“Made in China 2025” at center of US-China economic war
By Gabriel Black
19 January 2019
The current negotiations between the US and China over a deal to end the Trump administration’s escalating trade war measures confront a major stumbling block—Beijing’s “Made in China 2025” program, which aims to elevate Chinese competitiveness in key hi-tech industries. The US regards the initiative as a major threat to its own global economic and strategic domination.
China’s meteoric rise has been based on the gross exploitation of hundreds of millions of workers. Shenzhen, the prized miracle of China’s economic “reform,” is the greatest sweatshop in history. The larger Pearl River Delta area, which includes Hong Kong, contains 120 million people. Many of them rural migrants, these workers have been stuffed into factories, assembling and producing goods in some of the world’s most difficult and demeaning conditions.
The Chinese Communist Party bureaucrats, and the oligarchs for whom the CCP speaks, have grown enormously wealthy by providing cheap labour to major global corporations. The Chinese state banks sit on an estimated $3 trillion of foreign reserves. Chinese capitalism, however, has reached a crucial juncture. Either the country remains stuck assembling and producing the world’s goods, in what economists call the “middle income trap,” or it can try to become an owner and designer of leading global commodities.
For the Chinese ruling class this is a life or death question. Amid mounting economic problems, it has no alternative but to take part in the highly profitable but cutthroat global competition to develop and sell high end goods. It is not surprising therefore that the US is determined to prevent such a challenge through all available means.
The “Made in China 2025” program, which was announced in 2015, provides state subsidies and support to encourage the domestic production of at least 70 percent of the components of 10 key high-tech industries. The program targets next generation information and telecommunications technology, particularly 5G, as well as advanced industrial and medical robotics, artificial intelligence, and electric cars—for which China, as the world’s largest oil importer, is desperate.
For all the hype in both the Chinese and US media, however, China has a long way to go. Though Chinese manufacturing has grown enormously, going from less than 10 percent of global value added in 2005 to 25 percent in 2015, it remains dependent on foreign companies for the most cutting-edge, high-tech products. For example, China consumes 60 percent of the world’s semiconductors, but it only produces 13 percent of the supply. The United States dwarfs Chinese chip makers, with China importing more than $200 billion worth of chips. The top US suppliers of chips—Intel, Broadcom and Qualcomm—are each at least 10 times the market capitalization of China’s biggest chip maker Shenzhen Huiding Technology.
Another example is robotics. China has the largest market for industrial robots in the world—with over 430,000 in operation. However, as Qu Daokui, deputy director of China’s State Engineering Research Center for Robotics notes, “Only a quarter of the robots in the Chinese market are domestically made and the three core parts and components of domestic robots have long relied on imports.”
In the past 10 years, China’s GDP and GDP per capita have trebled, but Chinese corporations lag behind on the world stage. Quantitatively, China’s companies are some of the biggest in the world, as a list of the largest corporations by revenue shows. However, these companies are frequently oriented towards China’s own domestic market in contradistinction to other top companies that sell their goods globally. For example, of the top 50 corporations in the world, 11 are Chinese. However, their focus is overwhelmingly domestic: construction, electricity, railway, insurance, SAIC, China’s domestically focused car company, and oil.
The US and its allies are determined to restrict the ability of Chinese corporations to break into global markets. Using the pretext of national security, the United States, Australia and New Zealand have blocked China’s cell phone giants, Huawei and ZTE, from developing 5G networks, including in collaboration with major companies like AT&T. Legislation was signed into law last year making it illegal for US government employees to use Huawei or ZTE phones.
In a further move against Huawei, Washington instigated the detention of its chief financial officer Meng Wanzhou by Canadian authorities and is pushing for her extradition to face charges of breaching unilateral US sanctions on Iran. The extraordinary step based on sanctions that have no international standing is another indication that the US will stop at nothing to undermine China.
While facing huge hurdles overcoming US-led opposition to it “climbing the technology ladder,” China has invested enormous sums trying to do so. Last year the National Science Board of the United States stated that China was poised to overpass the US in R&D spending by the end of the year. China has increased its spending an average of 18 percent per year between 2005 and 2015.
China is training large numbers of scientists and engineers. A National Science Board report found, “Between 2000 and 2014, the number of S&E bachelor’s degrees awarded in China rose more than 360 percent to 1.7 million. The US had more moderate growth (54 percent) over the same period.” Likewise, it showed that peer-reviewed science and engineering articles rose 8 percent every year between 2006 and 2016, while the US had an annual increase of just 1 percent.
The relationship between these quantitative indicators of technical growth and actual achievement is complex. China, for example, has surged in the number of patents that it files—surpassing the United States several years ago. However, US patents were about two times more likely to be accepted than Chinese patents, according to a report from the St. Louis Federal Reserve. Other measures, such as the Nature Index, which measures country-by-country contribution to the leading science journals, shows an unmistakable trend: a substantial development of the scientific output of Chinese universities.
Contributions to Top Scientific Journals by top five countries, source: Nature
In this context, the Trump administration has sought to restrict Chinese students entering the United States. Since last June the State Department has restricted visas for Chinese graduate students in sensitive areas of research—changing them from five-year to one-year visas, with increased scrutiny for acceptance.
The Trump administration’s focus on “Made in China 2025” is also bound up with US preparations for war. Beginning with the Obama administration’s “pivot to Asia,” and accelerated under Trump, the US has been engaged in a huge military build-up and strengthening of alliances and basing arrangements throughout the Indo-Pacific against China.
The US is determined to maintain its technical edge in military hardware and warfare systems by undermining China’s own technological development including through its “Made in China 2025,” a crackdown on China’s alleged intellectual property theft, and restrictions on Chinese citizens, including students, in the United States.
FBI director Christopher Wray bluntly told the US Senate last year, “One of the things we’re trying to do is view the China threat as not just a whole-of-government threat, but a whole-of-society threat on their end. And I think it’s going to take a whole-of-society response by us.”
As in the 1930s, trade war and other forms of economic rivalry and conflict are intimately bound up with the drive to war—in this case between nuclear armed powers. The intense hostility in Washington to “Made in China 2025” is another indication of the advanced character of the war preparations currently underway.
Time to Fight Back Against China's Massive Intellectual Property Theft
OPIOID AMERICA: CHINA AND MEXICO PARTNER TO ADDICT AMERICA
$ERVANT OF RED CHINA FOR RAW CA$H, $ENATOR FEIN$TEIN’S DRIVER IS A $PY FOR HER CHINE$E PAYMA$TER$!
“All in all, it was an incredible victory for the Chinese government. Feinstein has done more for Red China than other any serving U.S. politician. “ Trevor Loudon
Time to Fight Back Against China's Massive Intellectual Property Theft
According to the 2017 Report of the Commission on the Theft of American Intellectual Property, the annual cost to the U.S. economy from intellectual property theft exceeds $225 billion and could be as high as $600 billion. In 2015, the Office of the Director of National Intelligence estimated that economic espionage through hacking costs Americans $400 billion per year. The Chinese government is estimated to be responsible for 50 to 80 percent of cross-border intellectual property theft worldwide[1] and a 2013 Verizon report claimed China is responsible for 90 percent of cyber-enabled economic espionage in the United States.[2] The profit China derives from stolen commercial secrets is so great that it likely accounts for a large portion of China’s often-touted miraculous economic growth.
Many experts, academics, Western governments, and cyber firms have identified this theft. All who have worked in China knows this is true but virtually no one proposes anything to remedy the loss. The US Government seems to have adopted the attitude that it is something Americans just have to swallow year after year.
Americans have enjoyed some success in suing states that have sponsored terrorism. Multi-billion-dollar judgments have been awarded to US plaintiffs in now numerous lawsuits against states, such as Iran, which have directed, sponsored, or financed terrorist acts. US industry ought to model such lawsuits to recover the intellectual property lost to the Chinese communist government via cyberspace-enabled espionage as well as against the financial institutions that launder money accrued from such theft. Congress could incentivize this straightforward remedy by amending the Economic Espionage Act to provide a private cause of action to allow private entities to take legal action against the state of China for such intellectual property loss.
Instead of embracing Western institutions and the rule of law, the Chinese government cynically uses them when in their interests and flouts them when they can. The government knows well how difficult it is for states that adhere to democratic principles to react to such brazen law breaking and thus knows the US Government may never get around to blocking or punishing Chinese intellectual property theft, let alone recover the economic loss from the last decade of such unchecked Chinese economic espionage. In short, the current situation favors and encourages the law-breaking, totalitarian state of China.
Economic espionage consists of the theft or private, industrial (proprietary) information and sensitive business information to aid Chinese industry and trade and business negotiations. This illegal activity is what China is especially well-known for and rightly so. Chinese-government economic espionage is likely greater than the economic espionage conducted by all other states against the United States combined. A 2013 MacAfee study estimated the annual loss for the United States from cybercrime and espionage amounted to as much as 1 percent of US national income and as many as 508,000 US jobs; China accounts for most of this loss. The US-China Economic and Security Review Commission concluded that Chinese espionage comprises the single greatest threat to US technology.
Further, China’s Cybersecurity Law, implemented in 2017, now requires personal information held by “critical information infrastructure” to be stored on servers in China and data deemed important be given a “security assessment” before it can be transferred abroad (meaning such information won’t likely or easily be allowed to be transferred). Conversely, any US business that wants to do business in China must agree to Chinese cybersecurity laws that require its data to be housed in China (which means US intellectual property will be lost once it rests inside China). Such requirements, beyond the obvious targeting of US intellectual property, form a formidable (if not Orwellian) barrier to fair trade and international digital commerce: any data stored in China is Chinese data (‘what’s mine is mine; what’s yours is also mine’).
Since US private sector loss to Chinese economic espionage is often hidden and incremental, the United States almost always defaults to a passive, dismissive attitude and does nothing. At the very least, the US Government ought to inform US industry that it cannot protect US proprietary information from Chinese government hackers and point out that business in or with China will likely ultimately cost more than they realize (such as loss of their source code as well as any intellectual property advantage they may have).
As former Director of the National Security Agency and the CIA, Michael Hayden, recently said, ‘the US Cyber Calvary ain’t coming to save any US business.’ The private sector ought to realize that its best remedy may be the Court system to seek damages to deter future Chinese industrial theft. Further, the US Government ought to encourage US industry to set up intellectual honeypots (pockets of false intellectual property), which the Chinese could hack into and steal in order to effect a level of deterrence and doubt into the Chinese intellectual property espionage effort. Nothing legally prevents them from creating such false information now and US industry would be foolish if it is not already doing this.
Chinese cyberspace-enabled economic theft has not only damaged US companies but has also helped China save on research and development expenses, while catching up on critical industries. The cumulative effect has been to erode the United States’ long-term position as a world leader in science and technology.
James Van de Velde is Associate Professor at the National Intelligence University as well as Adjunct Faculty at Johns Hopkins and Georgetown University. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of the US Government, the Department of Defense, or the National Intelligence University.
[1] Dennis C. Blair and Jon M. Huntsman, Jr., “The Report of the Commission on the Theft of American Intellectual Property,” National Bureau of Asian Research, May 2013, page 3.
[2] “2013 Data Breach Investigations Report,” Verizon, 2013, page 21. (http://www.verizonenterprise.com/resources/reports/rp_data-breach-investigations-report-2013_en_xg.pdf )
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OPIOID AMERICA: CHINA AND MEXICO PARTNER TO ADDICT AMERICA
American middle-class is addicted, poor, jobless and suicidal…. Thank the corrupt government for surrendering our borders to 40 million looting Mexicans and then handing the bills to middle America?
http://mexicanoccupation.blogspot.com/2017/11/princeton-scholars-opioid-crisis.html
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SENATOR DIANNE FEINSTEIN AND PARASITE HUSBAND RICHARD “BRIBSTERS” BLUM
Blum has long handed out bribes in the form of “campaign contributions” to other corrupt Democrat politicians so they keep their mouths shut about the staggering corruption that has profitably followed Feinstein from day one!
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WAR ON THE AMERICA WORKER: FEINSTEIN, PELOSI, OBAMA, and the CLINTON CRIME DUAL
“Senator Dianne Feinstein warned, at the time, they had to solve this crisis now—of immigrants coming in illegally and getting these jobs.”
http://mexicanoccupation.blogspot.com/2018/05/senator-dianne-feinstein-looking-to-buy.html
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