The European Union is bringing in major changes to its industrial policies. Amid increasing competition between different countries, the EU hopes its new industrial policies will serve to cope with the global technological competition and games between major countries.

First, the major strategic shifts in the EU's industrial policies. With anti-globalization emerging as a trend, trade protectionism, restrictions on foreign investment and radical economic intervention have increased. With the EU emerging as one of the largest economies in the global manufacturing industry, its enterprises have long taken up a lion's share of the international market. However, in recent years, the EU has failed to narrow the gap with the US and some emerging economies such as China have caught up.

To avoid being marginalized in the global competition and new industrial revolution and cope with the competition from China and the US, the EU has shifted to the mode of economic intervention.

After Germany released its National Industry Strategy 2030 in February, the European Commission officially announced the strategic agenda for 2019-24 in June, the first time industrial policies were highlighted after Germany and France signed a joint manifesto on a new industrial policy.

In August, the Industry 2030 High Level Industrial Roundtable submitted the final version of A Vision for the European Industry Until 2030 to the European Commission.

Second, the new industrial policies recently introduced by the EU include reforming outdated competition laws, increasing investment in innovation, developing new mechanisms to better protect local technologies, improving government input and supporting European industrial champions through government intervention. Germany and France will also join forces to safeguard European technological sovereignty to cope with the competition from China and the US.

The EU will also improve public funds to support scientific and technological innovation. EU officials recently drafted a 173-page plan to set up the European Future Fund, for which the member countries will provide $100 billion to be invested in strategic fields where performances by European countries fall behind other competitors.

This is one of the proposals submitted to the European Commission's new president, Ursula von der Leyen. According to plan, the EU will launch long-term equity investments in strategically important sectors of EU enterprises to sharpen its edges and strengthen its leading role on the strategic value chain.

The EU will also improve its strategic autonomy in the digital era. In July, the European Political Strategy Center, the European Commission's in-house think tank, released a report, Rethinking Strategic Autonomy in the Digital Age, calling for EU countries to focus more on independent innovation, improve scientific and technological research and development and eliminate the EU's dependency on other countries in terms of key infrastructure.

To enhance Europe's strategic autonomy, the report highlights that the EU countries need to protect European interests in line with the situation in the digital era, pay special attention to the potential risks of lagging behind on key infrastructure such as 5G equipment, build strong scientific and technological authorities to enhance independent R&D capabilities, strengthen international cooperation and formulate international rules conforming to European values and interests.

The Franco-German axis will be reconstructed to cope with the competition from China and the US. Amid rising China-US trade frictions and Brexit, France and Germany have become twin engines for improving the international status of European industries.

To urge the EU to change its rigid frameworks through consultations and promote the new European industrial policies, France and Germany signed and jointly issued the Franco-German Manifesto for a European Industrial Policy based on the National Industrial Strategy 2030 of Germany and the New Industrial France initiative.

The measures include increasing investment in innovation, reviewing the EU regulatory framework, providing financial subsidies for key industries, reforming the EU anti-monopoly bill to generate monopolistic European champions and even urge governments to promote the establishment of such enterprises and improving industrial technological protection.

The measures are being viewed as Europe's "most ambitious" industrial policy. Its strategic objectives include increasing the proportion of GDP of the EU industrial output to 20 percent by 2030, promoting intelligent manufacturing, and continuing to improve EU competition rules to defend European enterprises with key technologies from foreign takeovers.

Third, in terms of China's response to the EU's strategic shift, China needs to give full play to its institutional advantages to integrate innovative resources amid the rising global technological competition. It needs to focus on innovation and link production, research, funds, personnel and resources to develop cutting-edge industries and a forward-looking layout of technological infrastructure construction to promote industrial innovation.

Efforts are also needed to break the barriers between research and industry and make the fullest use of innovation factors.

China is also supposed to establish a national security system for economic and industrial security. Escalating trade frictions with the US, key shifts in EU technological and industrial policies and rising global high-tech competition have posed severe threats to the security of the global value, industrial and supply chain.

Therefore, China needs to urgently improve the security of foreign capital, by implementing major guarantee systems such as the unreliable entity list and the technological safety management list, and improve protection on key infrastructure and technologies as it promotes global innovation-oriented integration and industrial opening-up.

Efforts are needed to further explore the potential of tech diplomacy and innovation through interaction with major small countries. By focusing on key technologies, China can establish strategic relations with these countries. Tech diplomacy has become a key pillar of international scientific and technological innovation. Notably, major technology giants have tightened restrictions on technology transfers, increased technological protection and even implemented a technology blockade.

For more ways out, China needs to explore its unique advantages and exploit the technological innovation resource of key small countries such as Israel, Sweden, Norway, Finland and Denmark through in-depth mutual cooperation on cutting-edge scientific research projects, and by integrating international top talents and domestic industrial resources.

The author is a researcher with the China Center for International Economic Exchanges.

The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.

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