther open its mar­ket to achieve its ‘Made in China 2025’ strat­egy

NewsChina - - EDITORIAL -

When Washington an­nounced plans to raise tar­iffs on a list of Chi­nese im­ports worth US$50 bil­lion in early April, the US trade rep­re­sen­ta­tive of­fice specif­i­cally said the items are iden­ti­fied as those that “ben­e­fit from Chi­nese in­dus­trial poli­cies, in­clud­ing Made in China 2025.” The rhetoric led to wide spec­u­la­tion that by launch­ing a trade war, the Trump ad­min­is­tra­tion's ul­ti­mate tar­get is not just ad­dress­ing its trade deficit with China, but also curb­ing China's ef­forts to up­grade its man­u­fac­tur­ing sec­tor.

Un­der the Made in China 2025 ini­tia­tive, which was launched in 2015, China iden­ti­fied 10 sec­tors that it will sup­port to de­velop an ad­vanced man­u­fac­tur­ing sec­tor – these are in­for­ma­tion tech­nol­ogy, high-end ma­chin­ery and robotics, aero­space, marine equip­ment and ships, ad­vanced rail trans­port, new-en­ergy ve­hi­cles, elec­tric power, agri­cul­tural ma­chin­ery, new ma­te­ri­als and biomed­i­cal. It is no co­in­ci­dence that these sec­tors over­lap with the list of Chi­nese prod­ucts that will be sub­ject to higher tar­iffs.

As trade ten­sions be­tween the US and other coun­tries sim­mer, China should be aware that this could be the new nor­mal in the fore­see­able fu­ture. In re­sponse, China should avoid get­ting trapped in the quag­mire of a trade war. Rather than re­sort­ing to pro­tec­tion­ism, China should fur­ther open up its mar­ket, which will not only help to ease the con­cerns other coun­tries have, but will also help to bet­ter in­te­grate China's man­u­fac­tur­ing sec­tor into the global sup­ply chain.

This appears to be the strat­egy of the cen­tral lead­er­ship. Dur­ing the China De­vel­op­ment Fo­rum (CDF) held on March 26, Chi­nese Pre­mier Li Ke­qiang stressed that China wel­comes the par­tic­i­pa­tion of for­eign com­pa­nies in the Made in China 2025 ini­tia­tive. On the same day, Miao Wei, Min­is­ter of In­dus­try and In­for­ma­tion Tech­nol­ogy, said dur­ing the CDF that China will fur­ther open up its mas­sive man­u­fac­tur­ing sec­tor to for­eign in­vestors and the fa­vor­able poli­cies that ap­ply to the am­bi­tious Made in China 2025 ini­tia­tive will also ap­ply to for­eign com­pa­nies op­er­at­ing in China.

Then dur­ing the Boao Fo­rum for Asia held on April 10, Chi­nese Pres­i­dent Xi Jin­ping promised that China will sig­nif­i­cantly lower im­port tar­iffs on ve­hi­cles, ease restric­tions on for­eign in­vest­ment in the au­to­mo­bile and fi­nan­cial ser­vices sec­tors, and will im­pose stronger pro­tec­tions for in­tel­lec­tual prop­erty. On April 17, China's State plan­ner, the Na­tional De­vel­op­ment and Re­form Com­mis­sion, an­nounced it would re­move for­eign own­er­ship caps for com­pa­nies that pro­duce fully elec­tric and plu­gin hy­brid ve­hi­cles in 2018, for mak­ers of com­mer­cial ve­hi­cles in 2020, and the wider car mar­ket by 2022.

At the same time as it fur­ther opens its mar­ket to for­eign com­pa­nies, China should also con­tinue to pro­vide a bet­ter busi­ness en­vi­ron­ment for do­mes­tic firms. On March 30, the State Coun­cil, China's cabi­net, re­leased a guide­line to en­cour­age high-tech com­pa­nies to list on China's stock mar­ket. Ob­servers be­lieve the move will prompt many com­pa­nies that con­ducted their IPOS in other coun­tries, in­clud­ing in the US, to re­turn to China.

China should not al­low its Made in China 2025 ini­tia­tive to suf­fer over the prospect of a trade war. Af­ter 40 years of re­form and open­ing-up, China's man­u­fac­tur­ing in­dus­try is in­te­grated into the global sup­ply chain. Many “Made in China” prod­ucts, es­pe­cially high-tech ones, such as smart­phones, are ac­tu­ally pro­duced else­where. China should con­tinue to open its mar­ket to for­eign com­pa­nies, and nur­ture a healthy and fair busi­ness en­vi­ron­ment for both for­eign and do­mes­tic com­pa­nies. This is the only way that China will be­come a leader in free trade, as well as en­sur­ing the sus­tain­abil­ity of the Chi­nese econ­omy.

China should fur­ther open up its mar­ket, which will not only help to ease the con­cerns other coun­tries have, but will also help to bet­ter in­te­grate China’s man­u­fac­tur­ing sec­tor into the global sup­ply chain

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