SPEAKING FREELY China's ideas gap necessitates theft
By Brett Daniel Shehadey
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Whether a Chinese state-owned enterprise does it, a private Chinese firm, or the country itself; whether economic in nature or industrial, Chinese espionage is a key ingredient to success. If you cannot come up with the idea yourself, why build it, why buy it, when you can steal it?
China and the United States are two countries whose political power rests on a strong economic base but each has its own
natural advantage. The US excels at innovation and idea creation. In the not so distant past, China excelled at seeing those ideas put into mass production at low cost.
The need for the Chinese economy to transition to an internal investment and import-centric economy (that is, more like the US) makes the need for innovation even more critical. And because China does not have this capacity in any competitive terms with the US, or in the present ability, it must continue to find other ways to obtain it.
Two approaches exist to develop quick innovative capital. The first is done legally through the hiring of American innovators, researchers, scientists, engineers, experts, directors, managers, and others outside the sphere of the innovation gap. This will happen either by direct hires, forced technology transfers or company acquisitions. Employee poaching is another means, but not a primary economic strategy.
The US government prevents a good number of Chinese purchases of American firms in protectionist responses for cited reasons of national security that would otherwise be in the hands of the Chinese. Also, many Americans do not want to work for Chinese companies by choice, if they have one, because they know that even in private corporations, the government is in there somewhere.
The second approach that China uses to match or increase its competitive creative edge over the US is through economic and industrial espionage. In other words, they must lie, cheat and steal. It includes the dirty methods of industrial theft and hacking mainframes, among others.
This might be okay if it happened here and there every once and a while or independently across individual companies without any grand strategic calculus and national critical need, but this is encouraged by authorities that are often the direct and indirect controllers of such operations on a massive scale.
The Chinese capability and methods in the area of economic espionage have been known for some time. These are unfortunately superior to their native capability of developing innovative capital. Nor is the purchase or hiring of American professionals and experts easy or cost effective. Espionage costs less and they can be assured that if American firms discover them, they will not react in the same manner because they have the innovative surplus and the laws to restrict them.
Stealing trade secrets
Theft of trade secrets is illegal in the US. Trade secrets are part of the US corporate innovative process that includes any confidential information of a company's production or service. This is vital to its advantage over competitors in the market, along with trademarks and patents. It is the information that the company tries to protect.
Unlike trademarks, whose theft is the easiest to discover, or patent infringements, which are a little more difficult to pin down, trade secret thefts can be almost impossible to trace and verify. This is especially the case if they are taken piece by piece over time and incorporated into competing product internally whose transparency is questionable and lacking.
Because the parts are done in this way, cheap fraudulent parts are rampant within the Chinese economic structure. There is no way of knowing just how much China is doing this but it is bad enough, even in the defense industry, that the US is officially chastising the Chinese by name.
Forced technology transfers from mandated mergers are other ways that China acquires US innovation. Also, stealing innovation from the Pentagon and the defense industries: "China is using state-sponsored industrial and economic espionage to acquire technology fueling its fast-paced military modernization program and cut its reliance on foreign arms makers."
According to US intelligence officials, technology acquisition is the prime strategic focus of China. What is also overlooked in the US is that sometimes "imitation is the sincerest form of flattery". China wants so much to be the USA and the USA is too busy fighting to stop it over this point.
Instead of understanding the deeper underlying reasons why, US strategy is predicated upon a knee-jerk resistance and gearing up for a better retaliation capability. But US diplomats and civilian intelligence could stop playing the cards reserved for the Pentagon and take advantage of the strategic aspiration to be great like the US; and as Joseph Addison wrote in The Spectator in 1776, perhaps more aptly in this case, is the variant, the Chinese "imitation is a kind of artless flattery".
But innovation is the American bread and butter. President Barak Obama stated that "the only durable strength we have, the only one that can withstand these gale winds, is innovation." It is natural then that Americans will determine to stay the harsh realities of global economy and power transition and hold fast to what might keep them afloat a little longer as a global leader.
The American mission now becomes the protection of its precious skills and abilities advantage over China. It is has either ignored the possibility or discounted using the Chinese strategy of intellectual mimicry and technological gains against them.
For the last three years, US officials have formally cited China as one of the biggest espionage threats. But let us not forget that Russia, Israel and France are also grave cyber-security and espionage threats to the US. So it is not just the Chinese. And yet, the US response is directed only at China in any loud set way to face off head-on with ships, weapons and even better technology. It is as if neither state's natural inclinations can be altered.
The innovation advantage is not something the US or Europe wants to give up. But America may lose its comparative edge as culture and social-political infrastructure changes over subsequent generations. It may be that the US can overcome this period of flux if it can attract foreign immigrants with innovative capacity to leave their more restrictive systems and replace the natural-born thinkers with doers.
Lend me your thoughts
Espionage is a way of cheating innovation to be sure. From the viewpoint of the Chinese Communist Party (CCP), America is increasingly seen as a political enemy and an economic competitor. Such accusations are denied for obvious reasons and to China "nothing is deceitful in war". And here is a war not of might but of politics and geopolitics. So whether an idea is stolen or borrowed, it is fair game to them.
As for technology transfers, the Western "multinational" corporations are willing to sacrifice advanced technology for profit, and now their leaders are finally concerned with the national security implications of the civilian sector. This is one of the greatest sources and the reason China is able to fill more of the innovation gap, in addition to espionage.
A partial list of the "key findings" from a US Department of Commerce, Bureau of Industry Security report, entitled "Technology Transfer to China":
According to experts and executives interviewed for this study, the transfer of advanced US technology is the price of market access in China for US high-tech companies.
Most US and other foreign investors in China thus far seem willing to pay the price of technology transfers - even "state-of-the-art technologies - in order to "gain a foothold" or to "establish a beachhead" in China with the expectation that the country's enormous market potential eventually will be realized…
Numerous US high-tech firms have agreed to commercial offset or technology transfer agreements in exchange for joint ventures and limited market access in China. An increasingly frequent type of commercial offset is the establishment of a training or R&D center, institute, or lab, typically with one of China's premier universities or research institutes…
Technology transfer is both mandated in Chinese regulations or industrial policies (with which US companies wishing to invest in China must comply) and used as a deal-maker or sweetener by US firms seeking joint venture contracts in China.
Unless significant changes are made to China's current investment regulations and import/export policies, US commercial technology transfers to China are likely to continue, potentially enhancing Chinese competitiveness in high-technology industry sectors such as aerospace and electronics...
In the industry sectors studied, it is apparent that what technological advances and increased exports exist are disproportionately due to foreign investment capital and technology rather than to indigenous technological advances.
The US export control review process is not designed to evaluate continuing US commercial technology transfers to China that are demanded or offered in exchange for market access.
'First attain skill; creativity comes later'
China has spent years laboring in manufactured goods designed by foreign enterprises and now has many competitive corporations of its own. It is now looking to enter the market place of ideas in any way it can so that it can catch up and then eventually surpass the US's advanced technological edge. America's yesterday ideas may become technology transfers of China's tomorrow, yet they will not change the fabric of culture or the political conditions by themselves.
Americans, on the other hand, have always had a natural inclination to innovate which stems from the British and European foundations. The Chinese have in their past demonstrated amazing leaps of innovation, as did other great civilizations. Nevertheless, American and Western civilization developed a system that permitted and encouraged innovation and ideas to multiply and thrive upon a competitive system based around the individual.
This difference has everything to do with liberal laws regarding the individual's: freedom of speech, association, enterprise; the property rights heritage, patent protection, and the long march to the rule of law carried over from England.
It is not that the Chinese lack the ability to be brilliant innovators; many American Chinese scientists, writers and engineers abound all over the world, as well as idealists, but they do so in other systems. Chinese culture and government does not allow it at present.
The recent change in the CCP attitude to encourage innovation, in a still highly restrictive and limited atmosphere, is at best futile until a system is designed that promotes a safe environment to harbor the promise of open exchange and creation. Until then innovation will be in short supply among the Chinese population.
China has a deeply rooted saying that goes, "Don't be first". This is heightened in a social civilization of group and crowd-sponsored activity that as well as observing others is key to learning from their mistakes or copying their successes. One is safer in a crowd, as is one's reputation.
Stressing caution over risk is a widespread characteristic among the Chinese, which stems from a civilization that was traditionally under the toil of subsistence and survival. So there is strong reason for their reluctance to break with the past, or one's friends, family, and society, and go it alone, but this too is changing.
Caution, patience and observation are the opposite of taking risky innovation and trial and error that often leads to brilliant discoveries. To be sure, China has many sayings that encourage people to make mistakes and grow stronger. For example, "one cannot refuse to eat because there is a chance of being choked" or "a clumsy bird flies first".
China is not simply a culture of traditions but of deep mistrust. This is compounded at present by relationships between American political officials and Chinese political officials that are starkly grim and horrific; both nations can carry the blame.
Where Americans rely on business, law and contract, the Chinese rely on guanxi (relations or relationships) and human-driven order. Thus, the neglect of a mutual misunderstanding in diplomacy and differences of state operations has brought about a lack of trust between the two. Where the US sends in warships, China utilizes greater espionage and this is the political and economic battlefield of earth.
Another reason for China's espionage is its people's perception of the nature of innovation. To the Chinese, ideas and secrets are new and strange to be considered as property, let alone personal property. Ideas are not tangible things but they are vital things for success. The clever man or woman goes about in search of another's secrets to gain advantage in life. It is the responsibility of the other party to safeguard their information, and to expect to be targeted.
Let us not discount any changes at all or the innovations to be found in China.
China is still at the start of its new transition. Along with this transition should be expected great shifts, and the filling of the perceived and actual innovation gap will be altered. In time, we should expect to see more innovation, but the closing of the gap will be the result of generational, cultural and political developments. In other words, greater innovation is on the horizon, but most of the breakthroughs are still reliant upon American and Western captains of industry and pioneers in science and tech fields.
Scholars who isolate Chinese research expenditures as a world share, or the number of engineers, miss the context for which this activity takes place. Research in China is at present predominantly reverse-research and engineering is reverse-engineering of Western originated concepts and ideas. Moreover, it is impossible to measure until China begins to invent original concepts like did with paper and gun powder again.
How are we to look at a research lab that is led or consulted by a Westerner but the rest are Chinese nationals? Is any innovative product finally Chinese? And if so, was the idea a collaboration or a transfer?
Centralization of innovation and innovation mandates will not bring about a strong, natural and competitive innovative culture. Yet this is exactly what is happening now. Decades of sociological research and basic micro-economics support the old concept of competition driving innovation. Just because the CCP is determined to have an innovative culture like the US, does not mean it can break the fundamental principles observed in nature and society.
Until the internal needs of satisfying a healthy, vibrant, Chinese environment conducive for innovation are met, we should continue to expect that espionage, copy-cat strategies and fraud - not indigenous innovation - will come out of China as the de facto economic and industrial practice.
The idea mills being probed or purchased by the Chinese are done so not in the spirit of enhancing the innovative capacity as a whole, but an intermediary step: before innovation, if you have the money, then purchase innovators. When skills have been rightly acquired, create.
Once a good number of innovators exist, the expectation is that they can compete with a civilization of innovators. Not likely. Few Chinese will feel comfortable with this role, and even the most prominent of those will be politically monitored and assessed. China will need to alter itself, which it may be forced to do in gradation. Until then, we may await the truly "Chinese" inventions that the West or America has not come up with yet, with due patience.
Brett Daniel Shehadey is an analyst and writer. His work has appeared in The National Interest and Eurasia Review. He holds an MA in Strategic Intelligence from AMU and a BA in political Science from UCLA.
Speaking Freely is an Asia Times Online feature that allows guest writers to have their say. Please click here if you are interested in contributing. Articles submitted for this section allow our readers to express their opinions and do not necessarily meet the same editorial standards of Asia Times Online's regular contributors.