While everyone is angrily discussing China’s suspension of Taiwanese pineapple imports, Beijing yesterday started reviewing its 14th five-year plan at the meetings of the National People’s Congress and the National People’s Political Consultative Conference. It is worth noting that China’s industrial development strategies in the five-year-period from this year to 2025 would deeply affect Taiwanese and cross-strait economic and trade structures.
Given its need for domestic development and the US technology ban, Chinese industrial development can be expected to adopt three main strategies.
The first would be to delay and wait for change. On Dec. 7 last year, Chinese Minister of Foreign Affairs Wang Yi (王毅) made a five-point proposal calling for China-US relations to “embrace a new start after all the difficulties.” On Lunar New Year’s Eve, Chinese President Xi Jinping (習近平) emphasized during a telephone conversation with US President Joe Biden that the China-US confrontation would spell disaster for both as well as the rest of the world.
These remarks reveal Beijing’s adjustments in response to the new situation, as China makes an all-out effort to reverse bilateral relations after former US president Donald Trump left office. Strategically, the Chinese side hopes to first resume dialogue, followed by a resumption of cooperation with the US, the concrete goal being to delay or reduce the US’ technology ban and export controls.
The next strategy would be to break the deadlock indirectly. While actively rebuilding China-US relations, it would establish cooperation with the EU, Japanese and even Taiwanese businesses to indirectly obtain the advanced technologies affected by the US ban.
The final strategy would be to promote independent industrial development. The Chinese leadership has seen that the US technology ban has exposed the nation’s manufacturing and technology industries’ overreliance on foreign technology, and that its core component parts, key raw materials and critical production techniques rest on an unstable foundation. Even if Beijing improves relations with the US or obtains key foreign technology indirectly, it now knows that the ultimate solution is independent technological innovation.
Apart from listing technology innovation as the top priority in its new five-year plan, China took the unprecedented step of writing a dedicated chapter about the issue in the plan. It has also listed strengthening national strategic technological power and enhancing industrial supply chain independence as the two economic priorities for this year.
Through the Chinese Communist Party’s party-state system, China hopes to make a breakthrough in certain core technologies, such as mask aligners, chips, operating systems, cellphone radio frequencies and semiconductor processing equipment. Additionally, artificial intelligence, quantum information, life and health, brain research, biological breeding, aerospace technology, and deep earth and sea exploration, are all key aspects of scientific research.
Since the implementation of the 12th five-year plan from 2011 to 2015, China has worked hard to catch up with and surpass the world’s leading tech powers. In terms of research and development (R&D) investment, China replaced Japan as the second-largest in the world after the US in 2009. Its R&D funding increased by 172 times from 1991 to last year.
Chinese government data showed that despite the COVID-19 pandemic, R&D funding last year hit a record 2.44 trillion yuan (US$377 billion) last year, rising by 10.3 percent to account for 2.4 percent of its GDP.
In general, on the premise that China and the US are willing to work together, Beijng would have more room to maneuver through the fulfillment of the first-stage agreement and US market access. In other words, the old trick of delaying and waiting for change might have some effect. Taiwan would be an important target as China pushes to achieve a breakthrough through indirect means and its strategy for independent industrial development.
In the foreseeable future, Beijing would on the one hand continue to try to obtain the technology and talent of Taiwanese businesses in China through mergers and acquisitions, while on the other hand continue to encourage certain Taiwanese industries to invest in China by offering preferential measures.
More importantly, as part of its strategy to deepen import substitution and independent industrial development and innovation, China would boost its ability to attract Taiwanese businesses through regional economic and trade integration, including the Regional Comprehensive Economic Partnership and the comprehensive investment agreement between China and the EU, along with massive domestic demand.
Perhaps the Taiwanese public could ease the impact of the Chinese ban on Taiwanese pineapples by splurging on local pineapples and other fruits. The question is whether Taiwan is ready to handle the potential impact of China’s industrial development strategies.
Jivan Huang is the chief of Mainland China affairs at the Chinese National Federation of Industries.
Translated by Eddy Chang
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