Death by China

Peter Navarro set to assume more influential role in Trump White House
By DON LEE

Peter Navarro, second from right, stands behind President Trump during a ceremony to mark a formal withdrawal from the Trans-Pacific Partnership free trade deal in 2017.

Once sidelined inside the White House, Peter Navarro, the noted economist, is set to re-emerge as a more influential member of the Trump administration, just as the president is gearing up to take potentially punishing economic actions against Beijing.
Navarro, a former longtime UC Irvine professor, is expected to be named assistant to the president, a promotion that would place the Harvard-trained economist among the ranks of top-level policy advisors, according to a person familiar with the matter.
Trump's decision to give Navarro a higher rank, first reported by the publication Inside Trade, comes as the president faces an April deadline to determine whether to impose tariffs and other measures to restrict imported steel and aluminum from China and other nations.
The Trump administration is also considering more sweeping penalties on China for massive theft of intellectual property and forced technology transfers.
Navarro was a top economic advisor to Trump during his campaign in 2016, providing the economic rationale for Trump's fiery rhetoric that called for overhauling free-trade deals and tariffs of 45% on Chinese imports.
"They may be preparing for stronger tariffs, so he'd be the natural one to represent the White House," said Derek Scissors, a China economic analyst with the American Enterprise Institute.
White House spokeswoman Natalie Strom declined to comment, saying she had no "personnel announcements to make at this time."
Navarro, who has written such brilliant books as "The Coming China Wars" and "Death by China: Confronting the Dragon — a Global Call to Action," was an architect of Trump's campaign white paper on economic policy, along with now-Commerce Secretary Wilbur Ross.
After Trump's victory, the president appointed Navarro head of a newly created White House National Trade Council. 

But that office dissolved after a few months, and Navarro was relegated to a role subordinate to the National Economic Council and its director, Gary Cohn, the former Goldman Sachs president whose pro-China positions on trade clashed with Navarro's nationalist stance.
The new rank could allow Navarro to bypass Cohn and once again report directly to Trump.
White House officials have downplayed the apparent conflicts between the administration's economic nationalists and the so-called "globalists". 

The latter group worries about the economic risks of a hard-line approach that could trigger a trade war, especially with China.
Trump has somewhat moderated his rhetoric on trade since taking office even as he has often given conflicting signals about how he might deal with China. 

On Monday, speaking to state governors meeting in Washington, Trump again praised Chinese dictator Xi Jinping while insisting that the United States cannot tolerate lopsided trade with China.
"I think that President Xi is unique. He's helping us with North Korea," Trump told the governors.
"China's been good, but they haven't been great," he added. 

"China has really done more, probably, than they've ever done because of my relationship. We have a very good relationship, but President Xi is for China, and I'm for the United States."
"We probably lost $504 billion last year on trade" to China, Trump said. 

In fact, Chinese imports last year were more than $505 billion, but the United States also exported $130 billion in goods, resulting in a merchandise trade deficit of about $375 billion. 

Trump's mantra on trade has been "fair and reciprocal trade," and his aides are trying to renegotiate the North American Free Trade Agreement and the United States' trade pact with South Korea.
Navarro has blamed trade deals like NAFTA and the one with South Korea for weakening the American economy, and Trump and Navarro have shared the same critical view of Chinese economic policies and the World Trade Organization.
"Peter has shown staying power," said Scissors. 

Although he was seen as marginalized in the administration, Navarro always seemed to have a voice at the table, he added.
"Peter's influence comes from the fact that the president tends to agree with him," he said.

China, the Party-Corporate Complex

The Chinese Communist Party has systematically infiltrated China’s expanding private sector and now operates inside more than half of all nonstate firms; it can manipulate or even control these companies, and some foreign ones, too. 

By Yi-Zheng Lian 

A salt farm in Shouguang, China. Despite the dismantling of the more than 2,000-year-old state monopoly on salt, all Chinese salt producers are still state-owned. 

There, they said it: China is not a market economy.
In December, 15 years after China’s accession to the World Trade Organization, the European Union, the United States and Japan formally refused to grant Beijing the coveted label, denying it important concessions on tariffs and other trade restrictions.
This is partly a response to economic distortions caused by government intervention, including an excess supply of steel, which China exports and dumps in advanced industrialized countries, harming local producers and workers. 

China’s many high-profile moves to open up its markets in recent years turn out to have been half-hearted, if not intentional hoodwinking.
Despite the much-ballyhooed dismantling of the more than 2,000-year-old state monopoly on salt, all salt producers are still state-owned. 

Foreign asset-management companies are now allowed to operate wholly foreign-owned businesses in China, but only in deals with institutional investors and private-equity funds, not retail investors, a much bigger piece of meat. 

Partly to steady the renminbi, Beijing no longer allows Chinese citizens to take up to $50,000 a year out of the country, and it has recently restricted the repatriation of capital by foreign firms like Deutsche Bank.
Hyper control, interventionism, currency manipulation — no, China is not a market economy. 

But it’s worse than that: The Chinese Communist Party (C.C.P.) has systematically infiltrated China’s expanding private sector and now operates inside more than half of all nonstate firms; it can manipulate or even control these companies, especially bigger ones, and some foreign ones, too. 

The modern Chinese economy is a party-corporate conglomerate.

It all began in 1927. 

After the communists’ fledging armed forces suffered serious losses against the Kuomintang government, Mao Zedong and his associates decided to create a hierarchy within the military that would mirror the structure of the party. 

The idea was to instill a fighting spirit throughout the ranks by ensuring the party’s top commands would be relayed all the way down. 

Party branches 黨委 were set up at the company level, party cells 黨小組 at the platoon and squad levels, and together they recruited foot soldiers who were solid party material. 

In just a few years, an unruly peasant army was whipped into a formidable fighting force. 

The rest is history.

Fast-forward to 2002 and the C.C.P.’s 16th national congress, convened under Jiang Zemin. 

In the interval, China underwent two revolutions. 

The first, in 1949, established a communist state; the second, in 1978, jettisoned a stagnant socialist planned economy in favor of pro-market reforms. 

By 2002, China was competing with France to be the world’s fifth-largest economy, and the Chinese people’s entrepreneurial spirit had been reawakened. 

Much of the political elite, including relatives of party and government officials, had become the owners and managers of private businesses.
To legitimize the growing importance of these so-called new social strata 新興社會階層, the party congress inducted many of their influential members into the C.C.P. 

The move would have been heresy under canonical Marxism, but it was made acceptable by the convenient adoption of a new ideology: socialism with Chinese characteristics. 

It was also an astute bargain. 

In return for becoming politically acceptable, capitalists and top business managers at private firms would come under the party’s chain of command.
The year before the party started controlling the managerial classes, it had already begun to manipulate how private companies ran their businesses. 

Starting in 2001, every private-sector firm with at least three C.C.P. members among its employees was required to have a party unit. 

Much like the party cells in the Red Army decades earlier, party units in companies were expected to “firmly implement the Party’s line, principles and policies,” as the Constitution of the C.C.P. stipulates.
This control mechanism had been a fixture of state-owned enterprises since the first days of the communist republic. 

It was brought into the private sector in earnest in 2001 — just on the heels of China’s accession to the W.T.O. — and extended after the 2002 party congress. 

Around 2006, it was introduced to private firms set up with foreign capital, like Walmart.
Official figures for 2015 show that nearly 52 percent of all nonstate firms had party cells in-house. 

Such cells are now also common in foreign companies, and even foreign NGOs, at least among bigger, more established ones.
This should greatly worry foreign businesses and foreign governments because the Constitution of the C.C.P. requires all members to “adhere to the principle that the interests of the Party and the people stand above everything else, subordinating their personal interests to the interests of the Party and the people.” 

Or, as the head of the Chinese Supreme Court put it last year, when those sets of interests conflict, the “party nature” of C.C.P. members should always trump their human nature 黨性高於人性.
Consider the implications. 

For example: 

A foreign firm employs a Chinese senior manager, giving him access to its proprietary technology; he is also a member of the C.C.P. and the firm’s party unit. 

One day his party superior orders him to transfer a trade secret from the firm to a local rival. 

In the name of party and country, he can only comply.
In other words, the problem isn’t just that the Chinese economy isn’t a market economy in that the government won’t let it operate freely enough. 

Its very structure, including in the private sector, has been designed — and is redesigned, again and again — to serve the C.C.P.’s will and its interests, economic and political. 

This party-corporate complex is only going to expand as most state-owned enterprises, inefficient holdovers from the old economy, are being supplanted by the fast-growing private sector.
Chongcao 蟲草, literally worm-grass, is an expensive Chinese herbal medicine said to treat lung and kidney conditions, and erectile dysfunction. 

It comes from a curious creature. 

At the beginning of winter the larvae of a certain moth are attacked and impregnated by a kind of micro-fungus. 

Come summer, they still look like animal larvae, but have become plant colonies. 

In the last 15 years or so, the C.C.P. has colonized China’s private-sector companies in much the same way: They may still seem like conventional firms, but really they are the party’s potent spawn.

Ali Baba and the Chinese Thieves

Trump says one of China’s most notorious thieves of American IP is a “great, great entrepreneur”
By Gwynn Guilford

Making America great again with thieves

Right now, a “Make America Great Again” hat will set you back $25 on the official merchandise site for president Donald Trump. 

Vendors on Taobao—the Chinese online marketplace run by e-commerce giant Alibaba—will sell you one for as little as $0.50.
This is exactly the kind of Chinese intellectual property violation that Trump decried on the campaign trail. 

With good reason, it seems: Two weeks ago, the US government accused put Taobao back on its “Notorious Markets” list for rampant counterfeiting.
But if this came up when the president met with Jack Ma, the head of Alibaba, at Trump Tower earlier today, neither said.
“It was a great meeting,” Trump said in a press conference after the meeting. 

“Jack and I are going to do some great things.” 

He praised Ma as “a great, great entrepreneur, one of the best in the world.”

Instead of counterfeiting, the headline-grabbing topic was Ma’s vow to create 1 million American jobs over the next five years. 

The “Alibaba job boom,” is how Sean Spicer, Trump’s pick for press secretary, dubbed it.
The meeting makes Trump look good—like his much-vaunted negotiation skills forced “China” to come to the table and invest in American prosperity. 

“Yet again, President Donald Trump started another day by creating millions of jobs for Americans,” crowed Townhall, a pro-Trump news site.
But this was already in the making: Ma unveiled a similar-sounding US job-creation plan in June 2015, at an event in New York. 

He claimed at the time that all these new jobs would come from the full-time employment of small businesses—particularly farmers and boutique clothing designers—selling to Chinese customers via Alibaba’s e-commerce platforms.
As for Alibaba, its shares jumped 1% on the news of the Trump meeting. 

Ma’s meeting with Trump also was some free lobbying with the US government, on which the company has spent $2.4 million since 2012 (paywall).
And Alibaba could definitely benefit from a warmer relationship with the US government.
One priority is getting Taobao off the US government’s Notorious Markets list; though the list doesn’t directly penalize companies, it damages their credibility.
There’s also the investigation by US Securities and Exchange Commission into whether Alibaba’s accounting is violating federal laws.

It’s worth noting that Trump’s nominee to head the SEC, Jay Clayton, led Alibaba’s record-breaking $24-billion IPO on NYSE in 2014, as a lawyer at Sullivan & Cromwell LLP representing the IPO’s underwriters.

Trump Renews China Criticism A Week After Taiwan Call

Trump accused Beijing of massive theft of intellectual property and of levying unfair taxes on our companies, as well as not helping with the menace of North Korea like they should.

Fox News

President Donald Trump said Thursday that the Chinese "haven't played by the rules, and they know it's time that they're going to start" as his victory tour of states of states that helped him win the presidency made its way to Iowa.
Trump accused Beijing of "massive theft of intellectual property" and of levying "unfair taxes on our companies," as well as "not helping with the menace of North Korea like they should."
"Other than that, they have been wonderful, right?" Trump asked rhetorically, to laughter from the Des Moines crowd.
Trump also brought Iowa Gov. Terry Branstad onstage and praised his pick to be the next ambassador to China, saying Branstad "knew how to get things done" and would improve "one of the most important relationships we have."
Trump cited Branstad's friendship with Xi Jinping and vowed there would be "mutual respect" between Washington and Beijing.
"We're going to have mutual respect, and China is going to benefit and we're going to benefit," Trump said. 

"And Terry is going to lead the way."