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The U.S. Considers How to Limit Chinese Company and State Investments in the U.S.

ArmchairTechInvestor, June 28, 2018, by Brad Peery

Book-Simon and Schuster: China vs. U.S. 2018, A Police State vs. A Democracy. Expected publishing date: September 1, 2018
Book on Amazon.com: Trump’s Political Agenda and Achievements

Blogs
www.ArmchairTechInvestor.com, China vs. U.S. Issues
www.ArmchairPolitician.US, Trump Political Achievements

We are in the process of writing a Conclusions Chapter for our book, China vs. U.S. 2018 A Police State vs. A Democracy. The three main issues that will be covered in the conclusions chapter are:
• China has underway continuing efforts to acquire the intellectual property of U.S. companies in China and the U.S.;
• U.S. companies are subject to discrimination by the Chinese government in seeking to invest in China;
• China perpetuates a U.S. trade deficit that is being used in part to finance an aggressive One Belt, One Road (OBOR) Initiative to form political, economic, and military relationships in about 70 countries in Asia, Africa, the Middle East, and Europe; and
• What does the U.S. need to do to meet these long-term threats to the U.S. and its democracy.

The China investment in the U.S. element of these issues is addressed below.

*There are substantial intellectual property theft issues that the U.S. has leveled against China both in the U.S. and regarding U.S. companies operating in the Chinese market. The Committee on Foreign Investment in the U.S. (CFIUS) screens foreign investments in the U.S. to determine whether they are a threat to U.S. national security. The U.S. has passed legislation in the House and Senate that would revise the Committee on Foreign Investment in the U.S. (CFIUS) legislation. A compromise bill had not yet been agreed upon by the two chambers as of June 2018. President Trump had proposed broadening the legislation to go beyond national security interests to include such issues as China making small venture capital investments in the U.S. However he may have relented on tightening the scrutiny.

The focus of additional restrictions on China could involve scrutiny of more transactions, including possible limitations on state-owned companies. An export-import section could examine the treatment of U.S. companies doing business in the China market.
*President Eases His Approach On China, Wall Street Journal, by Bob Davis, June 26, 2018

The issues of intellectual property theft from U.S. companies also extends to China. It has a plan, “Made in China 2025” that details 10 areas of technology that Chinese companies will try to dominate by 2025. From a military standpoint, the most important areas are information technology, aerospace, maritime, robots, and advanced materials. China has been downplaying its Made in China 2025 policies, but it is probable that these policies will continue to be pursued aggressively.

Two factors of importance in the China market are that there are only 3 Chinese companies that are allowed to directly access the web and foreign companies must go through them to use the Internet. The second important factor is that foreign companies must have Chinese partners with whom they must share their technologies to do business in China.

International trade with China has two aspects that are crucial to understand the situation. On one hand, China imposes tariffs on foreign companies that want to export into the China mainland market. The size of these tariffs is substantial, including 25% on vehicles exported from the U.S. There are also Chinese industries that are protected under an outdated World Trade Organization (WTO) that still treats China as an emerging country and allows them protections for sectors that are vital to their national defense. The U.S. has imposed tariffs on steel and aluminum that are based upon these industries being vital to the U.S. national defense, and domestic manufacturing needs to be revitalized. This is in line with what China is still allowed to do under the antiquated WTO structure.

**Made in China 2025
1. Information Technology:
a. Semiconductor chips;
b. Computers;
c. Cloud computing systems;
d. Industrial censors;
e. Artificial intelligence; and
f. Quantum computers.
2. Robots
3. Aerospace:
a. Airplanes;
b. Jet engines; and
c. Civilian space industry.
4. Maritime:
a. Ships; and
b. Out-at-sea engineering equipment and systems.
5. Railways
6. Smart Vehicles:
a. Electric; and
b. Hybrids.
7. Renewables:
a. Geothermal
b. Hydro;
c. Solar; and
d. Wind.
8. Farming:
a. Equipment
b. Genetically modified organisms; and
c. Tractors.
9. Materials:
a. Advanced basic materials; and
b. Strategic materials
i. Rare earths
ii. Alloys.
10. Drugs and Devices:
a. Biotechnology;
b. Drug development; and
c. Hospital equipment.
**Made in China 2025: Beijing’s big ambitions from robots to chips, Reuters, Adam Jourdan, April 20, 2018

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