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Effects of China's Software Policy on World Economy?
guptaparesh asks: "The Chinese government is currently engaged in a comprehensive overhaul of its procurement policies and regulations. These regulations would ban non-Chinese firms from selling software to the Chinese government. Given that how much trade all the countries in the world are engaged in with China, isn't this a unfair trade move by the Chinese government?" A better question would be how this might affect the worldwide economy, particularly that of the U.S. and China. What benefits and drawbacks may China see as a result of this new policy? What steps might the U.S. take to attempt to counter it?
I wish more and more countries would do this and force the US companies to start serving the users at home instead of serving everyone else just so they can shaft everyone at home.
Did China revert into an undeveloped nation without someone telling me?? I didn't know an undeveloped nation could have the best economy on the planet!
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It's a Chinese national security issue. The CCP does not trust software outside of it's own country for fear of hidden backdoors. They think Microsoft may have had the Pentagon place backdoors into Windows to be used in times of war.
Life is not for the lazy.
A "Not Invented Here" syndrome for software is very good for national security, as the Soviet Union learned the hard way
China keeps giving themselvs huge rubs on the back and anyone who tries to move in on it gets a kick in the groin.
This is exactly the same as every other country (look who gets all the contracts in Iraq for example), the only "real" difference is we all know "china is evil" and America/Europe/Whatever you like near the Atlantic is "good" and "helping the industry".
So China's doing nothing different from anyone else. If anything being "shut in" may even help Linux if Microsoft piss off the wrong government member.
I like muppets.
China is a huge trade manipulator (if not the biggest in the world). However, lets not pretend that we're innocent here, with our monstrous ag. subsidies. Furthermore, we violated the same rule we're now faulting China for in Iraq (only allowing bidding from COW countries; all government bidding on non-sensitive projects, by WTO rules, is to be open to any country)
Freeze Ray. Tell your friends.
You could stop shopping at Walmart...
John Snow (the U.S. Treasury Secretary) fired a warning shot [iht.com] at China's currency fixing policies. Intellectual properties concerns, and trade issues like the one cited in TFA are also commonly voiced from the adminstration.
But with the trade deficit with China and budget deficit being funded by China, China is the one who holds the best cards in the coming tradewar that recent headlines hint at.
If China stops buying US bonds, or floods the market with what they already own, the US economy is screwed.
I think it is kinda funny that John Snow is making demands to China after getting so many loans from the Bank of China.
If I am going to bring legal action against someone, I am not going to go borrow money from them first - especially if I can't pay it back.
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The US still has cases of Bubonic Plague. They are often called "massive infection", and happen in the south west.
China does have serious infrastructure problems, civil rights problems, etc. However, you should be careful to note that its not a "Republican" view that China can't compete. In fact, China is example #1 for foreign direct investment in many business classes... where you'll find that the faculty and student body overwhelmingly call themselves Republican.
realistically, if the Chinese localization takes place in China, then the requirement that 50% of the development must take place in China has probably been met.
The more I think about these new regulations, the less offensive I find them to be(not that I really took much offense to them in the first place).
Those who know, do not speak. Those who speak, do not know. ~Lao Tzu
The US is a terrible market abuser, too. We're coddling Microsoft, for example, which even our own government has declared a monopoly abuser. The problem is that the "us vs them" here isn't "China vs US", but "corporate governments vs people".
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make install -not war
This pertains particularly to discussions within the U.S. about the direction of our economy.
As more and more manufacturing jobs, and lower end service jobs (New York City parking tickets processed in India?!) have moved abroad, the continued argument, particularly from those fostering and benefiting from the outsourcing, has been that the U.S. will become *the* place for high tech, high value jobs. We'll "lead the world" in this regard, or some such.
What was obvious to some is now becoming apparent in the general media. There's nothing special about these "high end" jobs that requires they be done here. Nothing other than our legal system and established tradition of rights and responsibilities particularly with regard to contract law.
As other societies advance, there's no reason for them to hire our services, at our significantly higher cost, when they have native talent or talent accessible in other countries that is equally well educated and equally capable.
Other societies have been busy building up that talent, and they are attempting to address the legal concerns. We're getting closer to the tipping point, where the U.S. becomes largely obsolete.
Largely obsolete, except for a lot of warships, planes, and nuclear warheads. Beware: That way lies overt fascism.
How should we counter it? Do nothing! No, really. Think about this. What it means is that China is limiting the population of people who can supply stuff to their government. When supply goes down, the price goes up. China is punishing themselves. We don't need to do anything. The absolutely dumbest thing we could do is "retaliate" by deciding to limit our own supply (e.g. establishing a reciprical trade rule).
Key to financial independence: Spend less than you earn. Save and invest the difference. Do it for a long time.
Why complain about these things when America already does something similar? Perhaps Americans would like to demonstrate a huge open market by letting more foreign companys bid for defence contracts. I don't think the likes of Boeing or Lockheed Martin will do well with real competition though, will they?
In these situations (and software is obviously such a situation), only one company, one country, wins the race. And the winner doesn't necessarily match up with the country that had the classical comparative advantage. It matches up with the country that, at a given point in time, happened to be producing more than the other.
If in fact a country does have the classical comparative advantage, then it can improve their welfare (indeed, world welfare) if they close their borders, allowing that industry to grow. Once the industry has grown, capitalizing on the increasing returns to scale, you can open up your markets and take down the producers in the other country.
So there's an argument for doing it. But, it should be noted that even though Krugman pioneered justifications for protectionism, he remains an ardent supporter of free trade. There are a number of reasons for that, but in this context, the biggest problem is that a country doesn't know, and can't know, if in fact it has a classical comparative advantage in this product. In other words, it doesn't know that there will ever be a time when it can successfully open its borders. In this case, the country (and the world) are worse off.
Further, the act of closing your borders, even if good in the long run, still has costs in the short run. Not only do you need to be sure that you can ultimately take over the market, but you need to be sure that the long run gains are sufficiently high to warrant the short run costs. In the end, protectionist policies simply aren't worth the risk.
Oh, BTW, one country's trade policies, even a country like China, doesn't have that much to do with the trade deficit. If China stopped exporting to us entirely, the trade deficit might drop initially, but it would come back up as we increase imports from other countries. Ultimately, the trade deficit is driven by our national savings rate.
"My girlfriend's got sodium laureth sulfate hair."
And of course, the U.S. didn't respect international copyright for something like 100 years, until somewhere around the beginning of the 1900's. For example, everything Charles Dickens wrote was legally pirated in the U.S.
Ben Franklin was also a notable "pirate", way back when...
The rational back then was that it benefited the U.S. economy (which it did). <sarcasm>Of course, now it's just absolutely horrible when "Intellectual Property" rights aren't respected... </sarcasm>
China is finally getting around to doing in software what they have always done in industries deemed "strategic" - they force world-leading companies to share technology with Chinese partners and eventually compete against the foreigners. It works because Western businesses feel like they need exposure to China's purported "billion-person market" at any cost. Look at Boeing. Look at Cisco.
Now it's true that the economic impact in China is negligible because they don't buy software from the West at all - they steal it. And TFA quotes the USTA pathetically whining about how China is closing themselves out of the world's best software. WAKE UP, you fucking morons in the US Dept of Commerce: China wants the "best software in the world" to be made in China, not Palo Alto, not Redmond, not Bangalore, not anywhere else.
This is the first shot in a trade war aimed right at one of the few industries left where the US can honestly be said to have a technological edge.
Actually I don't see how what the chinese govt is doing is any different then the US govt mandating Microsoft software.
evil is as evil does
It is not correct to compare US agriculture subsidies to currency manipulation that undervalues ALL of China's goods up to 40%.
First off, the economic effect is orders of magnitude different. The fact that the US supplies subsidies to one small sector of their own economy does not excuse the massive subsidies China dishes out that effects their entire economy. There are plenty of economic sectors in the US that receive no subsidy.
Second off, there is a compelling national defense interest to having enough domestic food production for your entire population. Should the US be cut off from food suppliers during war time, they want to be able to have food to eat.
Certainly, China could attempt to use national security as an excuse for this action. And I could grant that as reasonable when dealing with military and high-level government systems. However, there are plenty of low-level systems that require no great deal of security. One could reasonably argue that any platform could be put in place on these systems.
It is also not correct to compare China's current actions to US actions in Iraq's contract biddings. Unlike China, the US did not limit those bids to domestic companies only. Companies from outside the country were eligible to bid, granted that they had a policy favorable to the US.