Trump administration finds convenient excuses for its own economic troubles, economists

Chinese economists are lashing back at claims being made by the Trump administration that China engages in forced technology transfers, suggesting the US President is making up excuses to justify his desire for a trade war.

Lin Yifu, a senior economist at Peking University, says foreign companies have never been forced to transfer their technologies to Chinese companies when they enter into the Chinese market.

“American companies come to China to invest in its market and to manufacture products for Chinese consumers. It’s natural for them to bring their best technologies, in order to enhance the competitiveness of their products in the market.”

The economist says that multinationals, especially car makers who rely on China for a big chunk of their sales revenue, use their cutting-edge technology to attract consumers in the world’s biggest auto market.

“For instance, in the auto industry, China is by far the world’s largest producer and consumer of automobiles. On top of the United States, a lot of other countries, including Germany, Japan, and South Korea have operations in China. If automakers like General Motors and Ford don’t bring their best technologies, how can they gain an advantage over their rivals in the fierce competition of the Chinese market? ”

A huge amount of money is invested every year in China into research and innovation. China’s research spending has expanded by 20 percent a year since the year 2000. In 2017 alone, investment into R and D (R&D) hit a record high of nearly 1.8 trillion yuan, or 260 billion U.S. dollars.

China also pays out a growing amount of fees to license intellectual property. Fee payments from China to foreign IP owners have risen by 17 percent a year over the past two decades.

Some multinationals have begun to feel the pinch as the buying habits of consumers in the world’s second-largest economy change rapidly. And they’re facing rising competition from domestic rivals.

Foreign investors in China long received what was called ‘super national treatment’, a practice that gives foreign investors preferential tax treatment over domestic enterprises.

But the practice was deemed to be unfair for domestic companies, and since the year 2000 it has gradually been phased out.

Dong Yan, a senior researcher at the Chinese Academy of Social Sciences, believes it can be difficult for American companies to adapt to the quickly evolving conditions of China’s fast-paced market.

“In fact, we don’t have any items in the law that requires foreign companies to transfer their technologies. American companies have felt the pressure because China is undergoing an economic transition. For example, the ‘super national treatment’ for foreign companies in China has been gradually canceled over the years. They now receive equal treatment with their domestic counterparts.”

The loss of preferential treatment over their domestic counterparts might be a frustration for foreign enterprises. But as China continues to open wider to the world, it is continuing to offer opportunities for global investors.