German Giant Siemens Helps China’s Made in China 2025


Chinese Prime Minister Li Keqiang shakes hands with Joe Kaeser, CEO of Siemens, as German Chancellor Angela Merkel looks on, during the signing ceremony of the treaties at the chancellery in Berlin, Germany, July 9, 2018. REUTERS/Fabrizio Bensch

German Siemans is a world leader in technology by no means inferior to US companies in the same industries. Reuters says in its report “Siemens inks deal with Alibaba to launch digital products in China” today that Siemens has flagged plans to work with China’s State Power Investment Corporation on heavy-duty gas turbines.

If US politicians are wise, like Germany, the US may be benefited by win-win cooperation to transfer technology to China at a price much higher than the research and development costs. In can also conduct win-win cooperation in developing high-tech products like what Siemens is doing with China.

The US is unwilling to do so as it lacks the confidence to develop better technology than the current technology it can transfer to China to recover its research and development costs for research and development of future better technology.

US trade war with China will only harm itself and benefit EU. However, it reflect US pessimistic mindset.

The trade war is the last struggle of a doomed superpower.

Comment by Chan Kai Yee on Reuters’ report, full text of which can be viewed at https://www.reuters.com/article/us-siemens-alibaba/siemens-inks-deal-with-alibaba-to-launch-digital-products-in-china-idUSKBN1JZ22U.

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So Far Who Has Been Hit Harder in US-China Trade War?


SCMP says in its report “US-China trade war: who wins, who loses?” on July 6, “Conventional wisdom suggests the US has the least to lose from a trade war. But, not so fast …” It points out that many US enterprises produce parts and components of its products in China so that US tariff rise will raise their costs of production. As a result, the US is hitting itself while hitting China in the trade war.

However, Trump has taken into account of the losses the US will suffer. Usually both sides suffer in a war but Peter Navarro, director of the White House Trade and Industrial Policy Council, said that China would suffer more than the US in the trade war. Trump is satisfied with that.

However, one starts a war to achieve one’s strategic goal.

What is US strategic goal in its trade war with China?

To scrap China’s Made in China 2025 programme that may enable China to surpass the US in technology.

Does Trump’s tariff hikes in the trade war facilitate attaining that goal? According to SCMP’s another report “US tariffs take aim at Made in China 2025 plans in first salvoes of trade war” on July 7, the US uses tariff hikes to attack China’s machinery sector as the sector is one of China’s most significant sector that accounts for more than 25% of China’s total exports.

SCMP quotes law firm Covington & Burling as saying in a note that some 51 per cent of the targeted items were classified as nuclear reactors, boilers, machinery, and mechanical appliances and 23 per cent covered electrical motors and machinery, batteries and circuit assemblies.

Those are perhaps products with some technology but not with the high technology that China wants to obtain through its Made in China 2025 programme. Producers of such products may suffer some losses, but Chinese economy will not be hit hard to affect its ability to rise.

Moreover, Chinese economy is quite different from Western economies. In the West enterprises mainly rely on their own earnings to fund their research and development (R&D), the costs of which have to be recovered when they have won government contracts, which they cannot be sure to obtain.

Chinese government simply allocates lots of funds to research projects before any results have been achieved so that US tariff rise, though may cause some losses to Chinese enterprises in technology sector, does not hinder China’s R&D for high technology at all.

As China does not want a trade war with the US, its strategic goal is to hit Trump hard to make him cease the war or unable to be reelected.

That is why China’s tariff rises mainly target US farmers whose votes have enabled Trump to be elected. China attacks its enemy at the most vulnerable part while the US attacks at its enemy’s insignificant part. US offensives are tactical that do not serve its strategic goal while China’s serves its strategic goal well.

However, the tariff hikes will certainly hurt Chinese people as there will be significant rise in the prices of their food imported from the US due to the tariff rise especially soybean, which China cannot find alternative source for the huge quantity it needs.

China has to speed up its water diversion project to turn its vast desert in Xinjiang into farmland, which will not only free it from import of soybean but also enable it to export agricultural products to compete with the US on world market. That will be the way to really win the trade war.

As pointed in my previous posts, tariff is not a good weapon in a trade war. It usually hurts oneself while hurting one’s enemy.

Comments by Chan Kai Yee on SCMP’s reports, full text of which can be viewed at https://www.scmp.com/week-asia/business/article/2153975/us-china-trade-war-who-wins-who-loses and https://www.scmp.com/news/china/diplomacy-defence/article/2154114/us-tariffs-take-aim-made-china-2025-plans-first-salvoes.


Bizarre US Fear of China’s Rise


What China scares US politicians and media most is its Made in China 2025 and Thousand Talents programmes.

Made in China 2005 is first all a programme to develop the technology for the production of high-tech products as import substitutes and possibly for export if they have competitive edge in world market. In fact all countries in the world do so as long as they have the capabilities.

It is fair competition won by those who are able to develop the best technology.

The US blame China for its purchase of technology from US enterprises but that is common fair trade of technology in the world. The US can control and has been controlling the sale of US technology to China. There is such control in other countries though not so strict as in the US.

As a result, China has to develop the technology on its own. For that, it needs as much talents as possible. That is why China has the Thousand Talents programme to attract Chinese and foreign talents from abroad with better remuneration and living and working environment.

US enterprises are also doing that. I personally know a Chinese software engineer who was recruited by a US company and moved to the US a few years ago.

SCMP says in its report “China’s ‘Thousand Talents’ plan key to seizing US expertise, intelligence officials say” on June 22, “The programme, begun in 2008, is far from secret. But its unadvertised goal is “to facilitate the legal and illicit transfer of US technology, intellectual property and know-how” to China, according to an unclassified analysis by the National Intelligence Council, the branch of US intelligence that assesses long-term trends.

Why does the US regard the employment of Chinese talents trained in the US and US talents as China’s secret trick to “facilitate legal and illicit transfer of US technology, intellectual property and know-how”?

Chinese and American talents’ expertise belongs to them themselves instead of their former employers or their countries. They are free to provide their expertise to their current employers whether they are Chinese or otherwise. Such provision of expertise does not constitute illicit transfer of technology.

In fact China still lag quite far behind the US in science and technology the US may keep its superiority if it make similar efforts in made in the US and recruiting talents. US fear of China’s Made in China and Thousand Talents programmes is really bizarre.

However, wise US politicians and journalists know well that a declining United States cannot compete with China. Take recruit talents for example, the US cannot even provide safe living conditions for talented people with such high rate of crimes, frequent of mass shooting tragedies and poor infrastructure.

Since the US is unable to improve, it has to stop China’s rise by a trade war though the war will hurt the US itself.

Why shall such programmes regarded as aggressive

Comment by Chan Kai Yee on SCMP’s report, full text of which can be viewed at http://www.scmp.com/news/china/policies-politics/article/2152005/chinas-thousand-talents-plan-key-seizing-us-expertise.


United States Is Scared to Death by China’s Rise


At first, Trump said that he would conduct a trade war with China to reduce US trade deficit with China but when China offered to buy $70 billion more US goods a year for initial reduction of US trade deficit with China, Trump wanted more. He wanted China to scrap its Made in China 2025 plan with the excuse that China would steal US technology to fulfill the plan.

China in fact has not stolen US technology. That is quite obvious. Trump bases his accusation on Pentagon’s report on Chinese espionage. Military espionage is being carried out by each and every country of some significance in the world.

China has been trying to buy US technology but without much success as the US does not want China to get it. China has allocated lots of funds to attract its scientists and engineers back and employ other countries’ scientists and engineers. The US regards such employment as theft of US technology. Absurd.

Peter Navarro, director of the White House Trade and Industrial Policy Council, said that China would suffer more than the US in the trade war. He knows the US will suffer in the trade war. Why does he still wants the war?

If he wants to prevent China from getting US technology, banning China’s investment in the US, banning US college education on sensitive technology for Chinese students will be better. The trade war simply dos not ban those activities through which China may obtain US technology. Chinese students can learn technology from colleges and jobs in US companies after graduation.

China will still be able to recruit scientists and engineers from abroad in spite of the trade war.

Why inflicts hardship on the US itself while inflicting China?

Navarro and others like him are scared by China’s rise. China’s Made in China 2025 stresses development of technology in advanced rail and shipping, aerospace, agricultural machinery, artificial intelligence, augmented and virtual reality, biotechnology, blockchain development, business application software, electronics, new-generation I.T., new materials, new energy vehicle, precision farming, robotics, and satellite communications.

Navarro said, “These are the future of the world and of America, and China cannot have 70 percent of production of these industries by 2025.”

According to him if China succeeds in carrying out that plan, the future of the world belongs to China instead of America.

Navarro lacks confidence that in the 8 years to come the US can excel in the above-mentioned technology in spite of its sound technological foundation!

Therefore, he believes the only way to prevent China from surpassing the US is to conduct a trade war to make China’s economy suffer or perhaps collapse though US economy will also suffer.

He and others like him in the US are scared to death by China’s rise!

Article by Chan Kai Yee.


Do Be Entertained by the Funny Stupidity in the World


The US is now fighting trade wars with not only China but almost all other world economies with significant scale.

It seems that the US is conducting lose-lose trade wars everywhere. The US is increasing tariffs to reduce others’ exports so that others will do the same to reduce US exports. In such trade wars, both sides will suffer. We certainly will be worse off but we shall not be sad because our sadness cannot change the sad world situation. Sadness, however, is bad for our health and makes us miserable.

I myself am able to remain happy as I always find something funny in the bad news and thus be entertained by the news. I hope my readers will also be happy to enjoy the funny sides of bad news.

For example, Reuters’ report yesterday “Xi says China must lead way in reform of global governance”. The title itself is very funny. China leads way in reform? Does Xi mean that China shall be world leader? Is China strong and rich enough to be world leader?

Certainly, China knows it is not strong or rich enough to have the influence to be world leader.

How do you know that? I know that from the word “must”. It means that China, though not strong and rich enough to be world leader, but as the US has given up world leadership and global governance is now in chaos due to the various confrontations initiated by the US, China “must” manage to take the leading role in the world. The word “must” tells us how sad world situation is.

China has to strive to lead the way in reform of global governance due to the sad situation. That was why Xi said that it is necessary for the protection of China’s sovereignty, security and development interests according to Reuters report.

Xi is wise to know China’s sovereignty, security and development interests will be harmed if the world is in chaos due to poor global governance. That is why he puts forth the idea of the community of common destiny. The poor global governance caused by US withdraw from world efforts to stop global warming alone will cause disasters on a global scale.

It is also funny that journalists and analysts in well-know world media fear that China has the ambition to enhance its influence in the world. They are so anxious to maintain US world hegemony.

What’s good in US world hegemony? To have trade wars all over the world?

What’s bad in China’s influence? Win-win cooperation to benefit both China and its partners?

Reuters tries to make readers believe Chinese company paid a lot for equity in Sri Lanka government controlled companies for Sri Lanka to repay its debts owed to China. It simply ignores the fact that Sri Lanka said the funds were received by its treasury.

China paid a lot for the operation of a port company that loses money now. Why? It has the vision that the port will make Sri Lanka prosper in the future so that Sri Lanka will be good market for Chinese goods. China will transfer its industries to Sri Lanka and other countries in Silk Road economic belt to export goods to itself and developed countries including the US as Xi foresee China cannot maintain its trade surplus with the developed countries forever.

To pay for the imports from those countries, China has to develop technology-intensive industries for exports to those countries. That is one of the major aims of China’s Made in China 2025 plan.

You may be upset by lots of reports and analyses that demonize China by distorting China’s investment in Belt and Road projects as efforts to control others by excessive loans. You shall not be upset. Instead, you shall be entertained by their blindness in failing to see the truth. Perhaps, it’s not blindness. They distort the facts knowingly to earn a living.

Comment by Chan Kai Yee on Reuters’ report, full text of which can be viewed at https://www.reuters.com/article/us-china-diplomacy/xi-says-china-must-lead-way-in-reform-of-global-governance-idUSKBN1JJ0GT.


China Industrial Policy Seeks to Steal ‘Crown Jewels’ of U.S. Tech


White House exposes Chinese economic aggression

BY: Bill Gertz
June 19, 2018 9:01 pm

China’s government is using a multi-pronged strategy to systematically steal advanced American technology as part of economic aggression against the United States, according to a White House report.

The report, based in part on declassified intelligence from the Pentagon and intelligence agencies, provides some of the first public details on China’s industrial policies that have produced the world’s second largest economy, often at the expense of American companies.

“The Chinese state seeks to access the crown jewels of American technology and intellectual property,” says the report, made public Tuesday night.

China’s economic strategy involves obtaining and utilizing technologies and know-how gathered from around the globe through a combination of state-sponsored theft, cyber attacks, violations of U.S. export controls, and counterfeiting and piracy.

However, most of the Chinese economic aggression has taken place in the United States or against American companies doing business in China.

China’s economic aggression was defined by the White House as six behaviors: Theft, forced tech transfer, evasion of export controls, export restraints on raw materials, information-harvesting, and acquisitions.

Key American technologies targeted by the Chinese include artificial intelligence, blockchain know how, robotics, high-tech manufacturing, and high-tech shipping.

In dealing with American companies in China, Beijing has resorted to coercive and intrusive regulatory controls designed to force tech transfers from companies—based on promises of access to the Chinese market.

In the United States, China employs some of the hundreds of thousands of Chinese nationals studying and working at universities and research institutes to gain access to cutting edge technology and send it back to Chinese firms.

State-backed Chinese companies also are buying up American companies and hiring scientists and experts as part of the systematic program of economic aggression, the report said.

The 36-page report, “How China’s Economic Aggression Threatens the Technologies and Intellectual Property of the United States and the World,” was produced by the White House Office of Trade and Manufacturing Policy. The office has been spearheading President Trump’s policy of forcing China into changing its unfair trade and economic policies.

The report comes as the president announced on Monday he will add an additional $200 billion in tariffs on Chinese goods beyond the $50 billion announced last week. He announced the new tariffs after China retaliated by imposing $50 billion in tariffs on U.S. goods.

“China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology,” Trump said in a statement. “Rather than altering those practices, it is now threatening United States companies, workers, and farmers who have done nothing wrong.”

The White House report is based in part on a Pentagon study produced by the Defense Innovation Unit Experimental, known as DIUx, that concluded, “the scale of the [Chinese economic] espionage continues to increase.”

The report stated that U.S. national laboratories at Los Alamos in New Mexico and Livermore in California that are engaged in advanced defense research have allowed Chinese nationals to work there and obtain valuable information.

China has gained hypersonic missile technology from one U.S. laboratory. The ultra-high speed missiles are a priority for Beijing that seeks hypersonic weapons to defeat American missile defenses.

“Law enforcement efforts alone cannot keep up with (or adequately deter) a state-sponsored campaign of theft,” the White House report said, noting that China’s government has failed to cooperate with U.S. investigations of economic theft.

The theft program is supported by China’s Ministry of State Security (MSS), the civilian spy agency that has deployed at least 40,000 intelligence officers abroad and 50,000 on the mainland, the report said.

The MSS spies are augmented by more than 100,000 personnel in People’s Liberation Army cyber command that the report said has been fully operational since 2013.

China’s cyber espionage effort involving the theft of American trade secrets costs the United States between $180 billion and $540 billion annually, the report said.

An example of China’s violation of export laws was the case of Chinese national Amin Yu who was prosecuted for using shell companies to transfer U.S. systems and components for underwater vehicles to Harbin Engineering University in China from 2002 to 2012.

China’s systematic counterfeiting and pirating of U.S. goods costs American companies as much as $600 billion annually.

To force the transfer of foreign technologies and intellectual property to Chinese competitors, Beijing uses a variety of means.

They include foreign ownership rules that require tech transfers; administrative approvals and licensing; security reviews; imposition of technology standards that provide “backdoor Chinese access to source codes,” the report said.

“China uses security reviews to force foreign enterprises to disclose proprietary information,” the report said. “At risk are source codes, encryption algorithms, and other sensitive IP.”

Other methods are the forced research and development designed to facilitate tech transfer, the use of Communist Party committees, and placement of Chinese employees inside management at foreign joint ventures.

China also engages in large-scale open-source intelligence collection to gain access to American economic secrets.

“Large cadres of Chinese state actors engage in systematic, large-scale, open-source collection operations,” the report said. “They exploit foreign science and technology information to acquire foreign technologies and intellectual property and thereby gain competitive advantage by circumventing the costs and risks of indigenous research.”

Chinese science and engineering students in the United States “frequently master technologies that later become critical to key military systems, amounting over time to unintentional violations of U.S. export control laws,” the report said.

The report identified China’s Huawei Technologies, which has been identified as a national security threat by the Pentagon, as partnering with the University of California-Berkeley on artificial intelligence and machine learning programs that have military applications.

“Chinese state actors are strategically building research centers in innovation centers and hubs like Silicon Valley and Boston,” the report said, noting the Chinese Internet firm Baidu created an institute in California to compete with Google, Apple, Facebook, and others in artificial intelligence.

China’s strategy of gaining technology includes six lines of effort, according to the report.

They include protecting China’s domestic market from competition and imports; expanding China’s share of global markets; controlling core natural resources globally; dominating traditional manufacturing industries; acquiring key technologies and IP; and capturing emerging high-tech industries.

Peter Navarro, director of the White House Trade and Industrial Policy Council, called the president’s actions against China “courageous and visionary.”

“China has targeted America’s industries of the future, and President Trump understands better than anyone that if China successfully captures these emerging industries of the future, America will have no economic future, while its national security will be severely compromised,” Navarro told reporters on Tuesday.

Navarro said Trump has given China many chances to change its aggressive behaviors and promised action if Beijing failed to curb the activities.

Multiple negotiations failed to remedy two major problems, he said, the need to reduce the United States’ $375 billion trade deficit with China, and China’s continuing effort to steal critical American technology by any means necessary.

“It is important to note here that the actions President Trump has taken are purely defensive in nature,” he said. “They are designed to defend the crown jewels of American technology from China’s aggressive behavior.”

Trump, Navarro said, is attempting to prevent China from controlling a list of technologies outlined in a Chinese government report called Made in China 2025.

“What are these? Advanced rail and shipping, aerospace, agricultural machinery, artificial intelligence, augmented and virtual reality, biotechnology, blockchain development, business application software, electronics, new-generation I.T., new materials, new energy vehicle, precision farming, robotics, and satellite communications,” he said.

“These are the future of the world and of America, and China cannot have 70 percent of production of these industries by 2025.”

Source: Washington Free Beacon “China Industrial Policy Seeks to Steal ‘Crown Jewels’ of U.S. Tech”

Note: This is Washington Free Beacon’s report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


China’s tech war with the U.S. heats up as Xi urges self-reliance


Lucas Niewenhuis April 27, 2018

If it’s imported from the U.S. and has electric wires in it, China wants no more of it.

While largely agricultural tariffs and fees have featured prominently in the U.S.-China trade tiff so far, the overall arc of what may yet become a full-scale trade war will likely be highlighted by a years-long cutthroat competition in technology.

“In the past we tightened our belts, gritted our teeth, and built the two [atomic and hydrogen] bombs and a satellite… In the next step of tackling technology, we must cast aside illusions and rely on ourselves,” urged Xi Jinping (in Chinese), which New York Times reporter Chris Buckley called “telling comments.” Xi’s words mirror the Made in China 2025 policy, released in 2015, which aims to rocket the country to the top of global supply chains for high-tech goods ranging from smartphones and electric vehicles to airplanes and artificially intelligent robots. China is setting out to do so by a combination of government funding and incentives for the private sector, and dramatic re-resourcing for a huge array of technology. Here are some of the latest trends:
•Domestic smartphones are gaining market share, CNBC reports, as Apple’s iPhone lost its #4 position to Xiaomi. Consumers are increasingly opting for local brands such as Huawei, Oppo, Vivo, and Xiaomi, even — or especially — as the overall demand for phones falls.
•“Tesla has over 300 Chinese startups hot on its tail,” Nikkei reports, illustrating how high domestic investor enthusiasm for electric vehicles has become. Also in the news, per Caixin: Electric vehicle-maker Singulato set to raise $476 million.
•A state-backed semiconductor fund is filling up, Reuters says, as a second round of funding for 120 billion yuan ($19 billion) was “near to closing,” on top of $22 billion from the previous round.

Meanwhile, the U.S. is shooting itself in the foot, James Andrew Lewis of the Center for Strategic and International Studies argues, as the seven-year ban on selling American equipment to Chinese telecom giant ZTE “will only encourage foreign suppliers to rush into the space vacated by U.S. companies,” and “reinforce the Chinese government’s desire to replace U.S. suppliers with Chinese companies.”

Source: SubChina “China’s tech war with the U.S. heats up as Xi urges self-reliance”

Note: This is SubChina’s report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.