Forced Tech Transfers Are on the Rise in China, European Firms Say

Ironically, there are aircraft carriers moving around the oceans forcing some countries regarding some agenda.

That’s a disingenuous argument.

eg. in 2019, nobody is ‘forced’ to give their data to Google/Apple/Facebook, but actually avoiding those companies entirely is extremely difficult/nigh impossible.

Not engaging with China as a market or producer is practically impossible for many companies. When the choice is (a) give up your business by handing your IP over to Chinese competitors or (b) give up your business by losing access to critical supply chain/logistics, then that can be correctly characterised as ‘being forced’.

> Nobody is forcing you with a gun to your head. Don't want to be "forced" - don't go do business in China.

What if the gun is economic?

Ok - I'm gonna say this is not my element or knowledge - so I'm pulling everything from my nether regions...

But what if the only option - because you need to increase your profit for your shareholders - is either this (play in China by their rules) or "go out of business"; that is, the "gun" here is the choice between staying solvent and maybe even profiting (short term), or shooting yourself in the head (figuratively)?

Do your shareholders care if the IP is transferred, so long as they make money? Maybe they don't understand that continually creating IP to transfer isn't a long-term plan, but maybe they don't care - they're just as parasitical, and when you're dried up, they've moved on or will move on to the next host?

You are right that nobody has to do business in China, but how do you expect them to do business elsewhere?

Let's say a company in Europe wants to manufacture widgets for sale - worldwide or at home, no matter. They have to build a factory to make those widgets, but to do that, they need quick, fast, and cheap access to say, plastics, screws, molds, electronic parts, PCB manufacture, and the list goes on and on and on.

Where do they get that? None of that exists nearby; maybe at one time it did, but not any more. Some or all of that stuff they can get in China, but now they have all the costs of getting the materials to them (import/export), then quality assurance (if they don't have someone in China checking for them), etc. At a certain point, they are now spending a ton of money as overhead just to get the parts to make the widgets, because that infrastructure is no longer available nearby. That cost will be passed along to the consumer - but as soon as that widget, or something similar, can be purchased cheaper closer to the source of those components, to eliminate those extra costs...well, they're not going to go with the local guy any longer.

You (that is, the government) could try to tariff their way out of it, but unless the country and citizens are willing to completely obliterate their environment to make manufacturing of those components as cheap as they are in China (and China, btw, is experiencing this, and I believe this is what is driving their investment in countries in Africa and elsewhere - they are essentially offshoring what was offshored to them; externalizing the environmental deficits to another country - maybe also cheaper labor?)...

I'm not going to belabor this any longer; I just think it's not as simple as saying "well, don't make stuff in China"...

If by "lemming syndrome" you mean "tragedy of the commons", you're entirely right. This is exactly why either a concerted US government push-back is needed (as is occurring now) or an acceptance of the tech transference (as occurred before).

Yes and when China signed up for WTO they also promised to fully open their markets up. And no state support for their firms.

it helps to avoid a problem that existed since colonial times where colonial powers buy raw materials cheaply, manufactures in home country then exports processed/manufactured goods to colonies at orders of magnitude higher prices

I think a unique problem with China (and India too in the future) is that it is so big that the consequences of transfer materialize faster and and in bigger ways. Unlike smaller developing nations, China seems to be pretty good at learning and implementing, either as a matter of policy or through the sheer size of its markets and burgeoning professional class. Siemens and Kawasaki probably didn't expect China to internalize their high speed rail tech in a few short years, and proceed to compete internationally against them. Where do you draw the line from acceptable transfer? Is stealing a retroactively-applied term when someone exceeds the teacher or can the terms of transfer be done better upfront?

In other words, I wonder if there's a way to adjust tech transfers to developing countries based on not just the level of development, but also how 'dynamic' the developing country is? Is it fair to punish a country having a population and policies in place that focus on learning and development?

Which is a good thing. A nice gesture by the USA. WHich is now being abused by a country that obviously being very antagonistic.

If negative pressure is sustained long enough, alternatives will be developed. How long has China held a dominant position in electronics assembly? Less than 20 years...and that would be generous.

So things can change, definitely not overnight, but in a few years.

Chinese entrepreneurs have been opening factories in Africa, actually.

Relevant podcast:

https://hbr.org/ideacast/2017/11/the-hardscrabble-business-o...

They can’t run away, but, automation will make millions unemployed, that is almost a worse problem, none to blame !

Isn't IP transfer abundantly mentioned at the end of the article?

It removes much of the incentive to build new tech if you have to turn it over and let someone steal it.

I wouldn’t go into China with any proprietary tech as a foreigner.

yes it makes sense for countries to do this to avoid getting raided by foreign companies that have them over a barrel

Of course technology transfer is good for the transferee. I would like a pony too.

What the article is talking about is the forced joint-ventures. Do you want to open up a factory to make your product in China? In many industries, that is not legal. You have to find a Chinese partner to do a joint venture with. You can't just pick any company to do the joint venture with either. Practically it needs to be one that has politically connected owners, so that you don't have endless problems with permits and inspections.

Even though the law states that technology transfer is not a condition of the JV, any politically connected JV partner is going to do what politicians ask of them, which is demand technology transfer. Therefore to do business in China, you're forced to transfer your tech.

Meanwhile in the U.S. if you want to start a business, you fire up Stripe Atlas and you're done in ten minutes.