China’s State Council rang in this year’s holiday season by announcing a plan that could bring substantial gifts to certain Chinese manufacturers–as well as substantial challenges to their competitors in the United States. The plan calls for sweeping measures to support Chinese firms in “going global,” either through exports or by establishing a commercial presence overseas. China’s “go global” policy has been around for many years, but it has traditionally received less emphasis than its counterpart policy of “bringing in” investment and technology from abroad. The new plan, however, appears to place “going global” on equal footing with “bringing in,” which could have considerable implications for other countries’ domestic and multinational manufacturers.
With an emphasis on manufacturing enterprises, the plan calls for both commercial and policy banks to provide increased financial support for Chinese firms’ “going global” activities, and for greater proportions of China’s foreign exchange reserves to be allocated towards investments in these projects.
Reports in China’s official media have linked the plan to President Xi Jinping’s broader strategy of “one region, one path,” which aims to use Chinese economic power to link Central and East Asia into a unified commercial region, with China at its center, in order to alleviate the problems associated with slower growth at home and restricted access to preferred foreign markets. While this new iteration of the “going global” plan may be focused on investments in Central and East Asia, it may complicate the traditional remedies that U.S. manufacturers have sought to defend themselves against subsidized exports from China.
One of the plan’s specific objectives is to alleviate industrial overcapacity simply by transferring it out of China. To the extent that the Chinese government subsidizes Chinese manufacturing enterprises that are exporting to the United States from third countries, it could become more difficult for U.S. manufacturers to obtain relief under the U.S. countervailing duty laws. The United States may need to consider new tools to address such practices.
U.S. exporters and multinationals, particularly manufacturers of heavy equipment, could suffer as well. The plan intends to utilize Chinese financial clout to “escort” Chinese manufacturers of heavy equipment and other favored products into foreign markets. A recent merger between China’s two state-owned high-speed rail manufacturers is early evidence of the government’s intention to reorient favored enterprises from competition for domestic sales to competition for infrastructure projects abroad.