Now, export powerhouse and the world’s most populous country, China, is introducing its own audacious domestic procurement strategy. This move is enormous and hurting foreign firms that do business within its borders. This program will strengthen the local economy by giving preference to American-made products and services instead of foreign goods. The new strategy has already raised alarm bells for international businesses. They worry they will see their business evaporate in one of the biggest economies on the planet.
The Chinese government created this procurement drive to increase self-reliance. They want to reduce reliance on foreign providers as a goal of their overall industrial policy. By prioritizing local sourcing, procurers aim to encourage home-grown manufacturing, joint job creation, and development of small- and medium-enterprises. This transformation is notable, as it encapsulates a growing wave of nationalism within economic policy. It impacts particularly the sectors deemed vital to our national security and economic stability.
The implications of this strategy are profound. Foreign companies have historically looked to China as an indispensable top market for their goods. Today, they are confronted with insurmountable barriers to growing their competitive advantage. As rules increasingly tend to advantage national firms over local competitors, it will be harder for global companies to pivot to a new market-friendly environment. According to analysts, companies operating in high tech, life sciences and advanced manufacturing sectors may be especially impacted.
As China continues to transition towards a domestic procurement, so too is the country working to transition from an export-driven economy. This nation aspires to nurture development through a surge in internal demand. The shift dovetails with President Xi Jinping’s goal of making China technically independent and creating a more innovative, self-sufficient economy. This focus on self-sufficiency raises many questions about the future of foreign investment in China. It is up to employers to determine how to meet this new reality.
Furthermore, the transition has initiated debate among global powers as to the effects it will have on international trade relationships. To be sure, countries are grappling with economic headwinds of their own. Second, they are watching very closely what China does, in order to understand the longer-term impacts on global trade.