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China to pump hundreds of billions of yuan into key industry projects, with ‘no need to cover up its ambitions’ 

Summary:
One of the major roadblocks to the conclusion of a China-EU investment treaty has been the European demands that China cut back on subsidies for domestic industries to create a level playing field for foreign firms.AdvertisementAt the same time, the increased state involvement in industrial development adds to concerns about waste and inefficiency. China’s previous attempts to develop its domestic solar-energy and electric-vehicle industries through state planning resulted in massive overcapacity, and a few high-profile chip projects have already failed in China despite significant support from local authorities.According to a circular released by MIIT in April, the investment threshold for a project to receive cheap money from China Development Bank was set at 1 billion yuan (US6.24

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One of the major roadblocks to the conclusion of a
China-EU investment treaty
has been the European demands that China cut back on subsidies for domestic industries to create a level playing field for foreign firms.
At the same time, the increased state involvement in industrial development adds to concerns about waste and inefficiency. China’s previous attempts to develop its domestic solar-energy and electric-vehicle industries through state planning resulted in massive overcapacity, and a few
high-profile chip projects
have already failed in China despite significant support from local authorities.

According to a circular released by MIIT in April, the investment threshold for a project to receive cheap money from China Development Bank was set at 1 billion yuan (US$146.24 million).

There’s no need for China to keep a low profile or cover up its ambitions, given the obvious containment [policy] by the US Ding Shuang, Standard Chartered Bank

The only projects eligible for such financing are in cutting-edge industries such as information technology; new materials; high-end equipment; energy-saving and new-energy vehicles; medical equipment and pharmaceuticals; technological renovation of traditional manufacturing projects; and new infrastructure projects such as for 5G telecommunications and big data centres.

These sectors are similar to the key industries listed in the “Made in China 2025” programme – a state industrial policy plan to create national champions in cutting-edge technologies of the future, with government support.

The government was forced to put the plan on the back-burner after it triggered strong opposition from the United States and Europe. Even though Beijing no longer talks about the Made in China 2025 plan in public, the government’s ambition to use state power to forge industrial champions remains.

The joint programme by MIIT and China Development Bank is part of Beijing’s efforts to achieve “high-quality development of the manufacturing sector” after a growing list of Chinese businesses, including Huawei, have been blacklisted by Washington, restricting their access to US products and technologies.

Ding Shuang, chief Greater China economist of Standard Chartered Bank, said Beijing likely feels that “there’s no need for China to keep a low profile or cover up its ambitions, given the obvious containment [policy] by the US”.

“The new plan would be no different from the old one – it must take control of core technologies,” Ding said.

MIIT, which faces the immediate problem of dealing with the impact of US policies and the coronavirus, as well as long-term issues such as boosting the nation’s manufacturing base, is helping draft the new development plan for 2021-2025 under President Xi Jinping’s new self-reliance strategy.

Xiao Yaqing, China’s newly appointed industry minister, made a field visit last week to a jumbo jet assembly plant, jet engine research facilities and integrated circuit enterprises in Shanghai, urging the companies to “achieve breakthroughs in key areas and core technologies”.

Speaking at a forum of the
China International Fair for Trade in Services
last weekend, Xiao revealed that the ministry was drafting five-year plans to boost big data, software, information technology and telecommunications “with clear development goals and tasks”.

China’s January-July manufacturing investment dropped 10.2 per cent from a year earlier, far larger than the national overall fall of 1.6 per cent, according to the National Bureau of Statistics.

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