MAW: China update

Chinese stealth fighter jet may use US technology

A Chinese stealth fighter jet that could pose a significant threat to American air superiority may borrow from US technology, it has been claimed.

Balkan military officials and other experts said China may have gleaned knowledge from a US F-117 Nighthawk that was shot down over Serbia in 1999.

"At the time, our intelligence reports told of Chinese agents crisscrossing the region where the F-117 disintegrated, buying up parts of the plane from local farmers," said Admiral Davor Domazet-Loso, Croatia's military chief of staff during the Kosovo war. "We believe the Chinese used those materials to gain an insight into secret stealth technologies ... and to reverse-engineer them."

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Chasing the China Bandwagon

Mr. Hu did not go to New York, but his American visit was duly noted on Wall Street and its environs. At Goldman Sachs’s headquarters on West Street on Thursday, Jim O’Neill, the chairman of Goldman Sachs Asset Management, said he believed that the world’s economic growth rate was rising sharply.

“At the core of all of this is the behemoth known as China,” he said, adding that it must be part of every intelligent investor’s long-term strategy.

Mr. O’Neill is perhaps best known as the economist who nearly a decade ago coined the acronym BRIC — for Brazil, Russia, India and China — developing economies that, he said, were big enough and growing rapidly enough that no investor could afford to neglect them. The giant in that group is still China, he said, whose transformation has been so thorough that “most people, and not just investors, don’t realize the sheer dimension of its rapidly growing importance in the world economy.”

Given its current size and growth rate — a sizzling 10.2 percent in 2010 — China’s economy is likely to add roughly $1 trillion in G.D.P. in 2011, he said. To put that into perspective, he said it is “sort of like creating half of a United Kingdom.” Over the last decade, he said, China’s economy “has created three United Kingdoms, and that’s really extraordinary.”

Several articles and op/eds on China from Foreign Policy

Chinese goose and American gander

Let's start with GE Chairman and CEO Jeff Immelt. About a year ago, in the course of a dinner he thought was private, Immelt complained that China is a miserable place in which to do business. It was bent on expropriating GE technology and made selling in China very difficult if not impossible unless a company also produced in and transferred technology to China, he opined. A few months later, Immelt spoke of having an epiphany about the dangers of off-shoring too much GE production. In the GE annual report, he wrote of the need for and his intent to put more investment in the United States and to bring some of GE's foreign production back to America.

But the announced deal will take things in the opposite direction. The investment and production will be in China and the technology (much of it initially paid for by U.S. tax payers and the Defense Department) will be transferred from the United States to China, thereby enabling China's aviation industry to move more quickly toward its goal of overtaking the U.S. and Europe in commercial and military jet production.

So what's going on? GE's Vice Chairman John G. Rice put it bluntly in commenting on the fact that China is expected to buy $400 billion of airplanes over the next twenty years: "We can participate in that or sit on the sidelines. We're not about sitting on the sidelines." Rice added that: "This venture is a strategic move that we made after some thought and consideration with a company we know. This isn't something we were forced into by the Chinese government."

Okay, but why can't GE sell to that big market without a joint venture with a state owned Chinese company? Why can't it just make the avionics in the United States and export them to the Chinese aircraft makers and airlines? After all, China doesn't have this technology right now. So GE is a lower cost and infinitely more sophisticated producer than Avic.

Well, one reason might be that if GE doesn't do this deal, another avionics maker might. But hold it. That has to mean that the Chinese are effectively making access to this big market conditional on producing in and transferring technology to China. So who is Rice trying to kid. Maybe the Chinese government didn't call him up and shout directly over the phone that "Mr. Rice we command you to do a joint venture with Avic and to transfer your technology and production to China." But Rice is not as dumb as he thinks we are. He was afraid that if he didn't produce in China, he wouldn't have a chance at the business.

And Immelt did say that he had cleared all this with the U.S. Departments of Commerce, Defense and State.

But that raises an even more interesting question. Will we be hearing of any joint ventures between U.S. and Chinese companies that will transfer Chinese technology and Chinese based production to the United States? I'm sure your guess was "no." And you're right. But why don't Obama and his Commerce, Defense, and State Departments make it clear to the Chinese that if they want to sell in the U.S. market they need to produce something here and transfer some technology here? China is way ahead of the U.S. in the production of solar panels for example. This is a technology being fostered by the Obama administration. Why not get the Chinese to help us in solar panels just as Immelt and GE (with the apparent approval of the Departments of Commerce, State, and Defense - and the White House) are helping them with avionics?

After all, isn't what's good for the Chinese goose also good for the American gander?

Think Again: American Decline

This time it's different. It's certainly true that America has been through cycles of declinism in the past. Campaigning for the presidency in 1960, John F. Kennedy complained, "American strength relative to that of the Soviet Union has been slipping, and communism has been advancing steadily in every area of the world." Ezra Vogel's Japan as Number One was published in 1979, heralding a decade of steadily rising paranoia about Japanese manufacturing techniques and trade policies.

In the end, of course, the Soviet and Japanese threats to American supremacy proved chimerical. So Americans can be forgiven if they greet talk of a new challenge from China as just another case of the boy who cried wolf. But a frequently overlooked fact about that fable is that the boy was eventually proved right. The wolf did arrive -- and China is the wolf.

The China Paradox

Until recently, the Chinese paradox that most puzzled Western audiences was how to understand a country that is both communist and hyper-capitalist. But that is hardly the only, or even the most striking, paradox of the modern Middle Kingdom. China is fast on its way to becoming a global superpower, even as it grapples with such enormous domestic challenges as supplying enough energy to keep its cities lit, absorbing millions of rural migrants into cities each year, reining in choking pollution, creating a social safety net, and attempting to lift millions out of poverty. Although China holds $1 trillion in U.S. debt, its per capita GDP is still roughly one-tenth that of the United States. Beijing is subsidizing China's fast-growing clean-tech export industry, even as the skies above the country's largest cities remain a hazy gray. Such seeming contradictions are dazzlingly confusing to outsiders -- and sometimes to China's own leaders.

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