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1 Background This Question and Answer is my response to a question originally embedded in the comment/question by Martin Andrews about George Tait Edwards's answer to Why is “made in China 2025” so concerning to Trump that he demanded China must abandon that plan in order to stop the trade war?2 The Origins of Both Policies2.1 In Germany - “Industrie4.0/Germany4.0”This policy was born in and is dedicated to the advance of Germany’s industry for the sake of not only maintaining its current dominant position in the EU but also improving its future competitiveness and product quality.Both Germany and China see the need to upgrade their manufacturing and service industries to meet the future needs of their nations. The most comprehensive and effective article by Peter Altmaier (see below) covers so much ground that it is almost impossible to summarise, and I have struggled to do that, as shown below. But also see Sigurt Vitol’s thoughtful and considered paper about GERMAN INDUSTRIAL POLICY: AN OVERVIEW which can be downloaded at https://pdfs.semanticscholar.org/ba5f/3fe74bf2104008be298a7b332a673706ad3a.pdf2.1.1 The Objective of the Policy: The Creation, Across All of The German Economy, Advanced Computerised “Smart Factories” with a major upgrading in the optimised computerised interconnection of factory operations from raw materials, subcomponent and energy inputs to specific, individual-customer-specified outputs.As Peter Altmaier, the German Federal Minister for Economic Affairs and Energy Germany has summarised it, in A modern industrial policy,“Germany has a strong and successful industrial base. We need to keep it that way, we need to expand that.”In his lengthy and utterly specific article, he describes a policy which is the “fourth industrial revolution” which he names and describes:“INDUSTRIE 4.0Digitally driven and smartly networked“Digitally controlled production processes, smart factories and a networking of sales, production and logistics: the term "Industrie 4.0" describes a fourth industrial revolution which is picking up speed in the wake of rapid digitalisation.” And the description of the technology is“Industrie 4.0 combines production methods with state-of-the-art information and communication technology. This smart approach makes it possible to deliver tailored products to meet individual customer requirements – at low cost and in high quality. Highly flexible production methods and logistics will make it possible to customise products. Customers and business partners will be directly involved in operational and production processes, and there will be production methods and products that are closely intertwined with state-of-the-art, knowledge-intensive services (hybrid production, hybrid products).”So the system involves the implied digitally-controlled minimal inputs of energy, water and raw materials, combined with the just-in-time delivery of highest quality SME subcomponents to be assembled into a low cost, high quality customer-specified customised product which can “talk” through the internet of things to its maker, its buyer and the network of things around it.(Presumably the first three industrial revolutions the Federal Minister may have in mind may be the previous IR stages of the ages of steam, of electricity production and consumption, and of computers/internet communications, and of all the associated developments in these eras.)2.1.2 The Major Industrial Sectors AffectedIndustrie4.0/Germany4.0 highlights the following industrial sectors where Germany at present has a considerable leadership (as shown by export values) as highlighted by the Federal Minister:“The objective here is to foster innovation across the board, so that it covers all the lead markets and key enabling technologies that are of relevance for Germany. These include for example [my identing]mechanical and plant engineering,microelectronics,production technology,materials technology,bio- and nano-technology,energy and environmental technology,mobility and logistics,healthcare and medical technology, and not leastinformation and communications technology.“The process of technological transformation and the trend towards sharing knowledge and information on an ever-growing scale are continuing at unabated speed. Similarly, new developments in information and communication technology are having a considerable impact on the production of complex goods and services requiring a great deal of research and expertise. It is now increasingly possible for such complex manufacturing processes to be digitally controllable.”So Germany 4.0 while theoretically applying to “innovation across the board” is focused on the nine key areas highlighted. And the paper goes on to enumerate the value and employment of the leading six manufacturing activities in Germany, like thisThe paper goes on to demonstrate that export performance, the growing importance of export-related services, and highlights more industries which have “Innovative technologies with potential for the future” which are listed as“Within the framework of the Federal Government’s High-tech Strategy, the fields of health, mobility, climate/energy, security and communication are particularly addressed as important markets with potential for the future in cooperation with business and science. The Economic Affairs Ministry has special programmes for aerospace, the maritime industry, and the fields of mobility and information and communication technology. Also, innovative SMEs in all sectors can access government funding via the Ministry’s technology-neutral programmes.”In addition to all of the above, Germany intends toSecure raw materials and use them efficientlyPromote raw materials transparency (so you can see what’s being used where and how it’s forming part of something else, and how it’s being safely disposed of or recovered at the end of product life)Focus on renewable energyDiscount energy as a cost factor to assist energy-intensive industriesProtect the German environment byperforming climate risk checkhelping mitigate climate change andintroducing Carbon Capture and Storage (CCS) Technology to place extra atmospheric CO2 production in deep geological storage - as the Minister’s Report points out “The technology is currently being tested in Germany.”2.2 The Made in China 2025 initiative: Similar but differentAs Made in China 2025 - Wikipedia states “Made in China 2025 (Chinese: 中国制造2025; pinyin: Zhōngguó zhìzào èrlíng'èrwǔ)[1] is a strategic plan of China issued by Chinese Premier Li Keqiang and his cabinet in May 2015.[2] China is moving away from being the World's factory floor (cheap goods and low quality) to move to higher value products and services.[3] In essence a blueprint to upgrade the manufacturing capabilities of Chinese industries. [4] The goals of Made in China 2025 include increasing the Chinese-domestic content of core materials to 40 percent by 2020 and 70 percent by 2025.[5] The plan focuses on high-tech fields including the pharmaceutical industry, automotive industry, aerospace industry, and semiconductors, IT and robotics etc which are presently the purview of foreign companies.[6]”2.2.1 The Origin of the PolicyChinese Premier Li Keqiang has made it quite clear that the inspiration for his Made in China 2025 Strategy was the Germany 4.0 industrial policy.3 The Comparisons Between Germany and ChinaBoth Germany and China have a highly educated and skilled workforce with millions of SMEs, many of which are acting at the forefront of their technology.Both countries fund the Wernerian transfer of invention to innovation in millions of their SMEs through effective local banking systems which help finance that process.4 The Differences Between the Germany 4 Policy and Made In China 20254.1 German Support for SME invention and InnovationAlthough Germany has a highly effective Sparkassen local public banking system to fund the establishment, development and updating of SMEs in each locality, Germany has a partly rationalised Sparkassen Banking System which, although the most effective in the world for a nation of Germany’s size, has the following sub-optimal characteristicsthe number of independent Sparkassen Banks has been reduced from 2,834 in 1903 to about 431 today - see German public bank - Wikipedia.East Germany was under Communist rule for about half a century and the Sparkassen Bank SME-supporting role during that period was diminished although still major, and it is doubtful if the East German states of Germany have yet recovered (by 2018) to the SME stimulation level provided in the states of West Germany.The retention of 15,600 local SME branches in Germany does provide a good level of SME support but bank branches do not always provide the excellent services or positive decisions that a local independent bank HQ can.One of the few jokes told by the Economist in times past was a response to a 1960s Russian claim that “East Germany proves Communism works” to which that newspaper replied“No - East Germany proves that the Germans can make anything work.” The relatively high growth rates of Communist East Germany (from 1945 to the 1960s) were due to the continuation of Germany’s Sparkassen Banks with their century and half traditions, of supporting SMEs even under Communist rule.Let me be as precise as the numbers can indicate: Herbert Simon has provided in his essay and book about the Hidden Champions of Germany the following dataWhich data I have summarised in the following generated table:More recent figures indicate that Germany has raised its delivery of “Hidden Champions” to above 1,600 with the result that the German level of champions per million people is about 20. It seems to me that a sub-analysis of the data is likely to show that some West German states are achieving hidden champion rates of about 25 champions per million people.Germany does not have an adequate system for the growth of “Hidden Champions” to world-serving scale, because it does not understand or use Shimomuran macroeconomics. Germany succeeds through the excellence of SME family firms and the few but large bank-supported major industries without having a “capital abundance” in all of its its manufacturing industry. Germany’s growth rate has always been intermediate because of that reality. The focus of German industry and politicians is upon Germany, and the Industrie4.0/ Germany4.0 policy would be much more impressive if it were an EU4.0 initiative funded by investment credit creation by the ECB across all of the EU.The EU is unfortunately being run by Germany as if it were a German Empire. Such an outcome was never intended by its founders who established and intended a co-operating commonwealth of collaborating nations. German politicians should grow into European citizens and while a “Germany first” bias in Industrie 4.0 may be initially acceptable, all of the EU needs a similar industrial upgrading.In my view the level of invention and innovation is a constant capability of all peoples. When Scotland was the beneficiary of the slave-trading profits of the Tobacco Lords these funds (along with some Sugar Lord monies also based upon black slavery) founded the local Glasgow-centred banks of Scotland and invested in the 88 companies that were the foundation of the local industrial revolution. When England had at most 900 Provincial Banks these institutions funded the conversion of invention to innovation in England and that created the English part of the industrial revolution from about 1750 to 1880. All of that is well documented in sources too numerous and too voluminous to quote here.5 The Industrial Coverage of Made In China 2025The Chinese data in the above table is incomplete because many Chinese SMEs are larger than the Hermann Simon definition as “having a revenue below $4bn”I have calculated the number of SMEs China should have, if the German number of SMEs per million people, is applied to China. About a third of Chinese SMEs seem to be missing, particularly in the western and central provinces of China where local bank SME support seems less supportive than the excellent local bank facilities in the Eastern coastal provinces and around Beijing.I have emailed (with no response so far) various Chinese economists and authorities pointing out that China could be growing more rapidly (I estimate by up to an extra 5%pa for decades) if these SME-supporting bank facilities were extended in western and central China.6 The Centrality of 5G Communications to the AI/IoT economy[Note: In some of the following quoted texts about 5G development, the Made In China 2025 policy is sometimes referred to as MIC2025.]The upgrading in mobile phone and internet connections from the 4G system to 5G is a key component of the success of the new Germany4.0/Made in China2025 strategies. The move from 4G to 5G brings about very large improvements in the operation of the internet for mobile phones and all other “thing users” of the internet. See ‘Made in China 2025’: Beijing has big plans for 5G – if the world lets it which outlines the situation as:“China’s road to 5G has been well planned. In 2012, two years before China Mobile launched 4G services on the mainland, various Chinese entities joined an international initiative to research and develop 5G.“With peak data rates up to 20 times faster than 4G, 5G will serve as “the connective tissue” for new mobile applications, such as the internet of things, autonomous cars and smart cities – providing the backbone for the industrial internet, according to a Deloitte report.“On the consumer side, 5G smartphone users will be able to send high-resolution 4K video within a few seconds, and both video games and apps based on augmented and virtual reality technologies will be seamless. The 5G networks will also be able to support the growing number of connected devices globally, from fitness-tracking watches to internet-linked televisions and smart speakers at home.“The International Telecommunications Union, the United Nations agency overseeing development of the “IMT 2020” global standard for 5G, said the new technology would support 1 million connected devices per square kilometre; 1 millisecond latency (representing the nearly instant time a packet of data takes to get from one point to another); greater efficiency in terms of power and use of radio spectrum; and a peak data download rate of up to 20 gigabits per second.”Let’s list these again, for these upgraded characteristics are astonishing: 5G has the advantages thatIt’s up to about 20 times faster than 4GIt serves as the fast backbone of the “Internet of Things”(IoT)It has a huge service capability (a million connected devices/km2) withvery fast millisecond latency for message transmissiongreater effective use of power and use of radio frequencies withdownloads of up to 20 gigabits/secondenabling not only “smart factories” but “smart cities.”As the above report continues:“The agency works in tandem with the 3rd Generation Partnership Project (3GPP), an international collaboration of seven telecoms standard development organisations that draw up complete mobile system specifications.The 3GPP recently approved the much-anticipated global technology specifications for 5G, which is expected to kick off initial deployments by some of the world’s largest telecoms network operators either later this year or early in 2019.There are two sets of specifications completed under the 3GPP: one is called “5G stand-alone”, which was approved in June, while the other one passed in December 2017 is known as “5G non-stand-alone”.”China has been steeped in the proposed 5G trials, testing and upgrading of mobile phone and IoT Communications from 4G to 5G, as this chart illustrates:And where is the USA in all this? US phone producer companies are involved but Trump seems to imagine that the USA has the power to call a halt on the essential development of this massive upgrading to 5G mobile/IoT services in which America has not been centrally involved.As ‘Made in China 2025’: Beijing has big plans for 5G – if the world lets it reports:“Gear based on the 5G stand-alone specifications is designed to run independently of 4G networks – and this is the standard China is pushing. Operators will need to rebuild their core network and buy new 5G base stations to provide higher data speeds and greater capacity, as well as ultra-reliable, low-latency services to support machine-to-machine connection and autonomous driving.“The Chinese government wants every industry to use the most advanced infrastructure to upgrade productivity. This is a strategic agenda, and they think that 5G will help,” said Jefferies equity analyst Edison Lee, who covers Hong Kong-listed ZTE, China Mobile, China Unicom and China Telecom. He goes on to say“China has very ambitious plans to promote the industrial internet of things, cloud computing and artificial intelligence (AI), the capabilities of which require the support of brand-new 5G networks.”“For example, self-driving cars require sensors, AI and roadside base stations for fast and reliable connectivity to allow vehicles to “talk” to each other to avoid collisions and avoid pedestrians. Today’s 4G networks cannot meet those quick response times.“China’s plan for an aggressive 5G roll-out is in line with the MIC2025 road map. Initially, this focused on the domestic telecoms sector’s ability to increase broadband penetration nationwide to 82 per cent by 2025 as part of a push for industrial modernisation. Another objective was to see local suppliers making 40 per cent of all mobile phone chips used in the domestic market.“Under an updated version published in January, Beijing now wants China to become the world’s leading maker of telecoms equipment. Two of the world’s biggest telecoms gear suppliers, Shenzhen-based Huawei and ZTE, have helped lead China’s 5G research and development efforts.”7 Discussion Most observers do not seem to see the fuller picture of the computer-integrated AI/IoT “new world”. Both German and Chinese factories will become smart factories producing intercommunicating goods and transforming every sector of their economies. The inputs and the use of scarce resources will be AI-optimised, the whole industrial process will be a less costly just-in-time highly efficient production process providing goods and services to consumers in a transformed “5G-implemented Economy4.” The products made outside that system are likely to be literally “dumb” and unable to communicate with other things but may transmit usage and other data back to Germany and China.7.1 The Implications Of Both Industrial ProgrammesBoth Germany and China are going to have the most advanced industrial manufacturing economies and best consumer life experiences in the world.7.2 The Trump Effect In Accelerating China’s DevelopmentWhen Trump banned the export of Intel microchips to China, the Chinese developed their own microchips within 14 months. Donald Trump’s forced march has brought the title of the “World’s fastest computer” back to the USA by June 12 2018 but China has 82 more supercomputers than the USA does. See The world’s fastest supercomputer is back in AmericaAnd also see This is how dramatically China’s beating the US in its share of supercomputers where it says“According to the latest Top 500 list, published Monday (June 25), China has 206 supercomputers and is leading the US by a record margin—82. The US has just 124 machines on the list, “a new low,” according to the statement accompanying the ranking. Just six months ago, China, with 202 of the top computers, was only ahead of the US by 59. Top 500 has been releasing the supercomputer ranking, compiled by prominent computer scientists, every six months since 1993.”7.3 The USA Is the Likely Loser, Whatever OccursPresident Trump appears to be trying to persuade the entire Anglosphere - the USA, Canada, The UK, Australia and the EU- to remain as a group of backward economies, staying with the slower 4G based communications while China and Asia adopt the much higher 5G standard. Of course Trump the Luddite does not know what he is doing nor understand the implications of what he does. The development of smart factories and cities requires smart politicians and Trump is not that.I do not wish to compare the likely results of an integrated 5G-based military technology operating at up to 20 times the speed of a 4G-based technology. But even the most approximate initial comparison indicates that the USA, as has happened since the manufacturing-industry-exporting Ronald Reagan, has failed to invest or participate not only in the development of 5G but also has failed to keep its key once-major industries within its borders and continually updated, and these events inevitably have significant military implications.The American Republican/Conservative preference for “Rule by, for and of the rich” produces a profound disdain for manufacturing, a neglect of the living standards of workers through Austerity, a rot of US roads and public services through “small government”, and a pathological culture in domestic and foreign relations. FDR was much better than that. Trump isn’t.8 Conclusions8.1 The Recent New Initiatives of Industrie4.0/Germany4.0 and Made In China 2025 are the inevitable next stage of factory and services production, based upon on-board Artificial Intelligence and Microchips/Internet of Things/5G Rapid Communications, involvIngthe integration of entire factory production processes through minimal inputs, much higher productivity, just-in-time subcomponent and delivery, to produce excellent mass produced but individually ordered products as specified and much elseThe creation of a fast intercommunicating 5G-based “human-thing” environment of driverless cars, pilotless aircraft, goods-serving personal-delivered education, health and other government services and entertainment services based upon superb quality VRLeading to a new highly advanced integrated goods-and-services providing economy in which the network of things provides an advanced living experienceTrump’s opposition to Made In China 2025 is very unlikely to slow down or stop its implementation8.2 The development of smart factories, smart cities and smart economies within a smarter environment is the inevitable next stage in the economic history of the world. It is unstoppable and inevitable and very helpful to the futures of Germany and China and perhaps in future in Europe and very probably in Asia.8.3 The USA needs to “get on board” and adopt these fresh industrial renewal processes and these policies and not to try to prevent progress in Germany and China. Or the USA could just politically accept the continuation of its trajectory of relative economic decline, which under current leadership seems inevitable. Alternatively, as a first step, the USA needs to study how rapid economic growth is financed in today’s world and adopt more people-serving policies. In my view there are hundreds, possibly thousands, of very capable American politicians, perhaps a majority of them women, who could reverse US economic decline. But that is unlikely to be a quick process.