China is rapidly becoming a major industrial competitor in high-tech and growth sectors.
It aims, through the 'Made in China 2025' strategy, to become a world leader in ten key emerging industrial sectors.
In these sectors, it strives to strengthen its domestic innovation capacity, to reduce its reliance on foreign technologies while moving up in global value chains.
The report "China – Challenges and Prospects of an Industrial and Innovation Powerhouse" analyses China's approach to attain a dominant position in international markets through a combination of industrial, research and innovation (R&I), trade and foreign direct investment (FDI) policies.
It also offers an evidence-based assessment of China's current position compared to the EU and US innovation systems across a range of dimensions, emphasising quantitative data on China's development.
It concludes that China has become a major industrial competitor in several rapidly expanding high-tech sectors, and may well attain innovation leadership in specific areas.
This is also reflected in the EU-China Strategic Outlook, which sets out concrete actions to seek a more balanced and reciprocal relationship given China's growing power and influence.
- China is quickly gaining ground in high-tech value chains
- China is rapidly increasing its investments towards industries with a high innovative and technological content where traditionally the EU has been stronger than China
- China's restrictions on FDI are much stronger than in the EU and US
- China is a new R&I powerhouse
- China is on track to achieve its objective of global industrial and technological leadership in key sectors by 2049
In response, the report highlights the need for the EU to boost its industrial and R&I performance and – given the complexity of the EU-China relationship – develop policies that can help ensure a level playing field for EU companies in China.
Meanwhile the EU may also want to consider the potential need for protecting strategic assets from foreign investors. However, in doing so, it should take into account the large benefits that may flow from industrial investments from abroad.