China Stresses Reliance on Its Own Technologies in Five-Year Plan

(WSJ) China’s leaders approved an economic blueprint for the next five years that emphasizes “technology self-reliance,” a defiant message in the face of intensifying U.S. sanctions against Chinese firms.

“Technology self-reliance is the strategic support for national development,” said a communiqué released Thursday by a closed-door conclave of senior Communist Party officials.

The four-day meeting, held at a heavily guarded government hotel in western Beijing, was chaired by President Xi Jinping and attended by roughly 360 top officials. It laid out the plan for the years through 2025 at a time when China is gearing up for what leaders call a “protracted battle” with the U.S. The plan overall comes with an inward-turning tone, stressing the need to prioritize domestic markets.

The mission to achieve technological independence is becoming more important as Chinese companies come under pressure from Washington and get shut out of foreign markets. The U.S. has threatened bans on Bytedance Ltd.’s TikTok app and Tencent Holdings Ltd. ’s WeChat. Because of U.S. sanctions, Huawei Technologies Co. is running out of processor chips to make smartphones and may soon have to suspend production of its own most-advanced chips.

Chinese officials say President Trump’s trade war against Beijing, coupled with a recent cascade of actions aimed at restricting Chinese access to American technology and markets, has made Mr. Xi’s leadership conclude the U.S. is no longer a reliable partner—no matter who is in the White House in the next four years. Democratic presidential candidate Joe Biden has also vowed to be tough on China.

The official communiqué alluded to what is expected to be continued confrontation between the world’s two largest economies. Citing new challenges brought about by the complex international environment, it urges the ruling Communist Party to “maintain strategic resolve and manage our own affairs well.”

The new policy blueprint will accelerate Beijing’s shift toward fostering domestic companies and markets as China’s main growth drivers. Technologies and investment from overseas, which had powered Chinese growth for decades, would play a lesser role.

“Currently the biggest challenge for Beijing is a potential decoupling with the U.S.,” said Larry Hu, Hong Kong-based China economist at Macquarie Group, a Sydney investment bank. As a result, Mr. Hu said, the main theme in the new five-year plan involves “lowering reliance on foreign supplies and increasing reliance on domestic demand.”

Detailed action plans, Chinese officials say, will be fleshed out this spring, when China’s legislature is due to rubber-stamp the new plan. For now, it represents broad outlines of Mr. Xi’s effort to reshape the economy so that it can be driven more by internal forces.

The leadership also unveiled some longer-term targets for China’s economic development. It pledged to pull the country’s per capita output levels up to that of “moderately developed countries” by 2035. That would mean per capita gross domestic product of about $30,000 a year—somewhere around the levels of South Korea and Spain. Last year, the figure for China was $10,262, according to the World Bank.

Former paramount leader Deng Xiaoping had aimed for realization of the per capita target by 2050. By moving up the timetable, Mr. Xi is trying to project more confidence in an increasingly state-led model under his leadership.

Leading the drafting of the five-year plan is Vice Premier Liu He, the Chinese president’s point man on economic policies and his chief trade negotiator with Washington. While putting together the plan, the Chinese officials said, Mr. Liu sought to balance the domestically oriented policy shift against the need to avoid scaring off foreign investors.

Some analysts have said such a shift would make foreign businesses—already facing restrictions on market access and the potential for more Chinese retaliations—feel more unwelcome. Foreign companies hire millions of workers in China, representing an important source of employment and capital amid slowing growth. Beijing figures China’s big market will continue to be a draw for international capital.

While stressing domestic forces as the core, Thursday’s communiqué also promised to broaden foreign access to Chinese markets. China will “open wider, and in more areas…and will rely on the advantages of China’s large market to promote international cooperation.”

China has been pouring resources into its own research labs, universities and companies in the past two years to try to offset the impact from U.S. sanctions, especially in the area of technology. The effort has helped the country somewhat when it comes to weaning off its addiction to foreign technology; but in some sectors, especially semiconductors, China still lags behind.

There are emerging signs of government investments in chip projects going to waste. A semiconductor maker in the western city of Chengdu, for instance, received billions of dollars of financing from the local government in the past couple of years. But it stopped production earlier this year because of a lack of technological capabilities and continued thirst for funding.

The officials say the new five-year plan would improve the mechanism where government funds and other resources are reallocated and enhance the accountability of companies receiving such largess.

The communiqué also praised China’s progress in fighting the coronavirus pandemic under President Xi’s leadership.

Source: Wall Street Journal by Lingling Wei 

China Stresses Reliance on Its Own Technologies in Five-Year Plan China Stresses Reliance on Its Own Technologies in Five-Year Plan Reviewed by TechCO on 10/30/2020 Rating: 5

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