Part IV of this multi-part series on Communist China covered three components of the overarching Belt and Road Initiative, also called the One Belt One Road initiative: 21st Century Maritime Silk Road, Digital Silk Road, and Arctic Silk Road.
This part covers a mutually supportive economic initiative: Made in China 2025. The initiative was announced with great fanfare in 2015. It is part of a 3-step economic strategy to transform China into a technologically advanced leading manufacturing power by the centennial celebration of the founding of Communist China that will be held in 2049, as summarized here:
[Made in China 2025 is aligned] with the basic guideline of “innovation driven, quality first, green development, structurally optimizes and human-oriented” and the basic principle of “market orientation, government guidance, focus on the present, look into the future, overall promotion, key breakthroughs, independent development, opening and cooperation”. The first step is to develop from a manufacturing giant into a manufacturing power by 2025. The second step is to reach the medium level of the world manufacturing powers by 2035. The third step is to further consolidate China’s position as a manufacturing power and list China’s comprehensive manufacturing strength into the world’s top list by 2049 [sic].
Its primary goal is to upgrade and modernize China’s manufacturing in 10 key business sectors through extensive government subsidization in order to make China a major global player. As reported in a 2018 US Trade Representative report, “The Made in China 2025 Notice expressly calls for China to achieve 40% ‘self-sufficiency’ by 2020, and 70% ‘self-sufficiency by 2025, in core components and critical materials in a wide range of industries, including aerospace equipment and telecommunications equipment.”
A key priority of the initiative is a focus on innovation, research, and development – from both domestic and foreign sources. Not advertised publicly is an ongoing parallel effort by the Ministry of State Security to steal economic secrets from the West to “augment” Chinese research.
Nor is this additional unstated goal publicized: using industrial policies to decrease China’s reliance on foreign technology by stealing Western technology and intellectual property through joint ventures, and then locking out foreign firms in China in order to dominate global markets.
Intertwined with these efforts is expansion of the Chinese People’s Liberation Army, which is symbiotically reliant on the return on these economic investments and thefts of technology while delivering the security umbrella that makes those initiatives viable, including the projection of PLA military infrastructure overseas to protect Chinese investments overseas. PLA presence expands inexorably as Chinese authoritarian capitalism expands around the world. For example, Communist China now has the largest navy in the world, consisting of over 350 ships and submarines, including over 130 major surface combatants. This compares to the US Navy’s 293 ships as of early 2020. And ChiCom shipbuilding is projected to outpace the US for years, as well. Many of these PLA-Navy assets are being deployed along Maritime Silk Road routes, including to South Asia, Africa, and European ports as part of an expanding worldwide naval security network.
As reported in a DoD annual report to Congress in 2020 entitled, “Military and Security Developments Involving the People’s Republic of China”:
China’s strategy seeks to realize “the great rejuvenation of the Chinese nation.” This objective, which President Xi Jinping calls “the Chinese Dream,” is a long-held national aspiration to “restore” China to a position of strength, prosperity, and leadership on the world stage.
China’s foreign policy promotes changes to the international system on Beijing’s terms and according to ideas and principles it views as essential to its concept of a “community with a shared future for mankind.” According to Party officials, the overall goal of the PRC’s foreign policy is to build a “community with a shared future for mankind” that seeks to shift the international system towards an architecture based on the CCP’s principles for how nations should interact.
China’s economic development supports its military modernization not only by providing the means for larger defense budgets, but through deliberate Party-led initiatives such as OBOR and Made in China 2025, as well as the systemic benefits of China’s growing national industrial and technological base.
The “CCP’s principles” are classic communist fare: state-controlled enterprises, implementation of a social score system to control all actions of the people, no free speech, control of international organizations of ChiCom terms, and zero tolerance for dissent. Their world economic dominance goal involves substituting their “authoritarian mercantilism” and associated legal framework for the Bretton Woods-based international system and all of its permutations since it was established after World War-II. They seek to undermine, corrupt, subvert, and ultimately control all international organizations and systems to their advantage: UN/UNESCO, WHO, IMF, WTO, ISO, etc. The latter is particularly important, as the ChiComs seek to dominate the determination of international standards as a means to dictate the development and adoption of future Chinese-developed technologies. Made in China 2025 is part of the mosaic of ChiCom initiatives that supports achieving those objectives.
Controlling access to Chinese markets involves a carrot and stick approach to achieve their internal economic development objectives (ultimately self-sufficiency in key industrial sectors). The Communist Chinese use a variety of methods to achieve their economic dominance goals through exploitation and control of their system of public ownership of all economic and business interests, including state and private run enterprises. All of the methods involve one or more of economic coercion, protectionist barriers benefiting Chinese industries, foreign ownership restrictions, a Byzantine administrative licensing requirements and approvals process, arbitrary observance of trade commitments, and exploitation of Chinese domestic legal barriers to achieve mercantilist goals. One such method is overseas infrastructure investments, which fall under BRI/OBOR, as discussed in Parts II and III of this series.
Another key method is the exchange of foreign technology transfers for market access through the use of joint ventures. This is an important tech transfer mechanism under the Made in China initiative, as technological modernization of Chinese industry is its main objective. Here is a good summary of how a joint venture in China works:
A Chinese joint venture is a business that is created between more partners who share business goals and will divide the expenses, profits and losses between them. This is a common business form between a Chinese partner and a foreign company.
[An equity joint venture] is common when a foreign investor decided to provide its know-how, technology, and experience to a Chinese company that is already established on the market and has manufacturing capabilities. The arrangement between a non-resident company and a local one is concluded for a fixed period of time, usually a maximum of fifty years. The equity can include monetary contributions, materials, equipment or buildings, intellectual property rights.
Joint ventures are risky business, as Chinese objectives are frequently orthogonal to those of foreign investors. Frequently, the joint ventures are used to develop Western technology transferred into the venture, with the intellectual property ultimately stolen and repurposed in Chinese enterprises after the joint venture is dissolved.
Here is how the 2018 US Trade Representative report summarizes the technology transfer/theft problem for foreign companies seeking to do business in Communist China:
[T]he Chinese government uses foreign ownership restrictions, such as formal and informal JV requirements, and other foreign investment restrictions to require or pressure technology transfer from U.S. companies to Chinese entities. These requirements prohibit foreign investors from operating in certain industries unless they partner with a Chinese company, and in some cases, unless the Chinese partner is the controlling shareholder. Second, the Chinese government uses its administrative licensing and approvals processes to force technology transfer in exchange for the numerous administrative approvals needed to establish and operate a business in China.
China uses foreign ownership restrictions, including joint venture requirements and equity limitations, and other investment restrictions to require or pressure technology transfer from U.S. companies to Chinese entities. The evidence further establishes that China uses discretionary and nontransparent administrative reviews and licensing processes to pressure technology transfer or force the unnecessary disclosure of sensitive technical information.
To summarize, the goal of the Made in China 2025 initiative is to modernize the Chinese industrial base through the infusion/exploitation/theft/transfer of advanced technologies into the Chinese economy through the systematic carrot-and-stick processes described above. The ChiComs seek to become a technologically-advanced leading manufacturing power by the centennial celebration of the founding of Communist China that will be held in 2049.
This ends Part V of the series. Part VI will second tier geopolitical and economic goals and objectives of the Chinese Communist Party.
The end.
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I go out of my way to not buy products, made in China. While they steal intellectual property, they use it poorly when producing that stolen product.
No need to name names of companies that are Chinese owned, to get a flavor of the quality, but just shop around and compare one place to the next. The typical Chinese made product is still in the trinket category.
I haven’t heard it in the mainstream, but I almost never do, but China appears to be having very bad economic problems that were already going south, since 2019 or so. They have been heading in this direction, while, at the same time, having problems debt trapping countries, and that PLA Navy, which may be larger than ours, is still only a numbers thing. I wonder if that number includes all those fishing vessels that look like they are about to rust to pieces. China uses them as if they were part of their navy. I consider China a a threat to us, but one we could handle with the right leadership. They just love Biden, the puppet.
China is communist in name only. It is fascist and mercantilist. The west needs to understand this, because most companies are controlled by the state and used to further China’s goals. Unfortunately, many western multinational companies either don’t understand this or are willingly complicit with it. They sometimes seem to have more loyalty to China than to their western origins in their quest to capture Chinese markets.
If memory serves, many of the largest American corporations of the 1930s supported both the American and European flavors of Wilsonianism until it became “bad for business” to do so and “good for business” to gear up for war against the latter.
Mark, I sometimes wonder whether China is in a similar situation to Japan in the 1990s. Japan looked poised to take over the world. Most of the world, however, did not understand the stresses and fractures in Japanese society that eventually came to the fore and slowed the Japanese juggernaut. I suspect China has many, if not more, of the internal stresses that could come to the fore and slow it down.
China is communist in name only. It is fascist and mercantilist. The west needs to understand this, because most companies are controlled by the state and used to further China’s goals. Unfortunately, many western multinational companies either don’t understand this or are willingly complicit with it. They sometimes seem to have more loyalty to China than to their western origins in their quest to capture Chinese markets.