The end of the Cold War seemingly liberated business from geopolitical constraints. The “global factory” dissociated industrial complexes from their former national homes and scattered facilities across the planet in the pursuit of low-cost labor and efficient subcontractors. Many small states from the Caribbean to the Pacific Rim benefited from this process. But now that process may be turning full circle, as China’s vast resources give it a competitive advantage. With wage rates less than half of Mexico’s and a government dedicated to making China the dominant power in Asia, new industrial centers are being built that will re-integrate technology and production in a setting with major geopolitical consequences.

China is now the world’s fourth-largest industrial producer behind the U.S., Japan, and Germany. Nearly half of all the goods China exports are made by foreign companies that have built factories in China. Foreign investment continues to soar and is on pace to hit a record $50 billion this year. China’s hi-tech exports to the U.S. are now growing faster than any other export category, up 47 percent in the first seven months of 2002 compared to the same period in 2001.

Intel has announced a $100 million investment in Shanghai to assemble Pentium 4 microprocessors, Dell has moved its giant PC-making facility from Kuala Lumpur to Xiamen. Motorola plans to spend an additional $1 billion on R&D, hire 4,000 more engineers, and increase annual Chinese production to $10 billion by 2006. Microsoft has announced it will invest $750 million in China over the next three years. It currently supports software colleges at over 35 universities to train future generations of Chinese innovators.

Honeywell Aerospace claims it provides extensive training for the “best engineers” working for Aviation Industries of China (AVIC), including bringing them to U.S. plants to learn about American technology firsthand. AVIC is under the direct control of the government and is responsible for developing and manufacturing both military and civil aircraft, missiles, and jet engines. It also has extensive research capabilities in aerodynamics, materials, and manufacturing technology at the heart of Beijing’s military-industrial complex.

China is no longer just a place to make sneakers and toys. Indeed, thanks to aid American firms gave to the development of China’s satellite launchers, Beijing now plans a manned space program next year, which could provide a Sputnik-scale wake-up call.

China stands poised to become the production center of the world, a development that would weaken Beijing’s economic rivals in Asia, many of whom are political and military allies of the United States.

Beijing never accepted the post-Cold-War view of an harmonious world where the location of strategic industries has no political consequences. A U.S. General Accounting Office report released in April of this year found,

China has made improving its semiconductor manufacturing capability a priority for national and economic security reasons and plans to build as many as 20 multibillion-dollar manufacturing facilities over the next 5 to 10 years with substantial levels of foreign investment.

The report continued, “China’s efforts to improve its semiconductor manufacturing capability have narrowed the gap between U.S. and Chinese semiconductor manufacturing technology from between 7 to 10 years to 2 years or less” and that this rapid progress “has improved its ability to develop more capable weapons systems and advanced consumer electronics.”

Last summer, the U.S.-China Security Review Commission released its first annual report on the implications of American aid to Chinese economic development. The Commission was created by Congress, its twelve members appointed by the leaders of both parties. Its report found, “Chinese leaders consistently characterize the United States as a ‘hegemon,’ connoting a powerful protagonist and overbearing bully that is China’s major rival, but they also believe that the United States is a declining power with important military vulnerabilities that can be exploited.” In short, America’s days as world leader are numbered, and China’s emergence will bring about the final countdown.

China’s military modernization is aimed at defeating the U.S., especially in any battle over control of Taiwan. Beijing is also a major source of technology proliferation, helping put weapons in the hands of rogue states and terrorist groups, including the Taliban. The Commission explains China’s motives: “Beijing’s relationships with terrorist- sponsoring regimes provides China with leverage against the U.S., enhance China’s political and military influence, and provide the PRC with foreign exchange and access to energy sources.”

The Commission believes that China’s ties to terrorist states have continued despite the Sept. 11 attacks on the United States. One way Beijing prevents radical Muslims from aiding their brethren in China is by supporting their efforts against the West.

The Commission’s conclusions about China’s antagonistic policies would be disturbing enough, but the largest part of its report concerns the ways American corporations are helping China obtain the means to carry out its ambitions. The Commission found:

• The U.S. has been a major contributor, through trade and investment, to China’s rise as an economic power.

•The burgeoning trade deficit with China will worsen despite China’s entry into the World Trade Organization (WTO).

• The large number of Chinese students, scholars, and researchers present in the U.S. academic and industrial establishment is a principal means used by China to acquire American science and technology.

• China’s manufacturing capability in advanced technology products (ATP) has expanded dramatically; and the U.S. now runs a trade deficit with China in a majority of the items on the ATP list compiled by the Commerce Department.

• Over the next 10 years China will acquire a modernized industrial capacity to build advanced conventional and strategic weapons.

• The U.S. is developing a reliance on Chinese imports that could in time undermine our defense industrial base.

Though Beijing seems vulnerable because it depends so much on exports to the American market, Chinese strategists still draw on communist theory in their analysis. They do not see the United States as a democracy but as a plutocracy run by and for major corporations. They do not believe the “big capitalists” will allow the U.S. government to interfere with anything Beijing does for fear of losing their investments in China and their supply of Chinese-made products.

The political activity of major business firms and corporate-funded think tanks encourages Chinese leaders in this belief. James A. Dorn of the libertarian Cato Institute denounced the U.S.-China Security Review Commission in an Oct. 9 Wall Street Journal op-ed, calling on Congress to reject the Commission’s recommendation that American firms investing in China be strictly monitored. The only member of the Commission who refused to sign the report was William Reinsch, president of the National Foreign Trade Council, a business group whose members include firms working to expand China’s technology and industry. Reinsch was also a Commerce Department official in the Clinton administration. Last year, the U.S. Chamber of Commerce sponsored the Chinese ambassador’s tours of major American cities. Local audiences were treated to Beijing’s views on major international topics to promote “understanding” and a climate conducive to appeasement.

Too often America’s private enterprise culture blinds leaders to the reality that it is the government that integrates economic and cultural resources behind national power. In China, this means a regime still firmly in the hands of a Communist-trained elite, fanning the flames of popular nationalism. Putting more of the global economy into Chinese hands could create a situation increasingly dangerous for the United States and its allies in Asia. 
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