U.S. and China announce new tariffs in escalation of trade war

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President Trump followed through Friday on his threat to crack down on China for its “very unfair” trade practices, imposing a 25 percent tariff on $50 billion in Chinese imports.

Beijing quickly responded. In a late-night statement, China’s Ministry of Commerce said it would impose trade barriers of the “same scale and the same strength.”

The Chinese government said Trump’s tariffs were “damaging” relations and “undermining the world trade order.”

U.S. and Chinese officials in recent weeks had made progress on a deal that involved up to $70 billion in additional purchases of American products. But the Chinese offer was now “invalid,” the statement said.

Chinese officials, who had signaled their intention to retaliate if Trump went through with his tariff threats, are targeting the president’s supporters in farm states and the industrial Midwest.

Anticipating the Chinese response, the president said the United States would “pursue additional tariffs,” raising the specter of the tit-for-tat trade war that business leaders and many congressional Republicans fear.

In a short White House statement, the president said the import tax would apply to “goods from China that contain industrially significant technologies.”

Friday’s action follows an administration report in March that complained China had forced foreign companies to surrender their technology secrets in return for market access and had pilfered other advanced U.S. technologies through a campaign of cybertheft and investment in Silicon Valley start-ups.

“These practices . . . harm our economic and national security and deepen our already massive trade imbalance with China,” Trump said.

The United States last year ran up a $375 billion deficit in goods trade with China, a figure the president blames on Chinese trade barriers. Most economists say the gap is the result of broader forces such as Americans’ low savings rate.

On April 6, the administration published a proposed list of 1,333 products targeted for tariffs. After hearing objections from business groups, U.S. Trade Representative Robert E. Lighthizer dropped 515 items and added 284 new ones.

As a result, the tariffs will be imposed in two steps. On July 6, customs officers will begin collecting the tax on an initial basket of goods valued at $34 billion, which were on the initial list. The Office of the U.S. Trade Representative (USTR), meanwhile, will field comments on the new items on the list, valued at $16 billion.

“These tariffs are essential to preventing further unfair transfers of American technology and intellectual property to China, which will protect American jobs,” the president said.

USTR also plans to establish a process for U.S. companies to request permission to continue importing the targeted items on a duty-free basis, if no alternative suppliers exist.

The Chinese government is pursuing a $300 billion program of subsidies to enable its companies to dominate next-generation technologies such as artificial intelligence, robotics and quantum computing, upping the stakes for Trump’s efforts to preserve U.S. technological secrets.

China has a history of targeting industries such as steel or solar energy for growth, which results in excessive investment by its state-led firms. That, in turn, swamps global markets, driving prices to unsustainable levels and making it all but impossible for private companies to compete, a senior administration official said.

Unless the United States can somehow force China to change its industrial policies, American companies will lose out in a range of advanced technology markets, the official said.
“This is not market capitalism,” the official said, speaking anonymously to brief reporters. “These are state policies where they are targeting certain industries.”
Trump’s complaints about China’s trade practices are shared by many business leaders. But there is little support for using import taxes, which are paid by Americans, as a tool against the Chinese.
“Imposing tariffs places the cost of China’s unfair trade practices squarely on the shoulders of American consumers, manufacturers, farmers and ranchers. This is not the right approach,” said Tom Donohue, president and chief executive of the U.S. Chamber of Commerce.
The U.S. announcement comes at a complex juncture in U.S.-China relations.
Following a summit in Singapore between Trump and North Korean leader Kim Jong Un, Secretary of State Mike Pompeo stopped in Beijing for meetings with President Xi Jinping and other top Chinese leaders.

On Thursday, Pompeo thanked Xi for China’s help with North Korea and even wished the Chinese president a happy birthday.

But at a news conference with China’s foreign minister, Wang Yi, tension over trade was clear. Pompeo said the U.S. trade deficit with China is still too high, and Wang called for Washington to make a “wise choice” on tariffs.

After Trump’s statement Friday, Lu Xiang, a trade expert at the Chinese Academy of Sciences in Beijing, warned that relations between the two countries were heading to their lowest point since China began its economic reforms in the late 1970s.

“This is like holding up a pistol, putting the finger on the trigger,” he said of Trump’s actions. “It’s just one step away from pulling the trigger and firing the pistol. It’s a very dangerous and sensitive moment now.”

by David J. Lynch and Emily Rauhala/WAPO

Posted by The NON-Conformist

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China Hits Back On Trade Dispute, Slapping Tariffs On 128 U.S. Products

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Imported nuts from the United States are displayed for sale at a supermarket in Beijing, Monday, April 2, 2018. China raised import duties on U.S. pork, fruit and other products Monday.

Andy Wong/AP

China announced late Sunday that it would retaliate for the Trump administration’s tariffs on steel and aluminum by imposing its own import charges on a list of 128 U.S. goods, including agricultural products ranging from fruit to frozen pork.
The new tariffs, which China’s Ministry of Finance says begin on Monday, add fuel to what many economists fear is a burgeoning trade war between the two economic superpowers.
Beijing said it was suspending its obligations to the World Trade Organization to reduce tariffs on U.S. goods and would instead impose a 15 percent tariff on 120 U.S. goods, including fruit.
On pork and seven other products, the duty would be 25 percent, the Ministry of Commerce said, according to Xinhua news agency.

Beijing had warned last month that it was considering the tariffs on a range of products. It seems to have followed that script. Other items include wine and nuts, as well as aluminum scrap.

The ministry said the U.S. had “seriously violated” the free-trade principles in the WTO rules.

“China’s suspension of some of its obligations to the United States is its legitimate right as a member of the World Trade Organization,” the Chinese finance ministry said in a statement, according to Reuters.

The differences between the two countries should be resolved through dialogue and negotiation, the statement added.

The salvo from China follows the U.S. imposition of tariffs of 25 percent on steel and 10 percent on aluminum that were initially applied to several trading partners. However, the European Union, Argentina, Australia, Brazil, Canada, Mexico and South Korea have all since been temporarily exempted, while the White House has threatened further tariffs on China.

Last month, President Trump set in motion a further $60 billion in tariffs on Chinese imports to punish Beijing over the “theft” of intellectual property.

The South China Morning Post writes:

“… Beijing has so far held fire against major agricultural products such as soybeans or major industries such as aerospace giant Boeing – items that state-run daily Global Times suggests should be targeted.

The nationalistic newspaper said in an editorial last week that China has ‘nearly completed its list of retaliatory tariffs on US products and will release it soon.’

‘The list will involve major Chinese imports from the US,’ the newspaper wrote, without saying which items were on the document.”

By Scott Neuman/NPR

Posted by The NON-Conformist

Death of US dollar? China launches petro-yuan to challenge greenback’s dominance

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The highly anticipated yuan-backed crude oil futures have been launched in Shanghai. China is the world’s biggest oil consumer, with eyes on rival benchmarks Brent and WTI as well as the US currency.

 

Trading of the new oil futures contracts for September settlement started on the Shanghai International Energy Exchange at 440.20 yuan ($69.70) per barrel, reports Chinese daily the South China Morning Post. Some 18,540 lots have reportedly been sold and purchased so far.

The long-awaited step evoked a surge in global prices for oil with Brent Crude soaring to $71 a barrel for the first time since 2015. US crude benchmark West Texas Intermediate (WTI) reached the highest level in three years at $66.55 per barrel, before retreating to $65.53.

Experts see China’s yuan-dominated contracts as historic as the new futures symbolize the first time that foreign investors can access a Chinese commodity market. The launch ends years of setbacks and delays since the country’s first attempt at listing the securities in 1993.

At the same time, the petro-yuan launch is seen as a blow to the US dollar that has been weakening in recent months. The US dollar is the predominant settlement currency for oil futures contracts. On Monday, the greenback slipped to a 16-month low against the Japanese yen, but remained steady against a basket of six major currencies.

Chinese authorities have reportedly accelerated the launch amid growing crude imports. Last year, the country outpaced the US as the world’s number one importer of oil. Thus, the contracts may not only help to win some control over pricing from the major international benchmarks, but also promote the use of Chinese currency in global trade.

The greenback will get weaker, as soon as other nations have a real credible alternative to it, Ann Lee, Adjunct Professor of Economics and Finance at New York University and author of the book ‘What the US Can Learn From China’, told RT.

“It is more of a game changer for the US. As soon as other nations have a real credible alternative to the US dollar, they can dump dollars and switch to the yuan which can spark a dollar crisis. If that happens, not only will there be inflation from the tariffs, but also from the flood of dollars,” said Lee.

From Russia Today

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A Paranoid America Is Greatly Exaggerating Russian Power One sign of Russia’s weakness is its deepened alliance with China.

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Behind kerfuffle over a ‘nationalized 5G network,’ real US-China concerns

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The US, South Korea, and China are all racing to develop the next wireless communications technology, known as 5G.

The problem is that this competition is not shaping up as a race where the best technology wins but a clash of visions on how nations should develop. The long-held Western ideal of companies competing on a level playing field is squaring off against China’s single-minded drive to become the leader in key areas.

The immediate flashpoints are traditional industries – aluminum and steel – where China has threatened to retaliate if President Trump carries through with his threat to slap tariffs on those imports. The more difficult challenge will be reconciling Western economic ideals with China’s development strategy in cutting-edge technologies.

At stake are trillions of dollars of business in industries that entrepreneurs are just beginning to dream up using artificial intelligence, robotics, and other technologies. The consulting firm McKinsey estimates 5G alone will add anywhere from $2.7 trillion to $6.2 trillion to the global economy by 2025 as those next-generation wireless networks create the communications grid for self-driving cars, smart homes, and intelligent factories.

That’s plenty of money for many companies and countries to share in – if China and the West can reconcile their differences. What’s keeping the two sides talking is the knowledge that everyone loses in a trade war.

“These are big, long-term competitive concerns,” says Doug Brake, director of telecommunications policy at the Information Technology and Innovation Foundation (ITIF), a Washington think tank. And they’re not just economic.

What if China is so successful in a key 5G technology that the US military becomes reliant on it as a supplier? he asks. “What sort of position does it put us in?”

It’s those same military concerns that are behind China’s “military-civilian fusion” strategy, which aims to create a strong modern military on key high-tech technologies made domestically. And China is using a full array of tactics – from massive subsidies to state-owned and private companies to the appropriation of foreign technology – to achieve its goals.

 

Jason Lee/ReutersCaption

 

“The potential is certainly there and the determination of the Chinese is certainly there,” says Thomas Duesterberg, a senior fellow at the conservative Hudson Institute and coeditor of “U.S. Manufacturing: The Engine for Growth in a Global Economy.” “They’re putting a great deal of money and intellectual resources and mercantilist tools in the world trading order to try to achieve dominance.”

 Mr. Trump campaigned on the idea of getting tougher with China on trade issues, and his administration has made some early moves aimed at confronting the Chinese challenge. In August, the president followed up on a campaign promise of “a zero tolerance policy on intellectual property theft and forced technology transfer” by asking United States Trade Representative Robert Lighthizer to consider launching an investigation into China’s practices.

A memo stirs the pot

Discussion about US-China rivalry over wireless networks flared early this week when a leaked memo and slide presentation from within the White House National Security Council suggested that the federal government, rather than the private sector, should possibly build America’s 5G network. The rationale: to avoid the potential security challenge of Chinese technology handling US wireless communications. The idea drew wide criticism as unrealistic or unnecessary and prompted avowals from White House sources that it is not official policy.

On Tuesday, in his State of the Union address, President Trump reiterated his get-tough policy without mentioning China: “We will protect American workers and American intellectual property, through strong enforcement of our trade rules.”

While various Asian nations – not just China – have used industrial policies and low-cost labor to take big chunks of market share in manufacturing industries, such as steel, autos, and memory chips, China’s 5G drive also includes a determined effort to appropriate Western intellectual property (IP). According to government officials and private experts, this effort involves everything from outright theft of trade secrets through industrial espionage to a policy of forcing companies wanting to sell in China to transfer their technology to Chinese joint-venture partners.

China poised to be largest 5G market

The pressure on companies is enormous because China is such a huge market to sell to. The pressure will be especially intense on companies with 5G-related technology if, as expected, China becomes the biggest market for 5G by 2025. China’s Huawei and ZTE Corp., racing to build a 5G network in China, are providing increasing competition for Europe’s Ericsson and Nokia and South Korea’s Samsung with key telecommunications equipment at extremely low prices.

On Wednesday, ZTE said it planned to sell $2.1 billion worth of stock privately to help fund development of its 5G mobile network technology.

More subtly, Beijing is pushing for a greater role in setting technical standards in the next-generation wireless arena. The more 5G patents Chinese companies hold, the more they can pressure Western patent holders to license their technology to Chinese companies at a cheap price.

“It is here – in its potential reshaping of norms for standards-essential IP – that China’s ascent poses a real challenge to American firms’ practices,” concluded a 2013 report for the U.S.-China Economic and Security Review Commission. “The Chinese approach emphasizes IP as another factor of production, not as a source of profit or unique competitive advantage. Accordingly, the aim is to lower its price to the minimum, which would (hopefully) increase the profit margin of equipment producers” at the expense of patent holders.

Few observers believe that Chinese President Xi Jinping will back down anytime soon.

President “Xi has really staked his future on the high-tech sectors in China,” says Mary Lovely, an economics professor at Syracuse University in New York.

At an October hearing by the office of the US Trade Representative, examining China’s intellectual-property practices, Chen Zhou of the China Chamber of International Commerce warned that any US penalties could “trigger a trade war.”

Outcome still uncertain

From China’s point of view, many Western norms of trade and IP are rules of the game that keep Western companies on top and China and other developing nations from catching up.

It’s not clear China will win the 5G competition. Its attempts to introduce a rival 4G standard failed to catch on. And 5G encompasses a big collection of technologies, only some of which China has proven good at, says Mr. Brake of ITIF.

“Technology … is being integrated within the existing network and changing very quickly,” he says. “It’s very easy to imagine the innovations that such a network could engender.” What’s not clear is which specific technologies or products will succeed in the marketplace.

Government can streamline the permitting of all the new antennas the network will require, he adds. But the private sector is better placed to figure out what customers want.

By Laurent Belsie/ChristianScienceMonitor

Posted by The NON-Conformist

China Expected to Shake Up Oil Markets

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China Expected to Shake Up Oil MarketsChina is preparing to launch an oil futures contract based on its domestic currency instead of dollars in an effort to promote the renminbi as a global reserve currency.

It appears the liberal mainstream media is finally waking up to what TruNews readers have known for several months, that China is about to launch domestic oil futures trading not valued in American dollars, which will hugely impact the dollar’s “well-established role” as the global currency of trade.

According to a new report, the “petro-yuan” futures contracts will be offered beginning Jan. 18, following multiple rounds of testing. The Shanghai Futures Exchange will be traded under the “INE” acronym. Like all futures contracts, it will set a price in the present for the delivery of oil at a future date. Futures trading usually outpaces physical oil trading by a more than 20-to-1 ratio.

This will allow the yuan to undercut the dollar in global trade in the long term. In the short term, it’s unlikely to have a major impact on the dollar, the petro-dollar, or global trade. The Chinese oil futures contracts also will not have the relative stability of dollar-based oil contracts, and it’s unlikely non-Chinese investors will be allowed to participate initially. But President Xi Jinping seems to be focused on a long play.

From TruNews

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China’s Technology Ambitions Could Upset the Global Trade Order

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BEIJING — When President Trump arrives in Beijing on Wednesday, he will most likely complain about traditional areas of dispute like steel and cars. But Washington officials and major global companies increasingly worry about a new generation of deals that could give China a firmer grip on the technology of tomorrow.

Under an ambitious plan unveiled two years ago called Made in China 2025, Beijing has designs to dominate cutting-edge technologies like advanced microchips, artificial intelligence and electric cars, among many others, in a decade. And China is enlisting some of the world’s biggest technology players in its push.

Sometimes it demands partnerships or intellectual property as the price of admission to the world’s second-largest economy. Sometimes it woos foreign giants with money and market access in ways that elude American and global trade rules.

When concerned officials in Washington began blocking China’s ability to buy high-end technology last year, one American company found a way to help its Chinese partner around those limits. The company, Advanced Micro Devices, avoided scrutiny by licensing its exclusive microchip designs, rather than selling them.

The Chinese partner got access to the technology to make its own products. Advanced Micro Devices got a big payout.

The rules of global commerce are changing — and China and the United States are racing to create a future that aligns with their own distinct visions. The result could be an overhaul of 20th-century trade rules for a 21st-century global economic order, in which money, ideas and influence could become as closely watched and tightly regulated as hard goods packed on a ship and sent abroad.

Even before the Communist Revolution, China obsessed about absorbing foreign technology as a way to end a century of humiliation and restore its national strength. But Made in China 2025 is more ambitious than anything the government has ever attempted, a national industrial policy that aims to project a new type of global might and influence.

China is directing billions of dollars to invest in research at home as well as to acquire innovative technology from abroad. A Beijing-directed semiconductor fund is thought to have more than $100 billion at its disposal, while another plan aims to grow China’s artificial intelligence companies into a $150 billion industry by 2030.

Such efforts have some American government officials and business leaders calling for a rethinking of how the United States approaches trade. Lawmakers are pushing for tougher rules on technology purchases, which do not usually cover the types of deals that China increasingly prefers. Officials are also investigating whether China is stealing intellectual property.

“There are a few U.S. companies that have been leaning too far about sharing technology with countries that are potential enemies of ours,” said Wilbur L. Ross Jr., the United States secretary of commerce, in September remarks regarding information technology that were widely seen as referring to China.

“I don’t think that’s a very good idea. I think it’s the ultimate short-termism to give up very valuable I.T. in order to get a few quarters or a few years of improved sales.”

Robots and Rice Cookers

China looks to the West for much of its technology. Even some of its most sensitive systems that run government computers, banks and laboratories use chips from Intel and Qualcomm and software from Microsoft or Oracle, a dependence it sees as a long-term vulnerability.

The government hopes to change that. It is backing the effort with money: $45 billion in cheap loans for its companies, $3 billion for advanced manufacturing efforts and billions more in other financial support, according to the Mercator Institute for China Studies, a German think tank.

Made in China 2025 “is going to have substantial resources and focus devoted to it, especially at the local government level,” said Kai-Fu Lee, a prominent venture capitalist in Beijing.

The goal is not simply to beat the United States. China is preparing for a day when cheap manufacturing no longer keeps its economy humming. It wants to embrace industries offering skilled jobs that do not blacken its skies and cloud its rivers.

The plan itself has specific targets and quotas. By 2025 it envisions China meeting nearly three-quarters of its own demand for industrial robots and more than a third of its demand for smartphone chips. Other targets cover new-energy cars, like electric cars, and high-performance medical devices.

The template for Made in China 2025 was cribbed from a German government plan called Industrie 4.0, which calls for greater automation and the growing use of “smart factories” doing sophisticated work with fewer people. And the deal that woke up the world to China’s plan was a German one.

Last year, a Chinese appliance maker called Midea struck a surprise $3.9 billion deal to acquire Kuka, an advanced robotics company in Germany. The deal made Midea — best known for its refrigerators and rice cookers — a major player in automation.

“Our partnership with Kuka is actually about whole factory solutions,” said Irene Chen, a spokeswoman for Midea.

Where technology cannot be purchased, the government wants Chinese companies to extract it from foreign firms through deals or tough new laws.

China will soon require foreign auto companies to make electric cars there if they want to continue selling gasoline-powered vehicles in what is now the world’s largest car market. General Motors, Volkswagen and others have been scrambling to form joint ventures with Chinese partners to do so.

Cybersecurity laws enacted this summer give the Ministry of State Security the power to conduct security reviews of technology sold or used in China, said James A. Lewis, senior vice president of the Center for Strategic and International Studies. Such a step could require companies to expose some of their most valuable secrets.

At some companies, Chinese security officials conduct the inspections in corporate “clean rooms” in the United States, with the Chinese officials traveling on business visas, Mr. Lewis said. The companies argue that the access takes place under controlled circumstances that limit what Chinese officials might learn.

“If American companies have a big market in China, they say to the Ministry of State Security, ‘Come in,’” Mr. Lewis said. “Everyone fears retaliation. No one wants to lose the China market.”

Old Rules, New Products

Wary of the push, the United States has used existing rules to stop Chinese purchases of foreign businesses in areas important to national security.

But many of those tools do not apply to today’s deals, as A.M.D.’s Chinese pact shows.

A.M.D.’s joint venture with its Chinese partner can be found in a gleaming industrial area of the city of Chengdu called Tianfu Software Park.

The park represents Beijing’s vision of the future. Trees and sidewalks jammed with ride-sharing bikes sit beneath a vast strip of office towers, hotels and apartment complexes. Offices of China’s most innovative companies, like Huawei and Tencent, sit next to outposts of their foreign analogues, like SAP and Accenture.

Inside one of its glass towers, A.M.D. works with its Chinese partner, a company called Sugon, to produce new chips.

Under the nearly $300 million deal, A.M.D. agreed to license chip technology to a Chinese joint venture with Sugon to make chips for servers. Because A.M.D. controls that joint venture, the technology is considered to remain in American hands.

But A.M.D. struck a second partnership that the Chinese company controls. That joint venture works on applications such as integrating the chips with servers. The two ventures are on the 11th and 12th floors of the same building.

Experts say the dual partnerships could help China develop a new generation of powerful supercomputers. China already makes the world’s fastest computers, but they run on homegrown chips that cannot read commonly available software for supercomputers. With A.M.D.’s help, experts say, Sugon could develop chips that could make China’s supercomputers more versatile and adaptable and replace those from foreign firms.

“We have worked closely with and been very clear with U.S. government officials on the strategy and specifics of the technology, which is classified as permitted for export,” an A.M.D. spokesman said in an emailed statement. He added that the processors are also lower performing than other options that A.M.D. sells in America.

Executives in Chengdu said there was a firewall between the two joint ventures, and the one outside of A.M.D.’s control was not involved in chip development.

Yet in an interview with the Chinese state news media, Zhang Yunquan, a top government researcher and head of the National Supercomputing Center in Jinan, China, said that Sugon could use the work of the joint venture to make supercomputer microchips. Such a supercomputer would be crucial in designing next-generation weapons systems, according to experts.

“When they first announced the partnership I was shocked,” said Stacy Rasgon, a semiconductor analyst with Sanford Bernstein.

“You would think intellectual property and joint ventures would belong under Cfius review,” Mr. Rasgon said, referring to the Committee on Foreign Investment in the United States, which reviews foreign deals. “It should. It’s surprising it isn’t.”

New Rules for a New Era?

For some in the Trump administration, an 18-year-old book by two Chinese Air Force colonels has become required reading.

Called “Unrestricted Warfare,” the book argues that China does not need to match the United States militarily. Instead China can take advantage of the global economy and the internet to take down its main rival.

Some American officials see in it a guide to China’s plan. Some United States lawmakers are proposing to toughen American takeover laws to evaluate deals on an economic as well as a national security basis. They are also pressing for reviews of licensing agreements and joint ventures. The United States trade representative has also launched an investigation into whether Chinese companies are stealing intellectual property.

“There’s concern that U.S. firms are transacting away their competitive advantages,” said Greg Levesque, managing director of Pointe Bello, a research firm in Washington, and a former executive at the US-China Business Council.

Such changes could ripple through the tech world. Chinese investment often means more money with fewer strings attached. Some tech companies say that is good for innovation. China’s spending on science and research is also growing at a time when the United States government and others are cutting back.

Still, many American companies fear the deck is stacked against them. The United States long believed bringing China into the World Trade Organization, which oversees global trade disputes, would ensure it would follow the rules. But the W.T.O. has proved ineffective when it comes to tech issues.

At a recent dinner event in Washington, an American technology executive held up a dinner plate to illustrate the size of the China market, said a person who was there who asked not to be identified because the event was not public. Then the American executive held up a wine coaster that represented the size of his firm’s business.

The message was clear: American companies are at risk of being muscled out of the market.

“Made in China 2025 seems to reject all notions of comparative advantage and future opportunities for high-value-added manufactured exports from the rest of the world to China,” said Jeremie Waterman, president of the China Center at the U.S. Chamber of Commerce.

“If Made in China 2025 achieves its goals,” he said, “the U.S. and other countries would likely become just commodity exporters to China — selling oil, gas, beef and soybeans.”

By Jane Perlez/NYTimes

Posted by The NON-Conformist

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