China Prepares Policy to Increase Access for Foreign Companies

Some U.S. officials are likely to see Beijing’s move away from its controversial Made in China 2025 policy as more cosmetic than real

.. Odds that the new plan will go far enough in addressing U.S. complaints are long. President Xi and others in the Chinese leadership are used to exercising a strong hand in the economy. Many bureaucracies and state-owned enterprises benefit from the unfettered access to resources that come with big government initiatives and so don’t want to be hampered by the greater competition of a level playing field.

.. Officials in the Trump administration have called Made in China 2025 a threat to fair competition, saying it encourages state subsidies for domestic companies and forces technology transfer from foreign partners. Some U.S. officials are likely to see the changes as more cosmetic than real
.. A key concession under consideration would be dropping the numerical targets for market share by Chinese companies, these people said. Made in China 2025 sets defined goals of raising domestic content of core components and materials to 40% by 2020 and 70% by 2025, an increase that comes at the expense of foreign competitors.

.. President Xi’s economic adviser, Vice Premier Liu He, and other senior officials have criticized Made in China 2025 for creating waste. Cheap loans made available by various levels of government, for example, have led to extreme overcapacity among electric-vehicle battery makers in the past couple of years, making the sector less viable.

.. The Trump administration has pushed the “competitive neutrality” principle, making sure that it was part of the renegotiated North American Free Trade Agreement, known as the U.S.-Mexico-Canada Agreement. Under the concept, governments are prohibited from favoring state-owned companies over privately owned ones.

.. The idea was a favorite of prior U.S. administrations as well and became part of the Trans-Pacific Partnership

.. Vice Premier Liu, has told his U.S. counterparts, Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer, that China is planning to reduce auto tariffs and boost purchases of soybeans and other crops.

 

.. But the U.S. wants structural issues like Made in China 2025 and other policies addressed in any full trade deal.

.. “Any progress on addressing global concerns regarding the Made in China 2025 plan should be benchmarked not against new slogans and broad formulations,” said Jeremie Waterman, president of the China Center at the U.S. Chamber of Commerce. “It should be benchmarked against very detailed concerns regarding subsidies, standard setting, procurement and others.”

 

Xi Jinping, President for Life

He is abolishing term-limit rules and other norms that Deng Xiaoping created in the 1980s to prevent a repeat of Mao’s disastrous rule.

.. After taking power in 2012, Mr. Xi used an anticorruption campaign to purge rivals and concentrate power in his hands, breaking the post-Mao convention that power should be shared among a group of leaders loyal to different factions. China’s elite politics has since reverted to a winner-takes-all contest, as Deng feared.

Mr. Xi has created a Mao-style cult of personality, most recently granting himself the title of lingxiu, a term for a supreme leader not used in four decades.

.. Reformist adviser Liu He was promoted to the Politburo last October and is now tipped to become a vice premier as well as governor of China’s central bank. Mr. Liu is also due to visit Washington this week to discuss tensions over the lack of reciprocity in economic relations.

.. dangerous imbalances have built up in the financial system due to stimulus policies that require excessive debt, endangering China’s economic development.

.. By making himself essentially President for Life, Mr. Xi has made Chinese politics more volatile and unpredictable.