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The article gives several possible ways to improve the situation. However, one critical way is missing imho: China forces foreign investment to always come in t

by corty 6y ago

The article gives several possible ways to improve the situation. However, one critical way is missing imho: China forces foreign investment to always come in the form of a joint venture with a Chinese company. This practice needs to be forbidden or heavily penalized in all future trade agreements and similar international contracts.

jacquesm 6y ago
Forbidding that practice will simply mean that you won't be doing any more business in China. Which is fine with me. It's just that CEOs that see a virgin population of over a billion consumers for their widgets can't help themselves and will agree to just about anything to be able to tap that market before their competition does.
- dkdk8283 6y ago
  I support reducing trade with china. The need for cheap goods comes with a long tail price tag. It needs to be discussed more. Many Chinese workers are in severe poverty and strengthening Chinese businesses seems to only fuel inequality.
  - valuearb 6y ago
    Free trade with China has vastly improved Chinese workers living standards. Those rural jobs from the Cultural Revolution were actual poverty, and physically dangerous to boot.
    - funviolence 6y ago
      who cares? not our problem.
    - skolsuper 6y ago
      There are democracies we could have enriched instead, rather than supporting an authoritarian regime
  - Wolfenstein98k 6y ago
    I agree with you that we need to be much more careful and rigorous before trading with China, but China's market-based growth since Xiaoping's reforms are the reason hundreds of millions of Chinese citizens are out of poverty now. It is the new turn to geopolitical hegemony and debt entrapment that we should be careful of, not the incredible influx of wealth that has (wonderfully!) gone to the Chinese lower classes. Free trade, and the US leading the world charge to open up to China, is the best thing that happened to Chinese citizens. Things are different now that the state has such an iron grip, and its own intentions, however.
- close04 6y ago
  This is the shortsightedness of chasing short term profits for the investors rather than a more sustainable approach of not handing over the reins to a less than trustworthy partner. I'm genuinely curious for how many companies did this short term bump in profits outweigh the long term loss by irretrievably handing over technology, business strategies, etc. Edit for the comment below. > legally obliged to maximise shareholder value Fiduciary duties are not so explicitly described. A CEO must use care and be diligent when making decisions on behalf of the company and shareholders. Make choices in good faith with true belief that each choice is made with the best interests of the corporation in mind. Hence the best interests of the corporation must be weighed between short term and long term. A CEO could argue either way that they took the decision in good faith. This is where my curiosity came from, how many of these decisions turned out to be financially successful in hindsight?
  - secondcoming 6y ago
    Aren't CEO's kind of legally obliged to maximise shareholder value, so they have to do the deal with the devil?
    - tbihl 6y ago
      No. They are to act in the best interest of the corporation/shareholders, which with increasing clarity means not getting in bed with Chinese organizations (assuming your foresight extends beyond the end of your nose.)
      - secondcoming 6y ago
        hindsight is great!
    - jacquesm 6y ago
      Why do we see this thing over-and-over-and-over again? It isn't true. It never was. Stop repeating it.
      - 6y ago
- secondcoming 6y ago
  The agreement needs to be reciprocal. China should have to jump through the same hoops if it wants to do business in the US, UK, Australia, etc And not just for doing business either, things like home ownership too. If I cannot buy a house in China (not that I'd want to pay for a Chinese house that'll last 5 years max) because I'm not Chinese then they should not be allowed buy in my country either. Vancouver, Toronto, Sydney... all have property markets destroyed by Chinese funny money. It has to stop, but it won't due to greed. Trump is right about China (I'm not American, don't live or work in America, and have never, or could ever, vote in an American election. Take your faux outrage elsewhere)
  - michaelcampbell 6y ago
    > The agreement needs to be reciprocal. China should have to jump through the same hoops if it wants to do business in the US, UK, Australia, etc Then deal with the woke cries of xenophobia.
    - SpicyLemonZest 6y ago
      Disapproval of China is strong across the political spectrum.
  - true_religion 6y ago
    I don’t think people’s outrage about political topics is fake. If I came out I strong support the Uyghurs re-education camps, would those outraged by that be faking it simply because I have zero influence in the CCP?
  - beaunative 6y ago
    this is not a issue with Chinese buyers, this is a issue with existing land owner, who would do everything to imcrease sell price. Don't say somehow it's the buyers fault. Foreign buyers don't vote in election. it's the vote and money of property owners that allowed those purchase of land with no real purpose other than investment.
    - 6y ago
- gruez 6y ago
  >It's just that CEOs that see a virgin population of over a billion consumers for their widgets can't help themselves and will agree to just about anything to be able to tap that market before their competition does. Isn't that the point of forbidding it? You can't enter the market, but neither can your competitor, so there's no FOMO.
- goatinaboat 6y ago
  It's just that CEOs that see a virgin population of over a billion consumers for their widgets can't help themselves and will agree to just about anything to be able to tap that market before their competition does. Every CEO must realise by now that they will never get to tap that market, they will hand over their IP, they will carry the cost of establishing the product or service in the country, and then be booted out with nothing. Then a few years later a heavily capitalised Chinese company will show up and start competing with them with their own IP in their home country. It's heads China wins, tails the West loses. While our political class buries their heads in the sand, or worse, colludes in return for scoring points against domestic opponents.
murgindrag 6y ago
Or reciprocated. Chinese citizens have invested a ton in US businesses, which is sort of okay. They also bought a ton of land in the US, which led to skyrocketing housing prices, and in the long term, if it continues unabated, will lead to the US paying tribute to China in the form of rents on US land. There is no upside to this. We got cheap Chinese plastic trinkets. They got our real estate. Didn't we do this to the indigenous people here once ourselves? To be clear: I'm not opposed to being able to buy foreign land per se, but I am opposed to how one-sided this is. For the most part, US entities can't really own real estate in China (and even with Chinese entities, it's complex, but that's another story).
- Wolfenstein98k 6y ago
  Here in Australia, it's a giant issue too. There are plenty of houses which are Chinese-owned but unoccupied. They are effectively "banks" for storing cash. The scale is shocking, our "foreign ownership" figures for real estate are entirely skewed to this one country.
  - fuzxi 6y ago
    It's the same in Canada, too.
  - six2seven 6y ago
    Similarly in Spain. In large cities like Madrid or Barcelona these guys are owning properties, running both small and large businesses and very often avoiding taxes (try to ask in one of small venues for a bill and be sure then to check it). Moreover, quite some properties are Chinese-owned winding up the rental prices for local population, which were already pumped up by popularity of short-term holiday rentals such as AirBnB. These have been pretty well known problems to local population, but nobody up is doing anything about it, since it is an easy and quick money.
  - tgsovlerkhgsel 6y ago
    I believe Switzerland has a relatively elegant solution for this: You get taxed on the expected rental income if the house is empty unless you can prove that you couldn't rent it out.
chrchang523 6y ago
Flip the script: we may want this sort of thing to be happening more, not less, on a global scale. When we want to help developing countries, this is one of the most effective ways to do so. We should just be smart and restrict this to more-values-aligned, more-development-left-to-do countries like India, Rwanda, etc.
specialist 6y ago
I just learned that Tesla in China does not have a local partner. Which surprised me. Was Tesla an exception? Are there others? Regardless, I'm absolutely certain that China is exfiltrating every morsel of IP. As state policy. It's what they do. The only interesting wrinkle to me is that Elon Musk is probably okay with the knowledge transfer. A man on a mission. Whatever it takes to get humanity carbon neutral asap. -- I'm fine with developing economies doing their thing. The notion was to nurture the BRICS countries, allow them to mature, not crush them in their cribs. No one can argue today that China remains a developing economy. We're past time for realpolitik.
- generatorguy 6y ago
  Tesla is probably ok since the car is a platform auto updated over the air if China steals the design and can build the exact physical machine and even a version of the firmware it will soon be an inferior version of the product without updates. Kind of like how android phones that don’t get updated are inferior to those that do.
- yorwba 6y ago
  Wholly Foreign-Owned Enterprises (WFOEs) are not an uncommon way for foreign companies to operate in China, and Tesla is definitely not an exception. According to data from the Chinese ministry of commerce, WFOEs accounted for about 74% of all import/export by companies with foreign investment in the first half of 2020 http://project.mofcom.gov.cn/1800000121_33_13497_0_7.html http://project.mofcom.gov.cn/1800000121_33_13497_0_7.html
  - coupdejarnac 6y ago
    If that's true, I find that extremely surprising.
- ReallyFantastic 6y ago
  China ended its JV rule for the auto industry in April 2018: https://www.nytimes.com/2018/04/17/business/china-auto-electric-cars-joint-venture.html https://www.nytimes.com/2018/04/17/business/china-auto-elect... Tesla was the first auto company to take advantage of this exception, some have argued that this exception was specifically carved out to incentivize them to build the Shanghai Gigafactory
contingencies 6y ago
China forces foreign investment to always come in the form of a joint venture No. This is not just plain wrong, it is normally not the case. See WFOE comment.
xmly 6y ago
Only certain protective industries require that to get some licenses. Apple, Tesla and numerous other US companies are 100% foreign entity in China. For hybrid, the usual cases are that they want to get government subsidies or special tax incentives.
xmly 6y ago
Also, most of famous China companies, such as Baidu, Alibaba, Tencent and etc are also controlled by a foreign shell companies as well.
- 5m17h 6y ago
  What do you mean?I don't understand

by corty 6y ago

jacquesm 6y ago

Forbidding that practice will simply mean that you won't be doing any more business in China. Which is fine with me. It's just that CEOs that see a virgin population of over a billion consumers for their widgets can't help themselves and will agree to just about anything to be able to tap that market before their competition does.

dkdk8283 6y ago
I support reducing trade with china. The need for cheap goods comes with a long tail price tag. It needs to be discussed more. Many Chinese workers are in severe poverty and strengthening Chinese businesses seems to only fuel inequality.
- valuearb 6y ago
  Free trade with China has vastly improved Chinese workers living standards. Those rural jobs from the Cultural Revolution were actual poverty, and physically dangerous to boot.
  - funviolence 6y ago
    who cares? not our problem.
  - skolsuper 6y ago
    There are democracies we could have enriched instead, rather than supporting an authoritarian regime
- Wolfenstein98k 6y ago
  I agree with you that we need to be much more careful and rigorous before trading with China, but China's market-based growth since Xiaoping's reforms are the reason hundreds of millions of Chinese citizens are out of poverty now. It is the new turn to geopolitical hegemony and debt entrapment that we should be careful of, not the incredible influx of wealth that has (wonderfully!) gone to the Chinese lower classes. Free trade, and the US leading the world charge to open up to China, is the best thing that happened to Chinese citizens. Things are different now that the state has such an iron grip, and its own intentions, however.
close04 6y ago
This is the shortsightedness of chasing short term profits for the investors rather than a more sustainable approach of not handing over the reins to a less than trustworthy partner. I'm genuinely curious for how many companies did this short term bump in profits outweigh the long term loss by irretrievably handing over technology, business strategies, etc. Edit for the comment below. > legally obliged to maximise shareholder value Fiduciary duties are not so explicitly described. A CEO must use care and be diligent when making decisions on behalf of the company and shareholders. Make choices in good faith with true belief that each choice is made with the best interests of the corporation in mind. Hence the best interests of the corporation must be weighed between short term and long term. A CEO could argue either way that they took the decision in good faith. This is where my curiosity came from, how many of these decisions turned out to be financially successful in hindsight?
- secondcoming 6y ago
  Aren't CEO's kind of legally obliged to maximise shareholder value, so they have to do the deal with the devil?
  - tbihl 6y ago
    No. They are to act in the best interest of the corporation/shareholders, which with increasing clarity means not getting in bed with Chinese organizations (assuming your foresight extends beyond the end of your nose.)
    - secondcoming 6y ago
      hindsight is great!
  - jacquesm 6y ago
    Why do we see this thing over-and-over-and-over again? It isn't true. It never was. Stop repeating it.
    - 6y ago
secondcoming 6y ago
The agreement needs to be reciprocal. China should have to jump through the same hoops if it wants to do business in the US, UK, Australia, etc And not just for doing business either, things like home ownership too. If I cannot buy a house in China (not that I'd want to pay for a Chinese house that'll last 5 years max) because I'm not Chinese then they should not be allowed buy in my country either. Vancouver, Toronto, Sydney... all have property markets destroyed by Chinese funny money. It has to stop, but it won't due to greed. Trump is right about China (I'm not American, don't live or work in America, and have never, or could ever, vote in an American election. Take your faux outrage elsewhere)
- michaelcampbell 6y ago
  > The agreement needs to be reciprocal. China should have to jump through the same hoops if it wants to do business in the US, UK, Australia, etc Then deal with the woke cries of xenophobia.
  - SpicyLemonZest 6y ago
    Disapproval of China is strong across the political spectrum.
- true_religion 6y ago
  I don’t think people’s outrage about political topics is fake. If I came out I strong support the Uyghurs re-education camps, would those outraged by that be faking it simply because I have zero influence in the CCP?
- beaunative 6y ago
  this is not a issue with Chinese buyers, this is a issue with existing land owner, who would do everything to imcrease sell price. Don't say somehow it's the buyers fault. Foreign buyers don't vote in election. it's the vote and money of property owners that allowed those purchase of land with no real purpose other than investment.
  - 6y ago
gruez 6y ago
>It's just that CEOs that see a virgin population of over a billion consumers for their widgets can't help themselves and will agree to just about anything to be able to tap that market before their competition does. Isn't that the point of forbidding it? You can't enter the market, but neither can your competitor, so there's no FOMO.
goatinaboat 6y ago
It's just that CEOs that see a virgin population of over a billion consumers for their widgets can't help themselves and will agree to just about anything to be able to tap that market before their competition does. Every CEO must realise by now that they will never get to tap that market, they will hand over their IP, they will carry the cost of establishing the product or service in the country, and then be booted out with nothing. Then a few years later a heavily capitalised Chinese company will show up and start competing with them with their own IP in their home country. It's heads China wins, tails the West loses. While our political class buries their heads in the sand, or worse, colludes in return for scoring points against domestic opponents.

murgindrag 6y ago

Or reciprocated. Chinese citizens have invested a ton in US businesses, which is sort of okay. They also bought a ton of land in the US, which led to skyrocketing housing prices, and in the long term, if it continues unabated, will lead to the US paying tribute to China in the form of rents on US land. There is no upside to this. We got cheap Chinese plastic trinkets. They got our real estate. Didn't we do this to the indigenous people here once ourselves? To be clear: I'm not opposed to being able to buy foreign land per se, but I am opposed to how one-sided this is. For the most part, US entities can't really own real estate in China (and even with Chinese entities, it's complex, but that's another story).

Wolfenstein98k 6y ago
Here in Australia, it's a giant issue too. There are plenty of houses which are Chinese-owned but unoccupied. They are effectively "banks" for storing cash. The scale is shocking, our "foreign ownership" figures for real estate are entirely skewed to this one country.
- fuzxi 6y ago
  It's the same in Canada, too.
- six2seven 6y ago
  Similarly in Spain. In large cities like Madrid or Barcelona these guys are owning properties, running both small and large businesses and very often avoiding taxes (try to ask in one of small venues for a bill and be sure then to check it). Moreover, quite some properties are Chinese-owned winding up the rental prices for local population, which were already pumped up by popularity of short-term holiday rentals such as AirBnB. These have been pretty well known problems to local population, but nobody up is doing anything about it, since it is an easy and quick money.
- tgsovlerkhgsel 6y ago
  I believe Switzerland has a relatively elegant solution for this: You get taxed on the expected rental income if the house is empty unless you can prove that you couldn't rent it out.

chrchang523 6y ago

Flip the script: we may want this sort of thing to be happening more, not less, on a global scale. When we want to help developing countries, this is one of the most effective ways to do so. We should just be smart and restrict this to more-values-aligned, more-development-left-to-do countries like India, Rwanda, etc.

specialist 6y ago

I just learned that Tesla in China does not have a local partner. Which surprised me. Was Tesla an exception? Are there others? Regardless, I'm absolutely certain that China is exfiltrating every morsel of IP. As state policy. It's what they do. The only interesting wrinkle to me is that Elon Musk is probably okay with the knowledge transfer. A man on a mission. Whatever it takes to get humanity carbon neutral asap. -- I'm fine with developing economies doing their thing. The notion was to nurture the BRICS countries, allow them to mature, not crush them in their cribs. No one can argue today that China remains a developing economy. We're past time for realpolitik.

generatorguy 6y ago
Tesla is probably ok since the car is a platform auto updated over the air if China steals the design and can build the exact physical machine and even a version of the firmware it will soon be an inferior version of the product without updates. Kind of like how android phones that don’t get updated are inferior to those that do.
yorwba 6y ago
Wholly Foreign-Owned Enterprises (WFOEs) are not an uncommon way for foreign companies to operate in China, and Tesla is definitely not an exception. According to data from the Chinese ministry of commerce, WFOEs accounted for about 74% of all import/export by companies with foreign investment in the first half of 2020 http://project.mofcom.gov.cn/1800000121_33_13497_0_7.html http://project.mofcom.gov.cn/1800000121_33_13497_0_7.html
- coupdejarnac 6y ago
  If that's true, I find that extremely surprising.
ReallyFantastic 6y ago
China ended its JV rule for the auto industry in April 2018: https://www.nytimes.com/2018/04/17/business/china-auto-electric-cars-joint-venture.html https://www.nytimes.com/2018/04/17/business/china-auto-elect... Tesla was the first auto company to take advantage of this exception, some have argued that this exception was specifically carved out to incentivize them to build the Shanghai Gigafactory

contingencies 6y ago

China forces foreign investment to always come in the form of a joint venture No. This is not just plain wrong, it is normally not the case. See WFOE comment.

xmly 6y ago

Only certain protective industries require that to get some licenses. Apple, Tesla and numerous other US companies are 100% foreign entity in China. For hybrid, the usual cases are that they want to get government subsidies or special tax incentives.

xmly 6y ago

Also, most of famous China companies, such as Baidu, Alibaba, Tencent and etc are also controlled by a foreign shell companies as well.

5m17h 6y ago
What do you mean?I don't understand