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China’s Goal Is To Dominate The Internet. They Are Using Their Very Large Home Markets, And Unfair Trade Practices, To Achieve That Goal

ArmchairTechInvestor, April 23, 2018, by Brad Peery

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ZTE and Huawei are two Chinese companies that pose a threat to the U.S.’s broadband communications networks. ZTE has become the fourth largest cellphone supplier in the U.S. The UK banned the use of ZTE equipment because of concerns that China could force the company to infiltrate the UK’s broadband communications infrastructure.

China essentially requires Chinese companies that wish to do business in China to pledge allegiance to China. This can result in those companies being used to spy on countries where they do business. This is the equivalent of the U.S. requiring Apple to spy on behalf of the U.S. government, which they would not do. The reverse is true, in that Apple is being required to support Chinese government objectives that amount to Internet usage censorship, such as by requiring the removal of Apple Internet applications, as a cost of doing business in China.

The technological war with China has begun. It remains to be seen whether U.S. companies can do business in China without giving away their technology. China has pledged that proprietary company technology will be protected, but such words are easily annunciated.

In the case of access to the U.S. information technology markets. companies such as ZTE and Huawei are finally being restricted because of the business they do in the U.S. that could provide a threat to U.S. security, and open the U.S. up to Chinese surveillance.

China has a vision to become an Internet and tech power. It has pledged more state support for companies caught up in the trade fight with the U.S. A step China has already taken to dominate the Internet is to allow only three Chinese companies to directly access the Internet. Any foreign company that wants to access the Internet must do it through one of those three companies. This is a step along the way toward China’s ambition to dominate the Internet.

One of the main issues between the U.S. and China is the claim that China is stealing the intellectual property of U.S. companies. This is typically done through forcing U.S. companies that want to do business in China to form joint ventures with Chinese companies. One of the companies that has resisted this restriction was Tesla, when it decided to build an electric vehicle plant in Shanghai. It will be required to pay a 25% import tax on all vehicles sold in China. This is the kind of treatment that justifies Trump putting 25% tariffs on U.S. imports of Chinese products, such as steel.

As of April, 2017, the U.S. was drawing up a $100 billion sanctions bill against China, because of the alledged stealing by Chinese companies of the intellectual property of U.S. companies doing business in China.

The U.S. has imposed sanctions on ZTE, a large Chinese smartphone company, that restrict it for seven years from using semiconductor processors manufactured by Qualcomm, or the Android platform manufactured by Alphabet (Google).

Semiconductors are a “core” area where China lags behind the U.S. and that China wants to achieve Technological breakthroughs. The U.S. has blocked Broadcom, a Singapore company that has recently moved to the U.S., from pursuing an unfriendly takeover of Qualcomm. Broadcom could have discontinued Qualcomm’s 5G chip development program, opening the market to a Chinese company. This would create security risks for the U.S., including defense communications.

Mr Xi, the new Chinese President for life, has pushed Chinese companies to collaborate with the military, particularly in information technology, including quantum computing, artificial intelligence, and other advanced technology fields.
Xi Outlines Vision for Furure as Tech Power, Wall Street Journal, by Josh Chin, April 23, 2018

ArmchairTechInvestor Opinion
China has a very large domestic market that is enticing foreign companies to meet Chinese edicts that may disadvantage the foreign companies home countries in competing with China economically and militarily.

The new dynasty of President Xi needs to be viewed as at least a 20-year focused effort by China to dominate certain information technology and other technology driven industries, such as electric vehicles. That focus, plus the One Belt, One Road Trade network, involving 60 countries, will provide an increasing challenge to the current global technologic, economic and military dominance by the U.S.

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