💵 China's Stealing Our Tech Again

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American companies sometimes willingly strike deals with Chinese partners because they feel China is too profitable to miss out on. And in some cases, Chinese companies have shown they still have much to learn, even after cozying up to American partners.

In some industries, like car production, China has long required foreign companies to team up with local partners. Auto giants like General Motors and Ford, for example, make cars in Chinese factories that are jointly owned by Chinese partners.

Foreign companies have long complained that they are simply training future rivals. Japanese and European businesses say Chinese rail companies used technology from joint ventures to become giants in high-speed rail.

...if Washington reaches instead for more powerful unilateral tools, like tariffs and government tech controls, then it could end up destabilizing the very global trade order that it professes to be enforcing and protecting.

Non-confrontational diplomacy probably cannot stop Beijing’s systemic trade abuses. But more powerful unilateral tools could destabilize the global trade order.

Officials in the U.S. and European Union accuse China of using its courts and patent panels to undermine foreign intellectual-property rights and help Chinese businesses. They say China is focusing such efforts on industries it deems important, including technology, pharmaceuticals and rare-earth minerals.

A U.S. manufacturer of X-ray equipment had a decade-old patent invalidated by a Chinese legal panel. A Spanish mobile-antenna designer lost a similar fight in a Shanghai court. Another Chinese court ruled that a Japanese conglomerate broke antitrust law by refusing to license its technology to a Chinese rival.

At a casings factory in Hosur run by Indian conglomerate Tata, one of Apple’s suppliers, just about one out of every two components coming off the production line is in good enough shape to eventually be sent to Foxconn, Apple’s assembly partner for building iPhones, according to a person familiar with the matter. This 50 per cent “yield” fares badly compared with Apple’s goal for zero defects.

The second option for Beijing is to maintain high growth by rebalancing the economy increasingly toward consumption. Beijing has been trying to do this since at least 2007, but an increase in consumer spending requires an increase in the share that households retain of GDP.

Ordinary people, in other words, would have to receive a larger share of what the economy produces in the form of higher wages, stronger pensions, more welfare benefits, and so on, and this would have to be paid for by Beijing and local governments by giving up some of their share of GDP.

Such an adjustment is extremely difficult to accomplish politically.

Tens of thousands of Chinese pensioners took to the streets on Wednesday to protest against health insurance reforms that were introduced as cash-strapped city governments sought to control spending in the aftermath of China’s costly zero-Covid policy.

The protests followed a similar demonstration last week in Wuhan, where retirees gathered to oppose the government’s move to divert money from a mandatory health savings plan for workers to a state-controlled outpatient insurance fund. The reform took effect on February 1 in Wuhan.