A recent report lays out a number of options for Congress to scrutinize both China’s “Made in China 2025” industrial plan and the U.S.’ response to it. House Ways and Means Committee Chair Jason Smith, R-Mo., said recently that China trade issues will be a point of emphasis for the committee’s oversight work this year.
According to a report from the Congressional Research Service, Made in China 2025 is a broad set of industrial plans adopted by China’s State Council in 2015 to advance that country’s position in the global manufacturing value chain, “leapfrog” into emerging technologies, and reduce reliance on foreign firms. It focuses on 10 sectors, including energy-saving vehicles, new materials, high-tech medical devices, computerized machines, and next-generation information technology. Specific goals include boosting manufacturing quality, innovation, and labor productivity and developing globally competitive firms and industrial centers by 2025; reaching a level of development on par with global industry at an intermediate level, making major technology breakthroughs, and setting global standards by 2035; and leading global manufacturing and innovation with a competitive position in advanced technology and industrial systems by 2049.
China aims to achieve these goals through a range of state-led industrial and related science and technology policies, the report states, which feature a heavy government role in directing and funding Chinese firms to acquire foreign technology and related capabilities in areas where the U.S. has long been a global leader and has strong comparative advantages. These policies include tax preferences to incentivize foreign firms to shift production and research and development to China; the use of standards, intellectual property, competition, and procurement policies that seek to transfer foreign know-how to Chinese entities and use Chinese suppliers for key components; requiring foreign firms to partner with Chinese entities; and acquisitions of foreign companies in strategic sectors to take advantage of their expertise, IP, talent pools, and ties to suppliers and customers.
The report states that Made in China 2025 has been a major U.S. policy focus and engendered responses such as the Section 301 tariffs, the Phase One trade deal negotiated in 2020, and increased law enforcement activities. The U.S. has also concluded a deal with the European Union that restricts aerospace technology transfer to China, passed legislation to strengthen foreign investment review and export control authorities, and enacted a law to support U.S. capabilities in semiconductors and other technologies.
Nevertheless, the report concludes, Congress may want to consider additional measures to ensure that China’s policies don’t undermine U.S. technological leadership and jeopardize U.S. national and economic security. For example, lawmakers could examine the future trajectory of U.S.-China technology ties and how current trade, investment, and technology transfer might affect U.S. competitiveness. Congress could also evaluate whether existing U.S. tools and policies (export controls, foreign investment, etc.) have been effective in countering China’s industrial policies as well as how China’s reliance on certain U.S. capabilities strengthens U.S. leverage and creates options to counter China’s industrial policies.
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