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One of China's biggest trade partners is worried Beijing will turn to its 'old toolbox' of protectionism

China's plan to advance its manufacturing capabilities is drawing criticism from one of its major trade partners.

The initiative, "Made in China 2025," calls for China to upgrade its industrial base, and it could kill the country's need to import goods and services from Europe, according to a new report by the European Union Chamber of Commerce in China. That means Europe stands to lose a chunk of the 170 billion euros it currently earns in exports to the world's second-largest economy.

China's push for a high-tech industrial revolution could "distort markets and actually might cause havoc to European business opportunities — not only here, but also elsewhere in the world," Joerg Wuttke, president of the European Union Chamber of Commerce in China, told CNBC.

China has long been the world's factory, as a leading supplier of everything from air conditioners to mobile phones. The government now wants to develop the world's second-largest economy by upgrading its factory assembly lines to produce high-tech medical devices and cutting-edge robots. And foreign firms are getting nervous that they'll lose access to China, which is the world's largest consumer market with 1.4 billion people.

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Companies say it's already tough to do business in China because the government seems to favor domestic firms. Beijing has also been criticized for unfairly propping up Chinese companies, and not allowing for open market competition.

The worry is that China will again resort to "the old toolbox of government interference, despite the fact it has been talking about the invisible hand of the market for quite a while," Wuttke said.

Such tactics have already proven problematic — government subsidies to support industrial robotics are contributing to overcapacity, which could exacerbate existing tensions with China's trade partners, the EU Chamber warned.

The report also highlighted that massive Chinese government spending on this plan could worsen the country's giant debt problem. Some estimates put China's total debt at three times the size of its economy.

Still, it's clear that the Chinese government is searching for ways to further develop its economy. Beijing announced its annual GDP growth target Sunday, aiming for expansion around 6.5 percent.

The government's "Made in China 2025" initiative — announced in 2015, aiming to grow ten key sectors, including robotics and biomedicine — is just one part of larger policy plans created to support growth.

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