China opened its economy when, “Deng Xiaoping
was the chief engineer [in] 1978[1].” He introduced a socialist market economy
which allowed a few at first to ascertain wealth. Through further economic reform they
decollectivized agriculture which reversed the wrongs that were implemented
during Mao’s reign and they also started to create “Special Economic Areas,”
where capitalism was accepted[2]. China began to accept the tenants of a
capitalist economy and therefore implemented an, “open door,” policy for
foreign business. China went from, “one of the world’s poorest countries to its second largest economy in
just 30 years[3]” as a result of their policies. Today, they are in a position to potentially
overtake the USA. However, the USA has
been very resistive towards this country and have imposed tariffs. Despite these, China’s technology industry
specifically has become the go to for many electronics companies. Companies such as FOXCONN manufacture phones
and other electronics under the advise of foreign companies. China has a technology share policy which has
caused their technology industry to be very competitive. As mentioned earlier, China has, “Special
Economic Areas,” of which include Shenzhen,
China’s own Silicone Valley. Through the
technology share programs, foreign companies must partner with domestic Chinese
companies if they want to proliferate the Chinese market. This has caused China’s technology sector to
boom. Such companies that have
benifitted from technology share initiatives include Tencent, Brilliance China
Automotive Holdings, and China Electronics Technology Group Corp. The
technology share policy is a “Forced technology transfer (FTT)
[which] means that when a foreign company wants to enter the Chinese market,
it has to surrender its technology to Chinese companies
through a joint venture agreement[4].” This policy has allowed China to come close
to the technological sophistication of the USA.
The Chinese have been successful in using these trade secrets to their
benefit to create their own companies.
Foreign companies that consider proliferating the Chinese markets must
weigh the pros and cons of selling product in China as their technology could
very well be repackaged and sold as another brand. Therefore doing business in China has the
potential to damage the good will of the brand.
Regardless, companies seem to be satisfied with what they have achieved
in China. Companies such as BMW, Apple,
KFC amongst others have had steady profits.
With China’s growth in technology, the USA has seen its
international competitiveness reduced.
Through the Trump administration, the USA has successfully imposed
policy which stunts China’s growth and influence around the world. According to CNBC president Joe Biden has
announced that he will not immediately remove the said tariffs[5]. Despite the turmoil in America at this time,
it is very refreshing to see that the two administrations at least agree on
this foreign policy issue. Chinas
economy grew 2.3% in 2020[6]
while Americas experienced the worst quarter in history during the same time
period[7]. The specifics of the phase one deal with
China include IP Chinese crack down, currency protection, technology transfer
and agriculture[8]. Overall, the deal aims to address IP theft,
trade imbalance, and currency manipulation.
China is the origin for most counterfeits at 80%. The phase one trade deal with former
president Trump assures that China will also purchase more agricultural goods
from the USA. To look into this more
closely, China agreed to have an Action Plan to address IP theft within thirty
days of the trade deal being signed.
Furthermore, both parties agreed that technology transfers should occur
without interference of either party.
This would mean that if companies want to do business in China, they are
well beyond their means to do so without governments intervening on their
matter. China has also agreed to
purchase over $200 billion[9] in
energy and agriculture goods from America.
This could include such commodities as corn and soy. And, lastly it “includes
provisions to boost Chinese market access to financial services firms.”
The US- Sino economic competition relates to matters of sphere of
influence. These two countries are in a
conflict with one another to ascertain the support of the international
community. Sphere of influence can be
defined as a certain countries specific line of expertise when compared to
other countries. An example of this is
the USA after WWII, who used their sphere of influence to push democracy. The trade war that is occurring is really
rooted in an ideological conflict.
America still doesn’t want Chinese socialist and communist ideology to
proliferate the west and nor does China want liberal ideology in Asia. Therefore, these two nations are ensuring
that they maintain their influence via securing their interests in such
manifestations as the Trump phase one deal.
[1] Christina
Zhou et al, “China’s 40 years of economic reform that opened the country up and
turned it into a superpower.” ABC News (2018).
Retrieved from: https://www.abc.net.au/news/2018-12-01/40-years-of-reform-that-transformed-china-into-a-superpower/10573468
[2] Rainer
Zitelmann, “China’s Economic Success Proves the Power of Capitalisim.” Forbes (2019). Retrieved from: https://www.forbes.com/sites/rainerzitelmann/2019/07/08/chinas-economic-success-proves-the-power-of-capitalism/?sh=6fd28fa63b9d
[3] Linda
Yueh, “China’s Growth: A Brief History.”
Harvard Business Review (2015).
Retrieved from: https://hbr.org/2015/12/chinas-growth-a-brief-history
[4] South
China Morning Post, “Is the US right to cry foul about forced technology
transfer to do business in China – and what is Beijing’s position?”
(2019). Retrieved from: https://www.scmp.com/news/china/diplomacy/article/2181528/us-right-cry-foul-about-forced-technology-transfer-do-business
[5] Yen
Nee Lee et al., “Biden says he won’t immediately remove Trump’s tariffs on
China.” CNBC (2020). Retrieved from: https://www.cnbc.com/2020/12/02/biden-tells-nyt-columnist-he-wont-immediately-remove-trumps-tariffs-on-china.html
[6] Laura
He. “China GDP: Economy grows 2.3% in 2020 as recovery
quickens.” MSN (2021). Retrieved from: https://www.msn.com/en-us/money/markets/china-gdp-economy-grows-23-25-in-2020-as-recovery-quickens/ar-BB1cQfOL
[7] Jeff
Cox. “U.S. GDP booms at 33.1% rate in Q3, better than
expected.” CNBC (2020). Retrieved from: https://www.cnbc.com/2020/10/29/us-gdp-report-third-quarter-2020.html
[8]
Ross Pink, American Foreign Policy. POLI
3150. KPU 2020.
[9] Jacob
Pramuk. “Trump signs ‘phase one’ trade
deal with China in push to stop economic conflict.” CNBC (2020).
Retrieved from: https://www.cnbc.com/2020/01/15/trump-and-china-sign-phase-one-trade-agreement.html
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