Is It Just Drip, Drip, Dripping Away?…

We are talking here about U.S. competitiveness and economic might. In the 1800’s we wrestled economic power away from Britain. We begged, borrowed and stole their technology and trade secrets and this allowed us to take over the top slot.

Now we have a new competitor – China. They are trying to do the same to us as we did to the British, just with ‘Chinese Characteristics.’ They drag their feet about opening their markets and when they do open them, they demand that we transfer our highest technology to Chinese companies. It can seem like a no-win game, either we don’t transfer the technology and lose out on their large market or we do transfer knowledge, get access to their markets but then face enormous competition down the road from companies who now have our cutting edge technology.

The big boys like Qualcomm, Intel and Microsoft all hold world dominating patents. Literally every wireless device in the world is reliant either on Qualcomm’s chips or its patents. The Chinese have forced Qualcomm to share information on how they design and build their chips with Mainland companies and also to make investments in Chinese research in artificial intelligence, supercomputing, data centers and cloud computing. Other companies like Microsoft and Intel are being required to do the same.

China is sending an enormous number of students abroad and as the chart here shows, most are returning to China, some because we make immigration so difficult. We are educating the best and the brightest from China and then pushing some out the door. Doesn’t make much sense. 

Finally, China has launched a major initiative to rebuild the trade routes from China to Europe both by sea and by road. The One Belt One Road initiative already involves over $900 billion of investments in ports, railroads, etc. U.S. companies like GE, Caterpillar and Honeywell are benefitting but the price they pay is having to partner with Chinese companies who then learn the secrets of managing the logistics of big projects. The partner soon becomes the competitor.

One way to look at all this is that the world is very competitive today and we just have to live with this. The darker side however is that China is slowly but surely snipping away at America’s economic dominance. We side with the former view but we fear the latter.