China’s Plan for Domination at Heart of Trade Dispute with U.S.

By: | March 28th, 2018

Recent reports suggest the U.S.-China trade dispute may not spin out of control into a full-fledged trade war. This is due to the likely high cost to each party. However, understanding the U.S. position is important to the future of the relationship.

U.S. Position Detailed in 215-Page Report by the USTR

The Office of the United States Trade Representative (USTR)’s 215-page report: Findings of the Investigation into China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation Under Section 301 of the Trade Act of 1974, details the Trump administration’s “beef” with China. In short, the Trump administration argues the U.S. must act in its own strategic interest by altering the “status quo” in its trade relations with China.

China’s National Medium & Long Term Plan (MLP)

The USTR report states, “China’s National Medium-and Long-Term Plan for the Development of Science and Technology (MLP), issued in 2005 and covering 2006 to 2020, is the seminal document articulating China’s long-term technology development strategy.” China’s goal is to reduce dependence on foreign technologies in 11 key sectors to 30 percent by 2020.

China Acquiring Western Assets & Intellectual Property

To accomplish this, China has been buying European and U.S. technology to “enhance the absorption, digestion, and re-innovation of introduced technology,” aka “IDAR which stands for:

  1. “Introduce: Chinese companies should target and acquire foreign technology.”
  2. “Digest: Following the acquisition of foreign technology, the Chinese government should collaborate with China’s domestic industry to collect, analyze, and disseminate the information and technology that has been acquired.”
  3. “Absorb: The Chinese government and China’s domestic industry should collaborate to develop products using the technology that has been acquired.”
  4. “Re-innovate: At this stage, Chinese companies should ‘re-innovate’ and improve upon the foreign technology.”

China Seeking to Dominate in Strategic Emerging Industries (SEI)

  1. energy-efficient and environmental technologies
  2. next-generation information technology
  3. biotechnology
  4. high-end equipment manufacturing
  5. new energy
  6. new materials
  7. new energy vehicles

According to the USTR, China’s 12th Five-year SEI Plan “recommended specific fiscal and taxation policy support and set a target for SEIs to account for 8 percent of China’s economy by 2015 and 15 percent by 2020. The question is whether these practices are or will be consistent with free-trade principles.

“Made in China” 2025 Plan

China is seeking to have more and more advanced technology manufacturing, including 40 percent self-sufficiency by 2020 and 70 percent self-sufficiency by 2025 in the following areas:

  1. advanced information technology
  2. robotics and automated machine tools
  3. aircraft and aircraft components
  4. maritime vessels and marine engineering equipment
  5. advanced rail equipment
  6. new energy vehicles
  7. electrical generation and transmission equipment
  8. agricultural machinery and equipment
  9. new materials
  10. pharmaceuticals and advanced medical devices

In short, China plans to be the world leader in all of these areas by 2045.

Clearly, the Chinese are getting their “ducks in order.” Now, its time for the U.S. and the West to do the same.

David Russell Schilling

More articles from Industry Tap...