Funny US Accusation of China Stealing Its Technology


On June 21, I reblogged Washington Free Beacon’s funny article accusing China of aggression in stealing US technology titled “China Industrial Policy Seeks to Steal ‘Crown Jewels’ of U.S. Tech”.

Some readers may find the article offensive and be upset by the article’s demonization of China but I find the article quite entertaining.

US believes that China will surpass the US in technology by 2015

Previously, I believe that it takes a long time for China to surpass the US but the article tells me that the US is in panic as China will surpass it by 2025 when it has successfully completed its plan of Made in China 2015,

US Nightmare
China engages in large-scale open-source intelligence collection to gain access to American economic secrets according to the article.

What? Collection of secrets through open-source intelligence? You regard that as stealing of secrets?

Such sleep-talking can only be found in panicky nightmare.

Poor American politicians, you really need a war to stop China’s rise. Otherwise, you will never be able to overcome you panic.

But you cannot fight a real war as there is no chance to win. China challenged you to war first in the East China Sea crisis when CCTV carried rare footages about China’s strategic nuclear submarine for three days in a roll to warn the US that China has second-strike capabilities so that the US cannot retaliate with nuclear weapons if China had sunk a US aircraft carrier with China’s lots of DF-21D anti-ship ballistic missiles.

US refrained to fight saying that it would not fight for a few rocks (meaning the Diaoyu Islands (known as Senkaku in Japan)).

Second, Chinese navy chief warned the US China will fight pointing his fingers at US navy chief when saying that. At that time the US sent two aircraft carrier battle groups to force China to accept Hague arbitration reward but China was not scared. The US did not fight as China’s three airstrips had enabled China to have full control of the South China Sea.

So America’s only choice now is a trade war to stop China’s rise. Their ground for the trade war on China stealing US technology is ridiculous. Can such ridiculous ground deceive American people and make them support the war in spite of the difficulties the war may cause? Who knows?

Comment by Chan Kai Yee on Washington Free Beacon’s article, full text of which was reblogged by him on June 21.

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Will US-China Trade War Grows into a World Trade War?


US President is putting pressures on almost all rich countries including all developed European countries, Canada, Japan and South Korea for reduction of US trade deficits with them. China is the first facing a trade war with the US but I pointed out in my post “Lucky! Thucydides Trap Leads to Trade instead of Military War” yesterday, Trump’s trade war aims first of all at stopping China’s rise so as to maintain US world hegemony. It is thus typically a war caused by Thucydides Trap.

The war may spread to other countries as China’s tariff increase on US goods may hurt other countries’ companies that produce goods for export to China from the US.

Reuters says in its report “German carmakers join American farmers on front line of U.S.-China trade war” yesterday, “Daimler on Wednesday cut its 2018 profit forecast while BMW, whose Spartanburg, South Carolina plant is the largest single exporter of vehicles in the United States, said it was looking at “strategic options” because of the threatened trade war.”

Chinese Communist Party (CCP) has three magic weapons, one of which is the United Front. US pressure on the above-mentioned countries provides China with the golden opportunity to form a united front in China’s trade war with the US.

The trick is to reduce the enemy and united with friends as much as possible so that China’s strength will be enhanced to the maximum while that of its enemy will be reduced to the minimum.

Chinese President Xi Jinping knows and can apply the trick well. While threatening the US with retaliation of tariff increase, he promises to carry on China’s reform to open wider to the outside world including reduction of tariffs on imports from countries other than the US.

Reuters says in its report “China’s Xi says has honored word on opening up economy” yesterday, “Chinese President Xi Jinping said on Thursday he had honored his word by taking action on steps to open up the country’s economy”.

If by so doing Xi is able to form a united front with the above-mentioned countries, the trade war will become a world war between the united front of China and those countries and the United State alone.

Comment by Chan Kai Yee on Reuters’ reports, full text of which can be respectively be viewed at https://www.reuters.com/article/us-usa-trade-china-xi/chinas-xi-says-has-honored-word-on-opening-up-economy-idUSKBN1JH1CD and https://www.reuters.com/article/us-usa-trade-china/german-carmakers-join-american-farmers-on-front-line-of-u-s-china-trade-war-idUSKBN1JH072.


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.


Trade war update: Chinese investment in U.S. plummets, but yuan stays steady


Lucas Niewenhuis June 20, 2018

The hostilities continue between the American and Chinese governments, a day after Donald Trump prepared to go all in on his tariff-first strategy.

Since then, the White House Office of Trade and Manufacturing Policy, which is directed by Peter “Death by China” Navarro, ramped up the rhetoric even further with the release of a 35-page report titled, “How China’s Economic Aggression Threatens the Technologies and Intellectual Property of the United States and the World.”
•The title of the report is pretty self-explanatory, but if you need a refresher on the Made in China 2025 initiative at the core of the Trump administration’s criticism of China, we suggest articles at Macro Polo and at the Council on Foreign Relations.
•Though the Trump administration never developed any kind of multilateral strategy at all to pressure China to change its behavior, Europeans are now joining in criticism of Made in China 2025.
•A survey of 532 European companies in China found that 58 percent of them hadn’t been able to participate in the Made in China 2025 initiative, and substantial numbers said that they saw the initiative as driving discrimination against foreign firms, the Wall Street Journal reports (paywall).
•Also, 19 percent “felt compelled to transfer technology in exchange for market access” despite Chinese partners insisting that it isn’t required, the AP says.

With ever-rising trade hostilities comes a debate: Has cross-border investment already taken a hit as a result?
•“Reversion to the mean” is how Macro Polo recently characterized the slump in Chinese investment in the U.S. from 2016 to 2017, as the former year had a truly remarkable amount of outbound investment.
•But investment has plummeted yet again in 2018, the Rhodium Group reports, indicating that we may be “experiencing a more profound shift” driven at least in part by the trade tensions.
•The numbers: From a peak at $46 billion in 2016, Chinese investment in the U.S. fell to $29 billion in 2017, and was just $1.8 billion in the first half of 2018, according to Rhodium.

Economic observers are also paying close attention to the value of the Chinese yuan. Theoretically, Beijing could offset the impact of import taxes in the U.S. by devaluing its currency, effectively making its exports cheaper.
•“Letting the yuan weaken [is] something that logically the Chinese would consider” if more U.S. tariffs went into effect, Brad Setser, a former economist at the U.S. Treasury Department, told the Wall Street Journal (paywall).
•It hasn’t happened so far. The Wall Street Journal separately notes (paywall) that the latest numbers on a special “trade-weighted” measure of the yuan’s value, called the CFETS index, indicates that Beijing has actually pumped up the value of its currency since March this year.
•It is also an extreme measure. The second Journal report recalls that the previous large devaluation in 2015 “sparked capital outflows,” which Beijing later scrambled to clamp down on. Additionally, another devaluation “could damage Beijing’s long-term goal to open its financial markets and promote the yuan as an international currency,” according to Bilal Hafeez, a strategist at Nomura.

Source: SubChina “Trade war update: Chinese investment in U.S. plummets, but yuan stays steady”

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.


Kim goes to Beijing after Singapore Summit


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Lucas Niewenhuis June 19, 2018

For the third time in less than three months, Kim Jong-un has met with his Chinese counterpart, Xi Jinping. Here are SupChina’s reports on the first and second meetings.

This time, the visit to Beijing was announced (in Chinese) by Chinese state media while it happened — the visit was reported to last from June 19 to June 20, according to reports posted around 10am on the 19th, Beijing time. Because past practice was for Beijing to keep meetings with North Korean officials under wraps until they were completed, this led many foreign journalists such as NPR’s Anthony Kuhn to suspect that China is “feeling a bit more secure these days” with its North Korean relations.

Sanctions relief goes hand in hand with that sense of security, as NK News reports that “multiple DPRK-linked ships [have been] arriving at ports in China built to handle bulk commodities like iron and coal, goods sanctioned under UN measures.”
•Kim has transformed into a “very good diplomat,” Andrei Lankov, a Russian expert on North Korea, tells the New York Times (paywall). As he seeks further sanctions relief, “He wants to further disrupt the united China-U.S. front, which somewhat surprisingly emerged last year, but now is in critical condition due to the trade war.”
•China has “significant concerns” that part of that new diplomatic activity may be a direct dialogue with the U.S. that weakens China’s sway over its neighbor, former CIA analyst Chris Johnson told the South China Morning Post.
•“China would like Mr. Kim to be a little less cooperative with the United States — enough so that Mr. Trump might ease up on the tariffs, in the interest of keeping China in his corner where Pyongyang is concerned,” the New York Times writes.
•But overall, China is very satisfied with the course of North Korean diplomacy, as Quartz reports, because Trump very easily agreed to a major concession that China has sought for years: An indefinite freeze on American military exercises with South Korea.

Source: SubChina “Kim goes to Beijing after Singapore Summit”

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.


Trump escalates trade war, again


Lucas Niewenhuis June 19, 2018

U.S. President Donald Trump is preparing to go all in on his big bet on tariffs against China.

China’s tit-for-tat response to the first $50 billion round of tariffs, which were announced on June 15 (tit and tat both covered on SupChina Access), disappointed Trump, who released a statement that read:

Today, I directed the United States Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent. After the legal process is complete, these tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced. If China increases its tariffs yet again, we will meet that action by pursuing additional tariffs on another $200 billion of goods.

That would place a tax on nearly every product that comes into China from the U.S., as the Wall Street Journal points out (paywall):

A third round of tariffs would bring the total imports from China subject to U.S. tariffs to $450 billion, almost as much as the $505 billion in goods that the U.S. imported from China last year.

Markets around the world fell after the news of the dramatic and sudden escalation.
•“The Dow sank around 350 points, or 1.4%, on Tuesday. That put it in negative territory for the year and on track for its sixth straight day of losses,” CNN reports.
•American semiconductor makers saw larger losses at 2 percent or more due to their high exposure in China, according to CNBC.
•Chinese stock markets also sank, with “Shanghai closing down 3.78 percent, its biggest drop in two years, and Shenzhen down 5.31 percent,” the Washington Post says.
•“Every asset class is affected now by the U.S.-China trade war,” a German stock trader told Bloomberg (paywall), in a report that notes “miners, tech and automakers” saw the largest drops in European stocks.

China, of course, imports nowhere near $250 billion, let alone $450 billion in goods from the U.S. each year that it could tax in retaliation. Total imports of American goods into China were worth less than $170 billion in 2016, according to the USTR.

So China is threatening “qualitative measures” (质量型的措施 zhìliàng xíng de cuòshī), in addition to quantitative ones — i.e., tariffs — according to a statement (in Chinese, in English) by the Chinese Ministry of Commerce. The economists at Trivium explain what that could mean:

•Slow American imports via lengthy customs inspections
•Disrupt production for American companies in China
•Increase the scale and frequency of penalties for American companies
•Slowing licensing and other approvals for American businesses
•Restrict tourism to the U.S.

Other possibilities could stretch as far as an unofficial boycott on U.S. goods, similar to how China punished South Korea throughout much of last year (relations have recently improved again). The New York Times highlights the case of Apple (paywall), which has attained remarkable success in the Chinese market under the leadership of Tim Cook, but which worries that “the Chinese-bureaucracy machine is going to kick in,” and that China will “cause delays in its supply chain and increase scrutiny of its products under the guise of national-security concerns.”

Trump wrote in his statement, “These tariffs are being imposed to encourage China to change the unfair practices identified in the Section 301 action with respect to technology and innovation.” Read that whole Section 301 report here, and an analysis of that report and one of its principal targets, the Made in China 2025 initiative, on Macro Polo and at the Council on Foreign Relations.

Source: SubChina “Trump escalates trade war, again”

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.


China Deploys Drones Hundreds Times in South China Sea Military Drills


SCMP says in its reports “Chinese navy deploys drones in South China Sea missile drills” today that according to Chinese military media PLA Daily’s report yesterday three target drones were used in China’s recent naval drill to fly over a warship formation at various heights and directions to gather information about the fleet.

The timing of the PLA Daily’s report right after US Secretary of State Mike Pompeo reaffirmed in his recent visit to Beijing US deep concerns about China’s building and militarizing its outposts in the South China Sea shows China’s firm determination to safeguard its core interests there.

SCMP says, “The drones had already been sent out several hundred times during more than 30 previous drills, according to the newspaper.”

China can station lots of drones on its artificial islands, which will be great geographical advantages for Chinese military. With the artificial islands, China’s dominance over the South China Sea is ensured. US deep concerns may not make China change its claim. The only way for the US to recover its dominance there is to fight a full-out war, but no one can ensure that the US may win the war.

The only alternative for the US is perhaps to fight a trade war with China. US President Trump is precisely doing that in spite of China’s concession to reduce US trade deficit by $70 billion through the purchase of more US goods.

Trump’s choice of a trade war to hurt both China and the US instead of accepting China’s concession that will benefit the US shows that he, like other US morons, prefer hurting the US itself while hurting others to maintain US hegemony. I wonder whether American common people are so obsessed with hegemony.

Comment by Chan Kai Yee on SCMP’s report, full text of which can be viewed at http://www.scmp.com/news/china/diplomacy-defence/article/2150957/chinese-navy-deploys-drones-south-china-sea-missile.