Europe Finally Realizes Communist China Predatory Trade
European Commission just released a 700-page report on the economic distortions created by the Chinese government. The report offers 3500 authoritative references to the predatory role of China’s central planning and state ownership; state control of land, labor, and capital production factors; and direct financial subsidization to gain market shares in semiconductor chips, telecommunications, railways, steel, aluminum, chemicals, ceramics, renewables and electric vehicles.
China’s state control of its economy extends beyond State-Owned Enterprises (SOE) to private domestic corporations. All Chinese entities have de facto government control through their organizational structure. Despite corporate annual reports listing a private-owners, there is always a government actor in charge. China economic activity is controlled through informal, even unwritten, agreements among political and corporate elites called “networked hierarchy.”
According to the International Monetary Fund, China SOE financing leverage has exceeded 194% of GDP since 2018. SOE’s now dominate telecommunication, energy, transportation, public utilities, and other strategic sectors.
China’s State-owned Assets Supervision and Administration Commission regulators mandated in in 2019: “The focus will be on ramping up technological innovation by SOEs and making the most of SOEs to encourage innovation and develop the advanced manufacturing sector.”
China has designated 5G telecommunications equipment and infrastructure industries as critical for its global technological development and leadership. The government’s planning web allows China’s Huawei and ZTE to charge high prices in its protected domestic market, and then sell far below costs in foreign markets. As a result, China’s Huawei and ZTE now control 95% share of the domestic 5G market and have over 1 billion global users.
China state support includes access to below market loans, tax relief, subsidies and direct government grants. China’s intelligence apparatus explicitly and implicitly forces the transfer of technology from foreign firms to domestic entities. China also uses generous export financing to entice foreign governments to buy Chinese-made goods.
Huawei claims it is employee-owned, but its virtual shareholders have no voting rights. Huawei is actually 100% controlled by China’s Trade Union Committee. ZTE began as a state-owned military enterprise, before converting to a mix of partial state ownership and private management. But three of its ten largest shareholders are China SOEs.
China in 2017 implemented a National Intelligence Law which under Article 7 compels every Chinese subject to conduct espionage on behalf of the government. As a result, Chinese citizens conduct passive surveillance by installing software and hardware “backdoors” that are difficult to detect and can be re-inserted in software upgrades.