China's Five Year Plan

12_5_year.jpgDid you know China has a five year plan? They do and it's a doozy according to a U.S. – China Economic and Security Review Commission. Yup, China has a strategy in play and it's on Indigenous Innovation and Technology Transfers, and Outsourcing. From the opening statement:

Since 1953, the Communist Party of China has used a series of five-year plans to guide China’s economic and social development. In its newly-adopted 12th Five-Year Plan China makes clear that it hopes to move up the manufacturing value chain by making explicit mention of Strategic Emerging Industries, which the Chinese government would like to see dominated by Chinese firms. These industries are: New-generation information technology, high-end equipment manufacturing, advanced materials, alternative-fuel cars, energy conservation and environmental protection, alternative energy, and biotechnology. China’s goal is to take the Strategic Emerging Industries from a current combined share of 3% of Chinese GDP to 8% by 2015 and 15% by 2020.

Anyone name America's 5 year plan? Beyond destroying the U.S. middle class and American workforce, can anyone even think of one? China, on the other hand, is methodically going about dominating a host of advanced technology industries and capturing our jobs in that process.

Mathematician Ralph Gomory gave some stark testimony to what the United States can expect.

What we can expect in the future is simply more, and probably much more, of what we have seen to date.

What we have seen to date is this: rapid economic growth in China, coupled with a major negative impact of the imports of Chinese goods on the productive capability of this county. We have seen an enormous imbalance of trade as these imports are not balanced by a sufficient counter-flow of exports. In the U.S. we have seen greater corporate profits, accompanied by downward pressure on wages and employment.

Leo Hindery, New America Foundation, also testified with further reality checks that never make the press. Now how exactly does this make the iOutsource so cool of a product line?

Apple, despite its prominence, actually has only about 50,000 direct employees – 25,000 or so in the U.S. and 25,000 overseas. What the administration and others seem to purposely overlook are Apple‟s 250,000 indirect employees working at the company Foxconn, located outside of Shenzhen, China, dedicated to manufacturing Apple products sold in the U.S. (Foxconn‟s total employment in China is a staggering 1 million workers.) In other words, for every 1 of the 25,000 American workers now employed by Apple mostly in marketing, administration and R&D, there are 10 Foxconn workers in China who could, and many of believe should, be American workers.

Gomory explains in simple details why U.S. multinationals are Benedict Arnolds, running off to China. One word, profits:

The Chinese government, as Singapore’s had done earlier, makes intelligent use of this motivation. Through direct subsidies, abated taxes, and mispriced currency they can supplement cheap labor to the point where China becomes the most profitable place to locate the industries China is interested in. China is also able to add to this the lure of a giant growing market and to make, in practice, technology transfer a condition for market entry.

Our corporations, aiming to maximize profit and shareholder value, only hesitate at the thought that the companies they are helping to found might become their future competitors. But in the end it is not surprising that corporate leadership finds the bird in the hand superior to the two in the bush, since profits are reported quarterly, not every five years. Our present executive compensation policies for executives, strongly tied to stock price, then strongly reward these decisions.

Nor is there any strong reason for our corporations to believe that they are harming their country. Our own government, ignoring in practice Chinese mercantilist policies, has clearly supported the notion of free trade and has even in its official pronouncements supported the idea that outsourcing is good for the country.

It's actually getting worse for this 5 year plan is about China forcing technology transfers and dominating intellectual property, innovation. From the hearing commissioner Mulloy:

One of the tools the Chinese government will use to grow these Strategic Emerging Industries is indigenous innovation. This policy seeks to help China move up the value-added chain.

Indigenous innovation policies have drawn criticism from the U.S. and European business communities and policy makers because China uses this policy to require foreign companies to transfer their higher technologies and know-how as a condition of doing business in China or getting government procurement contracts in China.

China is doing this despite the fact that in joining the WTO it agreed to eliminate forced technology transfers. China claims that it is not violating that commitment because the decisions being made by foreign companies to transfer technology for market access are purely business decisions.

Hindery:

China’s approach to trade cannot be described as free trade. It is traditional mercantilism, a pattern of government policies aimed at advancing Chinese industries in world trade, an approach that has many precedents.

Now you know why Gomory testified the situation will only get worse for the United States and U.S. worker.

Both Gomory and Hindery have policy recommendations. Of course our government will promptly ignore all of them.

A video of the hearing is available below.

 

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The graphic at the top of this post is from DigiTimes and their in-depth article on China's 12th five year plan.

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Comments

National Plans

China is not the only country to have national plans - the French run national plans and the plans are generally supported by all political parties. They take a national view of things like transport infrastructure (the TGV construction), health, education, etc. It is a recognition that society is made up of mutually reinforcing interests rather than narrow vested interests as in the US.

The problem in the US is these discussing things immediately falls into juvilne name calling about 'socialism', etc.

It is easy to knock the US but what could the US achieve if it took the same approach and focused solely on achieving planned national objectives as opposed to being divided by narrow interests that pits Americans against each other. I don't live in the US but the only thing the US approach benefits is competitors to the US.

The last time the US was fully mobilized as a nation was WW2 and the fight back in Europe and the fight across the Pacific - why should war be the only driver of national interest and cohesion?

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political rhetorical insanity

the inane rhetoric such as "that's socialism" is absurd. Obamacare is corporatism if one wants to label his policies.

The airwaves fill with fiction. The U.S. policies benefit competitors and multinationals, esp. the so called U.S. multinationals in their moving of profits and labor arbitrage around the globe.

But clearly it will come back to bite them. They are not indigenous China corporations...yet.

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US lack of planning " a purpose driven life?"

China indeed is planning something other than taking care of it's own.
For far too long the Chinese have been hemmed in by foreign imperialists
to their thinking. Now it's their turn to rule inspite of any international
objections.

As the world slumbers to this fact, China is muscle building in every
direction - economic, military, and scientific. Their boarders are too
slender to accommodate their population and will have to expand in the
future. Question is where and how?

To continue the fast pace of economic expansion China has to acquire raw materials
at bargain basement prices to ensure their high profit margin. Best way to do
this is to become a "colonizer". Anyone interested in giving up their homeland to
China?

Get ready the dragon is ready to fly.

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Yes, we should do our thing

"China indeed is planning something other than taking care of it's own. For far too long the Chinese have been hemmed in by foreign imperialists to their thinking. Now it's their turn to rule inspite of any international objections." -- Anonymous

The question here is "Who is seriously objecting?"

Or more to the point, "What nation is actually acting like a serious contender to defend or otherwise win the World Championship?"

USA military are currently attempting to hang in there -- after years of mismanagement and ill-conceived ideology-driven misadventure -- but what is a military without coherent national leadership? Of what use is a military in a nation divided against itself? What is a military that is driven by short-sighted profiteering, perpetuated by a political elite that refuses even to consider a war profiteering act? (See, comment below, 'We should do our thing', as to "aggressive prosecution of War Profiteering Prevention Act and anti-trust law.")

 

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China to overrun international objections?

"Now it's their [China's] turn to rule in spite of any international objections." -- Anonymous

 

If China becomes the next global hegemonist, it will not be in spite of, but in acquiescence to, the demands of ruling national elites -- which are mostly subservient to, and corrupted by, anti-national and anti-democracy global capital.

Unfortunately, it is only democracies that can be depended on to limit their planning to nothing but taking care of their own. That is the great virtue of true democracy, a fact which seems to be almost forgotten here in postmodern Super America. When the democratic instinct to benefit the people is lost, democracy is lost. And when democracy is lost in a nation based on democratic traditions and institutions, the nation is lost.

The importance of the democratic instinct applies not only to the USA, but in every nation. Of course, if a nation has never developed democratic traditions and institutions, it can't lose them. However, it is ultimately fatal for any government to lose the democratic instinct -- unpopular kings tend to have short lives. The elitist rulers of China (Communist Party of China) have no doubt that they must deliver the goods in material terms if their power is to survive, but they do not premise their power on visions of global conquest as did Hitler or Stalin, in order to justify sacrifice from the people.

While China was indeed conquered through corruption by foreign imperialists during the 19th Century, they do not currently see themselves as 'hemmed in' or as seeking lebensraum the way that the German people did under Hitler's spell. Nor are they at all likely to embrace any kind of military adventurism.

Of course, it is true that Beijing is aware of a global expectation that the People's Republic will soon inherit the mantle of global hegemonist. And it is true that global hegemony is likely to lead to arrogance that self-righteously disregards international objections. This was demonstrated when Bush-Cheney led USA in a noble-hearted (or ill-considered?) attempt at implementation of the Project for a New American Century (PNAC) doctrine. However, it is precisely the failure of that attempt that makes anything like postmodern imperialism unlikely on the part of China. We can carry our thinking farther without much fear of contradiction -- China was never worried about PNAC adventurism, because China's leadership played it for all it was worth, risking nothing and picking up the pieces afterwards.

It's like security guys are always taught -- if you have to pull out your guns and start shooting, that means that you have already flubbed up. Beijing is surely of the view that, if you find yourself in a real shooting war, that can only mean that you have been invaded or you are a born loser. What else could anyone conclude from the history of USA wars since World War II (constitutionally undeclared), through which USA has managed to knock itself out repeatedly to end up as the national equivalent of a punch-drunk fighter who "never lost a fight." That's the guy with the title who is incapable of speaking a coherent sentence. That's the guy with the manager who has all the money.

Although the Chinese are notoriously fond of gambling, China is extraordinarily averse, as a nation, to risk-taking. Meanwhile USA has been wrestling with its imperial status, eating itself, slowly but surely dissolving its own democratic traditions as a gesture to a distorted version of American exceptionalism. A truly democratic nation should be prepared for war, but it should also be like a good bank -- never underwriting anything without a solid risk-free plan. No democratic nation will ever find that its leading industry is warfare.

World War III with USA versus China is unlikely to occur. However, what is likely is that trade wars of the old-fashioned guns-and-killing kind may break out, in which China may be implicated. Indeed, China is already implicated in such wars. However, what China has done in such cases is to follow the strategy of Sun Tzu that the best way to win a war is without anyone knowing that you have ever been involved in it.

China much prefers proxy war to actual war. Beyond that being a well-established military doctrine in Chinese thought, China studied the techniques from the British -- the most recent in a long line of conquerors of China. Britannia never attempted to conquer China unless covertly or with trade wars around the edges -- in which strategy the British Empire was notably successful.

I agree that our primary 'potential adversary' (to use the politically correct NSC term) is the People's Republic of China (PRC), but we need to understand what that means in the current global context.

The idea that our primary adversary is some kind of alien culture represented by Al Qaeda is off-the-mark -- a propaganda ploy. It would be more apt to compare China versus USA/NATO with France versus England during the pre-revolutionary French and Indian War (North American theater in the grand series of trade wars known as the Seven Year War). Native tribes and nations fought on both sides, but the battles were never between 'the West' (Europe) and a monolithic alien culture.

Yes, back in 18th Century North America, there was 'cultural war' in the background between a culture that was possessed of guns and steel versus stone-age cultures playing catch-up. Similarly there are today cultural conflicts or conflicting cultures, but that has been true for as long as history records.

A tightly interwoven global theater of operations is what's relatively new, and then there is Toynbee's conjecture that the world is currently headed toward a global culture, which is ultimately inevitable (but 'ultimately' is a very long time).

In terms of workable politico-military geo-strategy, despite that such truth is invariably kept under wraps, the primary 'potential adversary' facing USA is our friendly banker, the PRC. However, that should not be taken as meaning that some kind of great final conflict -- yet another 'war to end all war' -- is about to unfold.

All USA needs to do is mind our own business a lot better than 'our' corporate ruling elite have been!

Wise dragon is content. Dragon hunts trouble, finds it.

Dragons fight in the meadow.

Their blood runs black and yellow.

-- I Ching, 'The Receptive' (changing line in the sixth place)

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We should do our thing

We (U.S.) are losing the neo-mercantilist game, which is a game where the rules are constantly changed. We should forget about playing the neo-mercantilist game and do things a different way: establish a stable monetary policy and a stable fiscal-financial policy, add to that a stable across-the-board tariff, and then practice free enterprise, including aggressive prosecution of War Profiteering Prevention Act and anti-trust law.

Instead of pretending to run the world, we concentrate on running our own bailey wick, within which we promote a system that allows small businesses and start-ups to flourish, even if they are not "minority-owned."

Everything together, the point is to level the competitive playing field for producers.

Our five-year plan should be to establish tax-reform (eliminating loopholes), and reform of our monetary and fiscal/financial systems. eliminate ALL preference systems and let free enterprise operate -- and then keep the government out of business for five years. Of course, we would still have to do battle among ourselves on environmental issues, extraction issues, nuclear issues and environmental impacts of renewable resources. That's where the focus of our political debate should be.

We don't have to become like China. They do their thing. We do our thing. We maintain our borders: across-the-board tariff or VAT.

We take responsibility for a full-employment policy: immigration policy is secondary to full-employment policy. Full employment drives immigration, not the other way around.

To greatest possible extent, we accommodate our closest neighbors, Mexico and Canada. That's a kind of preference, but it's a natural and inevitable preference, based in history.

What we want to avoid is preferences that derive from our delusion that we are responsible for all the borders everywhere -- equally responsible for everything everywhere in the world, as though we had anything like sufficient power or resolve or wisdom to fix everything everywhere in the world. That was the United States in 1946. That was then. This is now.

We don't reject "gloablism" -- we simply announce that the "flat earth" approach to globalism is dead.

Why not?

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Economic Planning Exists in Many Mixed Economies

Most rapidly developing economies in the latter decades of the 20th and first decade of the 21st century with various combinations of public and private ownership use economic planning. How well economic planning works depends on institutions in each country and on international economic conditions not directly related to planning. Most of the rapidly developing countries of East Asia before the emergence of China provided government support and subsidies to manufacturing industries geared for export. China has learned from this experience, but unlike some of the other East Asian countries that relied on domestic capital, is now getting foreign multinationals to do the job. This is in essence the East Asian pattern of state supported manufacturing aimed at capturing markets in more developed economies with large consumer markets. Countries like the United States that simply open their markets for exports from countries with lower wages and various forms of state support for industry are bound to lose industries, technological capacity and jobs. Anyone who reads a few books about the development history of East Asian countries like Japan, South Korea, Taiwan and now the giant of all giants, China and then looks at the statistics on US trade deficits and the decline of the manufacturing sector in the US can see the relationship. The free traders can't seem to reconcile the facts of economic history with their doctrine. State support for manufacturing and exports equals planning and it has been more successful than the lack of planning. Outsourcing and off-shoring for the profit of multinational corporations and the Chinese state capitalist elite has been a kind of planning in reverse, planned de-industrialization.

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It makes one want to weep as

It makes one want to weep as we see our politicians setting policies that allows for trade imbalances and wealth transfers.

Westerners are building the Chinese Empire at the expense of their own countries - U.S. the worse offender.

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