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China's Plans All But Eliminate High-Tech Imports By 2025

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China's Plans All But Eliminate High-Tech Imports By 2025
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China is planning to cut most of its high-tech imports in the next eight years as part of its $300 billion plan to become nearly self-sufficient in a range of important industries, from planes to computer chips to electric cars, according to a report from New York Times citing a report from European Chamber of Commerce in China.

What Is CM2025?

The report from European Chamber of Commerce said China Manufacturing 2025 (CM2025) industrial policy aims to achieve domestic and international market-share targets in 10 industries, attaining self-reliance for key components.

It also focuses on five of the 10 industries covered by CM2025, including new energy vehicles, industrial robotics and semiconductors.

The New York Times report said this could be a potential negative for like Boeing Co (NYSE: BA), General Electric Company (NYSE: GE), Intel Corporation (NASDAQ: INTC), Airbus, Siemens AG (ADR) (OTC: SIEGY), SAMSUNG ELECTRONIC KRW5000 (OTC: SSNLF) and RENAULT SA EUR3.81 (OTC: RNSDF).

Current China Backdrop

The report comes at a time when China is mainly known for fairly low-end manufacturing, such as assembling iPhones, whereas the better-paid, value-added designs and marketing work is done in the United States and other countries.

“The appearance of ‘indigenous innovation’ — along with mentions of the need to realise ‘self-sufficiency’ — is particularly concerning — it suggests that Chinese policies will further skew the competitive landscape in favour of domestic companies,” the European Chamber said in its report.

Europe's Concerns

As part of its plan, the Chinese government would provide large, low-interest loans, assist in buying foreign competitors and extend research subsidies. Importantly, the plan says Chinese industries that benefit should own as much as 80 percent of their home market in just eight years.

But, the European Chamber of Commerce warns that such a move would increase existing tensions with China’s international trade partners.

“This would be even more undesirable at a time when support for economic globalisation and free trade is facing growing opposition in some quarters,” the European Chamber of Commerce report continued.

Furthermore, the report noted that China’s move to buy foreign competitors may jeopardize Chinese companies’ efforts to complete regular, market-based outbound investments.

Also, the timing of CM2025 is critical as President Donald Trump’s advisers are mulling a revision to corporate taxes to impose a 20 percent tariff on all imports, not just from China.

The New York Times noted that China is also laying the legal groundwork for challenging at the World Trade Organization a refusal by the United States to accept that China is a market economy for purposes of anti-dumping trade cases. It will make a similar challenge to European Union rules.

Related Links:

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  • What If Trump Brands China A Currency Manipulator?

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