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This article is about Huawei and the trade war is the larger background. I had some entrepreneurship experience both in China and the States. "Forced IP transfer policies" is one of the core issues between the US and China. I'd like to share some thoughts about this issue from the perspectives of some entrepreneur friends in China. AFAICT, the real impact of the "forced IP transfer" is very complex. I didn't see any media report about it, so I share it here.
The perspective from media: "Forced IP transfer policies" is very unfair because it helps Chinese companies to get an unfair advantage. It's bad for foreign companies and good for Chinese economies.
The perspective from many entrepreneurs in China: "Forced IP transfer policies" is very unfair because it helps the foreign companies get an unfair advantage. It's bad for Chinese private companies and economies.
Here is the explanation from the entrepreneurs' perspective:
1) The most "forced IP transfer" happened in the Chinese-foreign partnership companies.
2) However, the partnership is between state-owned companies and foreign companies.
3) Most of the state-owned companies are very inefficient. The system makes people lazy and corruptive.
4) The partnership companies did get some technologies, often the older technologies. However, they also get benefits from the state, very cheap land, subsidies, etc.
5)From the perspective of local entrepreneurs: Benefits from state + Foreign tech and brand makes the already-strong foreign companies even stronger. They get double advantages. It's very hard to compete with them. To local entrepreneurs, the Chinese state-owned companies + Foreign companies partnership model kills many local private companies unfairly.
6) From the technologies side, the state-owned companies get some older technologies, but since the state-owned companies have their own issues like lazy, corruption. They didn't get a tech edge in the competition. The transferred technologies outdated very fast.
One example is the Auto industry. Most auto brands from the US is very successful in China, for example, Buick is not very successful in the US, but the overall sales in China exceeded 10M!
Ford is also very successful in China https://thenewswheel.com/ford-sales-in-china-surpass-1-milli...
Did the "transferred technologies make them less successful"? It's really hard to say.
There is some "forced IP transfer" in some sectors, but the impact to the overall economies may or may not positive because it makes the local private companies in a very disadvantaged position. It's really a double-edged sword.
Huawei was put in the Entity list. That means two things.
1)Huawei can't sell any equipment or phone in the US. It's about market access. It's equal to Google/Facebook were denied to access the Chinese market if they don't obey the censorship policies. Huawei was also denied to access mainstream America market for a long time.
2)Huawei can't buy any components and services from any American companies. Even Google & Facebook are not accessible in China, they still have lots of business there.
So basically, Putting Huawei in the Entity list almost means to kill Huawei because Chips from American companies are important for their supply chain. It's not only about market access.
That's the reason many people in China feel very angry.
The basic idea behind your point is "What we (China) did is totally fine in terms of working against your (US) economy but you doing something different against us (China) is NOT okay, irrespective of the magnitude of impact."
Seems pretty silly to me. China's barring of US enterprises from selling in China is dramatically more damaging at scale than US blacklisting Huawei.
You misunderstood the comment. I didn't mean it's fine. Most people don't like censorship. I just presented the perspective from the other side.
Regarding your point about the "against US economy" or "against China economy". Maybe you are in a war mindset. If we jump out this "war" mindset, we can see "China's barring of US enterprises from selling in China" is really not about against the "US economy". It's about censorship.
1) There are many US companies which are very successful in China, Qualcomm, Apple, Nike, Starbuck, etc. Actually, I rarely heard any stories about the market access problem for non-internet companies in China.
2) There is a "forced IP transfer/partnership" issue in some sectors, for example, the auto sector. It is very unfair. But the result of it is also very complex. I will address it in a separate post.
3) The market access issue of many internet companies, such as Facebook/Google, is about censorship policies. Google operated in China several years ago, but it withdrew from the market because of the censorship requirements from the government. Apple complies with the requirement, so it works well in China. I didn't mean "Censorship" is a good thing. I just mean as far as I can understand, it's about "censorship", not about "against US economy".
"Magnitude of impact": Could you explain more about this point?
> Google operated in China several years ago, but it withdrew from the market because of the censorship requirements from the government
Google hesitated to enter China because of the censorship requirements (1) but eventually entered anyway, led by a researcher they hired away from Microsoft, Kai-Fu Lee (1, 2). They exited because they caught the Chinese associates stealing source code, and only after their first "war room" effort to nail down exactly what was going on (1, 3).
Thanks for bringing these references up. However, I think the major reason is still censorship or too much censorship & political dissent. The aim of stealing source code is probably to hack the account of political dissents as Google pointed out. The action was more about "the political motivation related to dissent" than "against US economy". That's my main point.
Brin: I don't think it's a question of taking on China. In fact, I am a great admirer of both China and the Chinese government for the progress they have made. It is really opposing censorship and speaking out for the freedom of political dissent, and that's the key issue from our side.
SPIEGEL: Four years ago, you allowed your service to be censored. Why have you changed your mind now?
Brin: The hacking attacks were the straw that broke the camel's back. There were several aspects there: the attack directly on Google, which we believe was an attempt to gain access to Gmail accounts of Chinese human rights activists. But there is also a broader pattern we then discovered of simply the surveillance of human rights activists.
"Second, we have evidence to suggest that a primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists. "
I don't think I did misunderstand that point. I'm just trying to say that the _reason_ is not really logical in the context of what the relative impact is on each others' economies from these actions. It's drawing an arbitrary line and not addressing the actual impacts of these actions.
You can differentiate mindsets or not but it's clear that the actions are taken to cause disadvantage for the other and advantage for themselves in both directions.
As someone who has been a part of multiple enterprises that have considered entering the Chinese market and would have not had any reason to be censored (nothing to censor), I can tell you that that's just not the case at ALL. China erects as many barriers to entry for foreign companies as possible. You yourself address that directly with regards to the forced IP transfer/partnership point. Many (most? speculatively) of the companies that are successful in the Chinese market are successful due to China having no reasonable alternative (Qualcomm, Intel, AMD, etc.).
When I talk about the magnitude of impact, I'm trying to compare say the entire loss of Huawei with the lost sales of US companies were they able to enter the Chinese market as easily as Chinese companies may enter the US market. Huawei is tiny on that relative scale.
// Many (most? speculatively) of the companies that are successful in the Chinese market are successful due to China having no reasonable alternative (Qualcomm, Intel, AMD, etc.). //
Yes, I agree that many of them are successful because they have tech advantages and there are no good alternatives as you pointed out. However, there are also many successful non-tech US companies in China. They have/had good alternatives. Here are some brands jump in my mind: Many products from Procter & Gamble Co, Coca Cola/Pepsi, Pizza Hut, Nike, Adidas, Walmart, Ford, KFC/McDonald, Starbucks, Subway.
From my experience in both the US and China, I guess there are far more successful US brands in China than successful Chinese brands in the US. Yes, the US imports more from China, but many products are US brands.
//China erects as many barriers to entry for foreign companies as possible. //
I also agree that business barriers for foreign companies in China are higher than they are in the US. Overall, the US is among the most business-friendly countries.
1) Doing business in China is harder for both Chinese local business and foreign business than it is in the US. This is the big picture. Especially when you are from the US, you may be very frustrated with some non-sense requirements for doing business in China. Many private local companies also face the same non-sense stuff, but because they understand the environment better, they may come up some tricks to work around the issues.
2) I totally understand that you have a bad experience about the barriers. From my experiences and my friends' experiences, the business-friendly-index for different kinds of business: State-owned companies > Foreign companies > Local private companies in many sectors. The least advantage one is the local private companies. Many local governments are competing for attracting foreign business to boost the local economies. They don't care about small local private business.
// When I talk about the magnitude of impact, I'm trying to compare say the entire loss of Huawei with the lost sales of US companies were they able to enter the Chinese market as easily as Chinese companies may enter the US market. Huawei is tiny on that relative scale. //
Maybe you are right about the impact. However, it's really hard to say the impact of the "protect state-owned companies" policies is a good impact on the Chinese Economies. From the economics point, the "state-owned" companies are very inefficient. It may cause far more damage to the overall Chinese economy.
Another point to see the impact is about the psychological impact: Killing Huawei to people in China is like Killing Apple for people in the US. Its psychological impact is far more than some business barries.
1) It is more like where the brand was strong survived (or where the technology was hard to replicate).
I'm pretty sure there are plenty of example including wahaha-danone etc.
Don't get me wrong, China did it well to carve back it's status and didn't get colonized by US, but sooner or later the other parties naturally get angry if piggy-backing goes too far. It's the same in friendship, if your friend is mean once doesn't matter, but if he always take away more then what he is giving then the relationship will break down eventually.
A large part of the dispute is due to China not enforcing and codifying its own laws. All US wants is for the laws to be on the books and fairly applied.
Why can't China be interested in both censorship and economic gain? It's two birds with one stone, and I really doubt such large bureaucracies would have such an important decision come down to two factors (money or censorship?), like what about internal political factors?
joel_liu was crystal clear about where the cases are similar and where they diverged.
There was even a numbered list to help you out with it.
Saying that there's more harm done by blocking Facebook inside China than there is by trying to eliminate Huawei worldwide... well, I'm already on record downthread calling that attitude colonialist.
I suppose, if it backfires and causes Huawei to successfully develop a competing OS, you'll be sort of right.. although I think intentions should count for something.
What's your point? Do you think I misrepresented his points?
What he didn't include was the relative damage from these different motions which was my expansion on it. Feel free to add more to the discussion than "what he said was well laid out".
Nice use of the edit to actually include something beyond "it was well laid out".
Not sure if you're being intentionally disingenuous or not but China hasn't blocked just Facebook from operating in China. They've blocked US enterprises whole hog except where they had no alternative. On a level playing field where US enterprises had equal access to China as Chinese enterprises to the US, the proceeds would be dramatically larger than that of the single enterprise that is Huawei.
Call it "colonialist" or whatever dirty word you want to paint the US as evil, it's hard to look at the way China has operated from an economic POV and not have expected retaliation at some point.
If Huawei and other Chinese enterprises develop their own OS, it will be comically difficult if not impossible for it to compete on the worldwide stage unless it's focused on being compatible with existing apps. Network effects are real. Android has minimal threat.
> They've blocked US enterprises whole hog except where they had no alternative.
Try walking through a mall in Shanghai it Beijing some day, and try saying this again. American companies and brands are everywhere. They don't have to drink Starbucks - it would be perfectly possible for a Chinese company to brew coffee - but they do.
> it's hard to look at the way China has operated from an economic POV and not have expected retaliation at some point.
They've provided cheap labor to American corporations, boosting those companies' profits. They've allowed their labor force to be massively exploited by Western companies, with the understanding that they themselves would be able to eventually move up the value chain and live on a level closer to people in the developed world.
The reason for the "retaliation" is that there is a circle of people in American politics that cannot accept the United States being eclipsed by another power. This is about geopolitics. An established power fears a rising power, and is moving to try to cripple the rising power while there's still time.
Perhaps the response is disproportionate because the United States has built up international coalitions over time, but a lot of people observing western media are going to think that this is but one event in a recent history of tension and escalation.
I would say similarly if China decides to limit their production of rare earth metals.
Well. I guess most chinese people agree that "freedom of thought/speech" is a great thing. Actually, Chinese people did enjoy most of this freedom now except one thing "Promote one person, one vote and multi-party" political system in public.
Korea and Taiwan got their best economic growth stage when they are in an authoritarian stage. China is still in this stage.
Japan is an interesting story worths to study.
Besides these countries, there are many countries, such as many in Africa, doesn't become better after the democratic process.
The Chinese government has a point that "Let's concentrate and grow the economic first. After everybody has a much better economic status, we can consider other things". I think they did have a good point on it.
There is an assumption that the "One person one vote democratic system is the best system for any country in any stage". However, the data just don't support this assumption.
