Focus topics

Beijing’s model of opening and closing

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  • Openness to China’s market has long been a concern for foreign invested enterprises (FIEs). These concerns are currently magnified as tense political EU-China relations loom over FIEs’ China businesses.​
  • To understand the logic and pattern of China’s opening and closing of markets through access barriers, a conceptual view of Chinese industrial policy is helpful. ​
  • As depicted in the conceptual graphic, for many markets Chinese industrial policy moved in three phases:​
  • In the first phase, the domestic market is just emerging and foreign tech enterprises are often dominating. In this stage, China highly encourages foreign investment to attract foreign technology and know-how. In some markets, such as the High-Speed Railway industry, market entry was coupled with tech transfer requirements designed to support domestic firms.​
  • In the second phase, technologically more advanced Chinese competitors are emerging. In this stage, Chinese industrial policy in many cases increases barriers for FIEs to enter the market or provides significant policy and financial support to domestic competitors to build up their market share and allow for industries of scale. The Battery White List, discussed in last week’s Sinolytics Radar, is an example of this.​
  • Once Chinese companies have matured, access barriers and industrial policy support are scaled back to allow for competition with foreign enterprises, which by this point usually have seen a substantial decrease in market power, for example in the onshore wind industry.​
  • Obviously, this simplified pattern of Chinese industrial policy implementation plays out very differently in different markets and for different technologies, but the overarching logic holds for numerous past and present examples. ​

Sinolytics is a European research-based consultancy entirely focused on China. It advises European companies on their strategic orientation and concrete business activities in the People’s Republic.


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