What Is Chinese “Innovation Mercantilism” and How Should the UK and Allies Respond?

Robert D. Atkinson June 28, 2021
June 28, 2021

Robert D. Atkinson argues that like-minded democracies need to form a ‘NATO for Trade’ in response to China’s propensity to circumvent the spirit (and letter) of the WTO and target democratic countries with trade coercion.

Beijing has deployed a combination of protective market policies and economic intimidation to achieve its domestic goals and ward off foreign competition. The alignment between the CCP and enterprise in China’s state-capitalist system enables the Chinese government to subsidize its commercial champions to enter foreign markets having forced foreign firms to engage in technology transfer in exchange for market access. Simultaneously, the CCP works to influence global standards bodies in an attempt to entrench the dominance of Chinese technical standards.

In the current international landscape, Beijing can cripple foreign industries by cutting off access to its domestic market. Atkinson argues that this tactic has already proven effective in recent times, with EU telecoms companies recently threatened with being shut out of the Chinese market should the bloc bring a trade case to the WTO against China for unfairly subsidizing its own telecoms giants, Huawei and ZTE.

This matters to the world as China is pursuing global dominance in key industries and technologies through its Made in China 2025 scheme. It is therefore time for a new approach under which like-minded democratic nations agree to come to each other’s aid. Success would depend on members of this ‘NATO for trade’ cooperating to deter Chinese economic aggression that would harm all nations.

China’s state capitalist model and economic playbook have proven to be powerful, and it’s imperative that like-minded democracies have their own strategy, building on each nation’s technological strengths, to ensure that they can compete and prosper economically and technologically.