The stock market has been volatile the past week as investors weigh the prospects of China and the U.S. reaching a trade accord. As I noted previously, analysts and investors have demonstrated a woeful ignorance regarding China’s rapacious mercantilist policies that rely on noncompliance with preexisting trade agreements, forced technology transfer and concerted and overt cyberattacks and hacking of U.S. defense contractors and corporations in order to steal military and trade secrets. Although this malicious activity has been occurring for the past decade, many investors seem to think it is a recent phenomenon.
Much recent reporting on the trade dispute also reflects a lack of historical perspective concerning China’s habit of breaking trade agreements with impunity.
An article in today’s Wall Street Journal, titled, Chinese-U.S. Integration Frays, is indicative of reporting that fails to discuss adequately, the crucial historical and strategic component endemic to the current trade dispute. The article leads by stating,
“The sudden deterioration of trade talks between the U.S. and China this week has raised the prospect of a once-unimaginable rupture between the world’s two largest economies.”
First, why is a a rupture between China and the U.S. “unimaginable?” They intentionally hack and steal our trade secrets, conduct brazen espionage and have successfully recruited employees of defense contractors to spy and disclose confidential military secrets. Why would this prolonged perfidy by China be advantageous to the U.S.? All of this activity is not “alleged,”it is well-documented and real. For those who have been paying attention to the overall aspects of the relationship, the rupture, wasn’t unimaginable, it was predictable.
For those who have used a frequently volatile and precipitous stock market as a barometer on the status of the trade relationship, naturally view the tariffs imposed by president Trump to be a draconian measure.
The article additionally implies that the U.S. clamp-down on the export of semiconductors as a national security risk, is somehow unwarranted or unfounded.
”Last October the Commerce Department barred sales of U.S. technology to Chinese government-backed semiconductor startup Fujian Jinhua Integrated Circuit, allegedly over theft of U.S. intellectual property.
Chinese theft of U.S. trade secrets in well known; characterizing it as “alleged,” in this particular instance is highly misleading, particularly since overall, the article fails to acknowledge that theft of U. S. trade secrets is well known, by American corporations and the U. S. Government alike.
Another example of failing to enumerate existing breaches of U.S. military secrets in order to provide a meaningful picture of the basis for the present disputes is the implicit assumption that all of this unsavory behavior has only recently become known,
“Starting in 2010, Chinese investment began surging into the U.S. American officials now worry those investment flows enable Chinese state and private actors to appropriate American commercial and military knowledge, and want to curtail them.”
This passage seems to imply or suggest, erroneously, that the revelation of Chinese subterfuge suddenly came to the attention of the U.S. While the article does acknowledge China’s harmful actions, it provides no historical perspective concerning the extent to which China has been conducting such tactics unabated. The realty is that China has been actively engaged in surreptitious activities and espionage for quite some time and their efforts become more brazen. The Associated Press reports that,
“This month, the Justice Department also unsealed a September indictment that accused a Chinese company and its Taiwanese partner, both funded by the Chinese government, of trying to steal eight trade secrets for a memory-chip technology known as “DRAM” from Micron Technology Inc., based in Silicon Valley. The indictment notes that the Chinese government had identified DRAM as “a national economic priority” that Beijing was determined to obtain.”>
Here is another example from a recent indictment,
“…from 2010 to 2015, the Jiangsu branch ran a team of nine hackers who tried to steal U.S. techniques for making jet engines. This is a subtle and highly valuable aspect of aerospace technology, one of the few that China hasn’t yet mastered or stolen, and the Chinese evidently wanted to obtain by stealth what they couldn’t produce on their own.”
Here is another unfair trade practice: Because of the massive subsidies that China’s state owned enterprises enjoy, they are able to run rings around private corporations. As one commentator recently remarked, “There is no reason a Chinese corporation should be the largest producer of railroad cars in the world other than subsidies and stolen technology.”
Far too little attention has been paid by reporters and investors alike to the actual cyber attacks by China that have successfully appropriated our military and trade secrets. These malicious and predatory practices are economically disadvantageous to the U. S. and national security threats. Do China trade absolutists think this is not a problem?
Trump is the first president who has refused to back down from China’s unscrupulous and unfair trade practices.
Clearly, his steadfastness, in light of previous weak-kneed U.S. presidents, has caught investors by surprise.