© 2015 Prof. Farok J. Contractor, Rutgers University
Chinese President Xi Jinping and US President Barack Obama. Joint news conference, Washington, DC, September 25, 2015.
PHOTO: PETE MAROVICH/BLOOMBERG NEWS (WALL STREET JOURNAL)
American companies state that their secrets are being stolen by Chinese hackers. US counter-intelligence says it has traced several of these attacks back to outfits sponsored by the People’s Liberation Army (PLA),[1] and that designs stolen from American companies’ computers have shown up—sometimes barely disguised—in Chinese companies’ products and services. The Obama administration has threatened sanctions against hackers and Chinese firms that benefit from such intellectual property theft.
But wait a minute! Isn’t the “pot calling the kettle black”? The US has by far the best cyber-capability in the world and has used it to spy on millions of international communications, including Angela Merkel’s mobile phone—as well as to gather data from both European and Chinese companies’ computers. It can access any Internet-connected device, anywhere, to read its contents. So well-developed is the US government’s data-mining and cyber-capability that it has harvested detailed information, even family photos, on the very PLA hackers that penetrate American companies’ computers.
This is a “game” played by most major governments. So why single out China?
The “pot-and-kettle” analogy has a flaw: it is not symmetrical. The legal and political systems of the two nations tilt the game in China’s favor because:
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The Chinese government can, and does, share its information with its companies—especially State Owned Enterprises (SOEs)—whereas the US government cannot, for a myriad of legal and ethical reasons.
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SOEs, or government-controlled firms, still make up a major fraction of the Chinese economy, accounting for 34 percent of fixed total investment.[2] Some observers indicate that state ownership in China has continued to grow, not shrink, especially in key sectors (although the growth rate of private enterprise is even higher). The government-owned sector in the US, by comparison, is minuscule.
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As US firm CEOs made it clear to President Xi Jinping during his Seattle visit in September 2015, US companies in China are increasingly being squeezed and pressured to share technology and proprietary designs with Chinese partners as a precondition for doing business in China or getting access to markets. In brief, the Chinese government makes no bones about its drive to help its companies learn from US and European firms. Neither the US nor Europe makes any such demands on foreign investors.
I always enjoy reading your articles, Farok. They are always interesting. What concerns me is that every time I go to buy something, it is usually marked “Made in China”. If I were in China I wonder how many things would read “Made in the USA”? This may not have much to do with what you just wrote but it has always bothered me. If I had my preference I would be the pot and China would be the kettle!!
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Dear Marie,
In stores in China there is very little from the USA. But the USA does sell them, for example, a Boeing Aircraft whose value is equal to 60,000 China-made toasters. So Americans see “Made in China” 60,000 times at Target or Walmart, whereas someone climbing into an airplane in China sees no “Made in USA” label.
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