American Economics with Chinese Characteristics

 

This title was considered as a possibility for the book itself. Just how far has the economy of the United States become entangled with that of the Chinese People’s Republic? Have the intertwinings of corporate ownerships and mutually dependent markets now made it economically impossible to separate from without a mutually-assured economic destruction? Frankly, this author fears that this is indeed the case. And if it is so, will the judgments made by courts and politicians continue to bend the branches of the American Constitution farther and farther away from the original roots as intended by the founding fathers?

If you were to boil it down to just one word to describe the deep undercurrent that lies at the heart of life in the United States and in China, what would that word be? For this writer, I would say that the United States is, after all is said and done, a culture based on trust. For China: it is distrust and its manifest corruption.

America entered, raced actually, into China to invest in Chinese industry and get a toe hold in the burgeoning economy of the Middle Kingdom. In many ways the economic growth in China di indeed seem like a miracle, and western capitalists were seemingly blinded by the glitter of all that gold to made in partnership with their Chinese counterparts. But when the global financial crisis really set in by 2008, the honeymoon ended, the veil of “normalcy” was removed, and the capitalist suitors could see it was the emperor and not the bride that wore no clothes. Suddenly, a whole lot of foreign CEOs have come to feel rather exposed. Now they check their cellphones at the door to the Forbidden City, rather than their common sense.

This rather abrupt  “We’re not in Kansas anymore” dawning on the minds of visiting multinationals has now led to what  long time China observer and writer James McGregor calls “seriously schizophrenic behavior”[1]. He goes on to describe an atmosphere in which the CEOs smile while operating as if behind enemy lines. Many companies forbid their representatives from bringing smart phones into China. Those that do, take out the battery so the phones cannot be remotely activated. Some executives go so far as to fly to Korea to place important calls. These and a host of other information security measures are, as James McGregor quotes a New York Times article, are now ‘Business 101’ in China.

But all this new-found wisdom is fine going forward, but how much damage has been done already? Many feel it is already way too late and mostly irreparable. Almost daily we are told of another cyber breach at a bank, a military installation, even a White House in DC. Being rather interested in aviation myself, I read more and more articles about aircraft manufacturers, large and small, struggling with how to be a part of the growing Chinese market in aviation, yet attempting to resist as much as possible the transfer of closely held technologies or revealing financial and marketing information. This struggle is not just on Chinese soil.

Just recently, Aviation Week & Space Technology reported that Hawker Beechcraft, the Wichita, Kansas maker of business jets, turboprops, and military trainers, announced that a $1.79 billion sale to a Chinese firm was off[2]. One of the reasons may well have been an increased awareness and concern by the United States government  about the transfer of advanced technologies, including composites, to Superior Aviation Beijing, which is 40% owned by Beijing’s municipal government (see “Urban Zones in this book).

There is nothing new about the transfer of American and western nations’ technologies to China, only the more recent concerns both here and abroad. When the world’s economies were surfing the crest China’s growing economic wave, there was really little that was done to stop this outflow of knowledge. After all, it was priming the pumps of Chinese production of increasingly sophisticated and less expensive products by which western companies and retail shops keep satisfying the consumers’ ever growing appetite. So, before that economic wave broke onto the American shores in 2007, the issue of “shared technology” was noted but little acted upon.

Take this headline from The Washington Times, dated February 4, 2004: “Boeing Sale to China skirts ban on technology transfer.” Quoting from the article, “China has obtained military navigation technology from Boeing used on advanced U.S. missiles and warplanes that was improperly approved by the State Department, according to U.S. government officials.[3]” The Bush administration had granted a waiver for the sale of Boeing 737-800 commercial airliners with the installed navigational equipment technologies in question as part of its “pro-business policies.”  Remember, this was 2004. Economies around the world were revving up to full tilt after the shock of 9-11. Business was booming, international trade was flourishing, and Americans seemed to feel that whatever technology that did get to China, it would be rapidly outdated by a newer and better one that would just keep flowing out of the uniquely American-knowhow minds.

Strange, is it not, especially when viewed with the benefit of hindsight? On any number of occasions over the past many years, China has been quite explicit about the goal of acquiring the much needed technology and information base to make their industries competitive, one might even say dominant, in the world of banking and commerce.

In 2006, for instance, the Chinese leadership launched what it referred to as the indigenous innovation campaign. The campaign’s goal is quite clearly stated as being to transform China into a global powerhouse of technology. The State Owned Enterprises (SOEs; including aerospace, armaments, telecommunications, etc.) are to obtain technology from multinational partners through “co-innovation” and, now get this, “re-innovation” by assimilating the imported technologies.

“Re-innovation”, now that’s a good one. That would be like saying, “No, teacher, I wasn’t copying Johnny’s test answers, I was just re-innovating them!” Good grief!  As James McGregor noted in a Yale Center publication, “Not surprisingly, multinationals and their governments saw this as a blueprint for technology theft.”[4]

Tin Geithner, U.S. Secretary of the Treasurer, summed it up in remarkably non-politically-correct terms when he said, “We’re seeing China continue to be very, very aggressive in a strategy they started several decades ago, which goes like this: you want to sell to our country, we want you to come produce here … if you want to come produce here, you need to transfer your technology to us.”[5]

American Economics with Chinese Characteristics? There is little doubt that there are trending pressures in that direction.



[1] “No Ancient Wisdom, No Followers”, James McGregor, Amazon.com

[2] “Aviation Week & Space Technology”, Oct 22, 2012

[3] http://www.washingtontimes.com/news/2004/feb/4/20040204-111249-1693r/#ixzz2B0iOKt1I

[4] http://yaleglobal.yale.edu/content/no-ancient-wisdom-china; This is a great article and is a clear and succinct summary of his book “No Ancient Wisdom, No Followers”

[5] Reuters, 11/23/11

 

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