Reuters Staff August 9, 2018
BEIJING (Reuters) – China has revamped a national leadership group charged with planning and studying its key technological development strategies, signaling potential policy shifts are underway as its technological ambitions fueled a backlash abroad.
The group, formerly called the “National Technology and Education leadership Group” under the state Cabinet, has been renamed without the mention of education to reflect a focus on technology, according to a circular published on the government’s website on Wednesday.
The circular said the change was due to “relevant arrangements” as required by work, without elaborating. Premier Li Keqiang, who had chaired the original group since 2013, will lead the renamed body with vice premier Liu He as deputy.
More assistance for China’s tech sector would mark the latest in a series of growth-boosting measures being rolled out by Beijing as an escalating trade war with the United States puts more pressure on China’s already slowing economy.
Shares of China’s leading tech firms rallied on Thursday, with investors expecting a policy boost for their sector.
An index tracking major IT firms rose more than 4 percent, while an index tracking major telecoms firms gained nearly 4 pct. China’s tech-heavy start-up board ChiNextP was up 3.4 percent.
Under a state-backed industrial policy known as Made in China 2025, China wants to catch up with rivals in sectors including robotics, aerospace, clean-energy cars and advanced basic materials.
The strategy, unveiled by China’s State Council in 2015, is at the core of China’s efforts to move up the value chain and achieve President Xi Jinping’s vision of turning the country into a global superpower by 2050.
However, foreign business groups have criticized the program as large-scale import substitution.
Under the plan, Beijing wants Chinese suppliers to capture 70 percent of market share by 2025 for “basic core components and important basic materials” in strategic industries.
Other members of the revamped leadership group include top officials from more than a dozen ministries and key central government bodies, including central bank head Yi Gang and State-owned Assets Supervision and Administration Commission director Xiao Yaqing.
It was unclear how the member composition was different because the state Cabinet did not publish the notice announcing the former group’s members on its official website (www.gov.cn).
The State Council Information Office did not answer repeated phone calls seeking comment.
Reporting by Yawen Chen and Ryan Woo; Editing by Paul Tai
Source: Reuters “China revamps national technology leadership group, tech shares rise”
Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.
Xi’s predecessor Hu Jintao has already realized the need of further reform to switch from export- and investment-geared economic growth to innovation-, creation- and consumption-geared economic growth. Without such reform China’s further economic growth will be impossible. He has not, however, made any significant progress in his reform due to the resistance of vested interests.
Xi carries on Hu’s reform and has made some progress but far from enough as the reform is a hard and even bitter transformation. Lots of export-oriented enterprises have either to move abroad to lower their labor cost or switch to products with higher technology through innovation and creation.
For those two aims, Xi has put forth the Belt and Road initiative to build infrastructures in underdeveloped countries to facilitate transfer of export-oriented industries to countries with cheaper labor and the Made in China 2025 Plan to encourage and subsidize innovation and creation.
Xi has already begun to carry out the initiative and plan but it takes time. If Xi has already attained the two aims, Trump’s trade war cannot hurt China. Now the trade war may give rise to quite serious hardship as the transformation needs more time.
Trump, being a strategy illiterate, is giving Xi the precious time he needs. If Trump had been a master of strategy, he would have concentrated superior force to conduct surprise attack at China, i.e. imposing very high tariffs on all China’s exports to the US at once. That will give rise to lots of bankruptcies and unemployment as export-oriented enterprises do not have time to move abroad or switch to high-tech production.
Trump, however, fails to understand his enemy. Sun Tzu says that in order not to be in peril in war, one has to know oneself and one’s enemy. Trump is ignorant about China, He believes that gradual escalation will gradually make China yield as the hardship caused by tariff hikes grows. He does not know that China is a heroic nation when it has a wise and brave leader so that it will never surrender whatever hardship the trade war may bring to it.
The failure to concentrate superior force to conduct surprise attack and illusion about China’s weakness foretell that Trump is doomed to failure.
With Trump’s gradual pressure, China will have enough time to carry out its transformation in haste but not too much haste to cause serious hardship, but will complete its transformation earlier and surpass the US earlier not only in economy but also and especially in high technology.
Why? China has abundant financial resources and gives priority to funding and subsidizing the research and development of science and technology as Xi wants to realize his China Dream of national rejuvenation. How can he attain his goal if China cannot become the best in the world in science and technology?
The US however, lacks funds and understanding of the importance of funding and subsidizing basic sciences. The Washington Post’s article “America is sacrificing the future” on August 3 tells us that the US has no future:
Entitlement spending (retired people’s spending) and the cost of servicing the surging national debt increasingly crowd out rival claims on scarce public resources, including those for basic science. Because it is politically expedient to sacrifice the future, which does not vote, to the consumption of government services by those who do, America is eating its seed corn.
For Trump obtaining votes for his reelection is much more important than basic science.
Article by Chan Kai Yee.
Full text of Washington Post’s article can be viewed at https://www.washingtonpost.com/opinions/america-is-sacrificing-the-future/2018/08/03/21085a3c-9660-11e8-80e1-00e80e1fdf43_story.html?utm_term=.b40699e34176&wpisrc=nl_most&wpmm=1.
US Pink House is holding a victory party with abundant luxurious food and drinks. Lots of handsome gentlemen and beautiful ladies are dancing in the vast ballroom. Note: It’s Pink House not White House though the launch of trade war to harm China makes White House as happy as Pink House.
What are you celebrating? Someone asks a reveler.
Our victory in trade war with China, replies the reveler.
How can you celebrate victory when the war has just started and no one knows the results?
We know the results, the reveler says.
I assume you have learnt math in school. It’s simple calculation. 500 v. 150, which side wins?
500, I suppose.
Right. Lots of revelers applaud frantically at the answer.
Reveler: We are all fans of our political star President Donald Trump. We are very happy that our brave gifted president has started a trade war to stop China’s rise so that we the United States will remain no. one in the world.
Questioner: But what has it to do with 500 and 150?
Reveler: You see China exports more than $500 billion goods to the US while US exports less than $150 billion. We can impose tariff hikes on $500 billion goods while China, only $150 billion. 500 is much bigger than 150 so it is very clear China will suffer much more than the United States. Therefore, our victory is certain. That is why we are here to celebrate our victory beforehand.
Questioner: But, we will still suffer as the prices of imports from China will rise. As Chinese imports are much cheaper than similar goods from other sources, we still have to buy them in spite of the price hikes.
Reveler: We will produce them ourselves.
Questioner: Labor here is much more expensive than China. Can our products compete with China’s in spite of the tariff hikes.
Reveler: We will use robots to reduce production costs.
Questioner: Production of so many types of robots needs lots of investment so that the robots may not reduce costs to the extent to make our products more competitive than China’s. Moreover, China is developing Silk Road economic belt to move labor-intensive production to the belt where labor costs are very low.
Reveler: Anyway, there is no need to worry. I guess you haven’t read Reuters’ article “U.S. trade official downplays effects of new tariffs: CNBC” on July 19. Read it you will find that there is nothing to worry.
The article quotes Kevin Hassett, chairman of the Council of Economic Advisers, as telling CNBC that the new tariffs only affect a small portion of imports and that so far they have not had a widespread negative effect on the economy.
However, China will suffer, the reveler says. That is the economic law of supply and demand. When price of supply rises demand will fall. Some Chinese producers will not breakeven when demand for their goods has decreased. Lots of them may bankrupt and lots of their employees will be unemployed. There may be riots that may overthrow the communist rule. As a result, China will be in chaos.
Questioner: There will be problems for some export-oriented enterprises, but Chinese government is very rich now and unlike American people, Chinese people have lots of savings to provide financial resources for the government to subsidize enterprises to move to countries in the Silk Road economic belt for reduction of labor costs.
Reveler: That will reduce China’s funding for research and development of high technology so that China will have difficulties to carry out its Made in China 2025 plan to surpass the US. China will thus be unable even to catch up the United States. We win!.
But are there no other ways than tariff hikes to fight a trade war? asks the questioner.
Reveler: We don’t know any. So far no one has ever fight a trade in any other way.
This blogger believes his ignorance will soon be cured.
Comment by Chan Kai Yee on Reuters’ article, full text of which can be viewed at https://www.reuters.com/article/us-usa-trade-china-navarro/u-s-trade-official-downplays-effects-of-new-tariffs-cnbc-idUSKBN1K91IO.
German Siemans is a world leader in technology by no means inferior to US companies in the same industries. Reuters says in its report “Siemens inks deal with Alibaba to launch digital products in China” today that Siemens has flagged plans to work with China’s State Power Investment Corporation on heavy-duty gas turbines.
If US politicians are wise, like Germany, the US may be benefited by win-win cooperation to transfer technology to China at a price much higher than the research and development costs. In can also conduct win-win cooperation in developing high-tech products like what Siemens is doing with China.
The US is unwilling to do so as it lacks the confidence to develop better technology than the current technology it can transfer to China to recover its research and development costs for research and development of future better technology.
US trade war with China will only harm itself and benefit EU. However, it reflect US pessimistic mindset.
The trade war is the last struggle of a doomed superpower.
Comment by Chan Kai Yee on Reuters’ report, full text of which can be viewed at https://www.reuters.com/article/us-siemens-alibaba/siemens-inks-deal-with-alibaba-to-launch-digital-products-in-china-idUSKBN1JZ22U.
SCMP says in its report “US-China trade war: who wins, who loses?” on July 6, “Conventional wisdom suggests the US has the least to lose from a trade war. But, not so fast …” It points out that many US enterprises produce parts and components of its products in China so that US tariff rise will raise their costs of production. As a result, the US is hitting itself while hitting China in the trade war.
However, Trump has taken into account of the losses the US will suffer. Usually both sides suffer in a war but Peter Navarro, director of the White House Trade and Industrial Policy Council, said that China would suffer more than the US in the trade war. Trump is satisfied with that.
However, one starts a war to achieve one’s strategic goal.
What is US strategic goal in its trade war with China?
To scrap China’s Made in China 2025 programme that may enable China to surpass the US in technology.
Does Trump’s tariff hikes in the trade war facilitate attaining that goal? According to SCMP’s another report “US tariffs take aim at Made in China 2025 plans in first salvoes of trade war” on July 7, the US uses tariff hikes to attack China’s machinery sector as the sector is one of China’s most significant sector that accounts for more than 25% of China’s total exports.
SCMP quotes law firm Covington & Burling as saying in a note that some 51 per cent of the targeted items were classified as nuclear reactors, boilers, machinery, and mechanical appliances and 23 per cent covered electrical motors and machinery, batteries and circuit assemblies.
Those are perhaps products with some technology but not with the high technology that China wants to obtain through its Made in China 2025 programme. Producers of such products may suffer some losses, but Chinese economy will not be hit hard to affect its ability to rise.
Moreover, Chinese economy is quite different from Western economies. In the West enterprises mainly rely on their own earnings to fund their research and development (R&D), the costs of which have to be recovered when they have won government contracts, which they cannot be sure to obtain.
Chinese government simply allocates lots of funds to research projects before any results have been achieved so that US tariff rise, though may cause some losses to Chinese enterprises in technology sector, does not hinder China’s R&D for high technology at all.
As China does not want a trade war with the US, its strategic goal is to hit Trump hard to make him cease the war or unable to be reelected.
That is why China’s tariff rises mainly target US farmers whose votes have enabled Trump to be elected. China attacks its enemy at the most vulnerable part while the US attacks at its enemy’s insignificant part. US offensives are tactical that do not serve its strategic goal while China’s serves its strategic goal well.
However, the tariff hikes will certainly hurt Chinese people as there will be significant rise in the prices of their food imported from the US due to the tariff rise especially soybean, which China cannot find alternative source for the huge quantity it needs.
China has to speed up its water diversion project to turn its vast desert in Xinjiang into farmland, which will not only free it from import of soybean but also enable it to export agricultural products to compete with the US on world market. That will be the way to really win the trade war.
As pointed in my previous posts, tariff is not a good weapon in a trade war. It usually hurts oneself while hurting one’s enemy.
Comments by Chan Kai Yee on SCMP’s reports, full text of which can be viewed at https://www.scmp.com/week-asia/business/article/2153975/us-china-trade-war-who-wins-who-loses and https://www.scmp.com/news/china/diplomacy-defence/article/2154114/us-tariffs-take-aim-made-china-2025-plans-first-salvoes.
What China scares US politicians and media most is its Made in China 2025 and Thousand Talents programmes.
Made in China 2005 is first all a programme to develop the technology for the production of high-tech products as import substitutes and possibly for export if they have competitive edge in world market. In fact all countries in the world do so as long as they have the capabilities.
It is fair competition won by those who are able to develop the best technology.
The US blame China for its purchase of technology from US enterprises but that is common fair trade of technology in the world. The US can control and has been controlling the sale of US technology to China. There is such control in other countries though not so strict as in the US.
As a result, China has to develop the technology on its own. For that, it needs as much talents as possible. That is why China has the Thousand Talents programme to attract Chinese and foreign talents from abroad with better remuneration and living and working environment.
US enterprises are also doing that. I personally know a Chinese software engineer who was recruited by a US company and moved to the US a few years ago.
SCMP says in its report “China’s ‘Thousand Talents’ plan key to seizing US expertise, intelligence officials say” on June 22, “The programme, begun in 2008, is far from secret. But its unadvertised goal is “to facilitate the legal and illicit transfer of US technology, intellectual property and know-how” to China, according to an unclassified analysis by the National Intelligence Council, the branch of US intelligence that assesses long-term trends.
Why does the US regard the employment of Chinese talents trained in the US and US talents as China’s secret trick to “facilitate legal and illicit transfer of US technology, intellectual property and know-how”?
Chinese and American talents’ expertise belongs to them themselves instead of their former employers or their countries. They are free to provide their expertise to their current employers whether they are Chinese or otherwise. Such provision of expertise does not constitute illicit transfer of technology.
In fact China still lag quite far behind the US in science and technology the US may keep its superiority if it make similar efforts in made in the US and recruiting talents. US fear of China’s Made in China and Thousand Talents programmes is really bizarre.
However, wise US politicians and journalists know well that a declining United States cannot compete with China. Take recruit talents for example, the US cannot even provide safe living conditions for talented people with such high rate of crimes, frequent of mass shooting tragedies and poor infrastructure.
Since the US is unable to improve, it has to stop China’s rise by a trade war though the war will hurt the US itself.
Why shall such programmes regarded as aggressive
Comment by Chan Kai Yee on SCMP’s report, full text of which can be viewed at http://www.scmp.com/news/china/policies-politics/article/2152005/chinas-thousand-talents-plan-key-seizing-us-expertise.
At first, Trump said that he would conduct a trade war with China to reduce US trade deficit with China but when China offered to buy $70 billion more US goods a year for initial reduction of US trade deficit with China, Trump wanted more. He wanted China to scrap its Made in China 2025 plan with the excuse that China would steal US technology to fulfill the plan.
China in fact has not stolen US technology. That is quite obvious. Trump bases his accusation on Pentagon’s report on Chinese espionage. Military espionage is being carried out by each and every country of some significance in the world.
China has been trying to buy US technology but without much success as the US does not want China to get it. China has allocated lots of funds to attract its scientists and engineers back and employ other countries’ scientists and engineers. The US regards such employment as theft of US technology. Absurd.
Peter Navarro, director of the White House Trade and Industrial Policy Council, said that China would suffer more than the US in the trade war. He knows the US will suffer in the trade war. Why does he still wants the war?
If he wants to prevent China from getting US technology, banning China’s investment in the US, banning US college education on sensitive technology for Chinese students will be better. The trade war simply dos not ban those activities through which China may obtain US technology. Chinese students can learn technology from colleges and jobs in US companies after graduation.
China will still be able to recruit scientists and engineers from abroad in spite of the trade war.
Why inflicts hardship on the US itself while inflicting China?
Navarro and others like him are scared by China’s rise. China’s Made in China 2025 stresses development of technology in advanced rail and shipping, aerospace, agricultural machinery, artificial intelligence, augmented and virtual reality, biotechnology, blockchain development, business application software, electronics, new-generation I.T., new materials, new energy vehicle, precision farming, robotics, and satellite communications.
Navarro said, “These are the future of the world and of America, and China cannot have 70 percent of production of these industries by 2025.”
According to him if China succeeds in carrying out that plan, the future of the world belongs to China instead of America.
Navarro lacks confidence that in the 8 years to come the US can excel in the above-mentioned technology in spite of its sound technological foundation!
Therefore, he believes the only way to prevent China from surpassing the US is to conduct a trade war to make China’s economy suffer or perhaps collapse though US economy will also suffer.
He and others like him in the US are scared to death by China’s rise!
Article by Chan Kai Yee.