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Giving up on China isn't an option for American businesses [Copy link] 中文

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Post time 2019-8-29 17:39:14 |Display all floors

Editor's note: The article was first published by China Plus on August 28, 2019. The article does not necessarily reflect the views of CGTN.

Business circles in the U.S. have voiced their strong opposition to the order from the White House that they stop doing business with China. China's market is too important for American companies, both for its vast market and its advantages as the world's factory. No business person in their right mind would just give it up.

Among China's 1.4 billion consumers are 400 million in the middle-income group, and this cohort is rapidly expanding. Their increasing demand and huge market potential are a big part of China's purchasing power. The U.S. National Retail Federation has pointed out that it is "unrealistic for American retailers to move out of the world's second-largest economy", which helps to explain why foreign investment in China keeps rising against the backdrop of a general slowdown in global foreign direct investment.

In the first seven months of this year, the number of newly-established foreign-funded firms in China surpassed 24,000, and the actual use of foreign investment exceeded 530 billion yuan (around 74 billion U.S. dollars), up 7.3 percent on the same time last year.

According to the U.S.-based research provider Rhodium Group, in the first six months, American investment in China reached 6.8 billion U.S. dollars – up 1.5 percent on the average for the first half of the year for the past two years. Major investors include Tesla, which is building its Gigafactory in Shanghai, and Bain Capital, which agreed to invest 570 million U.S. dollars in the Beijing-based data center developer Chindata.

A major reason why these American companies are investing further in China is that it's the only country in the world capable of providing complete industrial and supply chains, which significantly cuts down operational costs for a company. And its well-established logistics network of ports, highways, and railroads allows multinational companies to conveniently link together their networks of factories, suppliers, and global customers. That's a major appeal for foreign investors.

After all, it's not by chance that around half of the 800 suppliers for Apple are based in China. Last month, this icon of the American tech sector asked the Trump administration for a waiver for the 15 China-made components used in Apple's products due to be hit by an additional 25 percent import tariff. The reason for their request was simple: Apple can't find suppliers for these goods outside of China.

Each year, eight million college graduates join China's 900 million-strong workforce. This makes China the world leader in terms of the number of people going into the workforce with a higher education, which helps to explain why the country was ranked the 14th in the world in terms of its capacity to innovate.

Some of the companies that have tried to move out of China have quickly learned that it's not just a matter of packing up and relocating their production lines. A study by McKinsey found that China's workers are five times more productive than their counterparts in India. And a report in Wall Street Journal says some manufacturers moved back to China after encountering problems including a lack of skilled technicians, low productivity, substandard products, and delayed deliveries in countries such as Vietnam and India.

The world's factory wasn't built in a day. It's wishful thinking to say that American companies that are well established in China can quickly move to a new location. This goes against the law of markets, and is a major disruption to the normal operation of a business. For a business, it's a recipe for chaos, and for the American economy, it's a dampener on growth.

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Post time 2019-8-30 22:12:48 |Display all floors
The latest survey by the US-China Business Council whose members are the major US companies doing business and production in China reveal persuasively positive findings:

1. China Market A High Priority Profit Market

The China market is a priority over other markets due to its comparative significance as a driver of revenue growth.

The vast majority of companies report that their China operations are profitable—so much so, the number of respondents reporting a profit margin rate for their China operations that is higher than that of their overall operations jumped from 38 to 46 percent in 2019.

In fact, the number of US operations reporting high profits in China have consistently increased from 87% in 2010 to 97% in 2019.

Furthermore, 89% of those surveyed indicated their resource commitment to China for next year as stable-to-accelerated.

2. Staying On In China

In 2015, 5% moved back to the US. This year, 2019, only 3% will move back to the US; their reason? Increased costs and uncertainties arising from the US-created trade war.

87% said No! to moving out of China.

3. Intellectual Property

58% said China's IP protection has improved; there was 0% that said it has degraded.

4. Forced Technology Transfers

The question asked was:

Has your company been forced to transfer technology to China?

Result: 95% said NO.

Furthermore, 71% said they were not concerned about China's information flow and technology security policies.

5. MIC2025

The companies reported a 89% non-negative impact.
The number of companies indicating that MIC 2025 offered positive opportunities for their business in 2019 has nearly doubled since 2018.

This shift indicates that China’s efforts to offer foreign companies increased access to industrial policies are beginning to take root.

And Trump's administration is trying to malign China's foreign investment policies which have been consistently positive for the US' own businesses and industries in China.

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Post time 2019-8-31 18:12:48 |Display all floors
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Post time 2019-8-31 19:26:43 |Display all floors
markwu Post time: 2019-8-30 22:12
The latest survey by the US-China Business Council whose members are the major US companies doing bu ...

Even the chosen ONE fears the holy water like the horned ONE.

   After all, the Middle Kingdom with thousands of years of continuous history, China is one of the world's oldest civilizations, and is regarded as one of the cradles of civilization.

The Zhou dynasty (1046–256 BC) supplanted the Shang, and introduced the concept of the Mandate of Heaven to justify their rule...

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Post time 2019-8-31 19:52:27 |Display all floors
On Trump’s “Misguided Trade War” with China
By Allen Yu
Global Research, July 15, 2019
(ref: ... e-war-china/5683641)

Allen Yu is a blogger at and an IP attorney in the Silicon Valley.

Trump started his trade war with China over a year ago.  After a year of escalations, two high-profile G20 meetings and months of on-off-on again negotiations, the trade war has the world tittering on the edge of a global recession.

In the run-up to last month’s G20 meeting, Trump had boasted that “it’s me right now that’s holding up” a deal with China. Rejecting Beijing’s pleas for a “balanced” deal, Trump’s top trade advisor Lighthizer declared that any deal must involve China making up for its’ “past transgressions.”

The notion that the U.S. has long been the victim of unfair trade practices, especially at the hand of China, thus is no longer just election rhetoric, but the raison d’être of America’s trade war.

In the past, U.S. politicians often accused China of manipulating its currency to steal American jobs.  The fact that China never developed a “freely convertible” currency was not a result of cheating per se, but of the country focusing on developing its Main Street over Wall Street economy first.

Historical data shows that China has actually kept rates stable and steady over many decades.  There is no evidence of China ever artificially lowering its currency only to raise it later purely for trade gains.

With an almost 300% increase in wages over the last decade, China is no longer a low wage nation in Asia.  Yet the average Chinese worker last year – working on average 6-day weeks and 12-hour days – still earns only around 1/10th of his American counter-part, at around $2.86/hr vs. $22.04/hr. Is China still “stealing” American jobs?  If so, what about nations like Vietnam or India that now command even lower wages?

Americans face the same – albeit reverse – conundrum with its European and Japanese trading partners. Today the U.S. stands almost alone among developed nations without Universal health care.  This can be great drag and major source of trade disadvantage for American companies.  Trump recently provoked an uproar when he commented that Britain’s NHS should be part of free trade negotiations post Brexit, with British leaders biting back: the NHS is not “for sale”!  So is universal healthcare a “basic right” … or an “unfair” “subsidy”?

U.S. officials have long called out China’s state subsidies to its industries even though the U.S. itself has long used subsidies throughout its history.

The development of semiconductor technology, the Internet, and many blockbuster drugs in the U.S., for example, all arose from government-sponsored research in America’s Universities or corporate labs.  Silicon Valley grew out of generous subsidies strewn to in the aftermath of WWII. Some of its most prominent companies – Apple, Google and Facebook included – received billions of dollars in subsidies just this past decade alone!

Recently, based in part on a 2018 American Chamber of Commerce survey, the Trump administration has taken to berating China for engaging in rampant IP “theft” of American companies through “forced” joint partnerships.  China has challenged the U.S. to provide concrete evidence, but to no avail.

Over the last several decades, many American businesses have indeed flocked to China and sought out local partners to help them make products to sell around the world and establish critical beachheads in the Chinese market.  The American partners would bring know-how and technology while China would provide cheap, dependable labor and critical manufacturing infrastructure. This was all a very public and welcomed part of China’s opening up.

Perhaps some U.S. companies have recently felt “pressured” by the breaks and incentives offered by some local governments to partner with local businesses and bring technologies and high-skill jobs to their localities.  But if so, what of the deal that Trump announced with much fanfare in 2017 offering billions in tax incentives to Foxconn to partner with local businesses and universities to build advanced factories, run R&D facilities, employ high-skill workers, and jointly share and develop intellectual property in Wisconsin?

Global trade was never meant as a platform to structurally suppress the development of another nation. Even with IP concessions, China rightly understood that liberalization would bring unprecedented opportunities for its citizens and businesses to learn from the outside – to copy, imitate, and improve as the case may be – the many “unprotected” ideas that would inevitably flood in.  As China moves up the technological value chain, it seems only natural to up the ante and offer top businesses from around the world special incentives and breaks to bring to or develop in China the newest, breakthrough technologies.

It is ironic that Trump today would make “IP theft” such a focal point of his trade war.  Over the last couple of decades, China has become a top producer as well as top paying consumer of intellectual property.  In 2018 alone, China filed around 1.4 million patents, more than double that of the U.S.

China now ranks second only to the U.S. in global IP royalty payments.  Even Microsoft, the poster child of American companies being “ripped off” in the 1990’s and early 2000’s, has found success in China: developing a dominant market share for its products and running a world-class R&D program there.

Besides berating China of systemic “IP theft,” the Trump Administration has also alleged Chinese companies posing national security risks to nations around the world by potentially working with the Chinese military; criticized Chinese restrictions of direct foreign investments as unfair, illegal, and unacceptable; and slammed China uniquely for carrying out and benefiting from global industrial espionage and cyberattacks.

But if the Trump administration were truly honest about the global national security risks that partnerships between companies and military posed, what of the long list of U.S. companies – from Google to Cisco to Boeing – that have worked – secretively or publicly – with the U.S. military?  What of the companies that WikiLeaks have disclosed to have spied on the world on behalf of U.S. intelligence?

As for restrictions on foreign direct investments, it is the U.S. that has by far the most stringent restrictions on foreign direct investments in the world, with a Committee on Foreign Investment that has categorically rejected all major Chinese investments in its technological sectors for over a decade in the name of “national security.” Recently, at the urging of the U.S., the EU has also raised restrictions on its so-called “strategic sectors”[9] and Japan’s restrictions on its technology sectors earlier this year with an eye toward China.

Industrial espionage and cyberattacks is a complex global issue. Traditionally, the world’s biggest practitioners of industrial espionage have been associated with the world’s biggest economies.  In 2018, China, Japan, and the U.S. all ranked amongst the hardest hit of countries by cyberattacks, but it was China that ranked among the least prepared against such attacks while the U.S. the best.  The claim that China is the chief provocateur and beneficiary of espionage and cyberattacks is simply not grounded in fact.

China today represents a $600 billion market for the American economy. Several American companies including GM and Qualcomm already sell more in China than anywhere else in the world. China is willing to discuss ways to make trade more sustainable and fair, but that discussion must be grounded in principles of equality and reciprocity.

Many Americans are taught today to think that America’s inequality is a result of international trade. But how many really believe getting back $1-2/hr jobs from China (or elsewhere) is the key to reviving America’s Middle Class and solving America’s gaping inequality problem?

America’s revitalization cannot start in Beijing.  It must start at home with Americans confronting long-ignored structural problems, such as its perpetual runaway military budget, dysfunctional healthcare system, a government long captured by special interests, just to name a few.  A prosperous China – like a prosperous Europe or Japan – can raise the water for all.  An insecure America that sees a threat in everyone else’s successes will make the world less prosperous and less safe.

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