BEIJING – Conflict over China’s industrial policies is at the center of a trade war that’s set to escalate should President Donald Trump go ahead with planned tariffs on another $200 billion of Chinese goods as soon as this week.
The core of those industrial policies is the Made in China 2025 plan to dominate industries from robotics to new-energy vehicles and aerospace. A key element of that blueprint is an unofficial document that’s slipped largely under the radar: The Made in China 2025 Major Technical Roadmap, better known as the Green Book after the color of its original cover.
Whereas the official Made in China 2025 plan has no specific targets for Chinese companies to seize domestic and global market share and even says implementation must be dominated by markets, the Green Book’s 296 pages are full of goals. They are jaw-dropping targets, too, that if met would virtually lock foreign companies out of many industrial segments in China and threaten market disruption for businesses across the globe.
China says the targets are nonbinding and unofficial. It is committed to ensuring that the official Made in China 2025 plan and other relevant policies are applied equally to both local and foreign companies in China, Minister for Industry and Information Technology Miao Wei wrote in an April article in the state-run China Daily newspaper. The ministry didn’t respond to faxed questions seeking comments on the Green Book.
But foreign lobby groups and some trade experts see the Green Book as cover for industrial targets to keep them out of official documents, where they would attract greater scrutiny from foreign governments and possibly the World Trade Organization.
“High-level guidance directs industrial policies in China and then lower levels of government follow with implementation plans,” said Jeremie Waterman, president of the China Center at the U.S. Chamber of Commerce in Washington. “The approach is to ensure plausible deniability, in part. In many industries now there’s a sense that a certain percentage of procurement is reserved for the domestic champions.”
The Green Book was first published in October 2015 by the National Manufacturing Strategy Advisory Committee and updated most recently in January without its green cover. It had input from 25 academics and over 400 specialists and high-ranking industry representatives, according to its introduction section. The book is downloadable for free from the Internet and hard copies are sold online for about 73 yuan ($11) after discount.
Strengthening manufacturing is an “important strategy” in promoting China’s national power and security, and the establishment of the advisory committee is an institutional arrangement to improve policy-making, said former Vice Premier Ma Kai at the committee’s first meeting in Beijing in August 2015.
The Green Book breaks down targets for dozens of industries that supply the 10 key sectors prioritized by Made in China 2025, which also include biotechnology, advanced rail equipment, and agricultural machinery. It sees Chinese companies taking a 56 percent share of the global market and 80 percent of the domestic market for integrated circuits by 2030. By 2025, they’re seen controlling 90 percent of the domestic market for new-energy vehicles including hybrid and pure electric cars, domestic mobile communication equipment, key parts of industrial robots, new energy, renewable energy equipment and energy storage equipment.
In part because of the targets, foreign companies in industries including medical devices and advanced agricultural equipment — both priority industries in the Made in China 2025 plan — may already be losing business, said the U.S.-China Business Council.
“The Chinese government may say they are guiding documents, but what we’re seeing is that those targets are being met on the ground,” said Jacob Parker, vice president for operations at the U.S.-China Business Council in Beijing. “We’re seeing increased reports of foreign companies being excluded from certain Chinese domestic government procurement processes or tenders.”
The risk is a new round of overcapacity. That could repeat on a magnified scale the history of industries from steel to solar power and wind power that previously were swamped by Chinese competitors backed by government subsidies and cheap funding from state banks.
“The chances of creating massive waste across the system are just monumental,” said Scott Kennedy, a U.S.-China expert at the Center for Strategic and International Studies in Washington. “The Chinese may just not care about that waste and believe that increased market share and dominance of the industries will eventually allow them to recoup the profits.”
China is not alone in supporting its industries. Industrial policy was central to Japan’s rapid growth in the 1970s and 1980s and the Made in China 2025 plan itself draws heavily from Germany’s “Industry 4.0 Plan” adopted in 2013. In the U.S., breakthroughs in semiconductors, nuclear power, imaging technology and others were all aided by industrial policy, said Stephen Roach, former chairman of Morgan Stanley Asia.
Chinese officials in Beijing have downplayed the importance of Made in China 2025 in recent meetings with foreign visitors.
“The U.S. shouldn’t take Made in 2025 seriously,” said Wang Huiyao, an adviser to China’s Cabinet and founder of the Center for China and Globalization, whose advisory council is stacked with former lawmakers. He Weiwen, a former commerce ministry official and a fellow at the same research group, said China’s biggest concern with the U.S. is its right to develop, and it may not catch up with American manufacturing capability until 2045.
Trump nevertheless appears determined to confront China on industrial policies. China, meantime, has shown no willingness to compromise on plans to upgrade its economy, creating an impasse that appears destined to deepen in the days ahead.