by David Archibald
10 December 2018
In running a country you can have either productivity or control — one or the other, but not both at once.
The Chicoms under Dictator Xi have reverted to type and have opted for control. They are favouring state-owned enterprises at the expense of privately-owned companies. Productivity in the former is one third that of the latter. China’s standard of living will fall as a consequence. Capitalism is a far more efficient allocator of capital than any other system. As long as there is a shortage of labor, people in capitalist countries will have the highest standard of living possible for human societies.
A story told by Dr. Cheng Xiaonong about China’s misadventures in trying to be a competitive chip maker bear this out. China began researching chip technology in the 1960s, and starting importing U.S. and European technology in the 1970s. Nevertheless Chinese microchips were about 15 years behind standards in the West and 20 years behind in terms of production efficiency. China’s first attempt at catching up with the West in microchips was the ‘Microchip Project 908’. It took too long to start up, so that its product was already several generations behind when it entered the market. That failure was followed by ‘Microchip Project 909’, which also failed, for the same reasons.
Silicon chips are tricky things to manufacture. Australia gave up trying in the 1980s.
China then switched to accessing technology by buying Western chip makers, starting with an unsuccessful attempt at acquiring Micron Technology in 2015 for $23 billion. Micron, with 34,000 employees, is headquartered in Boise, Idaho. China’s most recent failure in chip making is a company called Fujian Jinhua Integrated Circuit. Its mission was to get into dynamic random access memory (DRAM) chip production by September this year. To that end it was provided with land and close to $8 billion. The technology for the venture was obtained by hiring staff from a Taiwanese chip maker, some of whom had previously worked at Micron. One of these, who had stolen data from Micron, turned prosecution witness.
In October the U.S. Department of Commerce announced a ban on Fujian Jinhua that barred American companies from selling technology and products to it. Some of the chip making equipment had arrived and was being installed. But with no further technical input from the US or Taiwan, the project remains ‘unfinished’. As Dr Cheng says in his article, it was strangled at birth.
China’s growth over the last 30 years during its partially capitalist phase appears to be a miracle, but it is also a parasitic growth on the West. Now the mutant has grown outsize and the body must reject it to have any chance of survival. Tariffs and economic and legal instruments alone will not be enough. The mutant must be extracted fully, through all means. Tariffs are like the beginning scalpel work that goes around the mutant to cut bits that interconnect the mutant to the body. You don’t stop there. You cut as much and as quickly as possible, mindful of the potentially fatal links but also of the race against time to complete the surgery.
As part of that disengagement, anyone with a Chinese passport should be prevented from visiting the West. Their intentions are only to steal or subvert. The continued existence of any country with people free to think and act as they please is an existential threat to a Chicom regime taking its subjects into an increasingly dystopian future of mass surveillance. The arrest in Canada of Meng Wanzhou, CFO of the Chinese telecom manufacturer Huawei, is a good start. Anything that chills relations is a step in the right direction.
The Chicoms are aware that their culture of control weakens their ability where it matters to them most — in waging war on their neighbours.
Thus the Peoples Liberation Army writings in 2015 started referring to the ‘Five Incapables’ — the inability of officers to ‘(1) judge the situation, (2) understand the intention of the higher up authorities, (3) make operational decisions, (4) deploy troops, and (5) deal with unexpected situations’. Just as the workers of state-owned companies have only one third of the productivity of the workers at private companies, Peoples Liberation Army forces are likely to be far less effective than troops that are able to think for themselves, a situation only enhanced by the technological advances of the last 30 years.
The Chicom military-industial complex, with its civilian-military fusion, is not as formidable as it appears from a distance. A large part of the structure is hollow. But we only make our own task more difficult by feeding it. We will learn that we can get along quite happily without China.
David Archibald is the author of “American Gripen: The Solution to the F-35 Nightmare”.