China today
TachiYan
CM2025.pptx
China’s Industrial Strategy
2013 – 2025
”The Lion Awakens” – Ch. 7 in Third Revolution – Eliz. Economy
China Manufacturing 2025: European Chamber
I. Belt and Road Initiative
PURPOSE:
Strengthen infrastructure both on the westward land route from China through Central Asia and on the southerly maritime routes from China through Southeast Asia and on to South Asia, Africa, and Europe.
WHAT IT IS: Foreign policy and economic strategy
KEY AREAS OF COOPERATION:
Coordinating development policies
Forging infrastructure and facilities metworks
Enhancing financial cooperation
Strengthening investment and trade relations
Deepening social and cultural exchanges
ECONOMIC CORRIDORS THAT COMPRISE THE BRI
China-Pakistan Economic Corridor (CPEC)
Bangladesh-China-India-Myanmar Economic Corridor (BCIM)
New Eurasia Land Bridge Economic Corridor (NELB)
China-Mongolia-Russia Economic Corridor (CMREC)
China-Central Asia-West Asia Economic Corridor (CCWAEC)
China-Indochina Peninsula Economic Corridor (CICPEC)
Financial Institutions Initiative
Asia Infrastructure Investment Bank
With $100 billion in pledged capital through mid-2018
lent more than $5 billion on 28 projects in 13 countries, ranging from a motorway in Pakistan to a gas storage facility in Turkey.
Though the U.S. and Japan tried to discourage other nations from joining the AIIB, 87 other countries signed on, thanks to China’s growing global importance and cash-strapped governments’ hunger for financing
The AIIB has an international staff of experts and frequently funds projects proposed and co-financed with existing lenders, including the World Bank and Asian Development Bank.
Silk Road Fund
A state owned investment fund of the Chinese government to foster increased investment in countries along the One Belt One Road. The Chinese government pledged US$40 billion for the creation of the investment fund established on 29 December 2014.[
Unlike the large Chinese banks, providing credit resources both in dollars and in yuan, SR Fund supports projects only with foreign currency (USD, Euro)
Silk Road Fund is semi-directly under the supervision of People's Bank of China (Central Bank) Its Party Organizational Relations are under the management of PBOC
II. Made in China 2025
Why China wants to change:
China has been the world’s factory, and now it wants more. By 2015, China had produced or assembled
28% of world’s automobiles 80% of world’s computers
90% of world’s mobile phones 50% of world’s steel
50% of world’s refrigerators 24% of world’s power
But these industries are energy intensive, rely on highly repressed labor force, & environmentally damaging
China wants to climb out of the “smile curve” trough and escape the middle income trap
High profit
margin
Lowest Value
Added
This requires control over transportation and sales offices in the countries to which you export
China’s race to get rich before it gets old
As China’s population ages, its eligible workforce is contracting:
2013-14: labor force by 3.7 million
2014-15: labor force by 5 million
Contraction in working-age population makes economic development harder and relative growth of elderly population stresses fiscal resources
China is a latecomer to manufacturing automation
Global manufacturing competition from
US
Germany
Japan
India
Brazil
Upgrading China’s industrial base is critical to holding on it its current manufacturing industries because there is plenty of competition from advanced industrial countries as well as emerging ones.
What is the CM2025 (Made in China 2025) Initiative?
It is a 10-year plan (2016 – 2025)
First of a 3-stage plan to establish China as a leading global manufacturing power by 2049, the 100th anniversary of the founding of the People’s Republic of China
It identifies 10 key sectors that will receive special attention – as they are the drivers of economic growth in the 21st century:
What China needs to solve its overall reliance on foreign technology and to
create its own sustaining innovation centers that lead the world
By 2025
70% of basic components and basic materials to be domestically manufactured
50% reduction in operating costs, production cycles and product defect rates
40 new innovation centers – established up & running
Broadband internet covering 82% of China
Productivity Growth – 7.5% by 2020; 6.5% by 20205
How?
Forced technology transfers in exchange for market access
When foreign multinational companies have to provide strategically significant technology to an indigenous entity they do not control in order to gain access to the massive Chinese market.
Market access and government procurement restrictions for foreign-invested companies
Preferential treatment to domestic Chinese companies in Chinese government bids for defense and non-defense goods—including rail equipment, medical devices, biopharmaceuticals
Standards
Push for development of international standards in 5G technology to ensure that Chinese-developed technology is included in them – this reduces licensing fees that Chinese companies would have to pay to use foreign technologies in industries covered by CM2025
Subsidies, Preferential loans & Government-backed investment funds
An investment fund is a supply of capital belonging to numerous investors used to collectively purchase securities while each investor retains ownership and control of his own shares. ... Types of investment funds include mutual funds, exchange-traded funds, money market funds and hedge funds.
Example:
https:// www.cnbc.com /2018/05/04/beijing-reportedly-set-to-launch-47-billion-investment-fund-for-chipmaking.html
Technology-seeking investments abroad (“outbound investments”
Example: Avatar trying to buy Atop Tech
https:// www.politico.eu /article/china-investment-uber-apple-us-tech-how-china-acquires-the-crown-jewels/
Creation of “super SOE’s” in industries like nuclear, rail, shipping, materials and grains
They are merging SOE’s in same industry into giant “national enterprises”
Closing “zombie firms” and cleaning up corporate debt (Kornai)
Strengthening party control over firms
EXAMPLE:
SHANGHAI (Reuters – 6/28/2018) - Chinese electric carmaker BYD Co Ltd has opened a new lithium battery plant in the northwestern province of Qinghai, which will be the world’s biggest when construction is fully completed next year, it said on Thursday.
The factory, BYD’s third, can eventually produce 24 gigawatt-hours of batteries a year, and is part of the company’s plans to raise its total production capacity to 60 GWh by 2020, it said in a statement.
