Why West Fears ‘Made in China: 2025’

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by F. William Engdahl, New Eastern Outlook:

The Trump administration has made the Chinese industrial transformation strategy, “Made in China: 2025,” or simply China 2025 the explicit target of its current trade war offensive against the Peoples’ Republic. Western industrial leading countries, including Germany, are understandably alarmed. Only they are ten years late, and until now have foolishly refused to collaborate with China in key developments, including of the new economic Silk Road or Belt Road Initiative. Here I want to briefly indicate what China is doing. In future reports I will discuss some fundamental flaws in their industrial strategy. Here it is important to understand what China 2025 signals to Western industrial domination.

When he took office, China President Xi Jinping moved to propose what is now the Belt and Road Initiative, a comprehensive network of new infrastructure projects going from China across Asia and Eurasia to the Middle East and the European Union. Xi proposed the BRI at a meeting in Kazakhstan in 2013. Then in 2015, after little more than two years in office, Xi Jinping endorsed a comprehensive national industrial strategy, Made in China: 2025. China 2025 replaced an earlier document that had been formulated with the World Bank and the USA under Robert Zoellick.

One quality I’ve come to appreciate from first hand observation over the course of numerous visits and discussions across China since 2008 is the remarkable determination of Chinese institutions and people, once a national strategy consensus is agreed, to realize that with almost a ruthless determination. Mistakes have been made, in the rush to go from one of the world’s most impoverished peasant economies to the world’s largest industrial producer. Quality control often has been secondary priority. However, step by step since Deng’s 1979 “Socialism with Chinese Characteristics” policy turn, China has emerged to become the literal workshop of the world. Until now it has been producing on license for Western multinationals such as VW or Buick GM cars, iPhones or MacBooks, or countless other products for Western multinationals.

“Rejuvenating Chinese manufacturing”

Now China is changing that. Much as Japan did after 1952 then later South Korea embracing the Japanese example, and more relevantly Germany after 1871, China is going to what they describe as “rejuvenating Chinese manufacturing.” This, translated, means instead of being the workshop assembling components for foreign giants like Apple, China will develop its own Apple, or BMW or G5. They have begun a new phase in development of their own world leading industry. Now as China 2025 says, the national industry and government institutions supporting that is undergoing a “transformation from Made in China to Created in China, from China Speed to China Quality, and from Chinese products to Chinese brands.” The broad concept for China 2025 has been modelled on the German “Industry 4.0” strategy which some call the 4th Industrial Revolution. It aims to utilize technological advances in key technologies such as artificial intelligence, internet of things, machine learning, cloud systems, cybersecurity, adaptive robotics to cause radical changes in the business processes of organizations. China has now made such concepts national strategic priority in its economic future development. It is no minor deal. And that is precisely why Trump advisers with their trade war actions are targeting precisely the key vulnerabilities and links to western technologies such as those of China telecom giants Huawei or ZTE Telecommunications which are still dependent on US chips and other sensitive technologies.

‘Post Industrial’ USA

Beginning in the 1970’s there was a deliberate strategy among major US multinational companies to move their manufacture abroad in search of cheap labor, low costs. US think tanks and journals praised the nonsensical idea that the West had entered a “post-industrial era,” a promised nirvana where instead of “dirty” industrial jobs in steel, autos and such, the future would be a services economy. In reality it was outsourcing of America’s manufacturing base.

Beginning especially in the 1990’s with China’s negotiations to join the Western industrial “club” by negotiating for WTO membership, corporate America and their bankers flooded into China, the world’s most populous country with some of the lowest wages. For more than three decades, US companies from GE to Nike to Apple have banked huge profits based on that China production, a fact conveniently ignored today by Washington.

China has used that foreign input to build the world’s largest industrial goliath. However, as they state, one in urgent need of serious transformation if China is to become a “world competitor” and no longer merely a screw-driver assembly for Western or Japanese multinationals. As the official preface to China 2025 states, “Chinese manufacturing is facing new challenges. With resource and environmental constraints growing, costs of labor and

production inputs rising, and investment and export growth slowing, a resource and intensive development model that is driven by expansion cannot be sustained.

We must immediately adjust the development structure and raise the quality of development. Manufacturing is the engine that will drive the new Chinese economy.”

As the policy document correctly points out, “Since the beginning of industrial civilization in the Middle of the 18th century, it has been proven repeatedly by the rise and fall of world powers that without strong manufacturing, there is no national prosperity.” The conclusion they draw is that, “Building internationally competitive manufacturing is the only way China can enhance its strength, protect state security and become a world power.”

The China State Council policy blueprint correctly points to a major transformation of global manufacturing after the financial crisis of 2008 where giant Western corporations are revolutionizing manufacture with developments including 3D printing, cloud computing, big data, bio-engineering, and new materials, intelligent manufacturing, such as plants based on cyber-physical systems. This is what China 2025 is all about, to as the official policy document states, “capture the manufacturing high ground in the new competitive landscape.”

They are frank about their present capabilities in manufacture: “Chinese manufacturing is large but not yet strong. The capability for independent innovation is weak and external dependence for key technologies and advanced equipment is high. Enterprise-led manufacturing innovation systems have yet to be perfected. Product quality is not high and China has few world-famous brands. Resource and energy efficiency remains low, while environmental pollution is severe. The industrial structure and industry services remain immature.”

This is how Beijing describes its present challenge. They will not remain a quasi-colonial industrial assembly platform for foreign companies. They now are building their own version, made in China, to compete as world class industry competitors. This is what has set alarm bells ringing all across the West.

The three steps

They lay out three clear steps: by 2025, by 2035 and by the centennial of creation of the Peoples’ Republic of China in 2049. By 2025 China plans to be a “major manufacturing power,” ten years after onset of China 2025. For that the plan is that China will have consolidated its manufacturing power, increased manufacturing digitalization, master core technologies and become competitive in areas such as high-speed rail or other areas where China is already a global leader, while improving production quality. Energy use and pollutant levels will reach that of advanced industrial countries.

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