Europe wants to steal Chinese IP

November 22, 2024

By Jerry Grey

I want to comment on the recent media announcements^ that the European Union will only allow China to open factories if they are willing to share IP on their technology, in other words, if you open a factory here, you need to allow our factory operators the ability to see how everything is made and then have the ability to copy it – there are two schools of thought about this.

One is that it’s fair game because China did that to the West 50 years ago
the other is that it’s a draconian measure that will cause China to pull back and not operate in Europe.

No one knows what China will decide to do but based on historical facts, there’s a chance China will cooperate but not until the EU moves first.

First of all, there are many accusations of China stealing IP, all over Western media we see reports that China stole our IP, they stole our jobs, the can’t innovate and they have grown only because the US, and its “shared value partners”, have allowed China to grow. And then, when they did grow, China broke all the rules and economically coerced it’s smaller partners and uses its military to protect its interests.

I know people will say “what about debt traps”, I say go read a book, that’s been well and truly debunked and if you can find out who Deborah Brautigam* is, and still claim there’s a debt trap, it’s not misinformation or misinterpretation, it’s a lie.

We can put a few of these accusations to bed immediately. There isn’t a single example I can think of where China has economically coerced a smaller trading partner – I know people will say “what about debt traps”, I say go read a book, that’s been well and truly debunked and if you can find out who Deborah Brautigam* is, and still claim there’s a debt trap, it’s not misinformation or misinterpretation, it’s a lie.

China has never, not once sent military into any country anywhere to protect its economic interests, it does have a military presence in Djibouti to protect international shipping as part of the Combined Joint Task Force – Horn of Africa, which has military contributions from eight different countries**, including the US France and Japan. So let’s write off the military expansion myth too.

Did China steal Western IP, quite likely but not on an industrial scale as alleged – When iPhone was first introduced, Mainlanders had to go to Hong Kong to get one and there was no doubt that some technologically advanced geeks bought them, stripped them down and then attempted to copy them, but, and this is a big but, even though China’s smartphones are now world beating, there’s not a single case of Apple, the only current US brand, Nokia or Eriksson ever suing a Chinese manufacturer for theft of IP, what seems to have happened is that Chinese looked at the products, decided they could do better and proceeded to do so – strangely enough, IP protection in China is strong, VERY strong, in fact, the National Intellectual Property Administration Office released a White paper^^^ about it. Furthermore, if China had stolen Western IP, you can be sure that these large, multi-national and, for a while hugely profitable companies would have sued. They didn’t and the absence of lawsuits against Chinese manufacturers tells us more than the anti-China headlines ever will. For the record, Apple did sue Galaxy for IP infringements and Galaxy sued Apple too. There is however, an interesting case of a Chinese developer suing Apple in 2020^*.

So, there’s two myths busted in one paragraph, China didn’t steal mobile phone technology and China can actually innovate, obviously they can because they now have the best phones, the best EVs, the best solar panels in the world and they also have the best space station outside of this world.

Did China steal US or European jobs? Of course not. let me give an example through a story here – if you were a factory owner and you had 1000 employees earning $1000 a month at the time USA was offshoring jobs $47k*** a year was about average but let’s make it simple, each employee actually costs you over $1,300 a month, that would cover my overhead cost for that one employee, it includes payroll tax, superannuation, and a few other costs. Now you look at a factory in China and the salary was $400 dollars a month instead of $1,000, the overhead were 10% instead of 27% so each employee will save you about $860. That’s a lot of money but let’s also look at the cost of your factory, in China it would be one tenth or possibly even less than the cost of a factory in the USA. You need to add shipping and transportation cost, perhaps some packing costs but you’d do a cost benefit analysis and come to the conclusion that a return on investment in China would be a very short period of time indeed, in property taxes on the factory alone they would save many multiples of the costs of labour, now multiply these numbers by some of the larger corporations which offshored, who knew, for example that according to Forbes^^, 66% of all US companies offshore one or more departments?

Savings are significant but let’s ask ourselves a serious question: when was the last time we recall the cost of a product manufactured by a Western corporation in China, or anywhere else for that matter, reduced? Most people can’t.

Savings are significant but let’s ask ourselves a serious question: when was the last time we recall the cost of a product manufactured by a Western corporation in China, or anywhere else for that matter, reduced? Most people can’t.

Now consider this, which companies are the world’s most profitable? The Number one is Saudi Aramco and the next 8 are all well known American corporations, the first Chinese company is at number 10 the ICBC, a Chinese bank. Think about that for a moment, USA offshored its jobs, saved enormous amounts of cash and now has 8 of the top 10 most profitable companies in the world – Lower costs don’t benefit the country because they aren’t paying more tax, didn’t benefit the workers because they haven’t got jobs, and didn’t benefit consumers because the savings aren’t passed on. They benefit the executives and CEOs who, for the last 50 years have been getting progressively richer and progressively more powerful, while their customers and former workers are getting screwed how is that China’s fault, China didn’t steal the jobs, the elites sold them out.

What China did was to gratefully accept the opportunity, bide its time while investing in its hard working people so that while US lives and lifestyles were deteriorating, Chinese were improving, it took over 50 years but it’s paid off because now, with education in China being so much better than it is in the West, with lifestyles, incomes and living standards all improving, China has leapfrogged the west, and in particular the USA in every measurable metric.

And now, the US and Europe are complaining, they want China to share. And guess what?

China is willing to share, every single speech Xi Jinping has made, every speech Li Qiang, China’s Premier has made, every speech Wang Yi, China’s Foreign Minster has made and every speech every single diplomat or government official makes as well as every media report which China presents to the world all state the same thing – China wants cooperation, it wants mutual benefit and it wants a peaceful world.

Now, I know some people won’t believe that because we are bombarded with “Bad China” narrative on a moment by moment basis, but the fact is, it’s really hard to prove wrong and 80% of the world, the people we used to call the Global South, the Underdeveloped World or the Third World know this. China means what it says, it delivers what it promises and if Europe really wants to grow with the rest of the world, rather than as they are currently doing, contracting with a belligerent and warlike US, then working with China is, without any doubt at all, the best way.

In order to cooperate with China and have China share its leading technologies with the rest of the world the world has to pay attention to one thing. China is not our enemy, China makes it abundantly clear that working together will be for mutual benefit. If China lends money, it doesn’t want control of infrastructure, if there’s a dispute it will go to court not to war. But if we want to do business with China, we do so on the basis of mutual trust. In order to gain, or regain that trust, then removal of spurious and dubiously justified trade barriers will be necessary. That’s called mutual trust and it leads to mutual benefit.

This is not a new world order, there is not a new rules based order, there are no deviations from rule of law and there is not a new world leader with China. What China, and much of the rest of the world wants, is an adherence to the rules that already exist, a cooperation under the Charter, the conventions and the resolutions of the global majority in the United Nations. An acceptance of international laws for trade in the world trade organisation and rules of war in the international criminal courts.

China hasn’t tried to change the WTO, it uses and applies by the rules of it.
China doesn’t want to change the UN, it simply wants the UN rules to apply equally to all countries, whether they be rich or poor.
China is happy to comply with the rules of war, the laws related to human rights and all the other conventions that should apply equally to all nations.

Once you realise that, then dealing with China isn’t hard at all – in fact it’s easy.

The EU, if it wants Chinese investment and sharing of Chinese tech, just needs to level the playing field – it’s probably fair to say that factories in Tanzania can make cars just as well as any factory in Europe and would be more than willing to do so. Dar E Salaam Port would be the perfect place for African made Chinese goods to head into the rest of the world – that’s the option facing Europe now.

This is not about Europe stealing IP from China, but nor is it about economic coercion. It is, and should be, about mutually and beneficially growing engagement rather than escalating confrontation with China.

^ https://x.com/jynpang/status/1859084761928528023

• https://www.sais-cari.org/staff/

** https://www.unav.edu/web/global-affairs/djibouti-the-tiny-valuable-nation-hosting-the-world-s-military-giants

^^^ https://english.cnipa.gov.cn/art/2024/5/11/art_3090_192413.html

^* https://www.forbes.com/sites/siladityaray/2020/08/03/apple-faces-14-billion-patent-lawsuit-in-china-that-may-block-iphone-sales-in-the-country/

*** https://www.glassdoor.com/Salaries/factory-worker-salary-SRCH_KO0,14.htm

^^ https://www.forbes.com/sites/jackkelly/2024/10/15/the-globalization-and-offshoring-of-us-jobs-have-hit-americans-hard/