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The most informative comment I’ve heard about Chinese business is that one needs to take the western conception of state / military / corporation and chuck them

The most informative comment I’ve heard about Chinese business is that one needs to take the western conception of state / military / corporation and chuck them out the window. In essence these are all descriptive functions of the same entity in China, and any apparent separation is just that—apparent. I know some may reply that, for example, Lockheed effectively lives at this nexus also. It’s a good argument, and probably similar though not exactly the same in arrangement. To me, the most interesting difference is that China has this kind of relationship with its major players regardless of industry, not just their defense contractors. So it doesn’t matter if you make cell phones, video games, toilet seats, ship hulls, or concrete—the whole concept of an enterprise not being interdependent on the state is a non-starter there. Whether it’s happening via backchannels to party officials or through ownership schemes like this one, the concept of private and public sector is so muddy there as to be almost meaningless. To me, this tells us a lot more about IP infringement and espionage than what we usually read, because where the west likes to conceive of corporations as competing in a market in China it’s more useful to describe corporations as tools of statecraft. Huawei wants us to think of them as competing with Apple because they both make cellphones. In reality, it’s as though the CIA or Mossad was competing with Apple—the aims of each may in fact be orthogonal to each other because market performance is not the real driver of the company’s decisions.

AmericanChopper 7y ago
I think this is a perfectly reasonable analogy. It’s not controversial to say that defence contractors in the US operate at the behest of the US government. The government uses national security to control their IP and dictate who they’re allowed to do business with, ensuring that their commercial activity is aligned with policy objectives. The Chinese government effectively has that level of control over their entire economy.
- neltnerb 7y ago
  Right, except that you don't go to prison if you're running Northrop Grumman and refuse to bid on a project. But I agree that enough cash effectively guarantees they will.
kyllo 7y ago
Marxists have a term for what you're describing: "state capitalism."
- basq 7y ago
  I've seen the term 'market socialism' used when describing China's system.
  - tokai 7y ago
    Market socialism, as fare as I'm aware, is defined by social ownership of the means of production. State capitalism would definitely be more appropriate to describe China. Especially in the marxist sense of the term. edit: I spoke with a Chinese student once, whom preferred the term dictatorial capitalism.
    - thedudeabides5 7y ago
      Xi calls it “socialism with Chinese characteristics” https://en.m.wikipedia.org/wiki/Socialism_with_Chinese_characteristics https://en.m.wikipedia.org/wiki/Socialism_with_Chinese_chara...
    - jlawson 7y ago
      >social ownership of the means of production Slightly off topic but can you clarify what 'social ownership' means, exactly? I've been trying to figure this out for a few weeks now. I just ask since you seem to know. Wikipedia says, "The two major forms of social ownership are society-wide public ownership and cooperative ownership." What's the practical difference between 'society-wide public ownership' and government ownership? The government is supposed to represent the people. What's the practical difference between 'cooperative ownership' and corporate ownership? A corporation is just a group of shareholders, often including millions of individuals and employees of the company. e.g. In America the government owns parkland, and people can use it. Is that 'social ownership' of the parkland? Or 'government ownership'? What's the difference? e.g. In the West, many corporations are owned by millions of shareholders. Sometimes the majority of ownership is ultimately from small shareholders, largely through pension funds. Is that 'social ownership' or 'corporate ownership'? What's the difference? What are some existing, real, sustained examples of 'social ownership' in real history? I feel like this term is either super general and not particularly meaningful, or it's one of those cases where the definition changes according to the argumentative needs of the moment, or it's just a euphimism for government control without a practical difference.
abledon 7y ago
would you classify Tencent on the same level as Huawei? And if so, does that mean most American youth are plugged into League Of Legends & Fortnite, a Chinese Surveillance system ? lol
- edoceo 7y ago
  And recently Reddit too, right?
  - avocado4 7y ago
    TikTok & Snapchat as well. Youths are more prone to getting radicalized too, which would be useful for the Party's geopolitical goals.
    - adventured 7y ago
      No. What's being floated in this thread is an absurd premise. By that premise, Norway controls Microsoft and Apple because they own part of the companies via their sovereign fund. Microsoft by itself of course is worth as much as Norway's entire fund. Snapchat is a publicly traded company, of which institutional money representing primarily US investors controls the dominant position in the company. Reddit is minority owned by Tencent, they hold a small share of the company. If you own 5% of a company the size of Reddit, you have close to zero control over the company. Tencent also does not own a controlling interest in Epic. Tim Sweeney all by himself is estimated to control more of Epic than Tencent does.
      - coldtea 7y ago
        Don't let arguments stand in the way of paranoia!
      - throwaway8879 7y ago
        >By that premise, Norway controls Microsoft and Apple because they own part of the companies Even so, Norway's political/ideological/moral objectives are in line with the west's. There is a difference between the Norwegians having some influence in something, as opposed to the Chinese.
kccqzy 7y ago
Bigger corporations are indeed highly influenced if not outright owned by the state. But smaller businesses like these mom-and-pop shops and young startups certainly are not.
- WhitneyLand 7y ago
  Thank you for posting. The OP was informative but a few more points of nuance like this are needed for good surface level understanding. For me it's useful to remember also that people can see the issues themselves differently there for cultural reasons. As a side note, ironically it seems like going for short trips there can sometimes illuminate less than reading on the subject or just knowing someone here with a foot in each culture. I don't hear much geopolitical talk during business meetings nor while buying things at the market. I recommend buying a friend in the US (or wherever you live) lunch a few times. It can be a highly time-efficient way to digest the big picture and also subtleties.
ma2rten 7y ago
Market performance is not the real driver of the company’s decisions. Every company has different stakeholders, who have different interests. The German state of lower saxony has a 20% stake in VW. That doesn't mean that VW does not compete with other car makers.
- roboys 7y ago
  Also it seems disingenuous to act like boards of US Fortune 500 companies aren't filled with ex-government/intelligence/military staff that play a role in aligning the company's interest with the government's interests. It's soft power that results in similar outcomes. Look at Theranos's board, it's not as unique as people think when compared to other majors...
  - deleted 7y ago
    [deleted]
  - darawk 7y ago
    Usually power is flowing the other way there though. Those people are on those boards so that they can influence government, rather than the other way around. I'm not sure if that's better or worse, though.
    - roboys 7y ago
      The gov influences companies through economic and legal incentives (subsidies, large gov contracts, etc..). This is especially true in important industries (energy, health care, tech). Does having a large % of ex-gov/mil/intel board members increase the likelihood of a company landing these contracts? I wouldn't be surprised, if true (for many reasons).
    - iforgotpassword 7y ago
      It goes both ways. A favor, now you owe me.
rgbrenner 7y ago
Yes.. there's actually a board inside Huawei of state communist officials which Huawei refuses to divulge what decisions they are in charge of and how much control they have. They say it's a non-issue because all large chinese companies have such a board. I learned this from Huawei's answer to the House Intel Committee in 2012. That committee produced a report which began Huawei's problems operating in the US: https://stacks.stanford.edu/file/druid:rm226yb7473/Huawei-ZTE%20Investigative%20Report%20(FINAL).pdf https://stacks.stanford.edu/file/druid:rm226yb7473/Huawei-ZT...
- yorwba 7y ago
  Having an official branch of the Communist Party inside a company stems from the days when they were a workers' party and needed to keep contact with the base. Huawei being unable to explain the formal decision-making powers of those representatives is unsurprising, considering that there are almost no formal rules to the arrangement. What matters is the informal function as a go-between. If the company wants government assistance for a project, they know who to ask. If the government wants the company to do something for them, they know whom to tell about it. And yes, that applies to any company incorporated under Chinese law, even subsidiaries of Western companies (say Microsoft Research Asia, or Google China). How much power those representatives have depends on whether the company is willing to listen to them or not.
DiogenesKynikos 7y ago
The comparison to the CIA and Mossad is rather absurd. Huawei has grown because it has been able to offer similar or better networking equipment as competitors for lower prices. Recently, it has also been able to produce smartphones which are arguably superior to the iPhone and cheaper. In other words, they clearly are trying to outperform their competitors in their key markets. They're growing rapidly because they've succeeded in doing so.
- chibg10 7y ago
  This isn't really incompatible with GP's point. It's really hard to be a global telecom spy network when you're nobody wants to buy your equipment because it's overpriced and low-quality... In fact, that would give the beneficiary government a lot of incentive to advance your interests with something like a state-sponsored IP theft program and massive subsidies
  - DiogenesKynikos 7y ago
    If you make things up, anything is possible. How about this possibility, which is actually supported by real, known facts? Huawei began with simple equipment they could manufacture cheaply, made money, and have invested in R&D to move up the value chain. Recognizing that Huawei is an important Chinese tech company, the Trump administration is holding it hostage in the trade negotiations. Americans are now being bombarded with piece after piece of vague innuendo about the company, insinuating (without any evidence, of course) that it's secretly a state-owned spying operation. That's another possibility.
    - chibg10 7y ago
      I honestly haven't seen conclusive evidence that Huawei has spied or been asked to in the past. Alas, imo, that's irrelevant because I'm aware that Huawei would not be able to turn down a spying request and continue to exist as a company. That Huawei has engaged company-spondored IP theft has been widely reported, as well as the fact that the Chinese government widely disseminates the IP it obtains via forced technology transfers that are required to do business in the country.
microcolonel 7y ago
In short, China is an advanced fascist state, with total integration of industrial success into the state (but privatized industrial failure).
xster 7y ago
> most informative comment I’ve heard about Chinese business So it seems like the whole comment is a repackaging and a commentary on someone else's opinion. I think it's an interesting thought exercise but it's also hard to derive what should one take away from this after reading.
throwaway94857 7y ago
I'd like to elaborate on the unity of the different elements of Chinese society you mention. Chinese institutions are all unified under a single structure, and that structure is the Communist (in name only) Party. Party members are embedded in every single important facet of society. Education, the military, the government, the private sector, it's all linked and unified by the party. Now, we can compare this structure to the mammalian neocortex. The neocortex incorporates inputs from lower layers of the brain to form high level abstractions and integrations. The West is basically functioning without a neocortex. Our institutions are not unified. There is no integrating layer above the corporate sector and government. In fact they are often at odds. What I am saying is that China represents an existential threat to the entire project of the West. If China is able to outcompete us with their more advanced (?) organization, we will be forced to copy them or become irrelevant. This would mean doing away with free democracies and instituting a ruling party - a neocortex - to oversee the entire society. I am not sure this would even be possible in diverse societies like those of the Western democracies. There is too much infighting and tribalism, at least right now. That does not bode well for us. But it's possible that cultural unity within our democracies may be sufficient to align the different parts of society to allow us to compete with China, without the formal superstructure of an all powerful Party.
- joejerryronnie 7y ago
  You're assuming the centralized "neocortex" model (i.e. communism/socialism) is more effective than the distributed model (i.e. marketplace/capitalism/crowd sourced). Who knows, at this point, but the next decade will be very interesting to watch.
  - throwaway94857 7y ago
    China is not Communist or Socialist though. They are basically fascist, or if you want to be strict about the definition of fascism they represent an entirely new form altogether.
    - joejerryronnie 7y ago
jdietrich 7y ago
It's important to note that this deep integration of corporations and the state is by no means unique to China - to a great extent, Deng Xiaoping's modernization in the 1980s emulated the chaebol of South Korea and the Keiretsu of Japan. Korean and Japanese business is based on tacit relationships between extremely large vertically-integrated corporations and the state while China has more overt elements of a command economy, but the effect is essentially the same. The least cynical reading is that it's an expression of neo-Confucian values; those in a position of political, military or economic power have a broad belief in the importance of cooperation and "social harmony". If the NSA want to access all of Google's data, they hide an implant in a data center, put optical splitters on key fiber links or bribe a third party to provide a backdoor in a vital software dependency (PRISM and BULLRUN). If the PLA want Tencent's data or the NIS want Samsung's data they just ask for it, on the understanding that a) they're not really in a position to say no and b) cooperation with the state is a mutually beneficial quid-pro-quo.
- paganel 7y ago
  I feel that if the NSA were to ask for much of Google’s data right at this moment there isn’t anything Google could do, and I’m not even that sure that they would want to do anything. The same goes for FB. If they decide not to comply then both of these companies might risk being broken up or worse, so why risk it? The bottom line is that if you decide doing anything against the current US powers that be (like harassing a Senator from outside his house late at night) do not use any of the services coming from companies directly liable to the US authorities. The same goes if you’re in China or Russia, try not to use the services of companies directly liable to those countries’ governments if you want to vigorously protest the current political status-quo.
  - edejong 7y ago
    And we shouldn’t believe for a second this isn’t already happening with multiple three letter agencies.
    - mattrp 7y ago
nabla9 7y ago
To some extent has been true for every big country that has successfully become a first world country after the WWII devastation. After the WWII Japan, South Korea, and Germany all had trade policies where the government coordinated closely with big export sector companies. Japan was famous for copying everything. Japanese businessmen toured western factories as potential customers with cameras, went home and build the same factory. The trick to success is to expose companies to free competition in the global markets while protecting and supporting them in every other way. State aid in financing loan guarantees was the norm. Protecting home markets from competition was the norm.
- Engineering-MD 7y ago
  Do you have any further information on how this was done in Germany? It’s nit something I’ve heard much about before, and is contrary to what I imagined.
  - yorwba 7y ago
    One example is that Volkswagen used to be state-owned until 1960. Afterwards, the federal state of Lower Saxony still kept a stake of slightly more than 20%, which combined with the requirement for 80% shareholder agreement effectively granted them a veto. That only changed in 2013 after it was found to violate EU regulations. https://en.wikipedia.org/wiki/Volkswagen_Act https://en.wikipedia.org/wiki/Volkswagen_Act
  - jasomill 7y ago
    Carl Zeiss AG and Schott AG are owned by a foundation managed by the science ministries of the two German states where Zeiss was founded and where it is currently headquartered, a structure which has its origins in the Zeiss firm's original incorporation in 1889.
  - deleted 7y ago
    [deleted]
- bestham 7y ago
  Well the Japanese might have copied the product, but they surly built a better more efficient factory than the one that served as inspiration.
mytailorisrich 7y ago
That is not true at all. There are state-owned companies, and there are private companies. Competition is intense. The links of private companies with party officials is not caused by some cultural difference that makes boundaries fuzzy but by plain old unchecked power and corruption: The Party can make or break you so you need to stay on "friendly" terms with them. This tends to happen everywhere there is no separation of powers and rule of law. In China it is simply perhaps better organised (or perhaps not). A corollary is that being a Party member is useful for one's career. The Party also recruits as a way of keeping control.
emtoor 7y ago
Thanks that was very insightful from a western pov
tyingq 7y ago
" know some may reply that, for example, Lockheed effectively lives at this nexus also." Probably similar for Northrup Grumman, Raytheon, Bell Helicopter, Dyncorp, Navistar, and others as well.
- _delirium 7y ago
  Arguably Palantir as well. And in Europe, BAE and Airbus.
xxxpupugo 7y ago
The concept of state and corporation should be separate to protect freedom is really a US phenomenon or ideal. In East Asia, the Japanese model, that later adopted by both South Korea and China, relies on the exact opposite. The government directly involves in guiding and shaping the economy. And they are smart in doing so, with the corporations being their vehicles to implement its policy and they are ones to picking the winners. So it is not like Planned Economy like the Soviets did, instead they are trying to embrace and take advantage of the market to better advance its objectives. Instead, here in US, corporations are more sensitive and faster than the government to propose new economic initiatives, while government just sits aside as the shepherd to prevent disasters. If you ever being able to read material from CJK countries, the government in general has a much bigger power and responsibility, and when problem happens, the societies' instinct is to push the government to act on it. But Huawei might be still a special case among of these. It is a weird company though, which doesn't need to respond to its share holders and yet participating actively in open and competitive markets.
- zaro 7y ago
  > The concept of state and corporation should be separate to protect freedom is really a US phenomenon or ideal. Not even in US this phenomenon is very strong. US protects its corporations with political and military means all the time, so I am not sure what separation you are talking about. In words there mightbbe some pretense for separation, but actions show otherwise.
- LudwigNagasena 7y ago
  Similar concepts existed in Europe in various forms such as dirigisme, Fascism, Keynesian economics, the German post-war model.
- ahartmetz 7y ago
  "To protect freedom"? That is the US catch-all argument and doesn't really say much. Whose freedom, from / for what, and what about other factors? To me from Western Europe the state and corporations are... comparable to families and sports clubs. Nobody would want to merge them for tons of reasons including personal freedom (here: separation of public and private spheres), effectiveness, responsiveness, avoidance of conflicts of interest etc. But coordination makes sense. Something I have noticed about large Asian companies is that there is much less in-fighting between parts of the organization, which can make up for other disadvantages they may have. In large Western corporations it seems to be everyone against everyone in mid-level management. At the lowest level it mostly looks like inexplicable inefficiencies and stupidities.
brainpool 7y ago
Spot on. It is really important to understand that China does not have the same value system as the enlightened world. I am not saying that the sino mindset is inferior in any way, but it is important to realize that it is very different and that many premises we take for granted are null and void when it comes to China. The Chinese state of today is far worse than the most dystopian views the west had of Soviet during the Cold War. Then the western block tried to paint as a dark image as possible of the alleged enemy. Today it seems most try to paint as an rosy picture as possible of the Chinese state when in reality it is something right out Orwell’s nightmares. Note. I have absolutely nothing against Chinese as individuals and people. It is the state that is scary, and to be honest; intimidating.
- ahartmetz 7y ago
  Have you visited China? It doesn't feel as dystopian as you may think. I don't mean to say that everything is fine, but on the other hand regular people don't seem to live in fear of their friends or children spying on them for the secret police like they were in the GDR.
  - IllogicalLogic 7y ago
    Do they live in fear of getting shot at grocery stores? I hear the crime rate is dramatically lower than ours.
  - brainpool 7y ago
    Yes, I have visited China on multiple occasions during the last few years. It has been an utterly chilling experience. I know xenophobia when I experience it, and South Africa during Apartheid was actually better.
spion 7y ago
So in China, the government owns the corporations, while in the USA, the corporations own the government.
- brainpool 7y ago
  Not quite. In the USA the corporations own the people. In China the state owns the people (there is not much government to speak of).
amelius 7y ago
So I suppose a "level playing field" is never going to happen. How are US companies supposed to compete against such state backed corporations?
- Barrin92 7y ago
  well two different answers depending on who you ask. Someone who leans towards free market ideology will say that China's state assisted capitalism is sclerotic and that picking winners and losers is ultimately bad for China and will turn out to be a drag, or alternatively by doing the same thing, which already seems to happen with the realignment on trade on both sides of the American political spectrum with Trump on the one hand and Warren's 'economic patriotism' on the other. The next question would then be whether anything like this can be pulled off in the US at all, which entirely lacks the sort of corporate social structures you find in Asia but also say Scandinavia or Germany.
thefounder 7y ago
Truth is that we know that Apple, Microsoft, CISCO and pretty much all the US corporations cooperate with the US intelligence services. Of course Huawei competes with Apple(among others) and CIA/NSA compete with their chinese counter-parts. Now, some of us are not very into communism so we rather prefer the US surveillance to the chinese one but make no mistake that the US corporations can't make their own choices when it comes to National Security. They have to obey the law and really they don't mind a powerful US government, why would they?

AmericanChopper 7y ago

I think this is a perfectly reasonable analogy. It’s not controversial to say that defence contractors in the US operate at the behest of the US government. The government uses national security to control their IP and dictate who they’re allowed to do business with, ensuring that their commercial activity is aligned with policy objectives. The Chinese government effectively has that level of control over their entire economy.

neltnerb 7y ago
Right, except that you don't go to prison if you're running Northrop Grumman and refuse to bid on a project. But I agree that enough cash effectively guarantees they will.

kyllo 7y ago

Marxists have a term for what you're describing: "state capitalism."

basq 7y ago
I've seen the term 'market socialism' used when describing China's system.
- tokai 7y ago
  Market socialism, as fare as I'm aware, is defined by social ownership of the means of production. State capitalism would definitely be more appropriate to describe China. Especially in the marxist sense of the term. edit: I spoke with a Chinese student once, whom preferred the term dictatorial capitalism.
  - thedudeabides5 7y ago
    Xi calls it “socialism with Chinese characteristics” https://en.m.wikipedia.org/wiki/Socialism_with_Chinese_characteristics https://en.m.wikipedia.org/wiki/Socialism_with_Chinese_chara...
  - jlawson 7y ago
    >social ownership of the means of production Slightly off topic but can you clarify what 'social ownership' means, exactly? I've been trying to figure this out for a few weeks now. I just ask since you seem to know. Wikipedia says, "The two major forms of social ownership are society-wide public ownership and cooperative ownership." What's the practical difference between 'society-wide public ownership' and government ownership? The government is supposed to represent the people. What's the practical difference between 'cooperative ownership' and corporate ownership? A corporation is just a group of shareholders, often including millions of individuals and employees of the company. e.g. In America the government owns parkland, and people can use it. Is that 'social ownership' of the parkland? Or 'government ownership'? What's the difference? e.g. In the West, many corporations are owned by millions of shareholders. Sometimes the majority of ownership is ultimately from small shareholders, largely through pension funds. Is that 'social ownership' or 'corporate ownership'? What's the difference? What are some existing, real, sustained examples of 'social ownership' in real history? I feel like this term is either super general and not particularly meaningful, or it's one of those cases where the definition changes according to the argumentative needs of the moment, or it's just a euphimism for government control without a practical difference.

abledon 7y ago

would you classify Tencent on the same level as Huawei? And if so, does that mean most American youth are plugged into League Of Legends & Fortnite, a Chinese Surveillance system ? lol

edoceo 7y ago
And recently Reddit too, right?
- avocado4 7y ago
  TikTok & Snapchat as well. Youths are more prone to getting radicalized too, which would be useful for the Party's geopolitical goals.
  - adventured 7y ago
    No. What's being floated in this thread is an absurd premise. By that premise, Norway controls Microsoft and Apple because they own part of the companies via their sovereign fund. Microsoft by itself of course is worth as much as Norway's entire fund. Snapchat is a publicly traded company, of which institutional money representing primarily US investors controls the dominant position in the company. Reddit is minority owned by Tencent, they hold a small share of the company. If you own 5% of a company the size of Reddit, you have close to zero control over the company. Tencent also does not own a controlling interest in Epic. Tim Sweeney all by himself is estimated to control more of Epic than Tencent does.
    - coldtea 7y ago
      Don't let arguments stand in the way of paranoia!
    - throwaway8879 7y ago
      >By that premise, Norway controls Microsoft and Apple because they own part of the companies Even so, Norway's political/ideological/moral objectives are in line with the west's. There is a difference between the Norwegians having some influence in something, as opposed to the Chinese.

kccqzy 7y ago

Bigger corporations are indeed highly influenced if not outright owned by the state. But smaller businesses like these mom-and-pop shops and young startups certainly are not.

WhitneyLand 7y ago
Thank you for posting. The OP was informative but a few more points of nuance like this are needed for good surface level understanding. For me it's useful to remember also that people can see the issues themselves differently there for cultural reasons. As a side note, ironically it seems like going for short trips there can sometimes illuminate less than reading on the subject or just knowing someone here with a foot in each culture. I don't hear much geopolitical talk during business meetings nor while buying things at the market. I recommend buying a friend in the US (or wherever you live) lunch a few times. It can be a highly time-efficient way to digest the big picture and also subtleties.

ma2rten 7y ago

Market performance is not the real driver of the company’s decisions. Every company has different stakeholders, who have different interests. The German state of lower saxony has a 20% stake in VW. That doesn't mean that VW does not compete with other car makers.

roboys 7y ago
Also it seems disingenuous to act like boards of US Fortune 500 companies aren't filled with ex-government/intelligence/military staff that play a role in aligning the company's interest with the government's interests. It's soft power that results in similar outcomes. Look at Theranos's board, it's not as unique as people think when compared to other majors...
- deleted 7y ago
  [deleted]
- darawk 7y ago
  Usually power is flowing the other way there though. Those people are on those boards so that they can influence government, rather than the other way around. I'm not sure if that's better or worse, though.
  - roboys 7y ago
    The gov influences companies through economic and legal incentives (subsidies, large gov contracts, etc..). This is especially true in important industries (energy, health care, tech). Does having a large % of ex-gov/mil/intel board members increase the likelihood of a company landing these contracts? I wouldn't be surprised, if true (for many reasons).
  - iforgotpassword 7y ago
    It goes both ways. A favor, now you owe me.

rgbrenner 7y ago

Yes.. there's actually a board inside Huawei of state communist officials which Huawei refuses to divulge what decisions they are in charge of and how much control they have. They say it's a non-issue because all large chinese companies have such a board. I learned this from Huawei's answer to the House Intel Committee in 2012. That committee produced a report which began Huawei's problems operating in the US: https://stacks.stanford.edu/file/druid:rm226yb7473/Huawei-ZTE%20Investigative%20Report%20(FINAL).pdf https://stacks.stanford.edu/file/druid:rm226yb7473/Huawei-ZT...

yorwba 7y ago
Having an official branch of the Communist Party inside a company stems from the days when they were a workers' party and needed to keep contact with the base. Huawei being unable to explain the formal decision-making powers of those representatives is unsurprising, considering that there are almost no formal rules to the arrangement. What matters is the informal function as a go-between. If the company wants government assistance for a project, they know who to ask. If the government wants the company to do something for them, they know whom to tell about it. And yes, that applies to any company incorporated under Chinese law, even subsidiaries of Western companies (say Microsoft Research Asia, or Google China). How much power those representatives have depends on whether the company is willing to listen to them or not.

DiogenesKynikos 7y ago

The comparison to the CIA and Mossad is rather absurd. Huawei has grown because it has been able to offer similar or better networking equipment as competitors for lower prices. Recently, it has also been able to produce smartphones which are arguably superior to the iPhone and cheaper. In other words, they clearly are trying to outperform their competitors in their key markets. They're growing rapidly because they've succeeded in doing so.

chibg10 7y ago
This isn't really incompatible with GP's point. It's really hard to be a global telecom spy network when you're nobody wants to buy your equipment because it's overpriced and low-quality... In fact, that would give the beneficiary government a lot of incentive to advance your interests with something like a state-sponsored IP theft program and massive subsidies
- DiogenesKynikos 7y ago
  If you make things up, anything is possible. How about this possibility, which is actually supported by real, known facts? Huawei began with simple equipment they could manufacture cheaply, made money, and have invested in R&D to move up the value chain. Recognizing that Huawei is an important Chinese tech company, the Trump administration is holding it hostage in the trade negotiations. Americans are now being bombarded with piece after piece of vague innuendo about the company, insinuating (without any evidence, of course) that it's secretly a state-owned spying operation. That's another possibility.
  - chibg10 7y ago
    I honestly haven't seen conclusive evidence that Huawei has spied or been asked to in the past. Alas, imo, that's irrelevant because I'm aware that Huawei would not be able to turn down a spying request and continue to exist as a company. That Huawei has engaged company-spondored IP theft has been widely reported, as well as the fact that the Chinese government widely disseminates the IP it obtains via forced technology transfers that are required to do business in the country.

microcolonel 7y ago

In short, China is an advanced fascist state, with total integration of industrial success into the state (but privatized industrial failure).

xster 7y ago

> most informative comment I’ve heard about Chinese business So it seems like the whole comment is a repackaging and a commentary on someone else's opinion. I think it's an interesting thought exercise but it's also hard to derive what should one take away from this after reading.

throwaway94857 7y ago

I'd like to elaborate on the unity of the different elements of Chinese society you mention. Chinese institutions are all unified under a single structure, and that structure is the Communist (in name only) Party. Party members are embedded in every single important facet of society. Education, the military, the government, the private sector, it's all linked and unified by the party. Now, we can compare this structure to the mammalian neocortex. The neocortex incorporates inputs from lower layers of the brain to form high level abstractions and integrations. The West is basically functioning without a neocortex. Our institutions are not unified. There is no integrating layer above the corporate sector and government. In fact they are often at odds. What I am saying is that China represents an existential threat to the entire project of the West. If China is able to outcompete us with their more advanced (?) organization, we will be forced to copy them or become irrelevant. This would mean doing away with free democracies and instituting a ruling party - a neocortex - to oversee the entire society. I am not sure this would even be possible in diverse societies like those of the Western democracies. There is too much infighting and tribalism, at least right now. That does not bode well for us. But it's possible that cultural unity within our democracies may be sufficient to align the different parts of society to allow us to compete with China, without the formal superstructure of an all powerful Party.

joejerryronnie 7y ago
You're assuming the centralized "neocortex" model (i.e. communism/socialism) is more effective than the distributed model (i.e. marketplace/capitalism/crowd sourced). Who knows, at this point, but the next decade will be very interesting to watch.
- throwaway94857 7y ago
  China is not Communist or Socialist though. They are basically fascist, or if you want to be strict about the definition of fascism they represent an entirely new form altogether.
  - joejerryronnie 7y ago

jdietrich 7y ago

It's important to note that this deep integration of corporations and the state is by no means unique to China - to a great extent, Deng Xiaoping's modernization in the 1980s emulated the chaebol of South Korea and the Keiretsu of Japan. Korean and Japanese business is based on tacit relationships between extremely large vertically-integrated corporations and the state while China has more overt elements of a command economy, but the effect is essentially the same. The least cynical reading is that it's an expression of neo-Confucian values; those in a position of political, military or economic power have a broad belief in the importance of cooperation and "social harmony". If the NSA want to access all of Google's data, they hide an implant in a data center, put optical splitters on key fiber links or bribe a third party to provide a backdoor in a vital software dependency (PRISM and BULLRUN). If the PLA want Tencent's data or the NIS want Samsung's data they just ask for it, on the understanding that a) they're not really in a position to say no and b) cooperation with the state is a mutually beneficial quid-pro-quo.

paganel 7y ago
I feel that if the NSA were to ask for much of Google’s data right at this moment there isn’t anything Google could do, and I’m not even that sure that they would want to do anything. The same goes for FB. If they decide not to comply then both of these companies might risk being broken up or worse, so why risk it? The bottom line is that if you decide doing anything against the current US powers that be (like harassing a Senator from outside his house late at night) do not use any of the services coming from companies directly liable to the US authorities. The same goes if you’re in China or Russia, try not to use the services of companies directly liable to those countries’ governments if you want to vigorously protest the current political status-quo.
- edejong 7y ago
  And we shouldn’t believe for a second this isn’t already happening with multiple three letter agencies.
  - mattrp 7y ago

nabla9 7y ago

To some extent has been true for every big country that has successfully become a first world country after the WWII devastation. After the WWII Japan, South Korea, and Germany all had trade policies where the government coordinated closely with big export sector companies. Japan was famous for copying everything. Japanese businessmen toured western factories as potential customers with cameras, went home and build the same factory. The trick to success is to expose companies to free competition in the global markets while protecting and supporting them in every other way. State aid in financing loan guarantees was the norm. Protecting home markets from competition was the norm.

Engineering-MD 7y ago
Do you have any further information on how this was done in Germany? It’s nit something I’ve heard much about before, and is contrary to what I imagined.
- yorwba 7y ago
  One example is that Volkswagen used to be state-owned until 1960. Afterwards, the federal state of Lower Saxony still kept a stake of slightly more than 20%, which combined with the requirement for 80% shareholder agreement effectively granted them a veto. That only changed in 2013 after it was found to violate EU regulations. https://en.wikipedia.org/wiki/Volkswagen_Act https://en.wikipedia.org/wiki/Volkswagen_Act
- jasomill 7y ago
  Carl Zeiss AG and Schott AG are owned by a foundation managed by the science ministries of the two German states where Zeiss was founded and where it is currently headquartered, a structure which has its origins in the Zeiss firm's original incorporation in 1889.
- deleted 7y ago
  [deleted]
bestham 7y ago
Well the Japanese might have copied the product, but they surly built a better more efficient factory than the one that served as inspiration.

mytailorisrich 7y ago

That is not true at all. There are state-owned companies, and there are private companies. Competition is intense. The links of private companies with party officials is not caused by some cultural difference that makes boundaries fuzzy but by plain old unchecked power and corruption: The Party can make or break you so you need to stay on "friendly" terms with them. This tends to happen everywhere there is no separation of powers and rule of law. In China it is simply perhaps better organised (or perhaps not). A corollary is that being a Party member is useful for one's career. The Party also recruits as a way of keeping control.

emtoor 7y ago

Thanks that was very insightful from a western pov

tyingq 7y ago

" know some may reply that, for example, Lockheed effectively lives at this nexus also." Probably similar for Northrup Grumman, Raytheon, Bell Helicopter, Dyncorp, Navistar, and others as well.

_delirium 7y ago
Arguably Palantir as well. And in Europe, BAE and Airbus.

xxxpupugo 7y ago

The concept of state and corporation should be separate to protect freedom is really a US phenomenon or ideal. In East Asia, the Japanese model, that later adopted by both South Korea and China, relies on the exact opposite. The government directly involves in guiding and shaping the economy. And they are smart in doing so, with the corporations being their vehicles to implement its policy and they are ones to picking the winners. So it is not like Planned Economy like the Soviets did, instead they are trying to embrace and take advantage of the market to better advance its objectives. Instead, here in US, corporations are more sensitive and faster than the government to propose new economic initiatives, while government just sits aside as the shepherd to prevent disasters. If you ever being able to read material from CJK countries, the government in general has a much bigger power and responsibility, and when problem happens, the societies' instinct is to push the government to act on it. But Huawei might be still a special case among of these. It is a weird company though, which doesn't need to respond to its share holders and yet participating actively in open and competitive markets.

zaro 7y ago
> The concept of state and corporation should be separate to protect freedom is really a US phenomenon or ideal. Not even in US this phenomenon is very strong. US protects its corporations with political and military means all the time, so I am not sure what separation you are talking about. In words there mightbbe some pretense for separation, but actions show otherwise.
LudwigNagasena 7y ago
Similar concepts existed in Europe in various forms such as dirigisme, Fascism, Keynesian economics, the German post-war model.
ahartmetz 7y ago
"To protect freedom"? That is the US catch-all argument and doesn't really say much. Whose freedom, from / for what, and what about other factors? To me from Western Europe the state and corporations are... comparable to families and sports clubs. Nobody would want to merge them for tons of reasons including personal freedom (here: separation of public and private spheres), effectiveness, responsiveness, avoidance of conflicts of interest etc. But coordination makes sense. Something I have noticed about large Asian companies is that there is much less in-fighting between parts of the organization, which can make up for other disadvantages they may have. In large Western corporations it seems to be everyone against everyone in mid-level management. At the lowest level it mostly looks like inexplicable inefficiencies and stupidities.

brainpool 7y ago

Spot on. It is really important to understand that China does not have the same value system as the enlightened world. I am not saying that the sino mindset is inferior in any way, but it is important to realize that it is very different and that many premises we take for granted are null and void when it comes to China. The Chinese state of today is far worse than the most dystopian views the west had of Soviet during the Cold War. Then the western block tried to paint as a dark image as possible of the alleged enemy. Today it seems most try to paint as an rosy picture as possible of the Chinese state when in reality it is something right out Orwell’s nightmares. Note. I have absolutely nothing against Chinese as individuals and people. It is the state that is scary, and to be honest; intimidating.

ahartmetz 7y ago
Have you visited China? It doesn't feel as dystopian as you may think. I don't mean to say that everything is fine, but on the other hand regular people don't seem to live in fear of their friends or children spying on them for the secret police like they were in the GDR.
- IllogicalLogic 7y ago
  Do they live in fear of getting shot at grocery stores? I hear the crime rate is dramatically lower than ours.
- brainpool 7y ago
  Yes, I have visited China on multiple occasions during the last few years. It has been an utterly chilling experience. I know xenophobia when I experience it, and South Africa during Apartheid was actually better.

spion 7y ago

So in China, the government owns the corporations, while in the USA, the corporations own the government.

brainpool 7y ago
Not quite. In the USA the corporations own the people. In China the state owns the people (there is not much government to speak of).

amelius 7y ago

So I suppose a "level playing field" is never going to happen. How are US companies supposed to compete against such state backed corporations?

Barrin92 7y ago
well two different answers depending on who you ask. Someone who leans towards free market ideology will say that China's state assisted capitalism is sclerotic and that picking winners and losers is ultimately bad for China and will turn out to be a drag, or alternatively by doing the same thing, which already seems to happen with the realignment on trade on both sides of the American political spectrum with Trump on the one hand and Warren's 'economic patriotism' on the other. The next question would then be whether anything like this can be pulled off in the US at all, which entirely lacks the sort of corporate social structures you find in Asia but also say Scandinavia or Germany.

thefounder 7y ago

Truth is that we know that Apple, Microsoft, CISCO and pretty much all the US corporations cooperate with the US intelligence services. Of course Huawei competes with Apple(among others) and CIA/NSA compete with their chinese counter-parts. Now, some of us are not very into communism so we rather prefer the US surveillance to the chinese one but make no mistake that the US corporations can't make their own choices when it comes to National Security. They have to obey the law and really they don't mind a powerful US government, why would they?