Friday, July 6, 2018

China is the Bernie Madoff of Trade

As we are finding out from the “trade war” some of that shine on China’s economy may be nickel and not silver.   That is something companies should note.  The Sinovel case, the latest with Micron, and all the others in between are clear indicators that this is a fraud bent entirely to the benefit of China.  Bernie Madoff operated the largest private ponzi scheme in the world from a separate computer in the back room - it was a big computer, but nobody ever saw it.  It generated good news for all kinds of investors, but the real, lasting investments were sucked out and the investors were stuck with the end results.  Most of the investors said, “I didn’t see that coming” but it did look too good to be true.

China is a thief disguised as a regular guy who is friendly and has a big pot of money for anyone who joins him.  That lure is Chinese customers for a business.  In order to get that business there are few things a company has to do:  join in a business deal with a Chinese vendor for the products you are selling there.  The Chinese are quick to point out that only about 10% of companies have to do this, but they don’t say that certain types of businesses are banned entirely from investment there. Management of these ventures are to be run by Chinese nationals.   I described a lot of these things in my second edition of the Chinese Information War.  You have to turn over software so it can be examined for “National Security” impact.  This gives the government access to proprietary code.  China promises not to abuse that access.  If they can’t get it that way, they steal it.  There are a number of other restrictions too, but they are too lengthy for a short story.

When a business buys into this “We have Customers for you” routine, it is more than just a business opportunity.  China has managed to get us to believe they are just like us and allow their businesses to thrive on their own.  But, they are really stealing money from any investor by skimming off money from the top, double dealing, applying tariffs and restrictions, and using a corrupt legal system to support their political objectives.  In that environment, they fund state-owned entities from the money pit.  Then too, they are buying politicians in the US though business dealings in their states.  All the while they are buying up major ports, planting more flags in the South China Sea, and buying their way into places through trade deals.  It sounds like something much bigger than any country could pull off, but Bernie Madoff did it from 1960 to 2008, just about by himself.


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