|China Is All About Growing Stronger
While it may appear both State-owned and private firms operate within China's economic system. This is mostly an illusion because the Chinese regime allowed some market principles to be introduced in China following economic reforms in the 1980s. In reality, the communist system does not allow for true private ownership and views all "tech innovation" as essential to its national interests. Thus, private and state-owned Chinese firms act in the interest of the Chinese regime when it comes to foreign investments in the high-tech sectors. This means behind the curtain the regime directs Chinese firms on where to invest and puts a priority upon the areas that benefit China the most over the long-term by increasing their ability to compete.
Through, “Sovereign investment funds and governmental investment management companies" China plays a large role in foreign direct investment in the tech sector. This could be seen in JAC Capital's acquiring the Dutch semiconductor firm NXP in 2016. Fifty-one percent of JAC is owned by an investment vehicle of China’s State Council, the regime’s chief administrative agency. Also, private equity firms can also be used to fund foreign acquisitions. A Reuters report revealed that partial funding for California-based private equity firm Canyon Bridge’s $1.3 billion bid to purchase American chipmaker Lattice Semiconductor originated from the State Council. This is why in September 2017, President Trump blocked the deal, citing national security concerns. Developing the semiconductor industry is high on the Made in China 2025 priority list and China currently relies heavily on imported chips which is one of its biggest imports.
|Research In China Is Hampered By Corruption
As Chinese companies have been forced to compete for their bottom line the desire to move up the manufacturing food chain has grown stronger. China’s main strength in recent history has been its ability to crank out cheap manufacturing and low-cost goods. This means Chinese companies have had to compete heavily on pricing and they are often forced to reduce costs and cut corners on quality wherever possible. This has only added to the image that Chinese products are shoddily made. All the above factors has increased the CCP’s desire to create respected local brands and added pressure to maintain and ramp-up its already unflexible path forward in its attempt to break into the luxury goods and high-tech markets. When we combine this with China's attitude towards expansion and flexing its growing military might it is easy to envision the potential for conflict ahead.
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