Categorized | China

What new industries will China attempt to dominate? There are seven.

FacebookTwitterGoogle+LinkedInRedditDiggStumbleUponbufferPinteresttumblrEmail

China’s most recent 5 year plan shows what industries the Communist Party of China has decided to focus upon.  I say Communist Party of China because the party makes the decisions, the party runs the government, so the government carries out the plan.  From a report by King & Spaulding:

The seven “strategic emerging industries” are (1) energy-saving and environment protection, (2) new-generation information technology, (3) biology, (4) high-end equipment manufacturing, (5) new energy, (6) new materials, and (7) new-energy cars.

 This means that the full force of government, government owned entities, government controlled entities, subsidies, low price inputs, talent, free credit, free land, etc. will be focused in these areas.  They will subsidize exports.  Prohibit certain exports so they keep the products in country for adding value downstream.  They will export and set predatory prices to drive domestic competitors in the U.S., Europe and elsewhere out of business.

Goal:  To create globally dominant industries in those sectors.

They have a plan.  Any U.S. companies competing in these fields could plausibly be the best in the business, but they will fail anyway because a company cannot compete with the full force of the Chinese government.

That is why state capitalism is kicking our butts.  Our politicians refuse to neutralize the predatory impact.  They have a strategy.  We don’t.  We have rhetoric.

When the U.S. built itself into an economic and production powerhouse, we had a strategy.  We executed it.

The full King & Spaulding article is below:

*******

July 2012

China Takes Further Steps To Boost Strategic Emerging Industries
Lingna Yan

As reported in the January 2011 Issue of the Trade & Manufacturing Alert, in October 2010, China unveiled its determination to develop seven strategic emerging industries in the State Council’s Decision to Accelerate the Development of Strategic Emerging Industries. The seven “strategic emerging industries” are (1) energy-saving and environment protection, (2) new-generation information technology, (3) biology, (4) high-end equipment manufacturing, (5) new energy, (6) new materials, and (7) new-energy cars. Recently, China made an important step to further the 2010 Decision. The State Council approved the 12th Five-Year National Development Plan of Strategic Emerging Industries (the “12th Five-Year National Plan”) at a standing meeting held on May 30, which is a detailed national plan designed to implement the supporting policies for the development of the seven industries over the 12th Five-Year period, i.e., 2011 to 2015.

The 12th Five-Year National Plan clarifies the priority development directions and tasks of the seven industries. In particular, the energy-saving and environment protection industry should (1) make breakthroughs in efficient energy utilization, pollutant prevention and safe disposal, and resources recycling technologies; (2) develop new and efficient energy saving, advanced environment protection, and resources recycling equipment and products; and (3) promote clean production and low carbon technologies. The new-generation information technology industry should accelerate the construction of next-generation information networks and make breakthroughs in new-generation information technologies. The biology industry should strengthen the development of biological resources utilization technologies and equipment and accelerate the construction of a modern biology industry. The high-end equipment manufacturing industry should give priorities to developing modern aviation equipment, satellites, modern railway transportation equipment, offshore engineering equipment, and intelligent manufacturing equipment. The new energy industry should promote the industrialization of renewable energy technologies. The new materials industry should give priorities to developing new functional materials, advanced structural materials, and composite materials, and engage in the R&D and industrialization of common basic materials. And the new-energy cars industry should accelerate the R&D and industrialization of the core technologies of key parts and materials. The Plan also singles out 20 major projects for government support.

A number of local governments also have formulated detailed plans to cultivate and promote these industries in their jurisdictions. For example, Guangdong Province, one of the largest provinces in terms of the scale of strategic emerging industries, promulgated its provincial 12th Five-Year Development Plan of Strategic Emerging Industries on March 6, 2012, targeting a 127 percent growth of gross output value by 2015. To accomplish the target, Guangdong Province declares that it will employ a series of subsidy measures to support the strategic emerging industries, including but not limited to loan interest subsidies, grants, tax exemptions and reductions, and equity infusion.

Chinese companies in the strategic emerging industries can expect significant subsidies from both the central government and local governments during the 12th Five-Year period. As reported, the central government has set up a 7.5 billion RMB investment fund this year for the strategic emerging industries. Along with the approval of the 12th Five-Year National Plan, the central government launched the first batch of the Strategic Emerging Industry Development Special Fund for new-energy cars, new materials, and high-end equipment manufacturing companies, providing funds equal to 15 percent of investment in fixed assets, up to 40 million RMB for a single project. Subsidy contributions from local governments are also substantial. As of the end of 2011, approximately 24 provinces/municipalities established special funds to support the strategic emerging industries. For example, Beijing municipal government has set aside a 20 billion RMB special fund to support technological development and industrialization, and a 20 billion RMB government procurement fund to procure products of these industries over the 12th Five-Year period. Similarly, the provincial government of Guangdong Province has pledged to input 22 billion RMB in subsidies over the 12th Five-Year period for these industries.

 

12 Responses to “What new industries will China attempt to dominate? There are seven.”

  1. William Ryan says:

    If we as Americans do not stick together ,make a plan of action and reverse our broken trade policies fast or we will never be able to put our economy back to work again. We must act fast and with coordinated plans and efforts to save what is left of our fragile economy. If China can do this with their 12th 5year plans system so can we.Help to spread the word to all in Washington who do not see the light or the hand writing on the wall.If government run capitalism is the only game in town then what are we waiting for?

    • Bruce Bishop says:

      William,

      You say, “If government run capitalism is the only game in town then what are we waiting for?”

      How about this: Can you see yourself, or your kids, working 16 hour days, six days a week, for fifty cents an hour? Of course, the company will provide you with a “living space” in a high-rise dorm next to the factory. And, just in case, there are suicide nets under the windows for when the stress gets to be too much for you.

      On the other hand, do you maybe see yourself as one of the apparatchiks of the Communist Party? In that case, your life would be a good bit better.

      As to our government’s plan of action, you can read all about it in the book “The Road to Serfdom,” by Friedrich Hayek.

  2. Thomas Crumm says:

    Knowing China’s next 5 year plan is focused on “new energy vehicles” could very well spell the end of America’s BIg Three and what is left of its industrial sector. Too many American consumers are unaware that models offered by the Big Three already contain large numbers of components made in China and other countries. This year GM made the decision to move vehicle design and development to China. Within 5 years you can expect GM dealerships to be stocked with GM cars made entirely in China. If this transition is well managed (by China) American consumers will continue to think they are buying GM cars made by American workers.

    America’s political leadership is now mouthing the words “America needs jobs and a healthy industrial sector is necessary for economic recovery”….and yet America’s trade and currency exchange policy continues to line the pockets of a few brokers and what is left of the desperate industrial leaders. Moving American jobs off shore in hopes of keeping share prices climbing is a very short-term strategy. America desperately needs a string of brilliant long term policy decisions on trade and currency exchange.

    China’s leadership has been playing America’s combination of democracy and capitalism for all its worth for decades. China’s leadership has managed to keep the peace at home at the expense of the economies of other nations. America needs to step up with a plan that will save what is left of its industrial sector….a plan for rebuilding the industries sacrificed in the last half century and that will bring its industrial sector jobs home.

    • Bruce Bishop says:

      Thomas,

      You say: “America desperately needs a string of brilliant long term policy decisions on trade and currency exchange.”

      We only need one brilliant and simple idea. This idea was provided by Warren Buffett in 2003 when he recommended that we impose “balanced trade” on U.S. importers of Chinese goods. In other words, our government could easily mandate that we import no more goods from China than China imports from us. This would reduce our trade deficit to zero (after a phase in period) and bring back millions of manufacturing jobs. You can Google “balanced trade.” There is also an excellent website called http://www.idealtaxes.com that focuses on balanced trade.

      As to currency manipulation, it is a red herring. If currency manipulation were the real problem, we would be totally at the mercy of China to “play fair.” “Balanced trade” is totally in our hands.

  3. Bruce Bishop says:

    China will dominate EVERY industry. Anything that can be manufactured can and will be manufactured in China, at one-third to one-tenth the cost that the U.S. could produce it for.

    Unless our government takes action, China will own us. They are holding enough of our money to buy a controlling interest in the entire Dow Jones 30 Industrials.

    The only viable course of action I have heard of, in ten years of studying this issue, is “balanced trade.” You can Google it.

  4. William Ryan says:

    Hi Bruce you must be talking about FOXCONN and we all agree that something must be done fast and I don’t want any Americans to be a slave to any one… I feel that the old tariff may be needed again for all imported goods… This extra tax on them might encourage more domestic production once again…After all we are not talking about Fair Trade here and you know that China will game any system we put out there.You also must know much more of the complexity of these trade issues than I but I feel the protectionist approach may be the only real hope we have left as they continue to eat our breakfast,lunch and dinner…Under Obamanomics we can see government run evey thing coming already, so why not compete economically with our own version of government run capitalism? In the Harvard Business Review they pointed out that Germany is the contrarian economy because the people buy their own goods. We do not do that here. Maybe is the people here had to pay an addition tax to purchase foreign goods they would think twice.

    • Bruce Bishop says:

      William,

      I agree that something must be done fast. The problem with tariffs is that they would hurt U.S. consumers and probably wouldn’t make U.S. products competitive anyway. Our government would have to select “winners” and “losers,” from among the thousands of products available.

      We were sold on the WTO and trade with China by the LIE that China would trade us their goods for our goods. China is not taking our goods. We are buying their stuff and paying cash for it. This is NOT trade. It is labor arbitrage, and is a betrayal of our country. It is destroying our country for the benefit of the few.

      By applying Warren Buffett’s “balanced trade” idea, we would allow the market to select those products where we could be most nearly competitive. Buffett recommended a five-year transition period to allow for the planning and ramping up of U.S. production to replace the Chinese products we would no longer import.

      The fact is, we should have NEVER started importing anything from China. As a communist nation, their ideology is contrary to ours and they should be treated as an enemy, just like the Soviet Union was. China is NOT our friend. They are destroying us while shaking our hand, looking us in the eye, and smiling.

      By imposing “balanced trade,” we would stop the bleeding and bring back millions of manufacturing jobs. This would begin the process of restoring our economic health. Here is a link to “balanced trade.” http://en.wikipedia.org/wiki/Balanced_trade

      As to “government run capitalism,” there is no such thing. It has to be socialism, communism or fascism, if the government is in control of production planning. These all become totalitarian in time because that is the only way to make them work. And, even then, they work poorly. The reason capitalism and the free market work so well is because people are risking their own money. Government has NO money except for what it takes from other people. Politicians tend to be cavalier when it comes to risking other people’s money.

      • Tom T says:

        “I agree that something must be done fast. The problem with tariffs is that they would hurt U.S. consumers and probably wouldn’t make U.S. products competitive anyway. Our government would have to select “winners” and “losers,” from among the thousands of products available. ”

        I disagree with you here, Bruce. If we could get all importers to pay all of our taxes we would have it made. Buffet’s plan is just a flexible plan that puts costs onto those worst business models for the country (good economic incentives there) but they are just a flexible tariff.

        Of course goods would come up in price to consumers. They would come up in price enough to allow more businesses in the U.S. to have an economically viable business operation providing those goods. If China wanted to be so dumb as to make their prices super low because we have a high tax on their goods, then China ends up paying U.S. consumer’s taxes and funding our government, which is a good thing.

        Of course China’s best option is to let Chinese have access to free market currency so they could consume some of their earnings by buying from the U.S. This same circumstance in the U.S. would be good for the U.S. economy—businesses paying their workers more so they create demand (Ford, I believe, was on to that one).

        Tom T.

        • Bruce Bishop says:

          Tom,

          We are back to comparative cost — U.S. vs China.

          In 1985, I worked for one of the top players in a fiercely competitive industry. Our products were of fabricated metal with electrical wiring. They were sold through a network of distributors who supplied local contractor supply houses. The contractors didn’t give a hoot-in-hell where the stuff came from. If they could save a buck and pass the pre-closing inspections, they were happy.

          Then, along comes China, with several knock-offs of our top sellers. The delivered price was one-third of what we could produce those products for. Our choices were, either let China develop its own distribution network, or, become an importer/distributor of Chinese products.

          The plant where I worked had over 1000 workers. By 1995, it was closed. So were the plants of our competitors. All of those companies in that industry are importing Chinese products now.

          We were as automated as it was possible to be, given the relative low volume and high variety of products. Plants that had been built in the South and in Mexico still couldn’t compete with the Chinese prices.

          We were also as vertically integrated as it was practical to be. We started most products with coils of steel, brass or aluminum and spools of wire. As the largest of the competitors, we enjoyed the economies of scale and a seasoned workforce. Still, we couldn’t compete with China. I can’t imagine a scenario where we could compete with China. Also, remember that China was just getting started. I’m sure they are a lot more efficient now.

          So, Tom, what would the tariff have to be to offset a three to one cost advantage?

          “Balanced Trade” would bring back the most highly automated (least labor) products and those where the price elasticity is greatest — medical devices, SCUBA gear, high-end electronics (?), avionics (?).

          Let me know what you think.

          Bruce

          • Tom T says:

            I guess that would depend on the product, Bruce. I would much rather see imports from China being taxed and to be able to relieve the tax burden on domestic producers. I don’t think, given that scenario, the tariff would have to cover the whole price differential.

            Buffet’s plan is a good one. It would stop China from buying all our manufacturing jobs due to incompetency in our U.S. Trade Representative and national trade policy (that of trading jobs for goods).

            The Federal govt. could actually sell import credits very much the same as exporters who earned them could. It could finance health care for all Americans if countries wanted to try to play the mercantilist game.

            While I am very worried about the trade deficit (which gives rise to the budget deficit), I am also worried about countries like China buying their way into our markets in more strategic ways much the way they have with rare earth minerals. It only takes time to compete unfairly and run competitors out of the business so that you can use your monopoly power to extract monopoly profits.

            In the balanced trade program Warren Buffet explained, the U.S. would have more businesses here in the U.S because he stops the mercantilist games. The government would have more revenue because more profitable businesses here mean more tax revenues to run the country’s defenses, and investment in infrastructure, education, etc so Buffet’s plan would help decrease the trade and fiscal deficits.

            With the U.S. issuing trade credits and keeping track of everything, the U.S. could easily have the agility that China has in these global games. Our politicians make the rules here in the U.S. They have been doing a pretty sorry job at it and the trade deficit, median income, and the distribution of the wealth of our economy shows. On all these fronts where there is a clear score card, they have failed the public. Right now we don’t have enough people that judge them on these merits and instead we have a really broken political system where appearances and mostly empty political rhetoric mean more than the above facts. My wife is a math teacher and she gives grades on the test scores and other things that make up a grade. It is all based on achievement and not a subjective wishy washy grade because she likes a student (this seems to be a perennial problem with our politicians).

            I like Buffet’s plan because it is not based on subjective policies, but objective policies. If you sell more than you buy from overseas, you get an import credit which can then be sold to someone importing more than they sell overseas. It is objective, not the subjective system we have now with the U.S. Trade Representative and our current trade policy. It has market dynamics that adjust with the facts. I would have a problem with a company like Walmart buying up exporting companies and concentrating the wealth more and more. It isn’t good for the country to have one company controlling everything. It can seem good in the beginning but it never ends up well in the end because greed and self interests will always surface with those in power.

            The way we are handling this problem now is that we allow our politicians to sell our economy in exchange for low interest rates that allows them to borrow cheaper and spend more of the nation’s wealth through the govt. instead of through the hands of the people who make up the economy. The low interest rates and a little greed on Wall Street produced a huge bubble where the Treasury is now monetizing the bank’s mistakes. The wealth of the nation is being concentrated not in the hands of the most deserving, but in the hands of cronies and those like James Dimon who are a heck of a lot smarter than our politicians they are paying off. All the incentives are wrong.

            I think Buffet has the analogies right with Thriftville and Squanderville. I widen this analogy to the people responsible for the policies that put us there and say that politicians are willing and able to use the nation’s credit card to overspend and they are more than happy being in charge of Squanderville while China plays the role of Thriftville, continually giving Squanderville the credit and low interest rates to create the problems for capitalism to hang itself. Our trade deficit is the score card for who is in Squanderville and who is in Thriftville. I was encouraged today when out to buy a dishwasher and the manager of the store understood what was happening with our politicians selling our jobs to China. If he can get it, there is hope in getting beyond the empty political rhetoric and start holding politicians accountable for what they are doing to the nation. It isn’t right vs. left, republican vs. democrat. Both parties are to be blamed for these sorry policies that are allowing politicians to use the nation’s credit card while selling its jobs to China and the oligarchs who take advantage of the current rules (and pay politicians to keep them in their favor).

            Tom T.

  5. William Ryan says:

    Ton and Bruce I like you guys and everything you say about the trade problems. I wish more people like you guys would advocate for a better trade deal for American workers…I saw Donald Trump on the 4th talking to Bill O Reilly and he was advocating for a 25% tariff on all goods only from China,not other countries…I think anything we do is better than what we are NOT doing now…Can we get the public debate going before the election? This issue should be the #1 issue in the election,not Obamacare.This issue is the real driver of our economy and jobs loss…Health care currently makes up 1/6 of the over all economy with no real competition. While the huge trade deficit which is largely made up of lost manufacturing jobs employs far more people and far more value added to any economy because it creates new wealth for that economy…Obamacare and the health care industry in general does not create new wealth and is classifies I believe as service.

    • Bruce Bishop says:

      William,

      Thanks for the encouraging words. Unfortunately, there are so many voices telling us to run in different directions that most people are hopelessly confused.

      Many of the “experts” are still saying that “Americans need more education.” Tell that to the 80% of our population who are not geared mentally for calculus, thermodynamics or C++. Or tell that to the 1.8 million engineers who are underemployed or who have simply given up on finding a job.

      The Boston Consulting Group claims that our jobs are coming back because Chinese wages are catching up to U.S. wages. You only have to read about Foxconn and the iPhone to realize that is hogwash.

      The Heritage Foundation claims that it was robotics and automation that took away our millions of manufacturing jobs — not China. As someone who spent 20 years evaluating opportunities for automation or robotics, I can assure you that is not the case.

      We are being betrayed, all around, by people and organizations who are supposed to be looking out for our interests. Our government has sold us out and yet it looks like a majority of them might get reelected again this year.

      In my opinion, only our government can stop the flow of our jobs, our wealth and our future, to China. And, there isn’t much time left.

Trackbacks/Pingbacks


Sovereignty at Risk with Globalist Agreements

Tea Party organizations and members can show their opposition to trade and global government agreements by taking action now!

* Organizations can sign this letter asking GOP congressmen to deny Fast Track to Obama.

* Tea Party members can email their legislator to stop Obama's unconstitutional Fast Track Scheme.

Friends Don’t Let Friends Buy Imports

Sign up to receive periodic updates

Frequency