China’s road to self-sufficiency under the “Made in China 2025” plan may impact China's economic growth

Xi Jinping 78 China aims to achieve 70% self-sufficiency by 2025

Tue, 19 Oct 2021 Source: Samuel Baid

China is a global factory manufacturing labour-intensive goods. It has been aiming to become a producer of high-end, specialized and technology-intensive goods since the launch of its “Made in China 2025” plan in May 2015.

The target industries are electric equipment, farming machines, new materials, energy-saving and new energy vehicles, numerical control tools and robotics, information technology, aerospace equipment, railway equipment, ocean engineering equipment and high-end vessels and medical devices, many of which are dominated by foreign companies.

China aims to achieve 70% self-sufficiency by 2025 and it seeks a dominant position as a high-tech manufacturer in global markets by 2049, which is the 100th anniversary of the People’s Republic of China.

In a bid to surpass Western technological prowess, China has been tightening its control over Chinese industries. China has been pushing Chinese companies to use Chinese technology even if foreign alternatives are more effective.

Though Chinese companies have been encouraged to invest in foreign companies to gain access to advanced technology; foreign companies have been complaining about restricted access to Chinese markets. Foreign companies have been alleging that to gain entry to markets in China, they are required to enter into joint ventures with Chinese companies under terms which mandate the foreign companies to transfer sensitive intellectual property and advanced technological know-how to those companies.

Such measures may not be favourable for China’s economic growth in these times when foreign companies are already considering shifting their manufacturing activities out of China over allegations of the mishandling of the Covid-19 crisis. Forcible technological transfer agreements are, in fact, one of the reasons for the ongoing US-China trade war.

The European Union Chamber of Commerce in Beijing, in a report, warned China that its roadmap to self-sufficiency, including restrictions to markets and a slew of cybersecurity, data privacy and other rules, would negatively impact its economic growth rate and potentially damage the economy in the long run. The EU Chamber appealed for opening up the markets to private players and foreign companies, as otherwise China risks stifling innovation.

EU Chamber’s report, published in September 2021, gives 930 recommendations in all which, as claimed by them, aims at developing an optimal business environment that will allow China to reach its full economic potential.

Apart from the control over Chinese industries and markets, China has also restricted issue of visas to foreign business people.

Those deemed economically essential and caught abroad when China suspended travel in early 2020 because of Covid, were allowed to return. However, other foreign businesspeople have said that they have been refused visas. Even though China is the most populous country in the world, foreign nationals make up only 0.06% of its population, as reported by China’s latest census. Both the EU Chamber and members of the American Chamber of Commerce in China have appealed to China for resumption of normal visa services.

It is clear from China’s plans to outdo the tech giants US, Japan and several European countries, that China is willingly sacrificing future growth for economic and political control. In today’s globalized world, no country can survive without an open market. Domestic markets will be able to compete internationally only when they are aware of how high the standard is in real-time, for which free trade plays a crucial role.

China is the global manufacturer of essential hardware components and can hold their sale/export hostage until the ransom of conforming with the terms of technology transfer or allowing Chinese industries to gain access to advanced technology is paid by foreign companies. Such an attitude will sour China’s political relationships and severely affect the trajectory of its economic growth.

Columnist: Samuel Baid