The CFO survey said it is happening to 1 in 5 US corporations, which is incredible if you think about it - but the trouble is the scale is larger than that, when you include what they steal via surveillance too.
I can't see an answer outside of decoupling, seeing as they're set on their path and proud of it.
Sounds impressive, then you read the article and realize they surveyed 23 companies in total. I don’t even know what’s 1 in 5 in that context. Four? Five?
> One in five North American-based corporations on the CNBC Global CFO Council says Chinese companies have stolen their intellectual property within the last year. In all, 7 of the 23 companies surveyed say that Chinese firms have stolen from them over the past decade.
Honestly are you really surprised? It's been going on for almost 40 years. Any exec saying they're surprised by this is disingenous at best, and lying at worst. If an exec sees a 40 year long pattern and decides to continue working with China, they're either incompetent or deciding that the potential profits are worth it.
To turn around and act surprised by this is like acting surprised that Trump keeps saying inflammatory things.
If you have to keep doing that why would you. If I wanted to start a company the smart thing to do would create a company called Orange Computers, steal a modified version of iOS call it iOP and then undercut apple because I didn't have to pay for RnD
How do you out-innovate a country which has less regulation, more intrusive surveillance, more factories ready to churn out whatever you invent, more workers (and Uighur slaves) ready to do the labour for less, and no qualms about stealing anything and everything you come up with and copying it at a scale you can't possibly match?
The article gives several possible ways to improve the situation. However, one critical way is missing imho: China forces foreign investment to always come in the form of a joint venture with a Chinese company. This practice needs to be forbidden or heavily penalized in all future trade agreements and similar international contracts.
Chinese citizens have invested a ton in US businesses, which is sort of okay. They also bought a ton of land in the US, which led to skyrocketing housing prices, and in the long term, if it continues unabated, will lead to the US paying tribute to China in the form of rents on US land. There is no upside to this. We got cheap Chinese plastic trinkets. They got our real estate. Didn't we do this to the indigenous people here once ourselves?
To be clear: I'm not opposed to being able to buy foreign land per se, but I am opposed to how one-sided this is. For the most part, US entities can't really own real estate in China (and even with Chinese entities, it's complex, but that's another story).
Here in Australia, it's a giant issue too. There are plenty of houses which are Chinese-owned but unoccupied. They are effectively "banks" for storing cash. The scale is shocking, our "foreign ownership" figures for real estate are entirely skewed to this one country.
Rich chinese buying real estate in the United Stats has detrimental effect on the poor and the middle class, and our economy in general, leading to ossification.
China produces lots of manufactured goods, and sells them to the US. The US produces tons of valuable urban real estate and exports it to China. (Similarly the US produces lots of higher education, and exports it in the form of international students)
No, what we got was a new robber baron class of ultra-rich billionaires the likes of which haven't been seen since the federal government had to break up Standard Oil, etc... Which has led to extreme wealth inequality and a complete lack of access to _our fucking politics_ for the vast majority of Americans.
Forbidding that practice will simply mean that you won't be doing any more business in China. Which is fine with me. It's just that CEOs that see a virgin population of over a billion consumers for their widgets can't help themselves and will agree to just about anything to be able to tap that market before their competition does.
>It's just that CEOs that see a virgin population of over a billion consumers for their widgets can't help themselves and will agree to just about anything to be able to tap that market before their competition does.
Isn't that the point of forbidding it? You can't enter the market, but neither can your competitor, so there's no FOMO.
I support reducing trade with china. The need for cheap goods comes with a long tail price tag. It needs
to be discussed more. Many Chinese workers are in severe poverty and strengthening Chinese businesses seems to only fuel inequality.
The agreement needs to be reciprocal. China should have to jump through the same hoops if it wants to do business in the US, UK, Australia, etc
And not just for doing business either, things like home ownership too. If I cannot buy a house in China (not that I'd want to pay for a Chinese house that'll last 5 years max) because I'm not Chinese then they should not be allowed buy in my country either. Vancouver, Toronto, Sydney... all have property markets destroyed by Chinese funny money.
It has to stop, but it won't due to greed. Trump is right about China
(I'm not American, don't live or work in America, and have never, or could ever, vote in an American election. Take your faux outrage elsewhere)
This is the shortsightedness of chasing short term profits for the investors rather than a more sustainable approach of not handing over the reins to a less than trustworthy partner.
I'm genuinely curious for how many companies did this short term bump in profits outweigh the long term loss by irretrievably handing over technology, business strategies, etc.
Edit for the comment below.
> legally obliged to maximise shareholder value
Fiduciary duties are not so explicitly described. A CEO must use care and be diligent when making decisions on behalf of the company and shareholders. Make choices in good faith with true belief that each choice is made with the best interests of the corporation in mind.
Hence the best interests of the corporation must be weighed between short term and long term. A CEO could argue either way that they took the decision in good faith. This is where my curiosity came from, how many of these decisions turned out to be financially successful in hindsight?
It's just that CEOs that see a virgin population of over a billion consumers for their widgets can't help themselves and will agree to just about anything to be able to tap that market before their competition does.
Every CEO must realise by now that they will never get to tap that market, they will hand over their IP, they will carry the cost of establishing the product or service in the country, and then be booted out with nothing. Then a few years later a heavily capitalised Chinese company will show up and start competing with them with their own IP in their home country. It's heads China wins, tails the West loses. While our political class buries their heads in the sand, or worse, colludes in return for scoring points against domestic opponents.
I just learned that Tesla in China does not have a local partner. Which surprised me.
Was Tesla an exception? Are there others?
Regardless, I'm absolutely certain that China is exfiltrating every morsel of IP. As state policy. It's what they do.
The only interesting wrinkle to me is that Elon Musk is probably okay with the knowledge transfer. A man on a mission. Whatever it takes to get humanity carbon neutral asap.
--
I'm fine with developing economies doing their thing. The notion was to nurture the BRICS countries, allow them to mature, not crush them in their cribs.
No one can argue today that China remains a developing economy. We're past time for realpolitik.
Wholly Foreign-Owned Enterprises (WFOEs) are not an uncommon way for foreign companies to operate in China, and Tesla is definitely not an exception. According to data from the Chinese ministry of commerce, WFOEs accounted for about 74% of all import/export by companies with foreign investment in the first half of 2020 http://project.mofcom.gov.cn/1800000121_33_13497_0_7.html
Tesla was the first auto company to take advantage of this exception, some have argued that this exception was specifically carved out to incentivize them to build the Shanghai Gigafactory
Tesla is probably ok since the car is a platform auto updated over the air if China steals the design and can build the exact physical machine and even a version of the firmware it will soon be an inferior version of the product without updates. Kind of like how android phones that don’t get updated are inferior to those that do.
Flip the script: we may want this sort of thing to be happening more, not less, on a global scale. When we want to help developing countries, this is one of the most effective ways to do so. We should just be smart and restrict this to more-values-aligned, more-development-left-to-do countries like India, Rwanda, etc.
It seems he fell into a classic trap, the Chinese partner never intended to make cars, as the only product they ever produced is a Smart-like "mini-four-wheel-car", which was itself stolen from an HK student design.
So the plan is quite apparent, the Chinese partner just wanted his reputation and brand recognition, in exchange for promised access to the China market, to leverage huge land quota (state controlled lucrative resource, highly coveted) and bank/government loans. It never planed to make any real cars, it's just a capital play to game and profit off of the system, like pennies for grands.
Thank you, this was an excellent read for myself, an English-speaking American. It's interesting how much of a big story this is locally for that city.
Are Chinese news stories often this long and detailed?
Is it extra newsworthy because Saleen / "Sailin" vehicle manufacturing was part of that province's five year plan? Or would this have gotten the same coverage regardless?
Honestly I don't have much problem with protectionism. Flagrant theft is no good, but when the companies enter in the domestic partnership the IP transfer is rather more de jure. And if China didn't take any IP they would continue to be massively under-developed and just a source of cheap labor, be cause there's no way in hell US companies would have willingly fostered higher skills, higher pay there.
Let's face it, major US companies that outsource to China are doing fine, at least compared to workers, and we shouldn't start fucking WW III to raise their profits further.
What's far more concerning to me is what is described in https://phenomenalworld.org/reviews/trade-wars, the general race-to-the-bottom export dynamics where every country surpresses wages to try to stay competitive, and via the paradox of thrift not enough consumption has been afforded. This will ruin us. And we see the race to the bottom politically too, which follows.
That book says bilateral tarries are a farce because commerce can route around them. As a programmer that makes....goddamn sense. They instead recommend general capital controls, which cannot be routed around. That also makes sense.
How about we fix our rotten economy, reinvigorate society, and win a cultural war rather than loose a real one?
> And if China didn't take any IP they would continue to be massively under-developed and just a source of cheap labor, be cause there's no way in hell US companies would have willingly fostered higher skills, higher pay there.
We sell the training for those skills to anyone willing to pay as part of a huge education industry. You can just buy the textbooks on amazon or get many of them along with any other materials for free.
Smaller countries in the west who couldn't possibly stand up the the big "bully" economies, and less developed regions like the US south, all have developed right up the cutting-edge with everyone else. They became developed by simply playing the game according to the rules. The real problem with developing countries is the ability tofollow those rules. The culture isn't fully-formed yet and some people are unclear on the line between stealing/scamming versus legitimate business. That doesn't mean stealing and scamming are a necessary part of development. It's the corruption that holds it back. Economic growth is based on people taking risks and making deals, which needs security and trust between them.
> We sell the training for those skills to anyone willing to pay as part of a huge education industry. You can just buy the textbooks on amazon or get many of them along with any other materials for free.
Education is necessary but not sufficiency, because the manufacturing secrets are sometimes intentionally secret, and sometimes simply the result of a process that isn't reproducible.
If you want a programming analogy, imagine if China had all the source code but no binaries. But worse, because there aren't codified programming languages to describe arbitrary industrial processes.
> Smaller countries in the west who couldn't possibly stand up the the big "bully" economies, and less developed regions like the US south, all have developed right up the cutting-edge with everyone else.
Do you know of any country (excluding tiny ones like Singapore) that became advanced without some sort of IP theft?
------
To be clear I am not arguing that the US + China relationship has been good or moral or whatever other positive quality. The US should have instead had better foreign aid policies to help countries develop---none of that IMF liberalization bullshit, but actual useful stuff like:
1. You can tariff us and we won't retaliate
2. We invest in your physical infrastructure
3. We give you IP and shit so your industry can ween itself
However, this very sweet deal comes with commensurately strict conditions:
1. Democracy
2. Unionizaiton
3. Gini coefficient maximum
4. Wage floor
5. Worker governance requirements.
It's really depressing that US foreign policy has been a objectiveless fucking joke entirely captured by the nefarious interests of corporations and bored rich people.
For some reason, after reading this article and a bunch of the comments here, I'm reminded of two quotes from two of my favorite authors:
"Standards of living far below what we would consider to be poverty have been the norm for untold thousands of years. It is not the origins of poverty which need to be explained, since the human species began in poverty. What requires explaining are the things that created and sustained higher standards of living."
from Wealth, Poverty and Politics by Thomas Sowell
"Modernity needs to understand that being rich and becoming rich are not mathematically, personally, socially, and ethically the same thing."
from The Bed of Procrustes: Philosophical and Practical Aphorisms by Nassim Nicholas Taleb
Personally I no longer support the concept of IP. Reason being that if it was enforced to the letter nobody except largest corps can't make a single thing now without breaking some patent and sued to the oblivion. As for software patents, this is just cherry on a cake of insult.
I bet there is not a single software product out there that does not break some patent.
There are two sides of the story, there is a Chinese version saying that there are a lots of frauds here.
Car making is a capital burning business, you just can not do it without the wealth like elon musk.
It's kind of a venture investment here, there were so many car investment in the past few years, when there were investment bubbles, but now, the bubble is gone.
I've read in a paper somewhere that a big part of why Chinese auto manufacturers aren't as successful as Japanese or Korean ones is because they're too tied to the local government to fail. Each province in China has their own local auto company connected to the provincial government, resulting in a lot of duplicated effort and inefficiency. Japan and Korea had a lot of indigenous auto makers when they first started as well, but they allowed the weaker ones to get bought out and cannibalized to build up the stronger ones.
Japan has a very long tradition of quality and striving for perfection. China, not so much. And cars these days really need to be more than “good enough” to compete worldwide.
Readit News
The CFO survey said it is happening to 1 in 5 US corporations, which is incredible if you think about it - but the trouble is the scale is larger than that, when you include what they steal via surveillance too.
I can't see an answer outside of decoupling, seeing as they're set on their path and proud of it.
https://www.cnbc.com/2019/02/28/1-in-5-companies-say-china-s...
I don’t see this as a minimized fact.
How come the Feds will prosecute bribery form foreign officials, but not the CEO or COO allowing corporate property to be stolen?
To turn around and act surprised by this is like acting surprised that Trump keeps saying inflammatory things.
Maybe stop relying on IP as your business strategy ? Always be innovating so that you always be one step ahead those who copying.
People who create need to be able to benefit from that creation.
Chinese citizens have invested a ton in US businesses, which is sort of okay. They also bought a ton of land in the US, which led to skyrocketing housing prices, and in the long term, if it continues unabated, will lead to the US paying tribute to China in the form of rents on US land. There is no upside to this. We got cheap Chinese plastic trinkets. They got our real estate. Didn't we do this to the indigenous people here once ourselves?
To be clear: I'm not opposed to being able to buy foreign land per se, but I am opposed to how one-sided this is. For the most part, US entities can't really own real estate in China (and even with Chinese entities, it's complex, but that's another story).
Not until they invade and slaughter everyone here. And no that's probably not going to happen. Hilarious that people think this way though.
China produces lots of manufactured goods, and sells them to the US. The US produces tons of valuable urban real estate and exports it to China. (Similarly the US produces lots of higher education, and exports it in the form of international students)
No, what we got was a new robber baron class of ultra-rich billionaires the likes of which haven't been seen since the federal government had to break up Standard Oil, etc... Which has led to extreme wealth inequality and a complete lack of access to _our fucking politics_ for the vast majority of Americans.
Isn't that the point of forbidding it? You can't enter the market, but neither can your competitor, so there's no FOMO.
And not just for doing business either, things like home ownership too. If I cannot buy a house in China (not that I'd want to pay for a Chinese house that'll last 5 years max) because I'm not Chinese then they should not be allowed buy in my country either. Vancouver, Toronto, Sydney... all have property markets destroyed by Chinese funny money.
It has to stop, but it won't due to greed. Trump is right about China
(I'm not American, don't live or work in America, and have never, or could ever, vote in an American election. Take your faux outrage elsewhere)
I'm genuinely curious for how many companies did this short term bump in profits outweigh the long term loss by irretrievably handing over technology, business strategies, etc.
Edit for the comment below.
> legally obliged to maximise shareholder value
Fiduciary duties are not so explicitly described. A CEO must use care and be diligent when making decisions on behalf of the company and shareholders. Make choices in good faith with true belief that each choice is made with the best interests of the corporation in mind.
Hence the best interests of the corporation must be weighed between short term and long term. A CEO could argue either way that they took the decision in good faith. This is where my curiosity came from, how many of these decisions turned out to be financially successful in hindsight?
Every CEO must realise by now that they will never get to tap that market, they will hand over their IP, they will carry the cost of establishing the product or service in the country, and then be booted out with nothing. Then a few years later a heavily capitalised Chinese company will show up and start competing with them with their own IP in their home country. It's heads China wins, tails the West loses. While our political class buries their heads in the sand, or worse, colludes in return for scoring points against domestic opponents.
Was Tesla an exception? Are there others?
Regardless, I'm absolutely certain that China is exfiltrating every morsel of IP. As state policy. It's what they do.
The only interesting wrinkle to me is that Elon Musk is probably okay with the knowledge transfer. A man on a mission. Whatever it takes to get humanity carbon neutral asap.
--
I'm fine with developing economies doing their thing. The notion was to nurture the BRICS countries, allow them to mature, not crush them in their cribs.
No one can argue today that China remains a developing economy. We're past time for realpolitik.
Tesla was the first auto company to take advantage of this exception, some have argued that this exception was specifically carved out to incentivize them to build the Shanghai Gigafactory
No. This is not just plain wrong, it is normally not the case. See WFOE comment.
Apple, Tesla and numerous other US companies are 100% foreign entity in China.
For hybrid, the usual cases are that they want to get government subsidies or special tax incentives.
So the plan is quite apparent, the Chinese partner just wanted his reputation and brand recognition, in exchange for promised access to the China market, to leverage huge land quota (state controlled lucrative resource, highly coveted) and bank/government loans. It never planed to make any real cars, it's just a capital play to game and profit off of the system, like pennies for grands.
Are Chinese news stories often this long and detailed?
Is it extra newsworthy because Saleen / "Sailin" vehicle manufacturing was part of that province's five year plan? Or would this have gotten the same coverage regardless?
Let's face it, major US companies that outsource to China are doing fine, at least compared to workers, and we shouldn't start fucking WW III to raise their profits further.
What's far more concerning to me is what is described in https://phenomenalworld.org/reviews/trade-wars, the general race-to-the-bottom export dynamics where every country surpresses wages to try to stay competitive, and via the paradox of thrift not enough consumption has been afforded. This will ruin us. And we see the race to the bottom politically too, which follows.
That book says bilateral tarries are a farce because commerce can route around them. As a programmer that makes....goddamn sense. They instead recommend general capital controls, which cannot be routed around. That also makes sense.
How about we fix our rotten economy, reinvigorate society, and win a cultural war rather than loose a real one?
We sell the training for those skills to anyone willing to pay as part of a huge education industry. You can just buy the textbooks on amazon or get many of them along with any other materials for free.
Smaller countries in the west who couldn't possibly stand up the the big "bully" economies, and less developed regions like the US south, all have developed right up the cutting-edge with everyone else. They became developed by simply playing the game according to the rules. The real problem with developing countries is the ability tofollow those rules. The culture isn't fully-formed yet and some people are unclear on the line between stealing/scamming versus legitimate business. That doesn't mean stealing and scamming are a necessary part of development. It's the corruption that holds it back. Economic growth is based on people taking risks and making deals, which needs security and trust between them.
Education is necessary but not sufficiency, because the manufacturing secrets are sometimes intentionally secret, and sometimes simply the result of a process that isn't reproducible.
If you want a programming analogy, imagine if China had all the source code but no binaries. But worse, because there aren't codified programming languages to describe arbitrary industrial processes.
> Smaller countries in the west who couldn't possibly stand up the the big "bully" economies, and less developed regions like the US south, all have developed right up the cutting-edge with everyone else.
Do you know of any country (excluding tiny ones like Singapore) that became advanced without some sort of IP theft?
------
To be clear I am not arguing that the US + China relationship has been good or moral or whatever other positive quality. The US should have instead had better foreign aid policies to help countries develop---none of that IMF liberalization bullshit, but actual useful stuff like:
1. You can tariff us and we won't retaliate
2. We invest in your physical infrastructure
3. We give you IP and shit so your industry can ween itself
However, this very sweet deal comes with commensurately strict conditions:
1. Democracy
2. Unionizaiton
3. Gini coefficient maximum
4. Wage floor
5. Worker governance requirements.
It's really depressing that US foreign policy has been a objectiveless fucking joke entirely captured by the nefarious interests of corporations and bored rich people.
"Standards of living far below what we would consider to be poverty have been the norm for untold thousands of years. It is not the origins of poverty which need to be explained, since the human species began in poverty. What requires explaining are the things that created and sustained higher standards of living."
from Wealth, Poverty and Politics by Thomas Sowell
"Modernity needs to understand that being rich and becoming rich are not mathematically, personally, socially, and ethically the same thing."
from The Bed of Procrustes: Philosophical and Practical Aphorisms by Nassim Nicholas Taleb
I bet there is not a single software product out there that does not break some patent.
Car making is a capital burning business, you just can not do it without the wealth like elon musk.
It's kind of a venture investment here, there were so many car investment in the past few years, when there were investment bubbles, but now, the bubble is gone.
Deleted Comment