Fearful Of "Triggering" Trump, China Begins Downplaying "Made In China 2025"

Trump's unorthodox policies appears to be bearing fruit.

Amid a barrage of constant tit-for-tat escalations which are finally beginning to spillover into markets - a necessary condition for Trump's negotiating strategy to be taken seriously by America's trading partners as Goldman explained at the start of the month - Reuters reports that Beijing has begun "downplaying" Made in China 2025, the state-backed industrial policy that has provoked alarm in the West and is the core reason behind Washington’s complaints about the country’s technological ambitions.

Halting China's relentless technological advance, much of which is on the back of reverse-engineered, "merged & acquired", or simply stolen US technologies, is the reason for the latest developments out of Washington, which according to media reports will see the Trump administration enforce rules that bar companies with at least 25% Chinese ownership from buying U.S. firms with “industrially significant technology."

To be sure, Trump's attempt to reduce the Chinese trade surplus with the US is just one aspect of Trump's complaint over US-Chinese relations: with a full-blown trade war looming amid U.S. President Donald Trump’s threats to impose tariffs on up to $450 billion in Chinese imports, his administration has fixed on Beijing’s signature effort to deploy state support to close a technology gap in 10 key sectors.

And, in what is a sign that these threats and diplomatic bluster are working, Beijing is increasingly mindful that its rollout of the ambitious plan has triggered U.S. backlash.

In the Reuters report, which quotes a senior western diplomat, in meetings Chinese officials have recently begun downplaying Made in China 2025.

The officials have stressed that the aspects that have raised the most ire abroad were simply proposals by Chinese academics.

In an attempt to prevent further provocations of the Trump administration, the state news agency Xinhua, which made more than 140 mentions of Made in China 2025 in Chinese language news items in the first five months of the year, has not done so since June 5, according to Reuters calculations.

According to the report, Chinese officials have gone so far as to suggest it was a mistake for the government to have pushed the plan so forcefully and publicly because it had increased pressure on China.

“China is apparently starting to adjust to the blowback caused by the heavy propaganda,” said the diplomat, who declined to be identified because of the sensitivity of the matter.

Three state media journalists told Reuters they had been instructed not to use the term Made in China 2025. Two others said they received no such instructions.

And yet, this appears to be merely another optical exercise at mitigating risk: “They won’t stop doing it,” the diplomat said, referring to Made in China 2025. “The way they talk about it is changing.”

As a reminder, under the "Made in China 2025" policy, unveiled by China’s State Council in 2015, China wants to catch up with rivals in sectors including robotics, aerospace, clean-energy cars and advanced basic materials.

The strategy is at the core of China’s efforts to move up the value chain and achieve Xi’s vision of turning the country into a global superpower by 2050.

Under the plan, Beijing wants Chinese suppliers to capture 70 percent of market share by 2025 for “basic core components and important basic materials” in strategic industries.

Other targets endorsed by senior Chinese officials include ensuring 40 percent of smartphone chips are domestically made by 2025.

Xi gave a May 28 speech on innovation that reflected the key ideas of Made in China 2025 without mentioning it by name.

Foreign business groups have criticized the program as large-scale import substitution; and since the substitution comes at the expense of the US whose technologies and R&D China is actively "absorbing", it is easy to see why Trump is enraged.

China's stated intent of aggressive modernization and catching up to the US has provoked the more hawkish members of Trump’s team, including U.S. Trade Representative Robert Lighthizer and trade and manufacturing adviser Peter Navarro, author of the book “Death by China”, while leaving moderates like Steven Mnuchin out in the cold.

This policy also former the foundation of Trump’s initial list of tariffs on $50 billion in Chinese goods, which will begin taking effect on July 6, and which specifically targets items related to Made in China 2025.

Commenting on the key ideas of Made in China 2025, Xi gave a May 28 speech on innovation that reflected this policy which forms the backbone of China's next evolutionary phase:

“Practice repeatedly tells us, key core technology cannot be demanded, bought or begged,” he said. “Only by firmly grasping key core technology in our hands can we fundamentally guarantee national economic security, national defense and other security.”

Well, the US clearly disagrees that "core technology cannot be demanded, bought or begged", and the result has been the rapid escalation in trade war tensions between the two nations.

And now, it appears that - at least optically for now - Trump's strategy is starting to bear fruit.

Comments

beebpop Bronze Mon, 06/25/2018 - 12:07 Permalink

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In reply to by Bronze

NidStyles liquid150 Mon, 06/25/2018 - 08:27 Permalink

I think we need to stop with calling the US imperial. Our government doesn’t operate like an imperial power.  If we did we’d be stomping everyone involved with insurrectuous behavior that interferes with our trade. We wouldn’t be losing on these trade deals, and we wouldn’t be fighting wars for foreign powers.

The people that work at the Federal Reserve tend to behave like they are imperial diktats. Of that I can agree, and I hate that they do that myself. I think their powers need to be cut back significantly, obviously. I also think after a certain period of time all Federal Reserve records should be available to public scrutiny, and that includes internal audits.

In reply to by liquid150

tmosley liquid150 Mon, 06/25/2018 - 08:05 Permalink

The negative impact from reimported inflation can be easily mitigated by increased production at home.

Currency supply is an abstract medium representing claims on human labor. If we are able to produce more and more goods ourselves, we can comfortably supply those claims until they are expended, and then rapidly increase our wealth.

In reply to by liquid150

liquid150 tmosley Mon, 06/25/2018 - 08:11 Permalink

Sorry Bubba, but the capital goods to produce shirts and plastic toys are GONE from the USA. Gone, gone, gone for good. You want to waste a bunch of capital to bring them back so Americans can take shitty jobs they don't want?

The idea that "if we are able to produce more and more goods ourselves" assumes that this is possible, and ignores the fact that the capital for such a project does not exist.

Stop living in a fantasy world.

In reply to by tmosley

curbjob tmosley Mon, 06/25/2018 - 08:26 Permalink

"The US produces the machines that make the shirts and plastic toys."

Lol, the US didn't even produce the tools that built the real estate bubble. My Dewalt tools are a decade old and were made in Mexico. 

Sure, that factory can be brought back here ... just make sure the plants cafeteria has avocado toast as the special. 

In reply to by tmosley

LyLo liquid150 Mon, 06/25/2018 - 08:21 Permalink

I just logged in to tell you my family is buying a 3d printer here soon.  I mean, I figure why buy shitty plastic toys and parts from China when I can make my own for a lifetime for a few hundred dollars? 

But I'm sure that since you said something was a fact that you're right and China will be our slave labor provider...  er...  trading partner for years to come because something something something jobs Americans won't do.

 

In reply to by liquid150

delmar Jackson liquid150 Mon, 06/25/2018 - 08:32 Permalink

Actually, the manufacturing of plastic toys and many other plastic items have been rising in the USA due to lower cost of raw material and advances in manufacturing technology requiring fewer workers. Lower natural gas prices and removing the need to ship items 12,000 miles has caused a resurgence of chemical and plastic manufacturing. Also, many many Americans would love to have a steady manufacturing job.

In reply to by liquid150

NidStyles liquid150 Mon, 06/25/2018 - 08:14 Permalink

When it starts flowing back into the US it will raise the value of the dollar and increase US buying power. Sure the first shock to the economy will cause a recession, but the end result will be a stronger and more robust economy. Assuming the Fed doesn’t pull another con like the last one and export reserves to foreign nationals without interest while nailing our feet with interest and locked liquidity stores.

There’s a reason the political powers with foreign backers are opposed to balanced trade. It’s because the US economy when aligned to operate without extensive external influence, it is extremely efficient. It’s why a country with such a small population can withstand more than half its yearly turnout leaving its shores permanently every single year. Yes, you’re reading that correct. More than half of our economic turnout leaves our shores every year. Trade imbalances indeed. We are being bled dry by foreign forces not interested in assimilation or cooperating. This is without regards to the underground economy. 

 

Everything Trump is doing on trade is good, it’s what we need to regain ground against this parasitism. The alternative is to let the US fall into foreign hands and never have a chance of being sovereign again. We will look like EU countries under Merkel and Brussels rule within a decade if that happens. Even worse is possible. See what happened to countries like Afghanistan from the end of the Second World War until now. That’s what the US will turn into.

In reply to by liquid150

Kayman liquid150 Mon, 06/25/2018 - 10:24 Permalink

Only simpletons and retarded people make statements like,

"Only simpletons and retarded people care about international trade deficits."

Watched Levin for 10 minutes last night while some bought-and-paid-for airhead academic blathered on about how good it was for the "consumer" that the U.S. gets to import cheap shit.

The "consumer" is a construct. The real world is full of People, who "consume" but need family-supporting jobs in order to pay for that consumption. 

In reply to by liquid150

Quantify liquid150 Mon, 06/25/2018 - 13:43 Permalink

Inflation is caused by printing which is called by trade imbalances, at least in part.                                                                                                                                                                                                                                                                                                                                                                                                    

In reply to by liquid150

Kayman Scipio Africanuz Mon, 06/25/2018 - 10:30 Permalink

Trump, warts and all, is a Leader. He has a builder's mind- starts with a foundation and knows every process required, along the critical path, up until the last roof tile.

That is the dangerous thing for foreign countries, Trump is not bluffing.

Odd thing that none of our Media has pointed out that the main Chinese Shanghai Index is now down 20% from its peak. If the Dow was down 20% the corrupt Media would be burning their skin off their skulls, since they have no hair left.

 

In reply to by Scipio Africanuz

DingleBarryObummer TheSilentMajority Mon, 06/25/2018 - 08:03 Permalink

Donald J. Trump said he would favor a 45 percent tariff on Chinese exports to the United States, proposing the idea during a wide-ranging meeting with members of the editorial board of The New York Times - Jan 2016
https://www.nytimes.com/politics/first-draft/2016/01/07/donald-trump-sa…

That should be the minimum.  Ease into it over the next couple years.

In reply to by TheSilentMajority