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Wednesday, December 30, 2020


By:   Edward J. O’Boyle PhD
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In a market economy, the purpose of any trade is mutual gain. For both parties what is gotten is more highly valued than what is given up. China, however, doesn’t play by that rule in international trade. It does not engage in trade for the gains that are shared with its trading partners. It executes trades in order to dominate its partners and reduce them to colonies. At the top of its list of trading partners which it intends to colonize is the United States. There are two strategies China follows to achieve colonization: mergers and acquisitions and supply chain dependency.

Between 2002 and 2016 China acquired $145 billion in American-owned assets including more than 50 companies each worth at least $50 million. Over the period 2005 to 2019 Chinese investors entered into more than 250 deals with the holders of $180 billion in U.S. assets chiefly in real estate, finance, transportation, and technology. In 2016 alone 61 deals were executed.

Chinese investors own many U.S. companies including GE Appliances, AMC, the Waldorf Astoria, Motorola Mobility, Smithfield Foods, Sotheby’s, MD Anderson Cancer Center Proton Therapy Center, and KHSL-TV. For several years China has been negotiating a complete acquisition of Genworth Financial, a Fortune 500 insurance holding company. Chinese investors tried but failed to acquire the Chicago Stock Exchange because the Securities and Exchange Commission would not approve the deal.china US trade

In 2019 alone, the Chinese trade surplus with the United States was $345.6 billion. China uses its foreign exchange reserves to acquire equity positions in companies around the world. From that perspective, China is able to build a global empire because U.S. consumers and producers turn to Chinese manufacturers for their low-cost computers, cell phones, apparel, and fashion. The United States does not sell enough commercial aircraft, soybeans, and semiconductors to close the gap. To handle the overall trade deficit with China, the United States has to borrow money from China, sell equity positions in U.S. companies, or both. Thus, the colonizing logic of the Chinese Chamber of Commerce having locations in Hawaii, Los Angeles, New York, Chicago, Seattle, San Francisco, and Cincinnati, and the Bank of China having two branch locations in New York and one each in Los Angeles and Chicago.

China’s second colonization strategy is supply-chain dependency which is the direct and intended result of her policy of positioning herself as the lowest cost producer of manufactured goods in the world (absolute advantage). China has become a major source of automotive parts including brakes, lithium batteries, engines, engine parts, and generators. China’s share of U.S. automotive parts has nearly doubled since 2007 no doubt due to heavy subsidies from the Chinese government. Today the United States is the largest importer of Chinese auto parts. The U.S. dependency on China is probably even greater because China supplies subcomponents to Mexico and Canada which are used in vehicles exported to the United States. Further, China has at least 105 suppliers in the United States along with Chinese firms located outside China that supply auto parts to the United States.  

In 2017, the U.S. imported $260 billion in electronics including smart speakers, virtual reality electronics, drones, and wide-screen televisions. U.S. production of computer and electronic products dropped from $53.9 billion in 2015 to $44.2 billion in 2017 to $41.0 billion in 2019.

China has an impressive record regarding its share of the pharmaceutical market in the U.S.: 97 percent of antibiotics, 95 percent of ibuprofen, and 91 percent of hydrocortisone. Between 2010 and 2018 U.S. imports of Chinese pharmaceuticals increased from $1.7 billion to $3.0 billion.

At a 2019 press conference on the indictment of three Chinese nationals for importing and distributing fentanyl, the U.S. district attorney made the following observation. “Make no mistake: China is waging an undeclared war on our country and our American way of life, with deadly drugs serving as its weapon of choice…. China is supplying the United States with the most potent and deadly fentanyl and other synthetic opioids on the market today.”

For years, China has been shipping food to the U. S. that has been contaminated with cancer-causing chemicals, banned antibiotics, bacteria, and illegal pesticides. A recent review of 100 studies regarding the extent of heavy-metal pollution on farmland and urban soils in China stated the following: “As a result of soil pollution, green plants and agricultural grain products are increasingly polluted, creating public and ecological health risks.”

U.S. senators and representatives depend on China to purchase securities from the U.S. Treasury so that they can continue decades of deficit spending. American colleges and universities boost revenues and cut their costs by recruiting Chinese graduate students who are a cheap source of labor as instructors for large under-graduate classes. When they complete their doctoral studies they are hired as regular members of the faculty.

Knowing American obsession with money and wealth, the Chinese intentionally use their lower manufacturing costs to drive U.S. manufacturers out of business so they can raise prices once they have achieved market control. China uses its trade surplus as a tool of Chinese economic and geo-political policy. The Chinese communist government has weaponized trade and is colonizing countries around the world. The United States is China’s crown jewel. Twenty years ago John Paul II, himself an advocate of greater cooperation among the most powerful nations engaged in global trade, warned that globalization might become colonization. With the exception of the Trump administration, America has not listened.

China does not want to trade with the United States. It wants to dominate. China has been acting like a colonial power, trading whatever it is able to manufacture under conditions of absolute advantage for American independence. Of late, there are indications that China is using slave labor to further extend its absolute advantage.

Continuous, unfettered free trade where China has no obligation other than to its own self-interest undermines the promise that both the Chinese and the Americans can expect to experience gains through the trading process and ultimately leads to a China using absolute advantage to sweep most of the gains off the table and an America left with the scraps.

Whenever there are no restraints on using absolute advantage at every turn, the market system cannot assure that free trade is fair for everyone involved. Justice is needed whereby both parties regard one another as equals, respect one another, and resist any opportunity to turn proper gain for both into ill-gotten gain for one. Without the moderating influence of justice, absolute advantage in the hands of the unscrupulous Chinese Communist government transforms globalization into colonialism.

If this direct threat to U.S. sovereignty fails to awaken Americans to this new global reality because they have been anesthetized by trillions of dollars in relief pouring out of Washington, the Founding Fathers will know that their heirs have put being comfortable ahead of being free

Edward J. O’Boyle is Senior Research Associate with Mayo Research Institute


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Last modified on Wednesday, December 30, 2020