Author: Chu Daye
Posted on: Global Times, March 7th, 2017
As European companies in China demand wider and deeper market access and urge equal treatment under the nation’s “Made in China 2025” industrial policy initiative, experts said mutual political trust is a hurdle for further and high-level industrial integration between China and the EU.
The Made in China 2025 plan calls for a significant increase in homegrown products in 10 sectors ranging from robotics to biopharmaceuticals as part of China’s efforts to upgrade its industrial capacity.
The European Union Chamber of Commerce in China released a report Tuesday noting that the plan may cause tensions with China’s international trade partners, as the agenda includes policy tools such as subsidies, support for China’s State-owned enterprises, limiting market access for foreign businesses and State-backed acquisitions of companies from the EU and other overseas markets.
Experts said competition is hard to avoid as China ups the ante in manufacturing and that this rattles some European firms.
“Every country that treats manufacturing as their lifeline will naturally seek to improve and climb higher up the industrial chain, which offers more value. Given that the space on this higher spectrum is limited, countries will run into competition with each other,” said Tian Yun, director of the China Society of Macroeconomics Research Center.
Tian said EU companies sensing competition is just a reflection of the break-in period between China and the EU in terms of labor division in the industrial supply chain.
“It is something that cannot be solved. During the forming of the EU single economy, different countries within the bloc had the same problem but after a break-in period, their industries became integrated,” Tian told the Global Times Tuesday.
China is experiencing an outflow of some low-end manufacturing jobs to countries such as India and Vietnam, due to environmental issues, rising costs and an aging population.
Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, said China is trying to transform itself from a big trading nation to a strong trading nation, and this has to be done with the transformation of manufacturing.
“Instead of giving direct support to certain industries as before, today’s State support is increasingly on efforts such as setting up a platform, creating an environment, building industrial parks and related infrastructure. And favorable policies are given to firms but these are under the WTO framework,” Bai told the Global Times on Tuesday, noting that some of the EU’s understanding of the situation is inaccurate.
Mutual political trust
The real issue, according to Tian, is mutual political trust, as deeper cooperation in business also involves politics.
“With political trust, China’s hundreds of industrial parks will indeed provide enough room for European firms to feel accommodated. However, the EU failed on its WTO commitment in recognizing China’s market economy status last year,” Tian said.
China launched a legal challenge against the EU in December 2016.
China is committed to globalization and opening-up and is making consistent efforts to be a fair and competitive market for both domestic and foreign players.
The government work report, released on Sunday, stated that foreign firms will be treated the same as domestic firms when it comes to license applications, standards-setting and government procurement, and will enjoy the same preferential policies under the Made in China 2025 initiative.
On January 17, the State Council, China’s cabinet, issued new measures to further open China’s market to foreign investors. Restrictions in the manufacturing of rail equipment, motorbikes, ethanol, oils and other sectors will be gradually removed.
“One will want his friends to come to his home country and make money. One will not want somebody who has been badmouthing him and still want to come in to his home country and make good money,” Tian said.
“The industrial chain integration between China, South Korea and Japan is deeper than that between China and the EU. Due to various reasons, the former integration process is currently stalled, and there is an opportunity for the EU,” Tian said.
“Competition and cooperation coexist,” Bai said. “And it is better to cooperate and jointly share the benefits of growth.”