China: Why China Matters #2

Originally published February 2018

In the world of politics, no one does it better than China's President Xi Jinping.  Like a smart day trader on Wall Street:  buy low, sell high.  But the key is, when to buy and when to sell;  like the gambler song made famous by Kenny Rogers:  Got to know when to hold and when to fold.

Nowhere is this more evident than in Xi's political prowess than in China's reactive response to US President Trump's memo on Intellectual Property. With this US executive order, Trump is declaring war on China's trade practices and intellectual property policies, claiming American companies and workers have been materially harmed by China's unfair trade practices and intellectual property policies. Amongst the many claims, the Trump administration alleges, are that China's policies force American companies to transfer technology to China as a condition of accessing the market and in many cases, restrict access to certain sectors of businesses or at least requiring a local partner.

As a result of China's policies, innovation in the US is stifled and China's policies are tantamount to industrial theft.  Proponents of the Trump Administration allegations believe that the cost of IP theft by China amounts to over US$500 billion and China's policy poses a national security risk to the US.  As a consequence of these serious allegations, the US President has directed the United States Trade Representative Robert Lighthizer to investigate in accordance with section 302(b) of the Trade Act of 1974 (19 U.S.C. 2412(b)), whether any of China's laws, policies, practices, or actions may be discriminatory or unfair to Americans and harming American interests.

In response to Trump's order, Xi, the consummate poker player, offers to reduce the number of restricted access businesses from 93 to 63, welcomes with open arms and investment dollars to any company with technology to have a home or "presence" in China special technology zones without the demand of technology transfer and rental at drastically reduced prices, and to explicitly pull out the red carpet for three key industrial sectors with government incentives:  clean tech, advanced manufacturing and medical/pharmaceuticals/health services.  When the tide is going one way, Xi goes the other.  Just when Trump is pushing to engage China in a war of words or a war of "takeaways", China is cultivating every "Tom, Dick and Harry" to come to China, with more transparent policies and investment dollars, relaxed or abbreviated policies and investing in the future in partnership with technology founders.  Xi's approach is the right one, at the right time, with the right incentives.

When the US is aiming to be "America First", hinting vestige of "protectionism and isolationism", Xi is expanding China's horizon.  In this poker game, he knows of one thing: a win is a win and win is a win-win, where both sides win and that comes from understanding, partnerships, collaborative efforts, and cooperation.  He realizes that nothing is gained by brandishing threats when at the end, it is about a competitive economy where business is business and only dirty business is to be avoided. When there is healthy competition, it brings the best out of each side and Xi is leveraging his advantage to the max and welcoming everyone with better conditions, better support and better deals. Like the popular television show where host Bob Barker barks out at the beginning of every show, Xi is reaching out to everyone: Come on down, The Price is Right.

Perhaps this is one lesson Trump and America should take note, for Trump may have forgotten the Golden Rule:  He who owns the Gold, Rules.  America watch out! Why China Matters?  Now you know.

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