US, China sign massive purchases deal but US tariffs remain. How does China steal trade secrets?
Rejoice...: The US and China have signed Phase One of a trade deal which is expected to see sharp increases in sales of US goods and services to China. The eight-part agreement will also see Beijing further open its markets to foreign firms and agree to new protections for trade secrets and intellectual property. This represents a truce in a two-year trade war that has roiled global markets and businesses.
...For Now: But the deal leaves in place US tariffs on about $370bn of Chinese goods - ot three-quarters of Chinese imports to the US. Possible tariff reductions will be left to later negotiations, which will cover many controversial issues like Chinese subsidies to domestic firms and its oversight of state-owned firms. US President Donald Trump has said the remaining tariffs “will all come off” if future talks produce a second agreement, although this is not expected to happen before the US Presidential election this November. WSJ
Made in China (After Stealing From Elsewhere): Accusations that China steals US technology has been the central driver of the trade war. But does China do this? What's the Chinese playbook to steal trade secrets? One way is hacking and outright theft of corporate secrets. Another is buying secrets through corporate deals. And sometimes China requires foreign firms to form joint ventures with local companies in other to do business in the country.
One case study is wind energy. Before 2005, Gamesa, a Spanish engineering company, was the wind turbine market leader in China. But that year, the Chinese government mandated that 70% of each wind turbine installed in China has to be manufactured in China. Gamesa then trained more than 500 Chinese suppliers to manufacture every part of its turbines.
This policy was questioned as a violation of World Trade Organisation (WTO) rules and China withdrew it - but only after it had acquired all the tech processes and secrets from Gamesa. Soon, Chinese state-controlled enterprises began to assemble turbines using the same suppliers Gamesa had tutored. China is now the world’s biggest market for wind turbines, and they are mostly made by Chinese companies. NYT via ET
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