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This woman you see on the screen is Meng Wanzhou, Vice President of Huawei.
The Canadian police arrested her at the end of 2018.
The main reason was because of alleged violations of America’s sanctions on Iran.
But there’s more to the story.
The Trump administration believes China is using their technology to spy on American
citizens.
But… is this just Donald Trump’s obsession or are there legitimate reasons to be scared
of China?
You see… whenever we talk about the military, we always talk about air, sea and land…
nowadays we should add another field: technology.
Chips, cameras, drones and all kinds of innovations that have revolutionized modern warfare.
As we told you in our previous videos, China is facing an existential threat and therefore
it needs to expand the military.
This is why they created what has been called the String of Pearls strategy.
This is a set of ports that can double as military bases that would go from the South
China Sea to Africa.
And, in another video, we told you about what we like to call sugar daddy diplomacy.
But still, there is something important China is missing for their military expansion: technology.
And, catching up with the West in this field is not easy.
And again, Xi Jimping is showing his lateral thinking on this issue…
How?
We’ll tell you in this video.
China.
A country famous for making cheap copies of anything that you can imagine, like these
copyrights violating ”LEPIN” bricks with the STAR…
WNRS logo on them…
But make no mistake…
China’s technological prowess goes way beyond that.
In 2015 China’s government unveiled “Made in China 2025”, a ten-year plan to update
the state’s manufacturing base by rapidly developing ten high-tech industries.
Chief among these are electric cars and other new energy vehicles, next-generation information
technology and telecommunications, and, last but not least, advanced robotics and artificial
intelligence.
These sectors are central to the so-called fourth industrial revolution, which is the
new buzzword to use when you want to look smarter.
Soon there won’t be a single talk show or political debate that isn’t talking about
it so… pay attention.
The fourth industrial revolution refers to the integration of big data and cloud computing
into global manufacturing supply chains.
’Made in China 2025’: is Beijing’s plan for hi-tech dominance as big a threat as the
West thinks it is?
The plan is to reduce the dependence on foreign technology.
Yes, it is true, most of the mobile phones you can buy are assembled in China.
But the majority of the high tech components, the cameras, the high end microchips… all
of that, is made in countries like America, Germany or Japan.
So far China doesn’t have the technology to produce those components.
And that’s why this desire to become a tech superpower is part of the so called Chinese
dream.
“The Chinese dream is closely linked with the dreams of people in other countries ... China’s
development is facilitated by the development of the world, and it will bring about the
greater impetus and opportunities for the common progress of all countries” – President
Xi Jinping, October 22nd, 2015
And now, China is trying to make another Silicon Valley.
The city of Nanjing, for example, is currently developing a research park to foster China’s
next generation of tech giants.
We’re talking about an area as big as SEATTLE ,housing dozens of high-profile startups and
companies.
And that’s just one big city.
It’s worth noting that this comes with the support of the Chinese government.
And this support comes with heavy regulations.
Businesses must meet certain criteria to qualify for tax relief and other support.
And there’s even more here…
Besides providing subsidies and setting targets, how does China intend to achieve its goals?
By investing or, directly buying American and European startups.
Chinese companies, both private and state-backed, have been encouraged to invest in foreign
companies in order to gain access to advanced technology.
In 2016 alone, the value of Chinese acquisitions in the United States amounted to over $45
billion.
And the same goes for in Europe.
OK, I know what you’re thinking… so what?
What’s the problem if China wants to invest in other countries?
Well, the problem is that many of those investments might be a strategy to steal technology from
Europe and America.
And, believe me, I’m not making this up.
Want an example?
Here it is!
You know those OREO cookies?
Well… that sweet cream they have in the middle is so pearly White because they use
a special Chemical component.
Something based on Titanium dioxide that requires rocket science to produce.
The patent to produce this belongs to a company called DUPONT and it’s as secret as the
Coca Cola formula.
So one day, a Chinese spy called Walter LIEW stole this formula.
Years later, a Chinese factory was mass producing this White tint.
And that’s just an example!
Of course, in the Oreo case, the patent holders could act and file a lawsuit against the spies.
But… what would happen if, instead of being a spy, this Walter LIEW guy had been the main
shareholder of the company?
In this case, he would have access to the company’s secrets without a problem.
And I know what you’re thinking…
Who cares about cookies?
Well… cookies aren’t important, you’re right.
But… what if, instead of white cream, we were talking about military technology?
Then we could have a problem.
And believe me, China would LOVE to get military secrets from European and American companies.
And you might wonder… is this as bad as some politicians are making it out to be?
Or is this just another chapter in the trade war with China?
Today we’re going to answer to all of these questions but, before we do, let’s take
a look back at the history.
MORE MONEY AND EVEN MORE DEALS
When it comes to investing in technology, Americans already have a huge funding market.
Want to create a start up?
Just in California you’ll find lots of VC funds competing to make the best deal with
you.
But the European Union is more of a virgin territory.
And this is why the European Union became the favorite destination for Chinese investors.
According to several studies published by the Mercator Institute for China Studies,
the foreign direct investment or FDI in the EU totaled more than €35 billion in 2016,
with a 77% increase from the previous year.
And Germany was the largest recipient, accounting for 31% of all that money.
Chinese investment in Europe is increasing.
The region accounted for a quarter of China’s FDI outflows in 2017
Chinese investors have always showed a strong predilection for tech and advanced manufacturing
assets.
Some of the big deals made were the acquisition of a German robotics company for €4.4 billion
and the €6.7 billion acquisition of Finnish gaming firm Supercell.
And those are just the bigger ones… just think about what €35 billion could do.
In the last couple years China began refocusing on the Big Three European economies: Germany,
the UK and France.
Those three together accounted for 59% of their total investment.
I know, I know, we’re throwing a lot of numbers your way.
But it’s very important in order to understand the magnitude of this phenomenon.
This is a database launched in order to track and cover China’s global investments.
The database covers China’s global outbound investments since 2005 and it’s now hosted
by the American Enterprise Institute.
The dataset is publicly available and also includes construction contracts and transactions
that were never completed.
How China is buying its way into Europe.
Bloomberg got to work and provided us with some pretty intense numbers: just in the past
10 years China has bought or invested in assets amounting to at least $318 billion.
Most of this money went to businesses but some also went to infrastructure: just in
the city of London, Chinese investors purchased a dozen office towers.
Knowing who is buying all these businesses and buildings in Europe is important in order
to try and understand how this kind of activity fits into China’s foreign policy.
Keeping in mind that the line between state and private is pretty blurry in China, it’s
worth noting that at least 63% of the total investments comes from state-backed companies
or investment funds.
In other words…
It is China’s government that’s investing in technological firms.
But why?
Is this all about making money or… perhaps there’s something more.
We’ll see right now.
DON’T TOUCH MY TECH!
Even though Silicon Valley comes to mind whenever someone talks about tech, we shouldn’t overlook
European tech giants.
Spotify, for example, is the most valuable streaming service on the planet.
The company has been valued at around $16 billion.
And guess where they come from?
Exactly!
Sweden!
But we’re not here to talk about civil technology.
We’re here to talk about military ones.
And here, Europe has a lot to offer.
For example, one of the biggest weapon manufacturers is the Airbus Group.
This French corporation designs, manufactures and sells civil and military aerospace products
worldwide and in 2017 had a reported revenue of €67 million.
Military tech is a very sensitive strategic topic and usually, it’s kept very well hidden.
But, if you invest in a company, you can access their databases and their secrets.
At the end of the day, you are one of the owners!
And this is, exactly, what happened to HUMMER.
Hummers are these armored cars you see on the screen.
The American army has been using them for decades.
In the year 2008, the company who manufactured them, a subsidiary of General Motors, was
at the edge of collapse.
And this is when a Chinese company came to the rescue.
In their first negotiations, they asked for a couple of cars so they could examine them.
Which is normal, right?
You don’t invest half a billion dollars in a company without knowing exactly what
they do.
So Hummer gave them those cars.
Then, the White House, with Obama as president, vetoed the Chinese acquisition.
Why?
Well, they didn’t want to sell a military company to another country, of course.
Nevertheless, those Chinese investors had already gotten what they wanted: the cars.
So what did they do with them?
Something called REVERSE ENGINEERING.
They basically took all the pieces apart and learned how to build their own hummers from
the scratch.
Since then, THESE are the Chinese army’s brand new armoured cars.
Yes, they are almost exactly the same as the American hummers.
And this is just an example.
There are many, many more.
So in Europe, they learned the lesson… and are determined to not repeat the same mistakes.
Is Europe Finally Pushing Back On Chinese Investments?
And that’s why Europe’s three major powers, Germany, France, and the U.K., have all recently
taken steps to closely scrutinize Chinese investments.
They have reasons to be afraid.
For example, Germany produces some state of the art tanks, the so called LEOPARDS.
Well… according to many experts, the new Chinese tanks have identical motors.
This is why Germany recently vetoed the Chinese attempt to invest $2 billion in robotics in
their country, citing national security concerns.
The government is also working on a proposal that would strengthen government vetting of
acquisitions by foreigners
And the same goes in France.
French lawmakers passed a legislation, as early as 2003, that also allows the government
to scrutinize and veto foreign investments.
Since them, they have added more regulations for companies in the big data, artificial
intelligence and robotics industries.
“France is open to long-term investment from China, but not looting” French Finance
Minister Bruno Le Marie.
And, you know, anytime France and Germany agree on something, it’s just a matter of
time before the European Union follows suit.
The agreed package will ensure that the EU and its Member States are equipped to protect
their “essential interests” while remaining “one of the most open investment regimes”
in the world.
And this is when the complicated part starts.
Because the line that separates those “essential interests” and the not so special is…
extremely blurry.
You see, we all agree that a company that manufactures tanks is a weapon manufacturer
and that we want to protect it.
No debate there.
But…
What happens with the company that produces the microchip that controls the computer on
board?
That might be an IT company that works with lots of clients, aside from the military one.
In fact, AIRBUS itself has a civil division and they produce commercial airliners…
Should we protect them too?
In other words… those “essential interests” can become a trojan horse for all kinds of
protectionist and, arguably, financially xenophobic measures.
And, believe me, the risk on this matter is also real…
Emmanuel Macron promises to stop foreign investors buying up French farms after China land grab
Yes, you heard that right!
How on earth is farming related to the military?
Hmm… hard to understand, right?
But the truth is, French farmers don’t like the Chinese.
And Macron has elections to win in the future.
And the same goes for the United Kingdom.
For example, in the year 2016, the British government vetoed a Chinese investment in
a nuclear power plant.
Was that a strategic decision or straight forward protectionism?
Well… it’s hard to tell!
And I know--- I know what many of you might me thinking!
Fuck the Chinese! right?
Well… the truth is… we need that Money!
Remember that story about Hummer?
So guess what happened right after the White House vetoed the Chinese aquisition…
General Motors to Close Hummer After Sale Fails
From one day to the next… , almost 3000 people lost their jobs.
And what about those 35 billion euros for European startups?
On a previous VisualPolitik video, we told you the story behind Silicon Valley and how
Europe was unable to attract Venture Capital funds.
It’s a fact: Brussels, Berlin and Paris are going crazy trying to find entrepreneurs.
Europe wants to lead that so-called Fourth Industrial Revolution.
But you don’t do that with grants and subsidies alone.
You need Venture Capitalists and private investors of all kinds.
And, a big share of this money is coming from China.
In fact…
Do you remember MENG HUANZHOU, the Huawei Vice president? Welll, don’t forget that
just in Europe alone, more than 11,000 people are working for this company.
So now the questions comes to you.
Which is more important: economic growth and innovation or… national security?
Is there a way to protect both things at the same time?
Please, leave your answers in the comment section below.
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