Technological innovation is Chinese industry’s best response to US trade protectionism

By Hu Weijia Source:Global Times Published: 2018/10/24 21:58:41

China must be prepared for a protracted trade conflict with the US, and Beijing needs a long-term plan to deal with the possible withdrawal of foreign investment.

How is the escalating trade conflict affecting transnational enterprises? Bloomberg interviewed several companies, and the interviewees said they are ready to relocate supply chains if the cost of importing Chinese goods becomes prohibitive.

As it renegotiates free trade agreements, the Trump administration's posture of using bilateral deals as a strategic tool to unseat China from its position on the global industrial chain is becoming more evident. The Chinese economy will perhaps feel more pressure as the ongoing trade conflict accelerates the withdrawal of foreign companies from China's manufacturing sector, especially low-end labor-intensive industries.

However, China's determination to upgrade its manufacturing sector is stronger than many had expected, and these efforts will cause the US strategy to fail.

The industrial sector occupies an important place in the Chinese economy. To ease the pressure of US protectionist trade policy, China must improve its bargaining power when doing business with other countries and regions. The country is trying to enhance its unique, irreplaceable role in global production and supply chains.

While the textile industry in many countries is still labor-intensive, new technology has advanced manufacturing processes in some markets, including China. For instance, if China can lead the world in the mass production of new textiles that can release or retain heat automatically depending on the weather, Chinese companies can maintain their massive advantage, in spite of rising labor costs and US tariffs that squeeze profit margins.

The ongoing trade conflict has made it increasingly urgent for China to invest more in technological innovation, especially in the low-end and labor-intensive industries. The country has ample scope to upgrade its industries, based on technological breakthroughs.

Beijing must be prepared to take countermeasures as the US attempts to restrain the rise of China's manufacturing sector by rewriting the rules of global trade. The best response will be to upgrade its manufacturing sector and promote technological innovation.

The author is a reporter with the Global Times.


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