Chinese IP theft and American investment prevent winning the tech race

While we claim to be competing, there are two giant holes through which America helps China develop technologies that are potentially vital to winning the competition. The first is our failure to respond to theft of intellectual property (IP). Even if claims of trillions in IP losses are exaggerated, the amount is certainly in the hundreds of billions. American retaliation against PRC beneficiaries of coerced or stolen IP is nearly non-existent, guaranteeing more theft.13

Outbound investment is the second. The US attempts to protect technology embedded in goods sales through the export control regime, though the regime has its own problems. For inbound investment, the Committee on Foreign Investment in the United Sates (CFIUS) has a solid track record in preventing loss of sensitive technology through acquisition here. Yet the same technologies that are controlled in exports or shielded off from acquisition can be developed in China, with American funding.

Consider a Chinese entity bidding for an American company developing a useful technology. It is likely be rebuffed by CFIUS. Then it tries to buy the company’s products to reverse-engineer. There’s at least a chance this is prevented by export controls. Yet the Chinese entity, often backed by Chinese government guarantees which make investment much more appealing, can freely solicit American money to develop the technology in the PRC. There’s no barrier to this at all – CFIUS has no jurisdiction and export controls (contrary to some claims) do not apply. And it’s actually the worst outcome, since we are helping China become more self-sufficient.