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Trade war

Beijing plans 'Made in China 2025' revision as trade war expands

Diplomacy intensifies after Huawei executive is granted bail

The "Made in China 2025" initiative plans for the country to be a global leader in various high-tech fields, including robotics.   © Reuters

WASHINGTON/NEW YORK -- China is planning to replace its signature "Made in China 2025" initiative with a new program promising greater access for foreign companies, U.S. media reported Wednesday.

The less-aggressive version of the industrial plan probably will be rolled out early next year, when the U.S. and China accelerate negotiations during a 90-day period.

The news of the revision emerged one day after a court in Canada granted bail to Huawei Technologies executive Meng Wanzhou. Together with news of China resuming purchases of U.S. soybeans, the move seems to signal that President Xi Jinping is offering an olive branch to U.S. President Donald Trump to defuse the trade war.

On Wednesday, The Wall Street Journal reported that China plans to replace "Made in China 2025" with a new program promising greater access for foreign companies. The revised plan would play down China's bid to dominate manufacturing, the Journal reported.

Coined in 2015, the "Made in China" initiative laid out bold goals to propel the country within a decade into high-tech leadership, with dominant positions in robotics, information and clean-energy cars, among others.

Bloomberg later reported that Beijing may postpone some aspects of the industrial program by a decade to 2035.

"They have been playing down the 2025," U.S. Commerce Secretary Wilbur Ross told CNBC on Wednesday.

Meanwhile, also on Wednesday, China reportedly purchased U.S. soybeans for the first time since the two presidents met on Dec. 1, pushing U.S. soybean futures to a four-and-a-half month high.

State-owned Chinese companies bought at least 500,000 tons of U.S. soybeans in deals valued at more than $180 million, Reuters reported.

Yet, with the trade war expanding to new areas, embroiling American neighbor Canada and triggering countries like Japan to shun Huawei from its next-generation infrastructure, the stakes continue to rise.

Whether China's new measures will be enough to push the trade negotiations with the U.S. forward remains unclear. Trump, for his part, made clear that even the detention and potential extradition of Meng Wanzhou, the chief financial officer of Huawei Technologies, could be bargaining chips in a trade deal.

In a Tuesday interview with Reuters, Trump said he might get involved in the case regarding Meng, who was detained by Canadian authorities in Vancouver at the request of the U.S.

"If I think it's good for what will be certainly the largest trade deal ever made -- which is a very important thing -- what's good for national security -- I would certainly intervene if I thought it was necessary," Trump said.

Huawei Technologies has fallen victim to the escalating trade war between the U.S. and China. (Photo by Yu Nakamura)

The Trump administration had officially maintained that Meng's arrest was unrelated to the trade war. The president's involvement would compromise the investigation into Huawei by the Justice Department, which in turn would undermine the country's standing as a state of laws, but Trump appears more interested in raising the pressure on Beijing.

In April, the Trump administration sanctioned another Chinese communications company, ZTE, for violating trade restrictions on Iran, pushing it to the brink of collapse. Huawei is five times the size of ZTE by sales, and is believed to import about $10 billion worth of American components a year. Squeezing its supply chain could drive it into a crisis at the blink of an eye.

Canadian authorities granted bail to Meng on Tuesday. They will decide by February whether to hand her over to the U.S. as Washington demands.

The U.S. and China have until the end of February to reach an agreement on trade before their 90-day truce on new tariffs runs out, and many expect Trump to use Huawei as a bargaining chip.

U.S. authorities also are expected to indict Chinese government-affiliated hackers as early as this week, and could sanction those involved in cyberattacks on American corporations and government agencies, local media report. Chinese authorities are suspected of having a hand in the data breach affecting up to 500 million guests of Marriott International hotels, which was discovered last month.

In his presidential campaign, Trump railed against China for the massive trade imbalance between the two countries. His attacks then shifted to the Made in China 2025 initiative. The U.S. now has additional tariffs on $250 billion of Chinese products.

But with retaliatory tariffs from Beijing, the U.S. trade deficit with China has actually increased. Trump is now making an issue of Huawei and cybersecurity in hopes of scoring a compromise.

Meanwhile, China is pushing the U.S. to back down on Meng even while expressing an interest in advancing trade talks. Regarding the detention of former Canadian diplomat Michael Kovrig, Foreign Ministry spokesman Lu Kang said Wednesday that "the Chinese authority will deal with the matter in accordance with laws and regulations."

Most diplomats in the Chinese capital believe Kovrig was detained in retaliation for Meng, though Lu declined to comment. Lu did say that the International Crisis Group, Kovrig's employer, had "not legally registered in the mainland of China as required by law," signaling that Beijing is cracking down on foreigners within its borders.

When Canada detained a Chinese citizen in 2014 at U.S. request, China retaliated by arresting Canadian couple living in Liaoning Province on espionage charges. They were freed years later.

As tensions grow, Japan has decided to cut out Huawei products from government-affiliated projects. China denounced this move as "discrimination" against its companies.

Many Japanese companies fear they could be dragged into the worsening controversy over Huawei. In the last week, China sentenced two Japanese nationals accused of spying, further stoking concerns.

The U.S. and China are still making efforts to resolve trade issues, with Chinese Vice Premier Liu He offering to revoke a 25% tariff on American cars in a Monday call with U.S. Trade Representative Robert Lighthizer. But recent developments pose a significant roadblock. "The two sides have yet to set a date for a face-to-face meeting," a source familiar with the matter said.

Nikkei Asian Review chief desk editor Ken Moriyasu in New York contributed to this story.

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