Will the Trade War Derail "Made in China 2025" Plan?

Since Trump's new tariffs policy on steel and aluminum imports targeted specifically at China, an intensified fight between China and United States has inevitably kicked off. The ever increasing trade deficit from China over the past decades is regarded as a signal of the weakness and economic loss in U.S. And the "Made in China 2025" blueprint, which is aiming to transform China from a labor-intensive economy into advanced manufacturing economy, will certainly accelerate this trade imbalance and will also be considered as a big threat to U.S. 

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(Source: DataYes RoboR Research Platform, Lianxun Securities, Bureau of the Census )

In China, the anxiety about trade comes from the United States' latest announcement on closing its doors to China's tech companies such as Huawei and ZTE. As China's semiconductor industry is heavily dependent on imports from U.S, without the chips, software and other equipment import from U.S., companies like ZTE will suffer badly in meeting its global network equipment and smartphone orders.  The recent events have also raised doubt on the feasibility of "Made in China 2025" plan. 


(Source: DataYes RoboR Research Platform, Everbright Securities, SEMICON )

Therefore, Chinese government has decided to accelerate the development of the domestic semiconductor industry in order to close the quality gap with U.S. as well as advocate independent innovation in other key industries under the "Made In China 2025" plan.  ZTE and Huawei have taught a lesson on the importance of domestically developing innovative technologies and high-end products in China. As such, the US tariff's hurt onimplementation of China's 2025 goals can turn out to be the catalyst as well. 

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