How China will bury us

China is thinking way beyond making money by trade and overseas investment.  James McGregor tells about still-Communist China’s latest economic plans:

How do we overcome the fundamental disconnect between our system of scattered bureaucratic responsibilities and almost no national economic planning vs. China’s top-down, disciplined and aggressive national economic development planning machine?

At issue is an array of Chinese policies and initiatives aimed at building “national champion” companies through subsidies and preferential policies while using China’s market power to appropriate foreign technology, tweak it and create Chinese “indigenous innovations” that will come back at us globally.

China has long been a “pay-to-play” market for foreigners, with mandated joint ventures in key industries, local manufacturing requirements and forced technology transfers as the price of market admission. Its entry into the World Trade Organization in 2001 was supposed to do away with the bulk of those barriers — and many were eliminated on paper.

But long gone are the days of China acting as a supplicant to gain access to foreign markets or obtain foreign investment. China now funds the U.S. budget deficit. Its rapidly developing domestic markets are expected to lead global growth for decades. The quarterly earnings of the world’s biggest multinational companies increasingly depend on their China business.

Chinese leaders — shrewd students of political and economic leverage — are shifting their focus from global trade and investment principles to the creation of their own rules and a “China model” of economic development that is difficult to challenge in international courts. Chinese policymakers are masters of creative initiatives that slide through the loopholes of WTO and other international trade rules. Facing off against this are 30 lawyers in the U.S. trade representative’s office of general counsel — only one of whom can read Chinese. This small cadre handles all WTO cases and supports all our trade negotiations globally. Only a half-dozen people in the office focus on China.

As part of their “China model,” that country’s leaders have decided that key sectors of the economy will remain “state dominated,” including automotive, chemical, construction, electronic information, equipment manufacturing, iron and steel, non-ferrous metals, and science and technology. Others will stay “largely in state hands,” including aviation, coal, defense, electric power and grid, oil and petrochemicals, shipping and telecommunications. State-owned companies in these industries are thriving in their protected home market. They have buckets of cash and easy access to state bank loans to carry out government directives to pursue overseas acquisitions and “go global.”

Most worrisome is the Chinese government mandate to replace core foreign technology in critical infrastructure — such as chips, software and communications hardware — with Chinese technology within a decade. The tools to accomplish this include a foreign-focused anti-monopoly law, mandatory technology transfers, compulsory technology licensing, rigged Chinese standards and testing rules, local content requirements, mandates to reveal encryption codes, excessive disclosure for scientific permits and technology patents, discriminatory government procurement policies, and the continued failure to adequately protect intellectual property rights. The poster child is the evolving “indigenous innovation” policy, which appears aimed at using China’s market power to coerce foreign companies to transfer and license their latest technology for “co-innovation” and “re-innovation” by Chinese companies.

via James McGregor – Time to rethink U.S.-China trade relations.

Notice that this is NOT free market economics but state-run and state-directed economics that takes advantage of capitalist economies by means of state monopolies, coercive government power, and economic clout.

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • kerner

    So Fascism is going to bury free market capitalism, eh? Well, the only way national socialism was able to be successful in the past was by fascist countries enslaving the surrounding countries. A scary prospect if we are discussing China.

  • kerner

    So Fascism is going to bury free market capitalism, eh? Well, the only way national socialism was able to be successful in the past was by fascist countries enslaving the surrounding countries. A scary prospect if we are discussing China.

  • http://www.bikebubba.blogspot.com Bike Bubba

    Looks like the Chinese are trying to kill off their economic growth with a list of regulations like that. Their only hope is that President Obama and his minions do the same here, and at least make it a competitive disaster.

    In other words, China is going to “bury” us the same way Japan “buried us” in the 1980s. Japan has been in a recession ever since, and hopefully for their people, enough voters are learning a lesson to overturn that foolishness.

    Hopefully for China’s, too.

  • http://www.bikebubba.blogspot.com Bike Bubba

    Looks like the Chinese are trying to kill off their economic growth with a list of regulations like that. Their only hope is that President Obama and his minions do the same here, and at least make it a competitive disaster.

    In other words, China is going to “bury” us the same way Japan “buried us” in the 1980s. Japan has been in a recession ever since, and hopefully for their people, enough voters are learning a lesson to overturn that foolishness.

    Hopefully for China’s, too.

  • kerner

    Right Bike. What is being described above is pretty much national socialism. But national socialism doesn’t work any better than any other kind of socialism. In 20th century Europe, some national socialists were able to keep it going by trying to enslave the surrounding countries. In Argentina, with no neighbors it could successfully enslave, it flopped. Government control and protectionist policies sound scary, but they don’t work.

    The scariest thing about this article is that China IS capable of enslaving, or at least intimidating and exploiting, other countries.

  • kerner

    Right Bike. What is being described above is pretty much national socialism. But national socialism doesn’t work any better than any other kind of socialism. In 20th century Europe, some national socialists were able to keep it going by trying to enslave the surrounding countries. In Argentina, with no neighbors it could successfully enslave, it flopped. Government control and protectionist policies sound scary, but they don’t work.

    The scariest thing about this article is that China IS capable of enslaving, or at least intimidating and exploiting, other countries.

  • kerner

    hmmm. I don’t seem to be able to post a comment. If all my comments show up at once, which has happened before, sorry for any confusion.

  • kerner

    hmmm. I don’t seem to be able to post a comment. If all my comments show up at once, which has happened before, sorry for any confusion.

  • sg

    Market analysts I have read say China is a huge bubble near a crash. On a positive note, some say China is poised to become the world’s largest Christian nation with nearly 200 million Christians. Not sure I buy that, but that could make things interesting especially if the Chinese Christians have a normal male/female ratio unlike their secular peers who prefer boys (bare branches).

    Christianity transformed Europe, maybe that will happen in China. I don’t think aggressive policies will save China, but I think we know Who can.

  • sg

    Market analysts I have read say China is a huge bubble near a crash. On a positive note, some say China is poised to become the world’s largest Christian nation with nearly 200 million Christians. Not sure I buy that, but that could make things interesting especially if the Chinese Christians have a normal male/female ratio unlike their secular peers who prefer boys (bare branches).

    Christianity transformed Europe, maybe that will happen in China. I don’t think aggressive policies will save China, but I think we know Who can.

  • Don F.

    I’m looking forward to China relieving the US of its vast unsustainable, violent empire.

  • Don F.

    I’m looking forward to China relieving the US of its vast unsustainable, violent empire.

  • sg

    “I’m looking forward to China relieving the US of its vast unsustainable, violent empire.”

    Right, because China will enforce peace just like the USSR did, and Cuba does, etc. It will be all peace and flowers and unicorns, oh, and human rights.

  • sg

    “I’m looking forward to China relieving the US of its vast unsustainable, violent empire.”

    Right, because China will enforce peace just like the USSR did, and Cuba does, etc. It will be all peace and flowers and unicorns, oh, and human rights.

  • http://www.newreformationpress.com Patrick Kyle

    ‘I’m looking forward to China relieving the US of its vast unsustainable, violent empire.’

    Really? You think we’re violent, wait until the Chinese Communists are in control. You must be historically ignorant.

    If you hate the US so much, then, as they say in Texas, don’t let the door hit ya’ where the Good Lord split ya’. Go live in China.

    You are wishing suffering, oppression and warfare on me and my children and every one else who will suffer under their particular brand of totalitarianism and economic hegemony.
    I can guarantee that if you met me in person you wouldn’t be foolish enough to say something like that to my face.

  • http://www.newreformationpress.com Patrick Kyle

    ‘I’m looking forward to China relieving the US of its vast unsustainable, violent empire.’

    Really? You think we’re violent, wait until the Chinese Communists are in control. You must be historically ignorant.

    If you hate the US so much, then, as they say in Texas, don’t let the door hit ya’ where the Good Lord split ya’. Go live in China.

    You are wishing suffering, oppression and warfare on me and my children and every one else who will suffer under their particular brand of totalitarianism and economic hegemony.
    I can guarantee that if you met me in person you wouldn’t be foolish enough to say something like that to my face.

  • DonS

    China IS funding our budget deficit, but that’s our own fault, isn’t it? We have the choice not to run one for them to fund. We also have the choice to reduce the regulatory mandates we impose on our own manufacturers so that they can better compete against Chinese manufacturers. We refuse to do that, because it is politically better to demonize manufacturers as evil businesses.

    Instead of wringing our hands about what China is doing to us, let’s put politicians in power who will take action to change what we keep doing to ourselves.

  • DonS

    China IS funding our budget deficit, but that’s our own fault, isn’t it? We have the choice not to run one for them to fund. We also have the choice to reduce the regulatory mandates we impose on our own manufacturers so that they can better compete against Chinese manufacturers. We refuse to do that, because it is politically better to demonize manufacturers as evil businesses.

    Instead of wringing our hands about what China is doing to us, let’s put politicians in power who will take action to change what we keep doing to ourselves.

  • Vic

    Anyone here up on the “Amero” and the NAFTA superhighway? Aren’t they a greater threat than China?

  • Vic

    Anyone here up on the “Amero” and the NAFTA superhighway? Aren’t they a greater threat than China?

  • Andy

    “I’m looking forward to China relieving the US of its vast unsustainable, violent empire.”

    This makes sense to me. China’s power may finally make this country recognize that we’ve got to solve our own problems before venturing all over the world. In other news, one govt reg our capitalist elite won’t complain about is the tax break American companies get for outsourcing American jobs to places like China.

  • Andy

    “I’m looking forward to China relieving the US of its vast unsustainable, violent empire.”

    This makes sense to me. China’s power may finally make this country recognize that we’ve got to solve our own problems before venturing all over the world. In other news, one govt reg our capitalist elite won’t complain about is the tax break American companies get for outsourcing American jobs to places like China.

  • Don F.

    To Patrick Kyle:
    God bless you, son.

  • Don F.

    To Patrick Kyle:
    God bless you, son.

  • sg

    China is also mining Africa for all manner of resources. They of course don’t have to worry about western media guilting them for exploiting the vast continent, its resources or people. With no internal nor external conscience to bother them, they have used modern methods to surpass the colonials of centuries past in record time.

    http://www.fastcompany.com/magazine/126/special-report-china-in-africa.html

  • sg

    China is also mining Africa for all manner of resources. They of course don’t have to worry about western media guilting them for exploiting the vast continent, its resources or people. With no internal nor external conscience to bother them, they have used modern methods to surpass the colonials of centuries past in record time.

    http://www.fastcompany.com/magazine/126/special-report-china-in-africa.html

  • Andy

    SG -
    No people historically has exploited resources and people better than the Americans, be it their government or their corporations. That’s just a fact.

  • Andy

    SG -
    No people historically has exploited resources and people better than the Americans, be it their government or their corporations. That’s just a fact.

  • kerner

    Andy:

    I don’t want to make assumptions about what you mean, so I’m going to ask you to explain what you mean by the exploitation of resources and people (some examples would help). And what do you mean by saying we have done it “better”?

  • kerner

    Andy:

    I don’t want to make assumptions about what you mean, so I’m going to ask you to explain what you mean by the exploitation of resources and people (some examples would help). And what do you mean by saying we have done it “better”?

  • http://www.toddstadler.com/ tODD

    Kerner, the reason your comments didn’t show up (until now, that is) is that “soci@lism” is a bad word, according to the (Akismet) spam filter. I’m sure there’s some fascinating reasoning behind that judgment, and why other words get a pass, but just a reminder to the approximately 0 people still reading this thread.

  • http://www.toddstadler.com/ tODD

    Kerner, the reason your comments didn’t show up (until now, that is) is that “soci@lism” is a bad word, according to the (Akismet) spam filter. I’m sure there’s some fascinating reasoning behind that judgment, and why other words get a pass, but just a reminder to the approximately 0 people still reading this thread.

  • kerner

    well, I’m still reading it. Thanks, tODD. No more $ocialism.

  • kerner

    well, I’m still reading it. Thanks, tODD. No more $ocialism.

  • kerner

    ack! It won’t accept variations of the economic system who must never be named either. I’ll have to start calling it voldemortism instead.

  • kerner

    ack! It won’t accept variations of the economic system who must never be named either. I’ll have to start calling it voldemortism instead.

  • Cincinnatus

    I, too, wouldn’t mind if China disburdened us of our empire. It will be their undoing, just as empire is always the undoing of the metropole. There is no such thing as an imperial republic. At least Rome had the decency to acknowledge the discontinuity.

    More relevant to this post, however, I could care less whether China “buries” us economically. Economic might isn’t the secret to what is uniquely American about the American project. But, as it happens, China isn’t going to “bury” anyone because, as sg quite rightly points out (I hope this smart commentator sticks around on this blog!), China is a massive bubble on the cusp of bursting. Stagflation of the sort which has afflicted Japan for two decades is the least of China’s worries. Not only will they suffer the ramifications of a speculative economy, but they have tremendous social crises to confront in the coming years, including utter failure of ethnic integration (the hegemony of the Han over a disgruntled array of non-Han Chinese who have been excluded from power for decades, the agitations of the Uhgyurs, Tibetans, etc., a staggering gender imbalance, a rich/poor, urban/rural divide that would make Republicans blush, an industrial sector based on what virtually amounts to slavery, disputes with nuclear-armed India, ad infinitum). China’s domestic problems make our coming entitlement and immigration crises look like the stuff of petty local politics.

    In short, China’s trajectory is manifestly unsustainable, much like that of the Soviet Union in the 1980s, and while the denouement of the story may be more or less sudden, more or less violent, and more or less imminent, China will fall, and it doesn’t even need our help to do it. In fact, let them overreach: the bigger they are, the harder–and more satisfyingly–they fall.

  • Cincinnatus

    I, too, wouldn’t mind if China disburdened us of our empire. It will be their undoing, just as empire is always the undoing of the metropole. There is no such thing as an imperial republic. At least Rome had the decency to acknowledge the discontinuity.

    More relevant to this post, however, I could care less whether China “buries” us economically. Economic might isn’t the secret to what is uniquely American about the American project. But, as it happens, China isn’t going to “bury” anyone because, as sg quite rightly points out (I hope this smart commentator sticks around on this blog!), China is a massive bubble on the cusp of bursting. Stagflation of the sort which has afflicted Japan for two decades is the least of China’s worries. Not only will they suffer the ramifications of a speculative economy, but they have tremendous social crises to confront in the coming years, including utter failure of ethnic integration (the hegemony of the Han over a disgruntled array of non-Han Chinese who have been excluded from power for decades, the agitations of the Uhgyurs, Tibetans, etc., a staggering gender imbalance, a rich/poor, urban/rural divide that would make Republicans blush, an industrial sector based on what virtually amounts to slavery, disputes with nuclear-armed India, ad infinitum). China’s domestic problems make our coming entitlement and immigration crises look like the stuff of petty local politics.

    In short, China’s trajectory is manifestly unsustainable, much like that of the Soviet Union in the 1980s, and while the denouement of the story may be more or less sudden, more or less violent, and more or less imminent, China will fall, and it doesn’t even need our help to do it. In fact, let them overreach: the bigger they are, the harder–and more satisfyingly–they fall.

  • Tom Hering

    Do the Chinese have their own notion of Exceptionalism, to match American Exceptionalism? A shining Forbidden City on a hill?

  • Tom Hering

    Do the Chinese have their own notion of Exceptionalism, to match American Exceptionalism? A shining Forbidden City on a hill?

  • Cincinnatus

    Yes, “Chinese Exceptionalism”–or rather, “Supremacy”–seems to be a popular notion. In fact, I’ve heard of “Asian Supremacy,” which has a rather…fascist…intonation to my ear.

  • Cincinnatus

    Yes, “Chinese Exceptionalism”–or rather, “Supremacy”–seems to be a popular notion. In fact, I’ve heard of “Asian Supremacy,” which has a rather…fascist…intonation to my ear.

  • Tom Hering

    Okay, sure. What else would drive expansion – theirs or ours – and a lust for world leadership but a sense of superiority?

  • Tom Hering

    Okay, sure. What else would drive expansion – theirs or ours – and a lust for world leadership but a sense of superiority?

  • Tom Hering

    Interesting discussion here which makes the point that if China decides to assume moral leadership of the world, their concerns and aims will spring from Confucianism. (They haven’t made this decision yet, as their single-minded goal thus far has been to escape national poverty through pragmatism.)

  • Tom Hering

    Interesting discussion here which makes the point that if China decides to assume moral leadership of the world, their concerns and aims will spring from Confucianism. (They haven’t made this decision yet, as their single-minded goal thus far has been to escape national poverty through pragmatism.)


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