Chinazism

President Trump's China criticism turns harsh at U.N., says won't take 'bad deal'
By Jeff Mason and David Lawder

U.S. President Donald Trump addresses the 74th session of the United Nations General Assembly at U.N. headquarters in New York City, New York, U.S.

UNITED NATIONS -- U.S. President Donald Trump delivered a stinging rebuke to China's trade practices on Tuesday at the United Nations General Assembly, saying he would not accept a "bad deal" in U.S.-China trade negotiations.
Four days after deputy U.S. and Chinese negotiators held inconclusive talks in Washington, Trump's remarks were anything but conciliatory and emphasized the need to correct structural economic abuses at the heart of the countries' nearly 15-month trade war.
He said Beijing had failed to keep promises it made when China joined the World Trade Organization in 2001 and was engaging in predatory practices that had cost millions of jobs in the United States and other countries.
"Not only has China declined to adopt promised reforms, it has embraced an economic model dependent on massive market barriers, heavy state subsidies, currency manipulation, product dumping, forced technology transfers and the theft of intellectual property and also trade secrets on a grand scale," President Trump said.

"As far as America is concerned, those days are over."
Although President Trump held out hope that the United States and China could still reach a trade deal, he made clear he wanted a deal that would rebalance the relationship between the two economic superpowers.

"The American people are absolutely committed to restoring balance in our relationship with China. Hopefully, we can reach an agreement that will be beneficial for both countries," President Trump said. 

"As I have made very clear, I will not accept a bad deal."

President Trump also recently said he was not interested in a "partial deal" to ease tensions with China, saying that he would hold out for a "complete deal."
U.S. stocks gave up modest gains and fell into negative territory after President Trump's U.N. address. 

President Trump's speech highlighted the plight of U.S. memory chip maker Micron Technology, which has become a symbol of U.S. assertions that China fails to protect American intellectual property and steals it or forces the transfer of it. 

Two years ago Micron accused a Chinese state firm of stealing its chip designs.

"Soon, the Chinese company obtains patents for nearly an identical product, and Micron was banned from selling its own goods in China," Trump said, "But we are seeking justice."
He added that the United States lost 60,000 factories and 4.2 million manufacturing jobs since China joined the World Trade Organization.
"The rhetoric around China and President Trump's speech was as harsh as we have heard," said Art Hogan, chief market strategist at brokerage National Securities Corp in New York.
The tone of President Trump's speech was at odds with some recent steps by China to meet his request for purchases of more American farm products. 

On Monday, Chinese importers bought about 10 shiploads of U.S. soybeans -- about 600,000 tonnes.
China's customs commission will exclude certain amounts of U.S. soybeans, pork and other products from its retaliatory tariffs, the official Xinhua news agency said on Tuesday.
The purchases were made following last week's trade talks, which both the U.S. and Chinese sides characterized as "productive." 

People familiar with the trade talks said no new Chinese proposals were presented, and the countries agreed to continue minister-level talks in early October.
In his U.N. speech, President Trump also drew a link between resolving the U.S.-China trade dispute and Beijing's treatment of Hong Kong. 

Washington was "carefully monitoring the situation in Hong Kong," he said.

"The world fully expects that the Chinese government will honor its binding treaty made with the British and registered with the United Nations, in which China commits to protect Hong Kong’s freedom, legal system and democratic ways of life," President Trump said. 

Hong Kong was a British colony until 1997.

"How China chooses to handle the situation will say a great deal about its role in the world in the future. We are all counting on Xi as a great leader," Trump added.
President Trump also touched on trade with Japan in his speech, saying that he and Japanese Prime Minister Shinzo Abe on Wednesday would "continue our progress in finalizing a terrific new trade deal."
It remains unclear whether the two countries will sign the deal at their bilateral meeting or whether Japanese requests for assurances that Trump won't hit them with autos tariffs will delay the final agreement.

Here are the reasons for President Trump's war with China

On Friday the US president ordered companies to halt business with the “enemy” Xi Jinping

By Dominic Rushe in New York

Even by President Trump’s standards his Twitter rant attacking China on Friday was extraordinary. 

In a series of outbursts President Trump “hereby ordered” US companies to stop doing business with China, accused the country of killing 100,000 Americans a year with imported fentanyl and stealing hundred of billions in intellectual property.
The attack marked a new low in Sino-US relations and looks certain to escalate a trade war already worrying investors, manufacturers and economists.
Not so long ago President Trump called Chinese dictator Xi Jinping “a good friend”. 

Now Xi is an “enemy”. 

How did we get here?

China, China, China
On the campaign trail President Trump railed against China, accusing it of pulling off “the greatest theft in the history of the world” and “raping” the US economy.

President Trump repeated the word China so often it spawned a viral video of him saying it over and over again. 

The attacks were a hit with voters and helped get him elected. 

He has continued lambasting China – to cheers – at rallies ever since.
His main beef? 

The trade deficit.

Trade deficit
The US imported a record $539.5bn in goods from China in 2018 and sold the Chinese $120.3bn in return. 

The difference between those two numbers – $419.2bn – is the trade deficit.
That deficit has been growing for years as manufacturing has shifted to low-cost China and it explains the hollowing out of US manufacturing.

For President Trump, and especially for his adviser Pr. Peter Navarro, who once described China as “the planet’s most efficient assassin”, trade deficits represent an existential threat to US jobs and national security. 

China makes up the largest part of the US trade deficit but those fears are also behind his disputes with the EU, Canada and Mexico.

His pro-Beijing detractors argue these deficit worries are hyperbole and a result of the US’s stronger economy, which allows consumers to buy goods at cheaper prices.
While it’s true that unemployment is at record lows and consumers continue to prop up the economy, manufacturing jobs have been lost and with them wage growth.
But it is not just deficits that concerns Trump.

Thieves
China has a deserved reputation for intellectual property theft. 

On Friday, President Trump estimated China robs the US of “hundreds of billions” a year in ideas.

In March, a CNBC poll found one in five US corporations had intellectual property stolen from them within the last year by China.
According to the Commission on the Theft of American Intellectual Property, the theft costs $600bn a year.

Beijing bucks
Like Tesla, Nio, a Chinese electric vehicle (EV) company, is suffering as subsidies for EVs are phased out. 

Unlike Tesla, Nio has Xi. 

China is pumping $1.5bn into the company to keep it on the road, the latest in a series of handouts that are unfair.
Cheap steel and aluminium, subsidized by the Chinese government, are the origins of this trade dispute. 

According to the White House, last year alone China dumped and unfairly subsidized goods including steel wheels, tool chests and cabinets and rubber bands on to the US market.

Currency manipulator
Earlier this month the US officially accused China of manipulating its currency “to gain unfair competitive advantage in international trade”.
It was the first time since 1994 that such a complaint has been made official and comes as the dollar has strengthened against world currencies. 

The dispute adds another layer of tension to a complex situation.
China disputed the charge accusing the US of “deliberately destroying international order” with “unilateralism and protectionism”.
The International Monetary Fund (IMF) is on China’s side, arguing the devaluation of the yuan is largely in line with worsening economic conditions in China.

What happens next?
The US has now slapped billions of dollars on tariffs on Chinese goods. 

China retaliated, again, on Friday with more levies on US goods. 

China’s economic growth has slowed to levels unseen since 1992; US economic forecasts have also been cut.

So far US consumers have not felt the pinch but JP Morgan estimates the average US household will end up paying $1,000 a year for goods if the latest set of tariffs go through.

The unanswerable question is whether any of this will sway President Trump. 

If the President continues to see a war with China as the necessary price to Make America Great Again, then the answer is probably no.

US spy chiefs warn tech execs about doing business with China

Politicians say companies need to be aware of Chinese threat
By James Vincent

US intelligence chiefs have been briefing Silicon Valley tech execs about the possible dangers of doing business in China, according to a report from the Financial Times.
The briefings include warnings about the threat of cyber attacks and the theft of intellectual property, and have been held with groups including tech companies, universities, and venture capitalists in California and Washington.
The meetings are the latest example of the US government’s increasingly combative stance towards China. 

In a statement given to the FT, Republican senator Marco Rubio — one of the politicians who organized the briefings — outlined the rationale behind them.
“The Chinese government and Communist party pose the greatest long-term threat to US economic and national security,” said Mr Rubio. 

“It’s important that US companies, universities, and trade organizations understand fully that threat.”
Those giving the briefings include high-level figures in the US intelligence community such as Dan Coats, director of national intelligence. 

The meetings also reportedly include the sharing of classified information — an unusual level of disclosure.
The FT reports that the briefings began last October. 

Since then, the trade war between the US and China has escalated dramatically. 

The most significant intervention came last week, with the White House announcing that US companies will be blocked from buying telecommunications equipment from certain foreign companies including China’s Huawei.
The Trump administration says this ban is necessary to counter the threat of surveillance and spying from Chinese-made equipment. 

But the ban is likely to have a big affect on consumers around the world, especially with the news that Google will no longer be able to supply the full version of its Android mobile operating system to Huawei.

Nation of Thieves

U. S. charges Chinese hackers in theft of vast trove of confidential data in 12 countries

By Ellen Nakashima and David J. Lynch

Prosecutors unsealed an indictment charging two Chinese with computer hacking attacks on a wide range of U.S. government agencies and corporations. 

The United States and four of its closest allies on Thursday blamed China for a 12-year campaign of cyberattacks that vacuumed up technology and trade secrets from corporate computers in 12 countries, affecting almost every major global industry.
The coordinated announcements in five capitals marked the Trump administration’s broadest anti-China initiative to date, yet it fell short of even stronger measures that officials had planned.
During debate, Treasury Secretary Steven Mnuchin blocked a proposal to impose financial sanctions on those implicated in the hacking, according to five sources familiar with the matter. 

Two administration officials said Mnuchin acted out of fear that sanctions would interfere with U.S.-China trade talks.
The centerpiece of Thursday’s synchronized accusations came in Washington, where the Justice Department unveiled indictments against two Chinese hackers, who it said acted “in association with” the Chinese Ministry of State Security (MSS).
Zhu Hua and Zhang Shilong, members of a hacking squad known as “Advanced Persistent Threat 10” or “Stone Panda,” were accused of conspiracy to commit computer intrusions, wire fraud and aggravated identity theft while pilfering “hundreds of gigabytes” of confidential business data, the indictment said.
“China’s goal, simply put, is to replace the U.S. as the world’s leading superpower, and they’re using illegal methods to get there,” said FBI Director Christopher A. Wray.
U.S. allies echoed the Justice Department action, signaling a growing consensus that Beijing is flouting international norms in its bid to become the world’s predominant economic and technological power.

Xi Jinping's empty promises

In the capitals of the United Kingdom, Australia, Canada and New Zealand, ministers knocked China for violating a 2015 pledge — offered by Chinese dictator Xi Jinping in the White House’s Rose Garden and repeated at international gatherings such as the Group of 20 summit — to refrain from hacking for commercial gain.
“This campaign is one of the most significant and widespread cyber intrusions against the U.K. and allies uncovered to date, targeting trade secrets and economies around the world,” British Foreign Secretary Jeremy Hunt said in a statement.
Still, some administration allies were skeptical that Thursday’s announcement would alter China’s behavior.

Deputy Attorney General Rod J. Rosenstein announces on Thursday the indictments of two Chinese for hacking attacks. 

“Just as when the Obama administration did it, indicting a handful of Chinese agents out of the tens of thousands involved in economic espionage is necessary but not important,” said Derek Scissors, a China analyst at the American Enterprise Institute. 

“International denouncements may irritate Xi, but they place no real pressure on him.”
Scissors said it would be more effective for the United States to hit high-profile Chinese companies with financial sanctions, including potential bans on their ability to do business with American companies.
The five governments that joined in the statements about China are partners in the “Five Eyes” intelligence alliance, sharing some of their most closely guarded technical and human reporting.
The foreign ministries of Denmark, Sweden and Finland tweeted statements saying they shared the concerns over rampant cyberespionage against corporations.
The united front against Chinese hacking and economic espionage stands in contrast to the “America First” president’s preference for taking a unilateral course to many of his trade goals.
“This demonstrates there’s a strong well of international support the United States can tap... Countries are fed up,” said Ely Ratner, executive vice president of the Center for a New American Security.
The hackers named in the indictment presided over a state-backed campaign of cybertheft that targeted advanced technologies with commercial and military applications. 

They also hacked into companies called “managed service providers,” which act as gatekeepers to computer networks serving scores of corporate clients.
The Chinese targeted companies in the finance, telecommunications, consumer electronics and medical industries, along with U.S. government laboratories operated by the National Aeronautics and Space Administration and the military.
Along with the United States and the United Kingdom, countries targeted by China include Canada, France, Germany, Japan, Sweden and Switzerland.
“The list of victim companies reads like a who’s who of the global economy,” said Wray.
The Stone Panda team made off with personal information, including Social Security numbers belonging to more than 100,000 U.S. Navy personnel.
The hackers employed a technique known as “spear-phishing,” tricking computer users at the business and government offices into opening malware-infected emails giving them access to log-in and password details.
They worked out of an office in Tianjin, China, and engaged in hacking operations during working hours in China.
Geoffrey Berman, the U.S. attorney for the Southern District of New York, called the Chinese ­cyber-campaign “shocking and outrageous.”
Over the past seven years, more than 90 percent of cases alleging economic espionage involved China as did more than two-thirds of trade-secret theft prosecutions, according to Deputy Attorney General Rod J. Rosenstein.
The industries targeted in the Stone Panda hacks are featured in the Chinese government’s Made in China 2025 program, which aims to supplant the United States as the global leader in 10 advanced technologies including artificial intelligence, robotics and quantum computing, Rosenstein added.

In November, in one of his last official actions, then-Attorney General Jeff Sessions announced a major initiative to combat Chinese commercial spying, building on four years of prosecutorial effort. The department vowed to aggressively pursue trade-secret theft cases and identify researchers and defense industry employees who have been “co-opted” by Chinese agents seeking to transfer technology to China.
While the show of anti-China unity was notable, the administration pulled back from plans for tougher action after warnings from the treasury secretary.
Mnuchin’s 11th-hour intervention left administration officials fearing Beijing would view the limited actions as a sign that Trump lacks the stomach for an all-out confrontation.
“We don’t comment on sanctions actions or deliberations, but it’s important to note that these issues are completely separate from trade,” said a Treasury Department spokesman asked to comment on the reports.
The administration’s action entailed statements from four Cabinet agencies — Justice, State, Energy and Homeland Security — while Treasury remained on the sidelines.
The condemnations also pose a complication as Trump and Xi seek to negotiate a trade deal. 

Over dinner in Buenos Aires earlier this month, the two leaders agreed to a truce in their months-long tariff war.
Talks between U.S. and Chinese diplomats are expected to begin early next month.
The Trump administration is seeking a deal that would involve structural changes to China’s state-led economic model, greater Chinese purchases of American farm and industrial products and a halt to what the United States says are coercive joint-venture licensing terms.
The indictments were followed by a joint statement from Secretary of State Mike Pompeo and Homeland Security Secretary Kirstjen Nielsen that assailed China for violating Xi’s landmark 2015 pledge to refrain from hacking U.S. trade secrets and intellectual property to benefit Chinese companies.
“These actions by Chinese actors to target intellectual property and sensitive business information present a very real threat to the economic competitiveness of companies in the United States and around the globe,” they said.
Thursday’s push to confront China over its cyber-aggression comes at a fraught time, as Canada has arrested a Chinese telecommunications executive at the United States’ request on a charge related to violating sanctions against Iran.

China's predatory trade practices

President Trump, a global loner, finds his hard line toward Beijing draw a crowd

By David J. Lynch

After almost a year of going it alone, President Trump finds himself with a surprising weapon in his trade confrontation with China: allies.
Pressure from Europe and Japan is amplifying the president’s vocal complaints about Chinese trade practices that he says discriminate against foreign companies and threaten U.S. economic growth — as fresh economic data Friday in Beijing showed the economy slowing more than expected.
To eliminate one major irritant, Chinese leaders already have begun scaling back an industrial policy aimed at dominating 10 technology industries, after concluding the president’s objections were widely shared and could not be resolved merely by waiting out the mercurial U.S. leader.
“One thing the Chinese have had to acknowledge is that it wasn’t a President Trump issue; it was a world issue,” said Jorge Guajardo, senior director at McLarty Associates and a former Mexican ambassador to China. 

“Everybody’s tired of the way China games the trading system and makes promises that never amount to anything.”
Administration officials say President Trump deserves credit for driving a hard line toward Beijing at home and abroad. 

Attacking Chinese protectionism now has bipartisan support in Washington; Germany and the United Kingdom joined the United States this year in tightening limits on Chinese investment.
But critics say the president has not done enough to capi­tal­ize on those shared grievances, instead alienating European and Japanese officials this year by imposing tariffs on their shipments to the United States of steel and aluminum.
President Trump’s resolve to pursue his confrontation with China is doubted amid administration infighting and suggestions that the United States might settle for increased Chinese purchases of American products rather than demand wholesale changes to China’s economic system in ongoing trade talks.
“It makes sense to get the other countries more involved... But they don’t know how serious Trump is on the systemic reform bits,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics.
China has tried to defuse the global irritation over its mercantilist stance by signaling a willingness to revise a program of state subsidies and market share targets called “Made in China 2025.”
The new flexibility comes as Chinese industrial production figures Friday fell short of economists’ expectations and retail sales grew at their slowest rate in 15 years.
Analysts in China and the United States say China is modifying the Made in China program because of pressure from all its major trading partners.
In September, trade ministers from the United States, European Union and Japan issued a joint statement that blasted the use of subsidies in turning “state owned enterprises into national champions and setting them loose in global markets.”
The statement, which did not name any country, also rejected forced technology transfer and cyberattacks — underscoring key elements of the president’s attacks on Beijing.
U.S. Trade Representative Robert E. Lighthizer has described the subsidy program, which sets market share goals for Chinese industry, as imperiling U.S. technology leadership. 

China wants its semiconductor manufacturers to provide 70 percent of domestic needs, up from less than 20 percent today, threatening the $6 billion in annual U.S. exports.
But roughly a dozen other countries are even more dependent on high-tech manufacturing and exports of advanced factory gear, and are more exposed to China’s desire to replace purchases of foreign products with domestic alternatives, according to the Mercator Institute for China Studies in Berlin.
“The pushback from other trading partners is a really important piece of the dynamic here,” said Michael Hirson, a former Treasury Department attache in Beijing who is now with the Eurasia Group. 

“That’s because the Made in China 2025 program is more of a threat to Germany, South Korea and Japan than it is to the United States.”
External pressure drove China this year to open markets for financial services and automobiles, according to economist Andrew Polk, a partner in Trivium China, a Beijing-based consultancy.
On Friday, the Chinese government also temporarily rolled back a tariff increase on U.S. autos, implementing part of a trade-war truce Chinese dictator Xi Jinping and President Trump agreed to during their meeting in Buenos Aires this month.
Over the past year, Chinese authorities have eliminated the foreign ownership cap for life insurers, approved foreign financial institutions underwriting domestic bond offerings and agreed to lift limits on foreign stakes in automotive joint ventures by 2022.
“This isn’t just President Trump bellyaching. It’s the only bipartisan issue in Washington. It’s a concern for Brussels and Canberra and that recognition is what has helped drive accelerated market openings,” Polk said. 

“They’re desperate to change the narrative. They realize how the ground has shifted under them.”
From the outset, the president has pursued his plans for an “America First” remake of U.S. trade policy with little regard for sentiment abroad. 

He withdrew the United States from the 12-nation Trans-Pacific Partnership as one of his first official acts, and he has imposed unilateral tariffs to a degree unseen since the 1930s.
His attacks on the World Trade Organization also undermined any chance that China’s trading partners would unite in a comprehensive complaint in Geneva.
The United States did win E.U. and Japanese support for a complaint to the WTO alleging China has violated U.S. intellectual property rights. 

But rather than use the global trade body for a broader attack on China, the administration has demanded changes in the way the organization operates.
To critics, the administration missed an opportunity to marshal China’s trading partners behind an across-the-board indictment of its state-led economy.
Jennifer Hillman, a professor of practice at Georgetown University Law School, told the Senate Finance Committee last month that the United States “ought to be bringing a big and bold case, based on a coalition of countries working together to take on China.”
On their own, U.S. allies have responded to China’s ambitions to acquire foreign technology via acquisitions, cybertheft or coercive licensing requirements with heightened scrutiny of its investments.
The E.U. agreed last month to establish a new screening mechanism for foreign investments, motivated largely by a sharp increase in Chinese activity on the continent. 

But the E.U. measure leaves final decisions to national governments and falls short of the Committee on Foreign Investment in the United States.
The German government in July blocked two potential acquisitions by Chinese investors, following similar action by Canada two months earlier, and lowered to 15 percent from 25 percent the foreign ownership stakes that require review. 

British Prime Minister Theresa May’s government also announced plans for closer scrutiny of investments by foreign entities.
Despite his reputation as a global loner, President Trump’s views on China are becoming the conventional wisdom. 

Last month, as the president prepared to travel to Buenos Aires for an international summit and dinner with Xi, a top administration official claimed broad support for U.S. goals.
“The rest of the world knows that China has been violating common trade practices, WTO trading practices and laws. The rest of the world knows full well about the issues of IP theft and forced transfers of technology. They know that and they’ve said so. This idea that other countries are not with us — it’s just not true,” said National Economic Council Director Larry Kudlow. 

“The rest of the world knows this, and China knows the rest of the world knows this.”
U.S. and Chinese officials are racing toward a self-imposed March 1 deadline to negotiate a trade deal that would involve changes to China’s state-directed economy. 

Many Trump allies are skeptical China will agree to turn away from its state-directed system and embrace additional market changes.
With the United States and China locked in a geopolitical competition, it is easier for revision-minded officials to advocate changes in programs like Made in China 2025 by citing shared concerns among all the country’s major trading partners, Hirson said.
Chinese authorities have changed course under pressure before. 

In 2015, regulators scrapped plans to require foreign financial institutions to install Chinese software amid complaints from U.S., European and Japanese diplomats and business groups, said Erin Ennis, senior vice president at the U.S.-China Business Council.
“We have seen progress like this in the past when the U.S. and other trading partners had a nearly universal view,” she said.
Administration officials scoff at the proposed changes as cosmetic and designed to sap U.S. negotiating willpower.
Michael Wessel, a member of the U.S.-China Economic and Security Review Commission, called disclosure of plans to allow foreign companies a greater role in the Chinese technology program “an influence operation at its best.”
He questioned whether changes in relevant Chinese laws would mean much so long as the courts remained under the control of the Communist Party.
“What the Chinese are talking about are really just baby steps,” he said.

The Necessary War

Chinese growth in investment, factory production and consumer spending have all slowed this year, and its economic growth has slowed alongside. 

By Mark Landler
Shipping containers in the Port of Los Angeles after being imported to the United States in 2010. Aides to the president say he believes that the United States has the upper hand on China.

WASHINGTON — President Trump is confident that the United States is winning its trade war with China. 

The world’s two largest economies are in the opening stages of a new economic Cold War, one that could persist well after President Trump is out of office.
President Trump intensified his trade fight this week, imposing tariffs on $200 billion worth of Chinese goods and threatening to tax nearly all imports from China if it dared to retaliate. 

His position has bewildered, frustrated and provoked Beijing, which has responded with its own levies on American goods.
The diplomatic stalemate has many in the business and policy communities considering the possibility that the United States may be in a protracted trade fight for years to come.
Kevin Rudd, a former prime minister of Australia, said in an interview that 2018 signaled “the beginnings of a war of a different type: a trade war, an investment war and a technology war between the two great powers of the 21st century, with an uncertain landing point.”
Signs of fallout were already apparent: Jack Ma backed off a pledge he had made in a meeting with President Trump last year to create one million jobs in the United States, telling the Chinese news site Xinhua that “the promise was made on the premise of friendly U.S.-China partnership and rational trade relations,” a premise he said no longer exists.
The latest tit-for-tat leaves little room for concessions, at least in the interim, as both countries dig in their heels and China tries to remain strong, despite an economic softening that President Trump clearly sees as an opening to force Beijing’s hand.
Chinese growth in investment, factory production and consumer spending have all slowed this year, and its economic growth has slowed alongside.

The situation is expected to worsen as effects of the escalating American tariffs ramp up.
While the United States made overtures toward China in recent days to talk trade in Washington this month, some officials said they now doubted Beijing would engage again at a high level until after the midterm elections in November, when Xi Jinping may meet President Trump on the sidelines of an economic summit meeting in Buenos Aires.
President Trump himself seemed to dangle the prospect that he, and he alone, could broker a resolution that threatened to cause economic pain to companies and consumers on both sides of the Pacific.
“Hopefully, this trade situation will be resolved, in the end, by myself and Xi Jinping, for whom I have great respect and affection,” Mr. Trump said in his statement announcing the tariffs.
Yet it is not clear that either side will see a reason to back down. 

President Trump believes that the United States has the upper hand on China, with an ability to impose tariffs on a far larger number of goods than the Chinese can match given that America imports far more than it exports. 

And while the tariffs are unpopular with Republican lawmakers, farmers and manufacturers, his trade approach remains popular with his political base.
The Chinese side has its own political reasons to avoid capitulation. 

Acceding to President Trump would be considered a sign of weakness for Xi, according to analysts.
And they see no sign that China is willing to give up on Made in China 2025, an industrial program that aims for dominance in robotics, artificial intelligence, and other high tech industries that have been the domain of the United States and Europe and that President Trump has identified as a policy initiative that must be stopped.
While Chinese officials have expressed a willingness to get rid of the name Made in China 2025, they have been much more cautious about accepting limits on some of the crucial features of the country’s industrial policy, like big loans from state-owned banks at very low interest rates to favored industries.

Inside the White House, there remains a pitched battle between those who want to make a deal with Beijing and those who are determined to keep piling on pressure to force a more radical change in its trade practices. 

At the moment, the hard liners have President Trump’s ear.
“You would expect the administration to have tabled a negotiating text with a clear set of commitments, but that has apparently not been done,” said Daniel M. Price, a former trade adviser to George W. Bush. 

Price said the Trump administration had done a good job of cataloging China’s abuses: theft of intellectual property, forced transfer of technology from foreign companies, predatory joint venture agreements. 

But it has failed to marshal a coalition to confront China, instead provoking separate trade fights with the European Union, Japan, Canada and Mexico by imposing tariffs on steel and aluminum and threatening additional taxes on imported cars.
“Doing this without the E.U. and Japan fully on board as though Chinese unfair trade practices were only a bilateral problem is wrongheaded and certainly less effective,” he said. 

“But it’s very hard to galvanize your allies when you impose steel and aluminum tariffs on them and threaten auto tariffs.”
For China, a complicating factor is figuring out who has influence in President Trump’s White House. Treasury Secretary Steven Mnuchin, who has been leading the negotiations, invited China’s top trade negotiator, Liu He, to Washington for a meeting next week, even though his last visit ended badly when President Trump spurned a deal that would have cut the American trade deficit with China.
Mnuchin believes the United States must be open to talks as long as China is willing to address structural issues, including the trade gap between what America exports and what it imports, pressure on American companies to hand over valuable technology as a condition for doing business in China and intellectual property theft.
Other senior officials, notably Peter Navarro, who oversees the office of trade and manufacturing policy, have told colleagues that inviting the Chinese now was a sign of weakness. 

Mr. Navarro, an economist who made his name with book titles like “Death by China,” is among those who favor putting more pressure on China to force a change in its behavior.
His office produced a compendious report in June called, “How China’s Economic Aggression Threatens the Technologies and Intellectual Property of the United States and the World.” 

In early May, he and Mnuchin clashed openly during a visit to Beijing after Mnuchin excluded him and other American officials from a private meeting with Liu.
It is not clear whether Liu will visit Washington next week. 

But even if he does, people who have spoken to Chinese officials said the unraveling of the agreement Liu believed he had struck on his last visit would make him reluctant to make any deal this time.
“The Chinese deep learning from that is, ‘We should not substantively re-engage until the administration has its internal house in order,’” said Rudd, who is now the president of the Asia Society Policy Institute.
After months of bruising encounters with President Trump, Rudd said Chinese officials recognized that they would need to change their policies on trade and market access. 

President Trump’s aggressive moves drew intense criticism from some quarters at home. 

But President Trump has shown little sign of changing course. 

While there are differences among members of his economic team, there is a broad consensus in the administration about taking a hard stance toward China. 

They point to evidence that the trade pressure on China was making it less adventurous in the East China Sea, where it spars regularly with Japan.
President Trump has forged ahead with tariffs even while saying that the trade tensions were making China less cooperative in pressuring North Korea on its nuclear arsenal — a claim that puzzles some of his own advisers.
“They have been helpful; I hope they’re still helpful,” President Trump said at a news conference Tuesday with the Polish president, Andrzej Duda. 

“There’s a question about that.”
But the president added, “It got to a point where the numbers were too big.” 

China “rebuilt their country with tremendous amounts of money pouring out of the United States,” he said. 

“And I’ve changed that around.”

Sina Delenda Est

President Trump and Europe are teaming up against China on trade
By Rick Newman

President Trump called it “a very big day for free and fair trade.” 

That’s Trumpian hyperbole, but the president’s new efforts to smooth out trade disputes with Europe include one major new development.
After meeting with European Commission president Jean-Claude Juncker, President Trump hosted a short press conference to highlight what transpired: There’s a new goal to eliminate tariffs on many goods traded between the two regions and to “resolve” President Trump’s new tariffs on steel and aluminum imports. 

Europe pledged to buy more American energy and agricultural products. 

And the two giant economies will try to improve cooperation on technical standards, which could ultimately boost trade.
The last point President Trump mentioned may be the most significant, however. 

Trump said the United States and Europe will work together to “address unfair trading practices,” including “forced technology transfer,” “theft of intellectual property” and “overcapacity.” 

Neither man mentioned China, but that’s exactly who they were talking about.

President Donald Trump and European Commission president Jean-Claude Juncker speak in the Rose Garden of the White House, Wednesday, July 25, 2018, in Washington. 

All advanced nations have the same complaints about China: It forces foreign firms to turn over key technology as a condition of doing business in the country. 

It copies or steals trade secrets belonging to foreign firms. 

And it subsidizes giant companies that produce steel, aluminum and other commodities, allowing them to undercut foreign rivals on price, gobble up market share and drive foreign competition out of business.
President Trump has tried to address those problems, mostly be slapping tariffs on Chinese imports and insisting that China reduce its trade surplus with the United States. 

Trade experts say that won’t work. 

But joining with allies and pressuring China together could work, they say. 

And the place to start is at the World Trade Organization, the mysterious, globalist, technocratic trade arbiter President Trump has repeatedly bashed, to the delight of his supporters.

Reforming the WTO
President Trump has moved toward the mainstream, at least for a while. 

President Trump said Europe and the United States will work with “like-minded partners” within the WTO to address China’s trade abuses. 

That’s a good idea. 

The United States and dozens of other nations formed the WTO in 1995, when China was still a fledgling, developing economy that qualified for more protections than advanced economies. 

China entered the WTO in 2001, opening the door to becoming the export colossus it is now.
China is now the world’s second-largest economy, and there’s no other nation that intervenes in the economy on the scale China does. 

The trade honchos who formed the WTO in the 1990s never quite foresaw that, and the WTO lacks many of the tools to deal with China’s unique economic model.
Reforming the WTO to bring China to heel would be the kind of drawn-out, detail-oriented forward crawl that President Trump seems to despise. 

So his interest could wane and he might not follow through. 

But of all the moves China should fear, a revamped WTO that sharply limits China’s ability to pump government money into giant, home-grown firms is probably more threatening than President Trump’s tariffs.
Other trade announcements President Trump made were less impressive. 

President Trump said the two regions would work toward zero tariffs on “non-auto industrial goods.” Fine, but autos are the biggest sticking point between President Trump and Europe, not fruit or leather or bourbon. 

And there was no mention of any action on autos. 

That means President Trump’s threat to put a 20% tariff on all imported autos remains, which would roil the industry if it were to happen.
Both sides also emphasized that they were beginning “talks” to lower trade barriers between the United States and Europe, without any actual commitments. 

And President Trump and Juncker both indicated either party could terminate the agreement, which means it’s more of an agreement to try to agree than anything tangible. 

Still, President Trump’s bluster was subdued and he didn’t insult anyone. 

Maybe it was a big day after all.

Nation of Thieves

US charges 3 Chinese nationals with hacking, stealing intellectual property from companies
By Evan Perez

The Justice Department on Monday unsealed an indictment against three Chinese nationals in connection with cyberhacks and the theft of intellectual property of three companies, according to US officials briefed on the investigation.
But the Trump administration is stopping short of publicly confronting the Chinese government about its role in the breach. 

The hacks occurred during both the Obama and Trump administrations.
The charges being brought in Pittsburgh allege that the hackers stole intellectual property from several companies, including Trimble, a maker of navigation systems; Siemens, a German technology company with major operations in the US; and Moody's Analytics.
The three charged in the Pittsburgh case are presumed to live in China and are either employed or associated with Guangzhou Bo Yu Information Technology Co., known as Boyusec, court documents say. 

US intelligence and private cybersecurity experts say Boyusec works as a contractor for the Chinese ministry of state security, that nation's version of the National Security Agency. 

The court documents unsealed Monday don't mention the Chinese state links.
US investigators have concluded that the three charged by the US attorney in Pittsburgh were working for a Chinese intelligence contractor, the sources briefed on the investigation say. 

But missing from court documents filed in the case is any explicit mention that the thefts were state-sponsored.
A 2015 deal between then-President Barack Obama and Xi Jinping prohibits the US and China from stealing intellectual property for the purpose of giving advantage to domestic companies.
In recent months US intelligence agencies have concluded that China is breaking the agreement.

But there's debate among intelligence officials about whether there's sufficient evidence to publicly reveal the Chinese government's role in the infractions, these people say.
Obama administration officials had touted the Obama-Xi agreement, as well as 2014 Justice Department charges against members of the Chinese People's Liberation Army for commercial espionage, for "reducing" some of the Chinese cyberactivity against companies in the US.
But the 2015 Obama-Xi deal was met with skepticism inside the US agencies whose job it is to guard against Chinese cyberactivity targeting US companies. 

Some now say there was only a brief drop in the number of cyberspying incidents, if at all.
In the waning months of the Obama administration, intelligence officials briefed senior White House officials on information showing that the Chinese cyberattacks were back to levels previously seen, sources familiar with the matter told CNN. 

Early in the Trump administration, US intelligence officials briefed senior officials, including the President and vice president, as well as advisers Jared Kushner and Steve Bannon.

Theft Empire

Treasury and Justice officials pushed for economic sanctions on China over cybertheft
By Ellen Nakashima

Obama noted at a news conference this month that the United States has seen “some evidence” that Chinese government hackers have reduced their pilfering of U.S. companies’ intellectual property and sensitive data.
But, he added, they have “not completely eliminated these activities.”
Although some researchers say the hacking activity has plummeted, officials at the Treasury and Justice departments and at the National Security Council have been pushing to impose economic sanctions on Chinese firms that have benefited from past thefts of U.S. firms’ commercial data.
Over the past year, they have advocated the use of a 2015 executive order on cyber-sanctions that would allow the government to sanction individuals and companies that were enriched by material hacked from the computer networks of American businesses.
“It’s about specific justice for specific victims,” said one U.S. official, who like others interviewed requested anonymity to discuss internal deliberations.
A sanctions package that names specific Chinese companies has been ready for more than a year. 

But pro-China senior officials in the State Department and within the National Economic Council have been opposed.

The administration was close to pulling the trigger on the sanctions last year but drew back after Xi Jinping reached an agreement with Obama that his country would not conduct such activity, and would set up a high-level joint dialogue on cybercrime and cooperate in investigations.
Dmitri Alperovitch, co-founder of the cybersecurity firm CrowdStrike, said China’s commercial hacking dropped over the past year after the agreement. 

Others note, however, that the indictments of five Chinese military hackers for economic espionage also played a role in changing China’s behavior.
But Beijing’s cooperation in law enforcement matters has not been optimal, officials said. 

And the Chinese government has not taken action against those who hacked U.S. companies and stole their intellectual property or pricing information.
If the Obama administration were to impose economic sanctions on Chinese companies, that would be a gift to President Donald Trump, said James A. Lewis, a cyber-policy expert at the Center for Strategic and International Studies. 

“It would be a chit he could trade in talks with the Chinese,” he said. 

“He could offer to lift sanctions in exchange for some economic or trade concession.”
At this point, the use of the order against China is highly unlikely, officials said.
“It’s hard to see the administration picking that fight with China with so few days left in the administration,” a second senior official said.
The Trump administration, however, could choose to use it.

Empire of Fakes

China's Alibaba back on US counterfeits blacklist
BBC News

Chinese empire of fakes

Chinese e-commerce giant Alibaba is back on the US's "notorious markets" list over counterfeit goods sales.
Alibaba was taken off the list four years ago, but US authorities say the firm's online platform Taobao is used to sell "high levels" of fake goods.
The company has rejected the allegations, insisting it polices its market place better than in the past.
The firm also suggested the "current political climate" in the US might be why they are back on the list.
US President Donald Trump had, during his campaign, repeatedly accused Chinese firms of stealing intellectual property.
Alibaba Group President Michael Evans said he was "disappointed" by the decision and questioned whether it was "based on actual facts or was influenced by the current political climate."
The Chinese online retailer and its market place Taobao have long been accused of being a platform for counterfeit goods.

Alibaba was suspended from the International Anti-Counterfeiting Coalition in May

Taobao fake goods

Taobao said earlier this year it had tightened controls on its sale of luxury goods, requiring sellers to show proof of authenticity.
In May though, Alibaba was suspended from the International Anti Counterfeiting Coalition (IACC) watchdog over piracy concerns.
More than 250 members, including Gucci America and Michael Kors, had threatened they would leave the IACC in protest at Alibaba's membership.
Alibaba -- by far China's biggest online retailer -- floated on the New York Stock Exchange in September 2014 and broke records by raising $25bn.

U.S. Won’t Grant China Market Economy Status, Senior Administration Official Says

China’s failure to allow market-driven economy have fueled trade tensions
By IAN TALLEY

Containers are unloaded from a cargo ship at a port in Rizhao in China's Shandong province. A senior U.S. officials said Friday that the U.S. administration won’t grant China the official market economy status. 

WASHINGTON—The Obama administration has decided it won’t grant China the official market-economy status Beijing doesn't deserve, a move sure to raise tension, as China pushes the U.S. and other countries to ratchet down import tariffs.
China contends Washington and other members of the World Trade Organization should grant it market-economy status on Sunday, the 15th-anniversary of its WTO accession, under the terms of its joining the group.
But the Obama administration disagrees. 

“The U.S. is not changing China’s status as a non-market-economy,” a senior U.S. administration official said in an interview. 

“China’s protocol of accession to the WTO doesn't require the U.S. or any other WTO member to automatically grant China market-economy status after December 11 2016.”
Market-economy status can dramatically lower tariffs WTO members can apply in cases charging another country with violating trade terms.
The incoming Donald Trump White House isn’t likely to reverse the Obama administration’s decision, given the president and his transition team have said they plan to place higher tariffs on Chinese imports, blaming Beijing for many of the American economy’s ailments.
Mr. Trump, at a rally in Iowa on Thursday, said: “China is not a market economy.” 

He cited dumping of artificially low-price goods on the U.S. market and theft of intellectual property by Chinese companies. 

“They haven’t played by the rules, and they know it’s time that they’re going to start,” he said.
Meanwhile, the Obama administration says China must formally file a case challenging U.S. treatment, something Beijing has yet to do.
Even though the senior Obama administration official said the U.S. would have to decide on the merits of a challenge, the person signaled Washington wouldn’t likely change its outlook. 

“If China wants to benefit from treatment as a market-economy country, it must change its own practices to let the market play a decisive role in the economy,” the official said.
Tension between the U.S. and China has been elevated in recent years over a host strategic and economic issues. 

The Obama administration has filed scores of anti-dumping and counter-valuing duties on Chinese imports, from shrimp to steel to solar cells. 

“Maintaining China’s status as a nonmarket economy is yet another step in the Obama administration’s vigorous enforcement of trade laws against China and holding China to its WTO commitments,” the senior official said.
But since Mr. Trump has put China in his trade-policy crosshairs, those strains are expected to intensify.
Although China’s leadership has said in recent years that it plans to make its economy more market-driven, U.S. officials and companies complain Beijing has made things more difficult.
China’s state-owned enterprises are still deeply integrated in nearly every aspect of the country’s economy and international acquisitions. 

U.S. companies complain government subsidies give Chinese firms an unfair advantage. 

That behavior by the Chinese has led to one of the biggest trade frictions in recent years: China’s huge excess steel production capacity that is pushing down prices globally.
Officials in Washington are also frustrated about the lack of access for U.S. investment in China. “China’s failure to take action and in some ways becoming even less open, has given rise to increased trade frictions and has led to global firms to question their ability to succeed in that market,” the official said.

China’s New Cybersecurity Law Is Bad News for Business

This law provides China with the legal tool to obtain all foreign anti-hacking proprietary security hardware and software, which could then be passed on to relevant Chinese firms. 

By Georges Haour 

In this Aug. 16, 2016 file photo, a worker is silhouetted against a computer display showing a live visualization of the online phishing and fraudulent phone calls across China during the 4th China Internet Security Conference (ISC) in Beijing.

China’s new cybersecurity law, expected to take effect next June, could hurt any foreign firm looking to do business in the world’s second-largest economy. 

Though the law is intended to fight hackers, it also requires that foreign companies provide China’s government with sensitive information about network equipment and software. 

Given the weaknesses of China’s enforcement of laws around intellectual property, it’s easy to see how trade secrets can fall into the hands of Chinese competitors at the expense of the best interests of foreign firms.
Businesses most at risk will be those with special hardware and systems for network management, which could well include ATMs. 

Because new-generation ATMs have a much higher level of connectivity, they’re more vulnerable to hacking, which is why they require sophisticated encryption devices and software to secure transactions. 

This cybersecurity law thus provides the government with the legal tool to obtain all such anti-hacking proprietary security hardware and software, which could then be passed on to relevant Chinese firms.

And having access to the hardware and software means Chinese firms would have access to individuals’ personal banking information, as well.
The new law is also counterproductive because the scope of information that foreign companies will be required to provide to Chinese officials is worryingly broad. 

Complying with this requirement will force U.S. firms to make expensive investments to build duplicate facilities within China. 

This is in total contradiction with the free flow of data, expected to swell in 2020 after the introduction of 5G.
U.S. companies will have to weigh this risk against the opportunity to do business in China, which has developed a reputation for ‘copying’ without getting insider access. 

For international companies, there is no easy way forward, as the choice is black or white. 

Either foreign companies will comply, knowing China has a way to peek into what was previously private, or they will choose to stand by principles of privacy at the risk of being excluded from the Chinese market. 

Despite the challenging dilemma, companies are likely to comply and give in to China’s demands. 

The market is too huge and far too ripe for future growth to be ignored, especially when compared to more stagnant outlooks in Europe and the U.S.
In addition to creating barriers for international business in China, this kind of legislative move could stall innovation. 

It could well be considered to be part of what is called “indigenous innovation” in China, which consists of favoring Chinese firms by establishing non-tariff barriers—such as specific standards or regulations on products—in order to prevent non-Chinese firms the access to China’s large and dynamic market. 

And the impact would be wide-ranging, from consumer electronics to products, such as equipment to produce renewable energy, including windmills and solar panels.
Innovation involves a complex process, but it requires a society to be as open as possible and to allow vibrant exchanges between people. 

While cybersecurity is important, this law will wrap around the free market as it grips security. Within China, entrepreneurs are, by and large, not bothered by their government’s management of the Internet, called the “great firewall.” 

However, this new law is a new step to tighten the government’s grip on Internet. 

Furthermore, far from favoring China’s champions in this very dynamic area, such as Huawei, Lenovo, or Tencent, this law will handicap them in the long term. 

Maybe the hope is that these companies themselves will fight to alter the law and mitigate the negative implications for China’s Internet landscape.
U.S. companies have already begun to strongly lobby against the law, as well as China’s position that the Internet must be managed by authorities. 

But despite the efforts of any company, American, Chinese, or other, the cybersecurity law is just a piece of a larger ongoing political puzzle that companies will have to deal with. 

In the end, agility will be key for companies to succeed in the tense political environment.

Chinese Peril

• China’s Dalian Wanda Group faces renewed scrutiny
• Top Senate Democrat Chuck Schumer raises concerns over Chinese conglomerate’s Hollywood takeovers

By ERICH SCHWARTZEL in Los Angeles and SIOBHAN HUGHES in Washington

Incoming Senate Minority Leader Chuck Schumer sent a letter Wednesday calling for further scrutiny of Chinese deals.
A top Senate Democrat is calling for increased scrutiny of China’s ambitions in Hollywood and other sectors, lending a critical new voice to a cause championed by President Donald Trump.
In a letter sent Wednesday, incoming Senate Minority Leader Chuck Schumer said the takeovers of U.S. companies by China’s Dalian Wanda Group Co. and others warrant further scrutiny to determine whether they are being orchestrated by Chinese government interests—leaving U.S. companies to compete on an uneven playing field. 

The move increases the likelihood of a re-examination of how the U.S. allows Chinese to invest in American companies.
“I am concerned that these acquisitions reflect the strategic goals of China’s government,” he told Treasury Secretary Jack Lew and U.S. Trade Representative Michael Froman in the letter, a copy of which was seen by The Wall Street Journal.
Wanda and its U.S.-based holdings have completed several entertainment acquisitions this year, and the conglomerate has a pending deal to buy Dick Clark Productions for $1 billion.
Mr. Trump, who has indicated his administration will also take a closer look at such deals, was copied on the letter.
If the president-elect follows through on promises to scrutinize such deals more closely, Mr. Schumer’s letter could signal a shift for U.S. policy toward China. 

For decades, some lawmakers on both sides of the aisle have been unhappy with the White House, both under George W. Bush and Barack Obama, whom they saw as timid about confronting China, the biggest holder of U.S. debt.
Now, a senior Democratic lawmaker and the incoming Republican U.S. president could be on the same side of the issue, potentially shaking up the landscape. 

Congressional backlash to Chinese investments have lately focused on flashy Hollywood deals, but the outcry could have sweeping ramifications across other sectors of the economy.

Beijing stooge Wang Jianlin

“You can be certain that the new Congress in 2017 will work on legislation to further expand CFIUS oversight authority,” Mr. Schumer wrote, referring to the Treasury Department’s Committee on Foreign Investment in the U.S., which examines foreign deals seen as potential threats to national security. 

CFIUS reviews have traditionally concerned sectors like aerospace.
Wanda has previously responded to similar calls for scrutiny by saying the company “has and will continue to comply with all applicable U.S. law in connection with its media and entertainment investments in the United States, including without limitation making the appropriate filings with the Federal Trade Commission and the Department of Justice.” 

The company declined to comment on Mr. Schumer’s letter.
Mr. Schumer’s stance aligns the Democrat on one issue with the President-elect. 

A document circulated by Mr. Trump’s transition team stated that the administration would ask CFIUS to review foreign transactions that couldn’t be replicated by a U.S. entity. 

That could cover Chinese investment far beyond Hollywood, since Chinese companies can become majority owners of U.S. assets but China doesn’t allow U.S. companies to do the same.
Mr. Schumer said the ability for Chinese companies to take a majority stake in U.S. assets, often backed by state officials and China’s sovereign-wealth funds, is unfair considering stateside companies are handicapped from doing similar deals in China. 

U.S. companies hoping to do business in China usually have to form a joint venture that often includes the sharing of intellectual property—an arrangement that Mr. Schumer called a “pay to play system.”
“While China’s government has aggressively pursued policies that encourage strategic acquisition in the U.S., U.S. companies continue to face steep barriers to market access in China,” he wrote. 

Mr. Schumer said Chinese acquisitions across multiple sectors—information technology, transportation, manufacturing and agriculture, among others—are often supported by Chinese government subsidies designed to encourage global expansion.
Like several politicians before him, Mr. Schumer set his sights on Wanda, whose chairman, Wang Jianlin, is China’s richest man, according to Forbes. 

Wanda’s acquisitions in Hollywood have raised concerns among politicians and some entertainment executives that they are “soft power” plays designed to spread Chinese propaganda and messaging through American media. 

The country is the second-largest movie market in the world behind North America, but it imposes a quota of 34 movies that can be imported from ALL countries to its theaters each year.
In the past several years, Wanda has become the world’s largest movie-theater operator through its $2.6 billion acquisition of AMC Entertainment Holdings Inc., expanded into film production with the $3.5 billion purchase of Legendary Entertainment and its Dick Clark deal signaled an expansion into television. 

Wanda has become known in Hollywood for an insatiable interest in acquiring more assets, and Wang has publicly indicated his hopes to own one of Hollywood’s major studios.
Congressional scrutiny of China’s media acquisitions has been ramping up since September, when 16 members of the House of Representatives asked the Government Accountability Office to investigate whether CFIUS’s authority has kept up with the expanding scope of foreign investment in the U.S.

China adopts cybersecurity law in face of overseas opposition

By Michael Martina, Sue-lin Wong

BEIJING -- China adopted a controversial cybersecurity law on Monday to counter what Beijing says are growing threats such as hacking and terrorism, although the law has triggered concern from foreign business and rights groups.
The legislation, passed by China's largely rubber-stamp parliament and set to come into effect in June 2017, is an "objective need" of China as a major internet power, a parliament official said.
Overseas critics of the law argue it threatens to shut foreign technology companies out of various sectors deemed "critical", and includes contentious requirements for security reviews and for data to be stored on servers located in China.
Rights advocates also say the law will enhance restrictions on China's internet, already subject to the world's most sophisticated online censorship mechanism, known outside the country as the Great Firewall.
Yang Heqing, an official on the National People's Congress standing committee, said the internet was already deeply linked to China's national security and development.
"China is an internet power, and as one of the countries that faces the greatest internet security risks, urgently needs to establish and perfect network security legal systems," Yang told reporters at the close of a bimonthly legislative meeting.
More than 40 global business groups petitioned Li Keqiang in August, urging Beijing to amend controversial sections of the law. 

Chinese officials have said it would not interfere with foreign business interests.
Contentious provisions remained in the final draft of the law issued by the parliament, including requirements for "critical information infrastructure operators" to store personal information and important business data in China, provide unspecified "technical support" to security agencies, and pass national security reviews.
Those demands have raised concern within companies that fear they would have to hand over intellectual property or open back doors within products in order to operate in China's market.
James Zimmerman, chairman of the American Chamber of Commerce in China, called the provisions "vague, ambiguous, and subject to broad interpretation by regulatory authorities".
Human Rights Watch said elements of the law, such as criminalizing the use of the internet to "damage national unity", would further restrict online freedom.
"Despite widespread international concern from corporations and rights advocates for more than a year, Chinese authorities pressed ahead with this restrictive law without making meaningful changes," Sophie Richardson, China Director at Human Rights Watch, said in an emailed statement.
Zhao Zeliang, director of the Cyberspace Administration of China's cybersecurity coordination bureau, told reporters that every article in the law accorded with rules of international trade and that China would not close the door on foreign companies.
"They believe that [phrases such as] secure and independent control, secure and reliable, that these are signs of trade protectionism. That they are synonymous. This is a kind of misunderstanding, a kind of prejudice," Zhao said.
Many of the provisions had been previously applied in practice, but their formal codification coincides with China's adoption of a series of other regulations on national security and foreign civil society groups.
The law's adoption comes amid a broad crackdown by Xi Jinping on civil society, including rights lawyers and the media, which critics say is meant to quash dissent.
Last year, Beijing adopted a sweeping national security law that aimed to make all key network infrastructure and information systems "secure and controllable".

Nation of Spies

Economic espionage: The saga of the Chinese spies and the stolen corn seeds
By Del Quentin Wilber

Chinese happy spy: Mo Hailong, left, prepares to enter court.

Chinese spy ring: Li Shaoming, Wang Lei, Wang Hongwei, Ye Jian and Lin Yong.

It was a chilly spring day when an Iowa farmer spotted something odd in his freshly planted cornfield: a short, bald Asian man on his knees, digging up seeds.
Not just any seeds — special inbred seeds, the product of years of secret research and millions of dollars in corporate investment, so confidential that not even the farmer knew exactly what he was growing.
The Iowa resident approached the trespasser, who grew flush and nervous, stammering something about being from a local university. 

When the farmer diverted his attention briefly to take a phone call, the stranger bolted to a waiting car and sped away.
That curious encounter eventually led to an exhaustive five-year federal investigation and prosecution into one of the most brazen examples of Chinese economic espionage against the U.S., a crime that annually costs American companies at least $150 billion.
The FBI pulled out all the stops to catch the spies. 

Agents obtained surveillance warrants from the nation’s secret intelligence court, planted GPS-tracking devices on cars, trailed operatives from airplanes and bugged their phones.
The probe culminated this month with a three-year prison sentence for Mo Hailong, 47, a Chinese citizen and U.S. legal resident who works for a Chinese conglomerate.
Federal officials say the prosecution of Mo, also known as Robert Mo, sent a message to China and others that economic espionage will not go unpunished.
But outside experts say the case also revealed the difficulty, and sometimes futility, of bringing justice to those responsible for feeding China’s ravenous appetite for U.S. intellectual property.
Mo, who is being treated for a rare form of cancer, received a sentence that was even more lenient than the maximum five years laid out in his plea deal. 

Five others indicted in the plot remain free in China, out of the reach of U.S. law enforcement. 

And though the FBI suspected the Chinese government was involved in the thefts, it was never able to prove the link.
Worse, even though the scheme was exposed, Chinese companies almost certainly got their hands on some of the lucrative seeds. 

Five years before his arrest, court records show, Mo was being praised by his superiors for the quality of seeds he already had stolen.
“You have to have some kind of stick to get them to think twice,” said Melanie Reid, professor at Lincoln Memorial University’s Duncan School of Law. 

“Because these investigations can be quite complicated and many of the players are in other countries and protected from U.S. prosecution, it is unclear whether these types of cases are making a dent. Theft of trade secrets is not only promoted by Chinese government policies and state-backed companies, but it also reflects their societal attitude toward intellectual property. They simply don’t see stealing U.S. trade secrets as a crime.”
Some U.S. law enforcement officials echoed those observations, saying there is no evidence on the ground that such prosecutions have slowed China’s quest for U.S. secrets.
But they say doing nothing isn’t an option either, and they note that aggressive prosecutions against other forms of espionage by Chinese, such as cyber hacking, appear to have deterred such acts.
The Mo case highlighted the challenges of such prosecutions, which often span the globe and require the assistance of scientists, analysts, linguists and corporate executives who can be wary about cooperating for fear of disclosing their trade secrets.
Proving the Chinese government was involved in the theft was seen as critical to deterring future attempts, but not surprisingly, China refused to cooperate or turn over information and suspects for trial.
According to a review of court filings and interviews with U.S. law enforcement and FBI officials, some of whom spoke about the case for the first time, the investigation got a kick-start because the farmer jotted down the license plate number of the rental car.
He reported the incident to DuPont Pioneer, the global agriculture giant that owned the seeds. 

The Johnston, Iowa-based company used the rental car license number to identify Mo, and then passed along the information to FBI Special Agent Mark Betten of the bureau’s Des Moines office.
Betten soon learned that a local sheriff’s deputy had spotted Mo and two other men acting suspiciously near a second Iowa seed-testing field, this one used by Monsanto, an agricultural corporation headquartered near St. Louis.
Mo’s appearance in two such testing fields operated by separate companies — more than 85 miles apart — sparked Betten’s curiosity. 

The agent did some sleuthing and discovered that Mo had recently mailed to his home in Florida 15 heavy packages containing “corn samples.”
Betten also learned that Mo was the U.S.-based director of international business for Beijing Dabeinong Technology Group, also known as DBN, a Chinese conglomerate that sells seeds through a subsidiary called Beijing Kings Nower Seed Science & Technology Co. 

Both are considered to have close ties to the Chinese government. 

Mo’s sister was married to DBN’s billionaire chairman.
The interest in Iowa seed was plain: China’s demand for corn is expected to outstrip supply in the next decade. 

To close that gap, China would benefit from planting better corn seed — like the kind being produced by Pioneer and Monsanto.
Creating robust seeds requires the breeding of two pure “inbred” lines of seed to craft a “hybrid” that is later sold to the public. 

Developing a single inbred can cost as much as $30 million to $40 million in laboratory testing, field work and trial and error; companies evaluate scores of inbreds to develop a single hybrid.
Though he worried his supervisors would balk at an investigation involving something seemingly as mundane as corn seeds, Betten ramped up the probe. 

By 2012, agents were trailing Mo as he sped across Iowa, Indiana and Illinois. 

Following the spy was not easy because he sometimes engaged in counter-surveillance maneuvers, such as driving slowly, then fast, making U-turns and watching traffic for possible tails.
“You have to be careful trailing someone in farm country,” said Betten, a Nebraska native who speaks in a clipped Midwestern accent. 

“Cars kick up a lot of dust and can be seen from a long way off.”
Betten and other agents watched as Mo visited agriculture supply stores and purchased Pioneer and Monsanto seed, stashing it in a rented storage locker. 

The store clerks never should have sold the seeds to Mo and his colleagues because they had not signed required contracts with the companies.
A few weeks later, Mo and two Kings Nower employees wheeled five large boxes destined for Hong Kong into a FedEx store in suburban Chicago.
After the men left, agents swept in. 

They discovered 42 bags of hybrid seeds in the boxes; each bag was marked with its own code, presumably to help identify the contraband. 

The FBI replaced the seeds with others already commercially available in China and shipped them on their way.
Stepping up their surveillance, the agents listened to secretly recorded conversations of two Kings Nower employees — Lin Yong and Ye Jian, both Chinese citizens who live in China — discussing their crimes as they crisscrossed farm country in search of seeds.
“These are actually very serious offenses,” Lin told Ye, according to Justice Department transcripts of secretly recorded conversations.
“They could treat us as spies,” Ye said.
“That is what we’ve been doing,” Lin replied.
After six weeks of seed gathering, Ye and Kings Nower’s chief operating officer, Li Shaoming, tried to spirit their haul to China. 

As they were departing Chicago’s O’Hare International Airport on Sept. 30, 2012, customs officers searched the men and their luggage and found thousands of stolen seeds, much of it hidden in resealed boxes of microwave popcorn.
Meanwhile, customs agents stopped another of Mo’s associates trying to cross the border into Canada and found corn seed hidden in his luggage too.
The men were allowed to leave the country, but the seeds were seized.
To bring criminal charges, the FBI first had to genetically test the seeds to prove they were the product of U.S. trade secrets. 

It took the bureau nine months to iron out the agreements with Pioneer and Monsanto to conduct the tests at an independent lab. 

“Neither Pioneer nor Monsanto understandably wanted the other to have their secrets,” let alone a Chinese company, Betten said.
The tests revealed that many of the seeds were inbreds belonging to both companies. 

In December 2013, agents arrested Mo at his home in Boca Raton, Fla. 

By then, the other defendants were outside the U.S.
Calls to the Chinese embassy in Washington were not returned, nor were messages and emails left with DBN and Kings Nower.
Pioneer declined to comment on the case. 

Monsanto said in a statement that it fully cooperated with the FBI and is pleased “this matter has been concluded.”
Mo pleaded guilty to conspiring to steal trade secrets. 

Subdued and apologetic at his Oct. 5 sentencing, Mo removed his wire-rimmed glasses to wipe away tears, saying that he had “destroyed everything I had wanted” in life.
Looking down at Mo, U.S. District Judge Stephanie Rose said she felt bad for the man’s plight but hoped her sentence would send a message to China that it needed to halt its economic espionage. 

She cited the crime’s cost and reviewed the investigation’s extensive history, the secret warrants, wiretaps and the tens of thousands of pages of court filings she had reviewed.
To think, she said, this “all started with a man in a field.”