Are you saying that Chinese semiconductor companies are outcompeting US semiconductor companies because they have greater access to capital? That doesn't seem right to me.
Suppose you have two companies in an industry where the start up cost is ten billion dollars. One can borrow ten billion dollars at 0% interest for the next five years, but they have to pay it back. The other just gets ten billion dollars from the government that they can keep.
Obviously the second company has a competitive advantage. The first has to charge higher prices in order to pay back the loan, which they can't do if the second undercuts them in the market.
This has been China's business model for decades. Then once all the competition is out of business they can raise prices to the point of profitability, but not to the point that anyone who hasn't already paid off their fixed costs can enter the market, and use the profits to do the same thing to the next industry.
Whereas China will give a Chinese company billions of dollars to unseat an incumbent in a mature industry and expect nothing in return except for that industry to be in China.
Aside from the expectation of unwavering loyalty to the Communist Party of China, you mean.
> except for that industry to be in China.
That is: it goes a fair bit beyond merely keeping companies in a given geography.
They have a documented history of doing this in multiple industries over the course of many years. Notice how substantially all of the consumer electronics devices that used to be made in the US or Japan or Korea or Germany are now made in China.
The former is definitely true, though China is not the only country engaging in such a practice.
The latter claim needs sources to back up.
If you look at the Chinese chip industry, then you see that a lot of money comes from the private sector. Huawei, Xiaomi, etc are investing a ton of money in semiconductor companies. SMIC got a lot of funds through a stock market IPO. Clearly it's not all government money.
There's also a big difference between investing in an industry with the goal of dominating the world and eliminating competition, vs the goal of becoming a sovereign equal. Why is it necessarily the former, and not the latter?
The reason why the Chinese government invests in many sectors, is because they want to be independent instead of being at the mercy of foreign sanctions. If it weren't for that, they'd happily buy from foreign suppliers because that's cheaper than developing the technology themselves.
There is another documented history: that of the US sanctioning China, preventing China from accessing all sorts of western technology. For example, the US denied China of space technology. So now, China has wholly self-developed space technology. China isn't selling space technology below production costs to kill competitors. China invested in this sector in order to safeguard their access to space. https://www.businessinsider.com/nasa-china-collaboration-ill...
The US forced TSMC to not supply to many Chinese companies, and TSMC isn't even a US company. The US is trying to kill the Chinese semiconductor industry, making it wholly reliant on foreign suppliers. For years, Chinese companies have bought from foreign semiconductor suppliers because those are better. But the US has now turned this matter into an existential crisis, a matter of survival. Is it then any wonder that China, both public and private actors, are now pouring billions into the domestic semiconductor industry?
A private sector which got so successful not least because government systematically robbed IP from competitors (Nortel...). Yes, western politics also messed this up, but no these are not "private" sector operations in the same way Tesla is.
You do realize that's exactly how the US became an industrial power right?
The difference being that most companies were happy to provide access to their technology in exchange of reaping higher profits from penny on the dollar Chinese labor and expedited logistics
But ofc, you never hear that, or the fact that we are talking of a different country with different laws, the US is not entitled to enforce its laws in other nations after all
Where do you think those "private companies" got the money to build their businesses? Notice also that it's domestic (i.e. controlled by the Chinese government) "private companies" doing this.
China isn't allowed to just nakedly subsidize everything under trade agreements, so they have to do money laundering like that in order to get away with it.
> Clearly it's not all government money.
It doesn't actually have to be. All it has to be is enough government money to put competitors out of business.
> There's also a big difference between investing in an industry with the goal of dominating the world and eliminating competition, vs the goal of becoming a sovereign equal. Why is it necessarily the former, and not the latter?
Because the former results in one country being effectively the sole source in the world for certain products, e.g. cell phones, whereas the latter results in a domestic industry but not the destruction of all foreign industry in that market.
> The US is trying to kill the Chinese semiconductor industry
The US is trying to prevent the world semiconductor industry from becoming monopolized by China the same way they've been doing to so many other industries, because semiconductors have significant national security implications.
By... selling stuff to people?
I'm sure they get government subsidies, but that's not all of their money, or even a majority.
> so they have to do money laundering like that in order to get away with it
I'd like to see some proof that 1) they launder money and 2) that it's in significant enough amounts as to allow companies to adopt a kill-the-rest-of-the-world strategy.
The latter part of your post basically boils down to "action X is evil when they do it, but not when we do it, because we're the good guys and they the bad guys". Where's the proof? Has China actually killed competition via years of state-funded undercutting, or is it just speculation that they might?
As for the Chinese government's massive spending and subsidization of key industries, it's largely due to being free of the particular ideological constraints which force the US government to entrust everything to the market (except the military industry) which has predictably led to brittleness and vulnerability.
The American approach does resemble the Chinese one in a sense. Whereas the Chinese government prefers to directly subsidize e.g. semiconductors, the US government pours unfathomable quantities of capital into a military capable of dissuading any country from capitalizing on the US's dependency on any of their industries. When this approach breaks down, as in the case of China, things tend to get very dicey.
This fails to explain why everything moved to China and not Mexico or Brazil or India.
> As for the Chinese government's massive spending and subsidization of key industries, it's largely due to being free of the particular ideological constraints which force the US government to entrust everything to the market (except the military industry) which has predictably led to brittleness and vulnerability.
Entrusting everything to the market works great when it's a level playing field. When a country is doing things that would be an antitrust violation if done by a company, that requires another country to stop them. Typically through the use of trade sanctions, i.e. tariffs.
> The American approach does resemble the Chinese one in a sense. Whereas the Chinese government prefers to directly subsidize e.g. semiconductors, the US government pours unfathomable quantities of capital into a military capable of dissuading any country from capitalizing on the US's dependency on any of their industries.
In other words it's completely different?
> This fails to explain why everything moved to China and not Mexico or Brazil or India.
Of course, no industries moved from the US to Mexico, Brazil or India over the same period as China's rise.
> In other words it's completely different?
Yes, in the sense that a portion of massive Chinese government spending goes directly into producing things that people need, and almost all of massive US government spending goes into funding imperialist violence.
If you want to make your country more competitive, you want Asian-style industrial policy and export discipline - as found not just in China but in Korea and Japan.
You mentioned electronics, but have they raised prices?
Check how much a piece of consumer electronics costs in China vs. the US. They could charge the same amount.
Go tell apple this, they would be very happy to be able to be able to charge even more for what they produce from China, they would be quite pissed to know that someone along the production chain is making too much money where it could be them instead
The only difference between let's say Xiaomi or US located electronics is that the US ones are very, very happy to pricegauge the hell out of their customers, that's why so many are happy to buy in alibaba rather than let's say Amazon or eBay
And now that HKVision has 'won', have they raised prices and are they extorting the market, as the original claim said?
What do you even mean?
Be explicit
It certainly wasn't China the one that started the tarrifs debacle throwing the world economy into disarray
NVDA just reported earnings and, while booming, it was not the blowout that you'd expect in the context of the greater demand picture for their products. That's in an environment where you don't have open multinational warfare in Asia-Pacific and their manufacturing partner TSMC is firing on almost all cylinders (water shortage excepted).
Fabs in the US and elsewhere in the Americas are more defensible in times of war, and more likely to prioritize demand from US companies when supply tightens.
US public companies are judged by the efficiency and timeframe of their returns on capital, which means that big long-term projects have to be carefully planned and justified.
That's not the case when the government gets involved. We've already seen China build a lot of other infrastructure for no reason. Highways, skyscrapers...
Additionally, Chinese companies operate in an environment where it's OK to steal foreign IP as long as the Chinese government approves of your business activity. So it's not just capital that the government uses to fertilize growth in its corporate nursery.
China urbanized 550 million people in the last 30 years.
They aren't building cities and highways to stand empty. They are building them in advance of demand. Sometimes the demand arrives a few months, or a few years after the infrastructure is in place. [1]
All those ghost cities you read about last decade? Most of them are now brimming with people.
In contrast, here in the US, we don't build housing until a decade after we need it (and when we do, the supply is anemic), so we have a crippling housing shortage in all major metro areas, which leads to sky-high rents. And through all that, we still have the occasional real estate bubble exploding, in a way that takes the entire world's economy down with it.
[1] https://en.wikipedia.org/wiki/Under-occupied_developments_in...
In contrast, governments can leg out risk on big capital-intensive projects. Read the citations in the wikipedia article you referenced (avoid the blog post and the China-based publication) and you will see what I am talking about. A government's ability to build infrastructure without knowing whether there will be demand upon completion is how we end up with projects like HZMB that don't serve an existing commercial or private purpose.
Once there's a reason for people to live there, other services and businesses organically move in, to serve those people's market needs.
It's not just a matter of risk tolerance - it's also the ability to coordinate between employers and landlords, to optimize city planning.
My point vis a vis semiconductors is that firms don't leap before they look. Governments can and do. You say they do it because they can guarantee demand. I say they can do it because they are more patient and risk tolerant. Either way, the logical conclusion is the same:
Firms can't lay out capex the way that governments can. Firms are held accountable for ROI, their shareholders have little patience for delayed gratification, and their ability to spend is very small relative to that of governments.
China is that