Comment by watertom | Hacker News Reader

Comment by watertom | Hacker News Reader

In order for Cisco to make products in China they need to share all of their IP with their Chinese partner, you need a Chinese partner company in order to do business in China.

I've seen people say that you don't need a Chinese partner, I've done business in China, I needed a partner company, and I was only doing software.

You need to share your IP with your Chinese Partner company. Your Chinese partner company is partially owned by the Chinese Government. When you share your IP with your Chinese partner company they share it with their owner, the Chinese Government. The Chinese Government then shares your IP with all the other Chinese companies that could benefit.

The Chinese haven't needed to steal Commercial IP because western companies have been handing it over to them willingly.

Making fakes

I got to know people at my Chinese partner company, and a relative of one guy was in the business of helping western companies manufacture in China. I was lucky enough to get a tour of a few "high end brand" factories. The relative was quite open about the fact that they right down the road was another factory, which I also toured, that looked almost identical to the first, where they were making similar products, almost identical to the first. The only difference was the leather, and quality of the fabric, and the hardware, you can't make a knock-off handbag if you use the same quality materials. The relative did allude to the fact that the cost of the second factory was buried in the cost of the first.

Never China.

I didnt realize how bad it was till I read the counterstrike go source code from the most recent leak. It has a lot of code in it for their “partners” which is exclusive for valves one chinese partner and includes censorship and reporting to a database meant for the chinese government (reporting was for a bunch of things including cursing, cheating, and even playing on the same side as a cheater)

Edit: to clearify, this behavior is behind a flag and only happens in the chinese version of CS:GO

Since the GitHub repo is a top search result on Google, care to mention a filename?

All I see are lots of "removed for partner depot" comments which are the kind of thing that shows up when code has been stripped down for public/semipublic sharing

try searching for China there: https://github.com/perilouswithadollarsign/cstrike15_src/sea...

>game/shared/bannedwords.cpp line 3

// Purpose: Implementation of China Government Censorship enforced on all user-generated strings

>engine/net_ws.cpp line 2971

// Set partner. Running in china?

Why do companies do this? It's not as if this is a secret. Is access to the Chinese market and manufacturing really worth losing your IP and having knock-offs made at scale?

Do you have any references to back this up? There are many large US and European companies doing business in China, and it is very hard to believe they all hand over all their IP willingly.

Just a Google away... this isn’t exactly a new topic. I don’t think they all hand over IP exactly as the GP stated, but it effectively happens through various means including what the GP said:

https://www.wsj.com/articles/how-china-systematically-pries-...

I've not met a (large) company that didn't take active measures against IP theft in China. Its not highlighted anywhere for the same reason security back home isn't highlighted: you don't want to share any info and you don't want to make a hard relationship any harder (by offending Chinese leadership).

> There are many large US and European companies doing business in China

The rush into China 20+ years ago forced the less willing to follow, just to stay cost competitive. And it's not like the original flood of businesses went in agreeing to give up all their IP, or expecting to wed themselves to Chinese manufacturing. They all went in chasing gold--cheaper production, access to what was to become the world's largest market. And like every gold rush in history expectations were foiled and people ended up making compromises they wouldn't have otherwise made.

I remember a graduation party I attended in 2000. A friend's parents flew in from India, where they owned several textile factories. I asked the father some questions about the direction of Indian and Chinese manufacturing, which caused him to launch into a long lament about the speculative investments flowing into China. So many investments were flowing into China they were making garments below the cost of inputs, and that's with the already low cost of labor, and without government financial aid. It made it impossible for him to compete fairly in the global markets.

The Chinese government knew what it was doing. They deliberately hyped the prospect of the Chinese domestic market to no end, holding it out as bait, and American businesses bought it hook, line, and sinker. They situated not only their most crucial industrial assets in China, but sent boatloads of cash and, more importantly, expertise on top of it. It's hard to exaggerate the irrational exuberance that played out over two decades.

Slowly, but surely, these mistakes are becoming apparent--not that any American MBA would ever admit to a personal error in judgment, or that they're prepared to make an about-face. This notion that it will all be worth it some day as the Chinese market matures still holds sway.

Of course, the potential of the Chinese market was always there, and still is. The error in judgement was believing China was dumb enough to just hand it over to the West, and to do so without exacting a price. That price is turning out to be far larger, and the first-mover advantages far more meager, than if the integration of China into the global market had occurred more organically and gradually, without American industry falling over themselves clambering across the Pacific, easy targets for industrial exploitation. Japan seems to have done a better job of it, as have many other countries. It's mostly the Americans that look like idiots.

I think we also can’t overlook the competition factor. If you main competitor is relocating production to China at 1/10 of the price then you really have no choice, but to follow.

Scott Sumner and John Cochrane make strong arguments that companies transferring intellectual property to China is neither poor business sense nor necessarily a bad thing https://johnhcochrane.blogspot.com/2018/08/intellectual-prop...

A large portion of what they produce has backdoors and large companies in china are government owned to some degree due to its different system of governance, this makes it more comparably to one large (and aggressively anti-compedative) company doing all of this rather than a country.

I can't find the source for it now but there was a story on Marketplace probably a year ago about how a lot of Western companies were scared to report the theft for years to their respective governments due to the fear that if the Chinese government found out, they could be at risk of losing their license to operate in China.

Do some digging and it’s easy to find. During the Carly days the people I was friendly with at HP were all fired up about a bunch of their network and storage connectivity components being pirated by the manufacturing partner.

The management at these companies in general are pretty dumb.

There’s a reason why in an age where all of the things are being computerized, most computer companies perform very poorly. When I followed this industry segment closely, Macs made more profit than HP, Dell, Lenovo and Asus combined.

So you are saying the fabs which TSMC operates in mainland China automatically spill over their IP to SMIC?

Very interesting but they might not have a need to steal but they still actively do en mass.

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