The current US‐China trade conflict concerns two major sets of issues. The first is the US‐China trade imbalance—a record $375 billion US trade deficit in goods in 2017 which is perceived to be because of the lack of reciprocity in terms of tariffs, market access and investment. China has already offered some concessions in this area such as opening up particular service sectors, lowering investment restrictions, and offering to buy more American agricultural and energy products; and, such concessions can be made to align with China’s overall economic reform agenda.
The US has demanded that the Chinese government abandon the plan altogether or face punitive tariffs. The US government believes that the state‐led financing associated with MIC 2025 will enable Chinese companies to unfairly compete and dominate over strategic industries, especially food, fuel, medicine, and semiconductors (where US companies are presently global leaders). China, on the other side, views it as critical to its plan to transform the country into a high‐tech power. On this second set of issues, there is no compromise in sight so far
Made in China 2025 is a strategy that aims to upgrade China’s industrial sector by shifting the country’s economy to higher value‐added manufacturing sectors such as robotics, aerospace, and energy‐saving vehicles. The stated objective of this programme, released in 2015, is for China to become a major competitor in advanced manufacturing, a sector dominated by high‐income, developed countries such as the US. Until now China has relied on manufacturing and exporting basic consumer goods like clothing, shoes and consumer electronics to drive the country’s growth. In these lower‐value, low‐wage sectors, China mainly competes with other developing countries like Mexico, Brazil, South Africa, India, Vietnam and Taiwan. But to escape the middle‐income trap, China will have to move towards high‐tech industries and that is where the MIC strategy comes in. This programme involves government subsides, heavy investments in research and innovation, and targets for local manufacturing content. It also builds on earlier government policies that encouraged or required foreign companies seeking access to the Chinese market to enter into joint ventures with, and transfer technology to, domestic firms. Trump argues that MIC 2025, with the support of state funding, puts the US companies at an unfair disadvantage. However, these policies are not unique to China—these are standard tools for developing countries wishing to catch up with the richer, industrialised West. Japan, South Korea, Taiwan, Hong Kong, and Singapore used similar policies to foster economic growth and raise incomes. From the Chinese perspective, the proposition is straightforward. If foreign multinationals are going to reap profits from producing and
selling goods in the large Chinese market, it should be able to take advantage of such investment to aid its own development. Even advanced industrialised states, including the US, relied on state intervention and protectionist policies during their own stages of economic development.






