Posted: 1 month ago

Is it still “Made in China 2025”?

On September 21, 2011, before running for president, Trump tweets “China is neither an ally or a friend — they want to beat us and own our country.”

Since launching the trade war with China, Trump had continually claimed, that the technology transfers by China is at the core of its ambitious “Made in China 2025” plans.

Unveiled in 2015, "Made in China 2025" is the government’s ten year plan to modernize China’s manufacturing base by rapidly developing high-tech industries.

” The country should also further open up its market and attract foreign investors to invest in key areas, such as the development of new information technology and bio-medicine, and foreign companies and institutions should be encouraged to set up R&D centers in China”, the Chinese State Council statement said.

“Made in China 2025” generated serious concerns among western policymakers, due to the technological advancement being directly linked to geopolitical advantages.  China’s state-led model and its ambition to control entire supply chains, meant, that entire industries could come under control of a rising geopolitical power.

Although the “Made in China 2025” plan stated as a basic principle that the government will “comprehensively deepen reform” and give markets the “decisive role in allocating resources,” experts worried that the plan represented a state-directed industrial policy intended to reduce not only China’s dependence on foreign technology, but to help Chinese companies become dominant global players in various advanced industries.

The developed countries, however, started to push back China’s trade and investment practices. Germany had tightened rules on Chinese takeovers of hi-tech firms. Chinese involvement in German industrial giants raised alarms and led Berlin to call for an EU–wide investment review body.

France also put restrictions on investments from China, to ensure French high-tech assets are not “looted” according to Finance Minister Bruno Le Maire.

Nonetheless, USA imposed trade tariffs did not knock China out and China made it through by increasing exports to the rest of the world. Today, China is ahead of the world in the post Covid-19 recovery. “Made in China 2025” had already had an effect on Chinese economy and made China less export dependent. However, if major foreign companies withdraw from China, it will be a severe blow to the Chinese economy.

Though, European companies  were less impacted by the USA-China trade war, the virus has become the last drop in the China fatigue. It is expected, that the Western societies will opt for the Chinese model of industrial self-sufficiency and will move towards diversifying the supply chains in the post corona economy by introducing a greater reliance on domestic production and the so called national industrial self-sufficiency.

Meanwhile, the ongoing search for diversification of the global supply chains creates ample opportunities for the regions like Central Asia and Caucasus, which in the new economic order could be well suited to become “new China” for low-cost manufacturing.

By Nona Mamulashvili, founder of Caucasus Economic Institute and President of Swiss Chamber of Commerce