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What Happens When China Does What Trump Wants? - Printable Version

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What Happens When China Does What Trump Wants? - C C - Dec 14, 2018

EXCERPT: The Trump trade war with China has never been just about America’s trade deficits. [...] The tariffs are only the means to an end. [...] to "re-shore" American companies to bring their overseas operations and jobs back to the U.S. And China is in its cross hairs as the place where Trump wants the most to bring home American companies and jobs.

To justify the Trump tariffs, the U.S. government points to Chinese theft of intellectual property, unfair restrictions on foreign firms operating in China, subsidies to state-owned-enterprises, and other offenses. Many such complaints are in fact valid. China does have a very dodgy record [...] The government has strong-armed foreign companies [...] Foreign business ownership in China, whether through new direct investment or acquisitions, have been restricted. [...]

What if China now does the Trump administration demands?

It would simply mean that the Chinese market will become much more open and easy for foreign companies to operate in, including American companies. Stronger property rights protection will allow foreign companies to deploy their advanced technologies and know-how in China, which make them more competitive, without the fear that some Chinese copy cat miraculously conjuring up an identical product in short order to compete with them. They will have 100% ownership of their operations in China, and be able to expand their operations across the country through fully-owned subsidiaries. They will take on a Chinese partner only if it makes business sense to do so, not because they have to. Finally, less subsidized state-owned enterprises will mean a more competitive domestic market with a more level playing field.

There are signs that China is prepared to implement some of the necessary reforms that are consistent with the demands of the Trump administration [...] This new phase of market opening and reforms will be very beneficial to China. Chinese companies are increasingly prolific producers of intellectual property, and they want better intellectual property protection as much as foreign companies....