Matthew Klein describes in Barron’s the protectionist plan China’s government is pursuing.
The People’s Republic of China is the most protectionist major economy in the world.
Xi Jinping may say he is opposed to “any attempt to cut off the flow of capital, technologies, products, industries and people between economies” in discussions with U.S. Trade Representative Robert Lighthizer and other visiting American officials this week. Pay that no heed. The Made in China 2025 industrial strategy is the latest act of aggression against the U.S. and its allies—and the Chinese government shows no sign of backing down.
Made in China 2025 is officially pitched as being about higher quality standards, greater investment in research, and using more advanced technologies in manufacturing. Chinese officials compare it to Germany’s Industrie 4.0, which is a modest government program to subsidize technical research. The Chinese version, however, is focused on replacing imports of high-value manufacturing with “indigenous” production.
By 2025, China aims to produce 80% of its “new energy vehicles,” 70% of its medical devices, 70% of its industrial robots, 60% of its advanced tractors and harvesters, and 10% of its commercial aircraft. The targeted sectors represent the bulk of U.S. manufacturing exports to China. While these targets are directly opposed to the spirit of an open international order, the Chinese government should have little trouble achieving its goals within the confines of World Trade Organization rules. China has plenty of experience with import substitution.
