The Effectiveness of China's Industrial Policies in Commercial Aviation Manufacturing

The Effectiveness of China's Industrial Policies in Commercial Aviation Manufacturing

The Effectiveness of China's Industrial Policies in Commercial Aviation Manufacturing

The Effectiveness of China's Industrial Policies in Commercial Aviation Manufacturing

Synopsis

This report assesses the effectiveness of China's industrial policies, using China's commercial aviation manufacturing industry as a case study. It evaluates China's efforts to create a national champion in this industry, and analyzes foreign manufacturers' efforts to protect key technologies when setting up production facilities there. It also offers policy options for foreign governments responding to Chinese policies."

Excerpt

In the 30-odd years since the beginning of economic reforms in 1978, China’s economy has grown at a remarkable rate. in 1978, China’s gross domestic product (GDP) was just $263 billion, placing it well below European economies such as France and Italy. Today, China has the second largest economy in the world. Although a large number of changes have been made in economic policy following the introduction of reforms in 1978, an about-face in Chinese attitudes toward foreign direct investment has been one of the most momentous. Initially concentrated in export zones, China has gradually opened up its economy to foreign investment in more regions and more sectors of the economy.

The influx of foreign direct investment has been accompanied by rapid growth in exports and new industries in China, which have contributed to this impressive economic growth. From manufacturing shoes, textiles, clothing, and toys, China has become one of the world’s largest assemblers of motor vehicles and a major force in a wide range of medium and heavy industries that were formerly the province of the United States, Western Europe, and more lately Japan, South Korea, and Taiwan. Improvements in China’s workforce, manufacturing technologies, and materials have enabled the country to enter new, more technologically sophisticated industries. Exports from plants in China, often wholly-owned subsidiaries of foreign corporations or jointventure operations between Chinese state-owned companies and foreign companies, have supplanted production from plants in the European Union (EU), Japan, the United States, and other countries. the shift in global output in these industries has been accompanied by the closure of plants in competitor countries and associated declines in employment.

As foreign trade and foreign direct investment became more important for China’s prosperity, China’s leadership made a decision to resume its membership in the General Agreement on Tariffs and Trade (GATT). When gatt was replaced by the World Trade Organization (WTO), China applied for membership. After 15 years of negotiations with gatt and the wto, China became a member of the wto in 2001. Prior to joining the wto, China made a large number of policy changes that improved foreign access to Chinese markets for goods and services. It also made a number of commitments to continue to open its markets following membership. However, membership has been followed by continued trade frictions. More than a decade after China’s accession to the wto, neither the eu nor the United States recognize China as a market economy; the eu and the United States have frequently charged

Directorate-General for External Policies for the Union, Policy Department, “EU-China Trade Relations,” European Parliament, 2011, p. 21.

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