China’s Unethical Moves to Get Ahead
Deng Xiaoping, the top politician in China during its 1980s expansionary period, is often misattributed to the quote “To get rich is glorious”. Nonetheless, the quote accurately represents China’s mindset following the “Century of Humiliation”, 1840-1949. China had been the world hegemon for much of its existence, and its forced submission and exploitation by foreign powers after the Opium Wars left this proud people feeling degraded. Rallying the people around this narrative in 1949, the newly ruling Communist party used the public’s anger to excuse the iron grip it kept over its citizens. Leaping forward thirty years, Deng Xiaoping significantly liberalized the Chinese economy which then burst onto the world stage. Finally open to foreign trade and investment, GDP grew exceptionally each year, averaging 9.4% from 1978-2012. To sustain this incredible growth and to morph into an economy that looks like prosperous Western ones, the People’s Republic of China (PRC) party still uses unethical practices to get ahead like stealing intellectual property, making predatory loans to developing nations, and unduly influencing Chinese “nationals”.
Intellectual property (IP) theft by the PRC is a consistent injustice on the world stage. To give a sense of how much it has impacted the US, government officials estimate that the USA has lost between $225 and $600 billion dollars due to IP theft by China. IP refers to creations of the mind such as inventions or company-specific strategies. Countries protect IP to incentivize research and development; if companies are allowed hold onto their creations, their chances of getting rich off of them increase dramatically. IP theft undermines the profitability of research and thus the incentive to do it. Since the Chinese private sector developed fairly recently, it lags behind in terms of IP, so it is no surprise that there is a strong push for its acquisition.
Currently, the PRC steals IP from the US by breaking international law and overlooking counterfeiting. First, the PRC requires foreign companies seeking to do business in China to form joint ventures with domestic companies and transfer intellectual property. This policy violates World Trade Organization obligations that prohibit member countries from necessitating intellectual property transfers. China responds by denying the need for companies to do business there. Although onlookers may think this is ethical quid pro quo, it is manipulative of the WTO rules. These rules were made on the premise that companies are profit-seeking, so to disregard that motivation is to transgress the spirit of the law. Individual firms will certainly agree to the technology transfer to gain access to the large Chinese market, and in the process they hurt their entire industry. With both the White House and the European Union recently lamenting the practice, pressure is mounting on the PRC to discontinue. Second, China is the leading creator of counterfeit goods. US companies lose billions to the sale of counterfeit goods in markets around the globe. I recommend reading this well-reported article about the absurdly large counterfeiting industry. Although Chinese multinationals are starting to speak up about the regressive implications of the counterfeiting industry, its massive profitability signals that it will remain a persistent problem.
Chinese IP theft is popular problem on the world stage, though a more dangerous practice receives less attention. In step with its new Belt and Road Initiative, meant to improve the infrastructure of China’s neighbors, the PRC has loaned billions of dollars emerging economies. On the surface, this seems like a benevolent endeavor, in practice, these loans can undermine national sovereignties. Take Sri Lanka for example. To finance the development of a port in Hambantota, a tsunami-damaged town on the southern coast, Sri Lanka accepted a large loan from China in 2010. Years later, Sri Lanka lacked the revenue to pay back the loans. After a negotiation period, Sri Lanka agreed to cede control of the port to Chinese authorities for 99 years. This practice is consistent with “debt-trap diplomacy”, a term applied to China by those who believe the goal of the initial loan was to acquire the strategically significant territory. Quartz has identified eight other Asian and African nations that may suffer the same fate as Sri Lanka without needed intervention.
Finally, the PRC is guilty of unduly influencing and intimidating those who it considers to be Chinese nationals. Around the globe, Chinese operatives have used money and force to create create outcomes that the PRC deemed advantageous. One example of the former is the manipulation of Chinese Student Associations (CSAs) on college campuses. In March, Foreign Policy wrote on this massive story, detailing how CSAs are often in close contact with PRC officials and how they are often bribed into advancing narratives formulated by the PRC. For example, the CSA at George Washington University were paid to cheer for President Jinping when he arrived in D.C. These types of actions mislead the US government into thinking the Chinese government has more domestic support than it really does, so in deciding how to deal with the PRC, government officials may choose a softer approach when it should not. Another Foreign Policy report characterizes the latter; the PRC often kidnaps, blackmails, and extorts Chinese nationals abroad. Often, the targets of these attacks are business men with considerable control over power-playing companies. Both types of manipulations imply serious economic consequences, although measuring their impact is difficult right now when they have only recently been brought to light. The PRC is actively distorting observable public opinion and therefore policy, and through pressuring key stakeholders, Beijing can influence multinational companies and organizations.
Taken in context, the PRC’s aggressive expansion in the last 40 years makes a lot of sense. A proud nation emerging from the worst century in its long history chooses to do whatever it can to regain what it lost. However, this does not excuse many of the unethical practices China uses today to return it to the global economic hegemony.
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Fernholz, Tim. “Eight Countries in Danger of Falling into China's ‘Debt Trap.’” Quartz, Quartz, 7 Mar. 2018, qz.com/1223768/china-debt-trap-these-eight-countries-are-in-danger-of-debt-overloads-from-chinas-belt-and-road-plans/.
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Pham, Sherisse. “How Much Has the US Lost from China's Intellectual Property Theft?” CNNMoney, Cable News Network, 23 Mar. 2018, money.cnn.com/2018/03/23/technology/china-us-trump-tariffs-ip-theft/index.html.