The Chinese government’s Made in China 2025 blueprint reveals Beijing’s audacious plans to dominate emerging technology industries. Many of these targeted sectors, such as artificial intelligence and robotics, have clear implications for defense. China seeks to achieve its goal of economic and military domination in part by acquiring the best American technology and intellectual property. President
new tariffs will provide a critical shield against this aggression.
China acquires American technology in multiple ways. Theft, both physical and cyber, occurs through orchestrated industrial espionage campaigns. For years the U.S. intelligence community has acknowledged China as a persistent leader in economic espionage.
Many American companies are forced to accept technology transfers to gain access to the Chinese market. China’s foreign-ownership restrictions require American firms to enter into joint ventures as minority partners in sectors that Beijing considers strategic. Other more indirect tools to coerce technology transfer include adverse licensing processes, discriminatory patent restrictions, security reviews, discriminatory catalogs that restrict inbound foreign investment, and intrusive testing requirements.
Once a foreign company enters a joint venture in China, technology and IP transfers may occur through joint manufacturing. A Chinese partner could even use its access and proximity to steal the technology outright. All too often the Chinese “partner” becomes a direct competitor, first in regional markets, then in global ones.
In 2010, for example,
formed a joint venture with the state-owned Harbin Electric to manufacture wind turbines. The venture ended after three years of sharing technology. As a result of deals like this—and at least one conviction of a Chinese wind-turbine maker for trade secret theft—Chinese firms’ share of the international wind turbine market rose from 9% to nearly 25% over the past decade.
China’s extralegal efforts to acquire critical technologies are typically spearheaded by Chinese companies and their agents, often with the assistance of legal U.S. residents or citizens. A poster child is
In 2016 she pleaded guilty to acting as an illegal agent of the Chinese government and conspiring to commit international money laundering. Ms. Yu illegally exported commodities that help in the production of unmanned underwater drones. China is particularly interested in this technology as it tries to gain control of critical waterways, including the South China Sea.
China’s investment in strategic technologies may ultimately pose the gravest danger to America’s manufacturing and defense industrial base. Through years of unfair trade practices and industrial espionage—building on its already massive trade surplus—China has accumulated trillions of American dollars. Now the Chinese government is embarking on a high-tech shopping spree in the U.S.
Since 2012 China has made more than 600 investments in advanced American technology, worth close to $20 billion, according to the data aggregator CB Insights. Artificial intelligence, augmented and virtual reality, and robotics receive particular focus. China’s biggest sovereign-wealth fund, the China Investment Corp., has deployed a significant fraction of the $800 billion of assets under management for a venture fund focusing on Silicon Valley. The state-backed venture fund Sinovation “has invested in almost 300 startups—including 25 in artificial intelligence,” according to a January 2018 report from Defense Innovation Unit Experimental.
These investments will lead to the U.S. being “colonized by purchase rather than conquest,” as
warned in a 2003 essay criticizing trade deficits. It is precisely because China has launched a sustained attack on America’s innovation base that Mr. Trump is imposing defensive tariffs. At the same time, there is bipartisan consensus for strengthening and modernizing the Committee on Foreign Investment in the U.S. The committee must be able to review a broader range of investment from China and other countries to address national- and economic-security concerns. As President Trump has said: Economic security is national security.
The 25% tariffs recently announced on $50 billion of China’s exports to the U.S. are targeted at high-tech industries. These tariffs will form a critical line of defense against predatory trade practices China has used to the detriment of American industries.
Consider solar energy. China’s unfair industrial policies have created excess global supply of solar panels and displaced American firms. Where China had no companies in the top 10 producers of solar panels, it now has six, including the top two. China’s industrial and military planners want to do the same for other industries. The president simply won’t stand for that.
How China responds to the White House’s actions defending America’s technological crown jewels will define the future U.S.-China economic and national-security relationship. Unfortunately, Beijing has initially responded with $50 billion of retaliatory tariffs, aimed partly at American farmers. As the president noted, this clearly signals China’s determination “to keep the United States at a permanent and unfair disadvantage.” That is why the president has directed U.S. Trade Representative
to identify $200 billion of Chinese goods for additional tariffs at a rate of 10%.
It has taken vision and courage for the president to take these steps. The far easier course would be to continue the relationship with China as his predecessors did. If China continues to escalate this trade dispute rather than treat the U.S. fairly, Americans may finally wake up to an economic and national-security threat that the president has seen coming for decades. With its huge trade surplus with the U.S., China must know it has far more to lose in this trade dispute.
The president won’t back down when America’s economic prosperity and national security are at stake. This is no time for miscalculation by China—and past time for China to end its economic aggression.
Mr. Navarro is assistant to the president for trade and manufacturing policy and director of the White House National Trade Council.