You might have wondered how Chinese brands, especially ones like smartphones and other devices in the tech sector, have managed to usurp the top position, bypassing long-term Western leaders. There’s a simple answer — forced tech transfers. China has long been engaging in the practice of forced technology transfers in which U.S. and European companies are asked to share Intellectual Property (IP) in order to gain access to the Chinese market. In fact, President Trump had imposed tariffs on Chinese products precisely to force Beijing to stop such unethical business practices.
The menace of forced transfers
The huge market size of China is the tempting carrot that the Communist Party shakes in front of businesses. Failing that, they force them to comply or get out of China. Such actions directly harm business and free market interests.
The U.S. is the leader in technological products. Its economy relies on the hard work of millions of professionals who innovate and give the country a huge advantage over the rest. By forcing companies to share tech, China is essentially stealing away America’s leadership position.
During a WTO meeting in May, the U.S. representative raised the issue with authorities. “Fundamentally, China has made the decision to engage in a systematic, state-directed, and non-market pursuit of other (WTO) members cutting-edge technology in service of China’s industrial policy,” U.S. Ambassador Dennis Shea said to WTO’s dispute settlement body (CNBC). Beijing, as always, dismissed the claims and never sought to address the U.S. concerns.
Made in China 2025
A bigger threat from the forced transfer is Beijing’s ambitious “Made in China 2025” plan. While the project might look like a development plan for the Chinese economy, a closer inspection reveals some sinister aspects. China does not seek to join high-tech economies like the U.S., Germany, etc. Instead, Beijing wants to bypass partnerships and be the top dog in the tech world.
“Made in China 2025 calls for achieving ‘self-sufficiency’ through technology substitution while becoming a ‘manufacturing superpower’ that dominates the global market in critical high-tech industries. That could be a problem for countries that rely on exporting high-tech products or the global supply chain for high-tech components,” according to the Council on Foreign Relations.
By allowing China to continue with forced transfer practices, America and Europe are allowing Chinese tech companies to grow without any valid supervision. In the future, these same companies will enter Western markets, armed with stolen tech, underpricing the products sold by local companies, and eventually capture the market. In short, the West invests money into research and development, but China ends up benefiting through forced technology transfers.
Protecting the American tech industry
President Trump’s import tariffs are already pressuring Beijing to re-evaluate their unethical business practices. President Xi and his advisers are reportedly considering acceding to some of America’s demands to end the trade war.
“The Chinese side is ready to have discussions with the U.S. on issues of mutual concern to push for a proposal acceptable to both sides to resolve their economic and trade issues,” Wang Qishan, Vice President of China, said in a statement (South China Morning Post).
If the U.S. plays its cards right, it can make China open up its market for U.S. companies without making technological transfers a condition for market access. And for an economy whose export sector largely depends on the American market, China will eventually have to submit to trade rules and start playing fairly.