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Home / US / China wants to be less dependent on the United States. It is a tall order

China wants to be less dependent on the United States. It is a tall order



Beijing has outlined its goal of gaining greater economic independence this week as the Central Committee of the Communist Party of China launched its latest Five-Year Plan. The 14th iteration of the broad policy framework will cover from 2021 to 2025, and is key to setting the country’s political and economic agenda.

The full scope of the plan may not be known for months, but a statement released on Thursday said China wants to focus on economic autonomy and technological independence. Doing so will help insulate the country from US efforts to limit their access to critical technologies.

“[We will] “Cultivate a strong domestic market and establish a new growth paradigm,”

; the statement said. “Domestic consumption will be a strategic focus.”

The statement did not set any specific goals. But messages from Beijing are being watched closely right now.

The world’s second-largest economy is likely to be the only major power in the world to expand this year as the coronavirus pandemic hinders growth elsewhere. China’s future is also tied to the ongoing trade and technology war with the United States, and tensions between the two sides are worsening.
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“Economic globalization is now facing headwinds,” said Han Wenxiu, a senior finance official with the Central Committee of the Communist Party of China. The pandemic, coupled with increased protectionism, has undermined international economic cooperation, Han added.

The need for renovation at home has been emphasized by Wang Zhigang, Minister of Science and Technology of China.

“Technology self-sufficiency is a strategic pillar for the nation’s development,” Wang said. “We have to drive independent innovation and do our own job well. That’s because critical technologies cannot be purchased or required. [from others]. “

Easier said than done

China’s desire to achieve economic self-sufficiency is not new. Many of the country’s Five-Year Plans prioritize sustainable growth and the expansion of the domestic industry. And an ambitious recent 10-year plan – “Made in China 2025” – was created to push China’s manufacturing sector into more technologically advanced areas.

But achieving economic independence is easier said than done.

Julian Evans-Pritchard, senior China economist at Capital Economics, wrote in a study last weekend: “There is no guarantee that efforts to promote self-sufficiency in specific sectors will succeed.

Evans-Pritchard points out that unforeseen events could derail China’s plans, such as when the outbreak of African Swine Fever devastated the country’s pork industry last year. The disease wiped out a third of China’s pig herd, causing shortages that forced China to import large amounts of meat.
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For the advanced sectors, the loss of independence from foreign countries is even more difficult. China relies heavily on other countries for the chipsets it needs to build the next generation of technology. The country imported chips worth more than $ 300 billion last year, about $ 64 billion more than it spent on crude.

“Made in China 2025” aims to help China ease that dependence and include the target of 40% of the chips produced domestically by 2020. That ratio is expected to rise to 70% by 2025.

But it seems that the country cannot achieve those goals. Last year, less than 16% of the chips China needed to be produced within its borders, according to an estimate released by IC Insights earlier this year.

Chaoping Zhu, global market strategist at JP Morgan Asset Management, said: “Given the huge gap between China and the US in the semiconductor industry, China will have to invest enormous amounts in a long time to catch up material progress ”. In Shanghai.

He wrote in a report on Friday that there are still doubts as to whether China can achieve autonomy in many areas, with chips topping that list.

According to Evans-Pritchard, self-sufficiency economy is not always good for economic development. He notes that firms are most productive when they can freely choose between domestic or imported inputs without political interference.

“Pursuing self-sufficiency (literally) is a textbook way to reduce productivity,” he wrote.

Beijing could be tied up

However, China may have no other choice when pursuing further economic independence.

Washington and Beijing have been locked in an escalating war over technology, trade and national security. Tensions only increased this year as they blamed each other for the initiation and mishandling of the coronavirus pandemic and conflict in Hong Kong and alleged human rights abuses in Xinjiang.
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The controversy has prompted the United States to impose heavy sanctions on Chinese companies that rely on American technology to survive, including tech company Huawei. Other technology champions, including China’s largest chipmaker SMIC, have also entered Washington’s sights.

“Faced with the risks of extending restrictions, developing domestic capacity and reducing dependence on foreign technology is becoming increasingly important for China,” Zhu wrote. from JP Morgan.

Evans-Pritchard argues that China still needs to find a way to solve its biggest problems, including over-reliance on infrastructure-focused investment as a means of protecting growth, and old population.

“Without faster progress in tackling structural problems, we think growth could slow to just 2 percent by 2030,” he said.


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