US Chamber of Commerce report criticises Beijing’s 10-year innovation plan

Study published as US Secretary of State Rex Tillerson is due in Beijing on March 18 which will likely set the stage for an expected meeting between Donald Trump and Xi Jinping

PUBLISHED : Friday, 17 March, 2017, 12:18am
UPDATED : Friday, 17 March, 2017, 12:18am

The US Chamber of Commerce has criticised China’s 10-year plan to boost innovation in ten strategic sectors by highlighting how 2.2 trillion yuan (US$318 billion) worth of state-directed capital and a raft of national security regulations associated with the programme are benefitting Chinese companies like smartphone maker Xiaomi Corp.

In a report titled “Made in China 2025: Global Ambitions Built on Local Protections”, the US advocacy group calls out central government-directed initiatives including an “Integrated Circuit Fund”, which will allocate as much as US$161 billion to develop chips through M&A and investment.

Some of these funds have supported Xiaomi’s effort to develop the company’s own smartphone processor, the report said.

China’s State Council announced its “Made in China 2025” plan, also known as MIC 2025, in May 2015, identifying ten priority sectors including robotics, Internet of Things, aviation, and biomedicine.

“MIC 2025 illustrates the state’s intent to leverage China’s legal and regulatory systems to favour domestic Chinese companies over foreign ones in targeted sectors,” the Chamber said.

Made in China 2025 industries will likely receive hundreds of billions of RMB in government support over the coming years that could substantially distort domestic and global markets.
US Chamber of Commerce report

“Perhaps most significantly, MIC 2025 industries will likely receive hundreds of billions of RMB in government support over the coming years that could substantially distort domestic and global markets. Such support may be used not only to invest in local innovation, but also to fund foreign technology acquisitions.”

The Chamber’s report comes at a sensitive time for Sino-US relations. US Secretary of State Rex Tillerson is scheduled to arrive in Beijing on March 18 for talks that will likely set the stage for an expected meeting between US President Donald Trump and his counterpart Xi Jinping.

Trump’s hard-line rhetoric about Beijing during the US presidential campaign, when he accused China of pursuing currency-related and other policies that give Chinese companies an unfair advantage, has softened since he entered the White House.

According to US media reports, Trump will host President Xi at his Mar-a-Lago estate in Palm Beach, Florida on April 6 and 7.

The Chamber’s report goes on to list numerous regulations that prevent foreign companies in different sectors from participating in lucrative Chinese markets.

For example, “forecasting China’s strong demand for [new energy vehicles or NEVs], a number of foreign companies opened battery factories in China in 2015.

“One year later, Beijing issued a list of companies allowed to supply the domestic market; no foreign company was included on the list.”

The Washington DC-based US Chamber of Commerce represents more than three million business of all sizes, according to the advocacy group’s web site.

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