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US is mistakenly making policy based on fear of China's tech abilities

High-tech industries are likely to miss Made in China 2025 targets

| China
These robotic arms, welding a pump truck part at a factory in Hebei province, are cutting-edge technology, but the domestically-made industrial robot industry will miss Beijing's target of meeting 50% of Chinese market demand by 2020   © Reuters

The U.S.'s delayed tariffs on more than $150bn of imports are not the only nasty surprise China is likely to get at the end of this year. When the holiday season ends and 2020 is upon us, China will face an embarrassing reality: it will miss its ambitious first-phase targets for its Made In China 2025 high-tech manufacturing masterplan.

Announced in 2015 by China's cabinet with President Xi Jinping's blessing, Made In China 2025 is the country's road map for upgrading its industries from the world's factory for cheap goods to a global power on par with the U.S. and Germany. However, since trade tensions flared up with the U.S. last year, China has scrapped references to the initiative.

These targets were "predictive," "nonbinding" and "not a government action," explained Miao Yu, a minister in China's Industry and Information Technology department in 2017. But the West has interpreted Made In China 2025 as concrete evidence of China's ambition and -- more importantly -- ability to dominate the global tech sector with brute government force.

As trade tensions intensify, not only will China miss the targets, but the country may take decades longer -- or may indeed never -- fulfill these lofty objectives. The U.S., on the other hand, will need to reevaluate if it has been fearing a tech "paper tiger" all along.

Just as the perceived threat from the Soviet Union was inflated during the Cold War era, the U.S. is likely to realize that China's threat to its technology dominance has been grossly exaggerated.

Missed targets will come from many sectors. Beijing aspired that domestically made industrial robots would meet 50% of Chinese market demand by 2020. In 2018, the market share of Chinese domestic industrial robot makers stood at 32.2%.

This included a 5.5 percentage point jump from a year ago after one segment of the market, automobile industrial robots, dominated by foreign companies, shrank, according to China Robot Industry Alliance (CRIA).

"We are facing a high degree of difficulty in reaching the objective set for 2020," Qu Daokui, chairman of CRIA, said at the World Robot Conference in Beijing last year.

In aerospace, China aspired to complete the research, production and delivery of self-developed 150-seat single-aisle mainline passenger aircraft by 2020. Moreover, it hoped domestically-made mainline passenger aircraft would meet 5% of Chinese demand by next year.

But the Comac C919, China's flagship effort to develop such an aircraft, is suffering delays and is still conducting test flights. It will take three to five years to obtain necessary approvals in China before the C919 can begin production and delivery, according to a Chinese news report citing government officials. That means meeting this goal will be significantly delayed.

By 2020, China also hoped to significantly expand its rail equipment sector overseas, with 30% of business generated outside its borders. Industrywide figures are unavailable, but China's leading rolling stock manufacturer, CRRC Corporation, made 9.5% of its revenue from outside of China in 2018, roughly unchanged for the past three years, according to its annual report.

Considering Beijing placed its hopes on CRRC as the main vehicle for internationalization, the country is unlikely to meet the 30% target next year.

The less tangible goals in Made In China 2025 are becoming almost impossible to meet given the intensifying trade frictions with the U.S. "Becoming one of the leaders in 5G international standards, technology and industry," for example, is highly questionable since Huawei Technology's 5G systems have been or are being banned by major countries around the world.

China is home to many innovative technologies, such as these robot soccer players competing during the RoboCup Asia-Pacific Tianjin Invitational Tournament 2019   © Reuters

Other goals will take much longer for China to achieve after international cooperation appears destined to decline. These include "reaching internationally leading levels in critical core systems in new energy cars" and "in integrated circuits" and "realizing breakthroughs in core technology in new generation robots."

What does this mean? First, rampant misinformation must be cleared up. Chinese government and media created these lofty policy documents and self-aggrandizing reports to rally the population and generate national pride. The West unwittingly took it all at face value. Much is lost in translation in this process and has led to unsound policymaking in the West to "contain" China now.

Second, we must caution against elevating current grievances relating to trade and economic issues to an ideological divide that amounts to a new cold war. Today, 60% of Americans have an unfavorable opinion of China, up from 47% in 2018 and the highest level since the Pew Research Center began asking the question.

A new cold war will lead the world to unprecedented turmoil and hurt all of us.

Finally, the world should seek incremental improvements, not one-shot solutions. The global economy and financial markets are in uncharted waters, and so are China's reforms. Structural issues such as reforming state-owned enterprises and corporate deleveraging are extremely difficult to solve after years, sometimes decades, of kicking the can down the road.

As we look at 2020 and beyond, China will not be the only country that faces disappointing outcomes in national policy. The U.S. and others need to reassess their own policies if we want to return our future to international cooperation and collective advances.

Nina Xiang is the founder of China Money Network, a media platform tracking China's venture and tech sectors. She is also the author of "Red AI: Victories and Warnings From China's Rise In Artificial Intelligence."

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