BEIJING China's plan to boost domestic manufacturing by 2025 is "highly problematic" and could be used to discriminate against foreign firms in favour of Chinese competitors, a top European business lobby said on Tuesday.
Beijing's "Made in China 2025" plan calls for a dramatic increase in domestically-made products in 10 sectors - from robotics to biopharmaceuticals - that the government hopes will accelerate an industrial upgrade as economic growth slows.
Foreign business groups, however, have grown more vociferous in criticising Beijing's lacklustre market reforms, and worry that the plan will force members to give up key technology in order to access the market or bypass them altogether.
"Made in China 2025" amounts to a "large-scale import substitution plan aimed at nationalising key industries" or "severely curtailing the position of foreign business", the European Union Chamber of Commerce in China said in a report.
Chinese policies, including hundreds of billions of euros in subsidies, were already harming European business, the chamber said.
"Under recently passed legislation in the new energy vehicle industry, for example, European business is facing intense pressure to turn over advanced technology in exchange for near-term market access," the group said.
"In the field of industrial robotics, government subsidies are contributing to overcapacity in the low- and mid-tiers of China's market; and in the information technology industry European business is seeing market access constrict further," it said.
A progressive increase in domestic parts used in such sectors to 70 percent by 2025 is among targets set out in the plan, which aims to use subsidies, technology standards, financial policy and government-backed investment funds to reach them.
Premier Li Keqiang told China's parliament at the opening of its annual session on Sunday that foreign and domestic companies "will enjoy the same preferential policies under the Made in China 2025 initiative".
But such pledges have done little to allay the concerns of China's trade partners, and there are growing calls in the United States and Europe for equal market treatment in response to what they see as Beijing's mercantilism.
The office of the U.S. Trade Representative said last week it would take aggressive action with other countries, including using "all possible leverage" to give U.S. producers fair, reciprocal access to their markets.
The nominee to be the next U.S. trade negotiator, veteran steel industry lawyer Robert Lighthizer, has long argued for such aggressive measures against China.
Chamber president Joerg Wuttke said the report was intended to "send a wake-up call to companies and members" about what the competitive landscape would look like in 2020 and 2025, as Chinese companies benefit from a protected market at home and then look abroad.
"The worry that we have is that this unbalanced competition landscape that we face in China might be replicated in our home turf," Wuttke told reporters before the report's release.
"Are you up to it to compete against state-sponsored companies in China as well as globally?" Wuttke said.
(Reporting by Michael Martina; Editing by Richard Borsuk)