Frank Cries Wolf as China Provides “A Ticket Out of the Recession”

Mao was fond of talking about contradictions among the people. So he would perhaps be amused by the contradictions China is now engendering among American politicians.

Republican Frank Wolf of Virginia is one of the most strident China critics in Congress. I remember in 1991 when Mr. Wolf  at a hearing of the Senate Foreign Relations Committee dangled a pair of socks that he brought back from China. He had picked them up on a tour of a Beijing prison workshop, and his action triggered a  frenzy on Capitol Hill about Chinese “slave labor” making clothing for US retailers. Myself and many other China reporters at the time were told to chase this story. But it led mostly down blind alleys. So, as a result of Wolf’s hyperbole, instead of focusing on the genuine and serious issues of human rights and the continued jailing of Tiananmen protestors, we were sidetracked from the main topic.

Wolf is now starting to raise another China outcry. In the AP story excerpted and linked below, Wolf calls for slashing the$6.6 million budget of the White House Office of Science and Technology Policy (OSTP) by 55% to prevent the office from having any technology cooperation with China. At issue is a feel-good clause in a resolution from President Hu Jintao’s January state visit in which the US and China said they would “deepen dialogue and exchanges in the field of space.” Mr. Wolf is going after White House OSTP Director John Holdren’s budget because he held two meetings with Chinese Minister of Science and Technology Wan Gang. Mr. Wolf says that those meetings violated a budget clause that forbids OSTP and NASA from technology cooperation with China.

Once again, Mr. Wolf is headed in the wrong direction on the right issue.  At issue is China’s schizophrenic Indigenous Innovation technology policy. The policy calls for extensive international technology cooperation and cross-border R&D. But it also is focused on forcing foreign companies in key sectors such as energy, transportation, telecommunications and aviation to hand their latest technology over to Chinese state-owned companies — and get only a minority interest in any resulting joint-venture or project. As China is THE global growth market for many of these industries, more than a few companies are complying as shrewd Chinese business bureaucrats play them off against each other.

The issue that Mr. Wolf and his colleagues should be focused on is forced technology transfers. The OSTP’s “innovation dialogue” with China is merely a diplomatic side-show.

China’s rampant disregard for IPR protection in areas where it wants to obtain advanced foreign industrial know-know and technology, and the policies behind forced technology transfers, are certain to become bigger political issues in Washington as members of Congress discover how much US government R&D money was spent on the technologies now being strong-armed from US companies by China.

Meanwhile, outside the beltway, American governors and mayors are clamoring for Chinese investment, as they should be. China has mountains of cash, and the US is in dire need of additional foreign investment. Delegations from from four Chinese provinces showed up at  the National Governor’s Association meeting in Salt Lake City last week looking for investment opportunities. Reuters describes these efforts as “a back-door way into the US market that bypasses Washington” and a “way to gain allies in any future trade disputes between the two countries.” Washington State Gov. Christine Gregoire said that doing business with China represents a “ticket out of the recession” for her state.

The US should welcome Chinese investment. The more economic and financial ties between the two countries, the more likely we have a stable relationship as the US learns to deal with China’s rise and China learns how to become a “responsible stakeholder” in the global system. At the same time, Congress and the Obama administration should work with China to eliminate the forced technology transfer policies. US investors in China and Chinese investors in the US, left to their own commercial devices, can work out fair deals and sustainable investment frameworks.

China should know that creating contradictions among the people is not a long-term winning formula.

Excerpt from AP:

Wolf, R-Va., argues that cooperation in space would give technological assistance to a country that steals U.S. industrial secrets and launches cyberattacks against the United States.

He says Obama’s chief science adviser, John Holdren, violated a clause tucked into budget legislation passed this year that bars the White House Office of Science and Technology Policy and NASA from technological cooperation with China. He says Holdren did so by meeting twice with China’s science minister in Washington during May…

… Holdren told a Congressional hearing chaired by Wolf days before his May meetings with Chinese Science Minister Wan Gang that he would abide by the prohibition on such cooperation with China, but then spelled out a rather large loophole: that it did not apply in instances where it affected the president’s ability to conduct foreign policy…

Space cooperation between the two world powers like the U.S. and the Soviet Union pursued in the Cold War still seems a long way off…

…China sent an astronaut into space in 2003, and plans to send the first building block of a space station into orbit this year, but it still has comparatively limited experience. Another constraint on cooperation is that its manned space program is dominated by its military, whose other capabilities — most clearly demonstrated by a 2007 test that destroyed an orbiting satellite — have alarmed American officials.

But one benefit of basic forms of cooperation, such as sharing data and basic design criteria, could be to learn a little more about China’s opaque space program. Since 1999, the U.S. effectively banned use of its space technology by China. That also has a commercial downside for American producers in an increasingly globalized marketplace.


Excerpt from Reuters:

For China, the partnerships could represent a back-door way into the U.S, market that bypasses Washington, as well as a way to gain allies in any future trade disputes between the two countries.

For U.S. states, the economic opportunity carries hazards, including the risk that job gains could be temporary and that intellectual property could be lost.

“I think some states look at some strategic industries and ask the question: So, the Chinese are going to put some money in here, but are they going to take away our industry and bring it back home? Are they going to steal our technology and put our companies out of business?” said Paul Markowski of Global Strategies-Analysis Group/MES Advisers…

Governors said there were some exciting opportunities.

“It’s huge,” Wisconsin Governor Scott Walker, a Republican, said of the possible impact of Chinese investments in agriculture and related technology.

Iowa Governor Terry Branstad said his state is looking to increase exports of meat, corn and soybeans, while Iowa manufacturing and financial firms were hoping to do more business with China.

“We see some real opportunity there and we’re also interested in potential reverse investment of Chinese companies investing in Iowa,” said Branstad, who will travel to China this fall.

But there are obstacles.

“The hostility from Washington abounds because the Chinese have attempted both front-end and back-end to steal technology. That is the bottom line,” Markowski said.



About James McGregor
James McGregor is an American author, journalist and businessman who has lived in China for more than 25 years. Currently, he is chairman of APCO Worldwide, Greater China. A professional speaker and commentator who specializes in China’s business, politics and society, he regularly appears in the media to discuss China-related topics. McGregor is the author of the books "No Ancient Wisdom, No Followers: The Challenges of Chinese Authoritarian Capitalism" (2012) and "One Billion Customers: Lessons from the Front Lines of Doing Business in China" (2005). He also wrote the 2010 report "China’s Drive for ‘Indigenous Innovation’ – A Web of Industrial Policies." From 1987 to 1990 McGregor served as The Wall Street Journal’s bureau chief in Taiwan, and from 1990 to 1994 as the paper’s bureau chief in Mainland China. From 1994 to 2000, he was chief executive of Dow Jones & Company in China. After leaving Dow Jones, he was China managing partner for GIV Venture Partners, a $140 million venture capital fund specializing in the Chinese Internet and technology outsourcing. In 1996, McGregor was elected as chairman of the American Chamber of Commerce in China. He also served for a decade as a governor of that organization. He is a member of the Atlantic Council, Council on Foreign Relations, National Committee on US-China Relations and International Council of the Asia Society. He serves on a variety of China-related advisory boards.

2 Responses to Frank Cries Wolf as China Provides “A Ticket Out of the Recession”

  1. roy says:

    Seems like China is already winning by creating contradictions: American business leaders are aligned with China favoring trade policies which allow them to increase their profits and personal bonuses through offshoring, while American labor & middle class sees its jobs vanishing. Once China has captured enough of our technology, markets, & employment for themselves they aren’t going to care about contradictions in America. They are happy to bleed us dry and will be delighted when we are eviscerated.

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