While details are still scarce, there are signs that President Xi Jinping and others are aiming to prioritize “new productive forces,” which could have big implications for U.S. factories, especially in emerging industries.
Chinese Communist Party (CCP) officials concluded a key meeting in Beijing on Thursday that is expected to produce an economic roadmap to revitalize China’s sluggish economy.
If early reports are any indication, that roadmap will look familiar.
The New York Times report the Post-official meeting summary The statement, released after the conclusion of the “Third Plenary Session of the Central Committee,” appears to echo a message from Chinese leader Xi Jinping himself, urging China to “adhere to a state-led, technology-focused strategy, and do it better – that is, make it cleaner, fairer, and pay close attention to national security.”
Bloomberg more:
This is a broad statement lacking in specifics, but more will come out in the coming days with detailed reports and various policy announcements.
Xi Jinping’s favorite new phrase: “New Productivity” — will likely attract a lot of attention. It’s a twist on an old Marxist concept and involves using more state power to speed up the development of everything from nuclear technology to electric car manufacturing.
Quality growth is also a key focus, with authorities wanting to shift the economy away from a reliance on real estate and big infrastructure projects towards more advanced, strategic sectors such as artificial intelligence and computer chips.
That thinking is one reason why President Xi Jinping has been reluctant to roll out big state-run construction projects to boost disappointing economic growth after the pandemic, and why authorities have not acted more aggressively to stem the property market’s slump.
The phrase “new productive forces” is key. At least for the time being, it seems to be at the heart of Xi Jinping’s economic vision. In an opinion piece for the Brookings Institution, Arthur Kroeber writes: explanation The “new productive forces” is a kind of transformation for the Chinese economy, moving it towards a “technology-centric, industrial policy-led growth strategy” that aims not only to “achieve mastery of established technologies” but also to leverage national resources and become an innovator through “centralized control over capital allocation.”
The problem with this strategy, critics argue, is that Too much emphasis on state-led developmentChina’s current economic problems range from a massive housing crisis to local government debt, sluggish consumer spending and global trade tensions. Especially in relation to the United StatesCritics say China needs to open up a bit more if it wants to strengthen its economy.
But events this week suggest that that won’t happen, and we shouldn’t ignore the game plan. Xi’s strategy may work. Clover writes:
First, there is a lot of talk about this in China. Superiority The development of renewable energy technologies such as solar, wind, batteries, and electric vehicles is the result of a similar, but much less systematic, industrial policy effort. This success is not an isolated one. China currently accounts for about 20% of global manufactured exports and about 30% of global manufacturing output, and so far these shares have been driven by Resistant US-led trade “decoupling” efforts.
This strong and diverse manufacturing ecosystem, combined with a large and skilled workforce, means that more systemic government-led coordination and basic research efforts are likely to bear fruit. But China will remain deeply intertwined with the rest of the global economy. They will depend on external markets to absorb the inevitable production surplus.And even an economy as large as China is unlikely to be able to fully localize the complex supply chains of high-tech products.
The bold parts of the quote are our emphasis. While President Xi Jinping and his team may be preparing to lead the way in solar, wind, batteries, EVs, and other new technologies we have yet to think of, the success of his “New Productive Capacity” strategy depends on flooding global markets with Chinese products, which is in fact nothing new. China has been doing just that for the past two decades, leading to the “China Shock” that devastated America’s industrial communities, causing tens of thousands of factory closures and millions of job losses.
The US has finally woken up to this, imposing heavy tariffs on Chinese products in strategic industries and export controls on technologies it considers essential to national security. This US response likely influences some of China’s current policies. China may be able to get around some of the export controls, but Xi Jinping understands there is no guarantee China will have access to what it needs. China will have to invent something.
But make no mistake: China will likely do whatever it takes to keep its products in the U.S. consumer market. Remains the world’s largestFor example, we already know that China is evading tariffs by shipping products through countries like Mexico and Vietnam. Even if China becomes the global innovation leader, at least as currently planned, its economy will likely continue to depend on successfully shipping its inventions around the world.
While China has yet to release details about the Third Plenary Session, there is enough information to understand Xi Jinping’s vision for the next few years. Now the United States needs to strengthen its own strategy. Part of that should include continuing strategic investments in industrial policies such as the Control Inflation Act, the Bipartisan Infrastructure Act, and the CHIPS and Science Act, all of which have stimulated economic growth in the United States. Approximately $900 billion in investment After 2021, domestic production will be halted. The US must be able to manufacture what it needs. That’s it.
But the United States needs to implement a modern trade enforcement plan to counter China’s unfair trade practices, and we outlined many of the policies we believe would be most helpful in a recent report. SHOCKWAVES ReportThis includes modernizing trade tools, restoring Section 421 protections against import surges, further leveraging enforcement mechanisms like tariffs, working with allies, and implementing domestic content preferential treatment.
While the specific content of the third plenary session has yet to be revealed, enough is known about China’s overall strategy to gauge where it is headed. The only question now is how the United States will respond.
