It’s important to remember that in China, copying a neighbor’s product is not only acceptable but even a respected way of operating. Why reinvent the wheel when you can focus resources on how to manufacture the same wheel more efficiently and undercut the wheel’s inventor by offering the same thing cheaper? The only reason the country has any IP laws is pressure brought from outside. In practice, within the country, these are largely disregarded, and they only have any significance if a product is intended to be sold outside the country.
Many Western operators have unfortunately learned this the hard way. What from our perspective is somewhere between cheap copying and industrial espionage is “business as usual” in China.
A funny example of this came to mind. As China has strongly entered the automotive industry, there are companies there that sell abroad and those that don’t. Among those that don’t, you find some remarkable cases. Some, for example, have completely copied Bosch’s inertia sensors, right down to the serial number. They know very well that it’s useless to try to enter, say, Western markets with such a product, but on the domestic market, it has no significance, so there’s no point in even trying to conceal the matter, not even by changing the serial numbers.
Many places are already in trouble with these replica parts manufactured in China. “Fortunately,” often it’s actually a completely 1:1 official part that is just sold “through the back door” bypassing official channels – a Chinese subcontractor simply uses their free capacity, and if such a part ends up with an end customer somewhere in the world, it is actually exactly the same as an official part; the official manufacturer just hasn’t received their own margin, and if the part’s serial number isn’t found on the lists, the manufacturer will indeed disclaim responsibility if a complaint is made.
But then there have been cases where the part is very similar, but not from the same production line. Clearly, a party manufacturing official parts in China has been involved in the copying, but the part has been made in another factory, and the copy is not necessarily identical – perhaps materials were slightly economized, or quality assurance is somewhat lacking. These parts find their way into spare parts chains through various routes, and then when problems emerge, the official manufacturer quickly washes their hands of it as the part didn’t originate from them, but it can be such an accurate copy that distinguishing it is difficult. From the Chinese perspective, nothing wrong has been done; goods for which there is global demand have been manufactured, and in their opinion, everything is fine. Outside China, supply chains are in turmoil as they need to somehow verify what is genuine and what is a copy. And this is not about crude counterfeits but specifically about making truly identical components. At worst, these have been found in aircraft spare parts chains, and also in military equipment…
In this example, the spare parts (aircraft cockpit avionics) are from an official manufacturer, but it was revealed that some of the circuits used in them were not original but Chinese copies and/or old circuits removed from electronic scrap, which were re-marked with incorrect information in China and sold as spare parts.
In this regard, the Chinese are very efficient – if there is demand for a product, it will be arranged. Just don’t ask too many details…
A good overview of how China practically became a monopoly in rare earth production and processing over the last 40 years.
When China realized the need to modernize, enormous amounts of money were invested in this area in the 1980s. Rare earth production, for example, received significant tax breaks. The industry was fragmented, overproduction was chronic, and corruption was rampant. Cheap Chinese production practically drove rare earth production in the rest of the world into bankruptcy, but this did not cause alarm bells to ring elsewhere.
In the 2010s, the Communist Party, tightening its grip, cracked down on the industry at Xi’s command. Corruption was rooted out (almost half of the production could have been illegal!). The industry’s numerous companies were eventually consolidated into one dominant giant, China Rare Earth Group, which now holds a commanding market position. The company is, of course, controlled by the state.
Now it is easy for Beijing to monitor, adjust, and regulate rare earth production as a geopolitical ace up its sleeve.
This operating model really suits many things that are manufactured in China. Practically everything humanity needs is made (or what else is invented on top of that), and with cheap prices, other countries are put in a tight spot through competition. In other products, it’s harder to achieve a dominant position, as other countries can also produce products if necessary, but China is strong in many sectors.
So, behind this is a certain determined logic that simply aims at different things than what is aimed for in Western societies.
One can also ponder the matter with their own eyes by simply visiting a local Prisma or K-rauta. You won’t find much American merchandise, but you’ll find a vast amount of Chinese junk, and a remarkably significant portion of branded goods, even those thought to be from other countries, are “made in China” if you look closely. While the USA might still rule in high tech, by glancing at the student demographics of almost any respected university outside the USA, a slightly different future forecast than usual might begin to emerge from the crystal ball.
I agree with the conclusion but disagree with the reason.
The reliability of China’s statistics can be a bit random, and I don’t know about their accounting practices either. Well, that’s not nice, but there are much worse things there. In my opinion, the essential political risk lies precisely in the politics, when everything is subordinate to politics. You cannot trust that you actually own what is yours on paper, because the checks and balances so highly valued in the West do not exist there.
This is the essential aspect of China’s strategy that the West refuses to understand, accept, and counter. China chooses its desired industry and, with state support, invests heavily in it, driving competitors elsewhere into profitability problems. This way, markets are captured, and non-Chinese competition is reduced in the long run. As a bonus, dependence on China arises, along with potential espionage benefits, such as in telecommunications, and potential blackmail opportunities, such as remote control of electric cars.
China’s Minister of Commerce, Wang Wentao, says that the country plans to increase imports and strive for more “balanced trade” over the next five years.
China is planning to increase various trade and investment agreements, but at the same time, the country is trying to ease consumers’ daily lives by supporting, for example, the purchase of cars and home appliances. In addition, the consumption of services is to be increased and unnecessary restrictions removed as part of the economic strategy. Of course, it’s another matter how successful they will be.
The article below explains how China is accelerating its AI investments, but above all aims for widespread, diverse adoption… not necessarily the dominance of top-tier models. China is building infrastructure based on cheaper hardware and optical modules, while the United States still leads in advanced chips.
Baidu, Tencent, Alibaba, and data center companies are reporting strong AI-driven growth, and the state is also defining common standards for computing capacity. China is close to the United States in top-tier models, but chip shortages and high costs are reportedly slowing its development and scaling.
China increased its total exports more than expected in November, but “deliveries” to the United States plummeted by almost 30 percent and have already shrunk for the eighth consecutive month, even though a truce has already been reached in the trade war.
The EU and ASEAN markets are compensating for the drop and the trade balance is swelling, but weak domestic demand and the good old housing crisis are forcing the country into further stimulus. In addition to these, the strengthening of the yuan emphasizes the need to boost consumer demand.
"Key Points
Outbound shipments surged 5.9% in November in U.S. dollar terms from a year earlier.
Reuters-polled economists had forecast an average 3.8% growth.
Despite the tariff truce, exports to the U.S. plunged 28.6% in November."
We’ll see, this has been talked about for the last 15 years.
At the same time, pressure to act is growing elsewhere in the world. For example, the German economy is structurally struggling under Chinese competition and export pressure.
Previously, Germany’s economy had a surplus in relation to China, now it has a deficit of 100 billion euros per year!
\u003e BERLIN, Nov 4 (Reuters) - Germany faces a record trade deficit of 87 billion euros ($101.46 billion) with China this year, according to a forecast by state-owned international economic promotion agency Germany Trade \u0026 Invest (GTAI) seen by Reuters.
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\u003e On the one hand, Otte said, the trade imbalance is due to weak German exports to China, which are set to fall by over 11% this year.
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\u003e “China is slipping as a customer market. This year, China is likely to rank only sixth, behind Italy,” said Otte. Just a few years ago, it was in second place behind the United States.
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\u003e And on the other hand, more Chinese goods are ending up in Europe’s largest economy, likely also as a consequence of high U.S. tariffs.
