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Trade wars between China and the US China is known worldwide for the goods it produces especially in technology and other consumer goods through outsourcing, however, there is an imminent conflict of interest ensuing between China and the US, many allegations have been made as well as interpretations as to what could be the driving factor for the trade conflicts. The US has at times restricted selling of microchip technology to China. This paper will give an in-depth to these issues by identifying business sectors dependent on Chinese manufacturing and labour for serving the current markets in consumer product sector, business-to-business and in technology (Driskil, 2009). For a long-time, the United states perceived China as a copycat. However, now things appear to have taken a different dimension with the US fearing China’s quick rise to becoming a technology powerhouse. The US sees this as an imminent threat to its dominance. The administration in place is purportedly waging a war against China citing a number of transgressions. It is clear now that the US is overly paranoid following China’s technology rise. These fears are unfounded, China like other emerging economies is still attempting to catch up with the wide technological gap economies that are led by the US (Gunn, 2013). China’s outsourcing providers have continuously improved their standards; this has set the stage for the country to become among the top players in the world. China has covered a milestone in laying the groundwork for a successful and diverse outsourcing industry in the past years. The local and central authorities have demonstrated great determination to foster information technology and other industries all over the country. The authorities have also introduced initiatives to enhance training, education as well as other supporting infrastructure (Gunn, 2013). Following this strides, China is quickly creating a formidable outsourcing industry. Despite the remarkable progress, China faces a number of challenges as well, for instance, there is a shortage in the number of people well versed with necessary international business skills, fragmentation in the outsourcing industry also poses a significant challenge (Hu, 2018). As China races to become a powerhouse for hi-tech manufacturing, it has faced numerous accusations from think tanks, industry groups, and the U.S. government. China has been accused of hacking, spying as well as forcefully acquiring intellectual property. However, China has continued to deny such allegation citing that it has placed efforts in protecting rights to intellectual property. A policy blueprint termed “made in China 2025” that was unveiled in 2015 has not been well taken by the US and appears to be at the core of the trade conflict (Lim & Lee, 2018). The policy blueprint targets growth of industries such as robotics and artificial intelligence to improve China’s technological capabilities (Lim & Lee, 2018). There are three notable concerns that caused the US to initiate the trade war, for one, the US was concerned that China’s trade surplus, depressed job creation in America, secondly, China used unfair and illegal methods to get US technology and thirdly, the concern that China sought to weaken the US international standing and its national security. Following the dispute over China’s trade imbalance and exchange rate the first conclusion is that a trade imbalance mirrors the economic conditions in both US and China the second conclusion is that the term ‘equilibrium exchange rate’ was marked with analytical confusion. The fair and efficient solution for the problems necessitates policy change in both US and China (Liu, 2018). The first conclusion on the industry policy dispute is that China’s utilization of market power can only be viable until other large countries retaliate as a united group, the second conclusion is that China used its market power to its own benefit at the expense of other trade partners (Liu, 2018). The major stock slides witnessed in China over the recent past pose the question of whether the tech firms will be able to face the uncertain future if the US is to make good of the threats to cut technology trade with China. Tencent which is the among the top ten largest company in terms of stock value was the worst hit. The company, following the stock market slide lost $45 billion (Posen, 2018). A number of other technological companies in China suffered the same fate. The US administration first began by imposing duties on China that were targeted to lower the large trade deficit. However, this was not successful since the trade deficit by the end of 2017 was $375 billion on the US side (Posen, 2018). Following the trade spat, the US has resulted to more scrutiny on technology flow to China. Past administrations only targeted technologies with dual use, those that had military and civilian value. However, the current administration now intends to restrain all outflow of the US technology to China due to their quick ability in adapting and competing with the American companies that have a higher-cost production cycle (Mullen, 2017). Despite the fact that Tencent’s stock slide was not a direct result of the US actions, it revealed the increasing susceptibilities of Chinese technology firms. Technology is an important factor in China’s relationship not only with the US but with other developed countries (Watal, 2010). The competitive strength in China, especially in manufacturing is mainly driven by the availability of cheap labour. However, up and coming technologies such as “internet for things”, 3D printing, robotics and artificial intelligence are now replacing the need for labour intensive manufacturing in addition to allowing the developed countries alter their market dynamics. The US administration demonstrated its power when it cut-off access to the US market to ZTE, which is a China based telecommunications maker (Akita, 2018). The US accused ZTE of utilizing stolen technology. despite lifting the decision, it served as a clear indication on the impact of an ensuing trade war with regard to Chinese tech-related business. China main fear lies in the fact that the supply of the essential semi-conductor technology by Qualcomm and Intel might be disrupted, China remains an important consumer of semi-conductors from the US and it is investing heavily to manufacture its own semi-conductors in order to be independent from the US (Gunn, 2013). Following the ZTE occurrence, China has a more urgent obligation to advocate for domestic innovation (Gunn, 2013). China is known to seek its independence from other countries and the case of ZTE was a compelling wake up call. Both technology and non-technology industries in the US such as Wal-Mart, Microsoft and Apple could also stand to lose if China opts to boycott US goods as was the case with Korea when China boycotted their cosmetic industry following military differences (Gunn, 2013). Worldwide, only about 10 percent of multinational corporations outsourced their IT work as of 2002, but as of 2008, the figure had grown to 70 percent. Currently, the outsourcing industry has become increasingly sophisticated as the suppliers’ progress in specializing in niche areas including, research and development, telecom engineering and high-tech, offshore engineering, online tutoring, e-learning, gaming and animation and legal service. Analysts project that offshoring and outsourcing in these areas will continue to skyrocket in the coming years. China’s outsourcing market only accounts for a fraction of the global market for outsourcing and offshoring, though the market continues to evolve. As of 2007, China’s outsourcing market amounted to $15.2 billion, with business process outsourcing and IT outsourcing exceeding $6 billion and $9 billion respectively (Akita, 2018). Work offshored had revenues of more than 40 percent in China as of 2007 amounting to 2.3 billion of the total work outsourced (Akita, 2018). The benefits of the offshore contracts, especially IT-related outdo the global markets by great margins. Currently, the Chinese outsourcing providers are working with companies all over the world. Most of these companies have long-term contracts signed with blue-chip companies such as Oracle Corp, Hewlett-Packard Co. and Microsoft Corp (Dasgupta, 2018). Chinese firms offer the multinational corporations a wide range of services-from knowledge management activities, business-process, high-end IT to customer service request and back-office administrative tasks. The skill levels have also maintained a steady improvement, with IT services and Chinese software companies having vendors with Capability Maturing Model of upto level 5 certification. The vendors as well provide specific business knowledge in areas such as healthcare, insurance and banking (Dasgupta, 2018). Such specialization and skill sets develops better relations between client and vendor which ultimately increases productivity and profitability (Dasgupta, 2018). For a number of years, the PRC government has stressed the advancement of IT as a means of complementing the country’s strength in manufacturing with the initial focus being on the production of hardware, this however shifted to IT services with the incorporation of a new strategy that advocated for home-grown innovation, driven by science and a robust IT economy, that offers high-value service jobs and supports both global and domestic industries (Akita, 2018). Lately, China has notably continued to boost its venture capitalism investments intended to support commercializing of emerging technologies. Despite the fact the US attracts most of the investments globally, China’s venture capital investment rose sharply to almost a third of the global share, this ranks as the highest increase in any economy. China’s start up ecosystem can be termed as both vibrant and vast with the highest number of tech icons second to the US (Akita, 2018). Claims that industrial policies are behind China’s tech ascendancy are unsubstantiated, this is because all the leading tech firms such as Tencent, Baidu and Alibaba are all founded by private entrepreneurs. Both China and the US have made contributions to start-ups in the different countries with China financing a number of start-up companies in the US, however, the two venture financing flows maybe in peril due to US growing fear about China (Dasgupta, 2018). As much as China has had an impressive run in terms of progress and innovation, it would be premature to assume that China has matched the American technology industry. The tough restrictions on individual thinking, rigid school system and interventionist government bureaucracy have stifled creativity and independent thinking stopping China from attaining desirable innovation potential. China has the potential to succeed in strategic industries such as commercial aircrafts, pharmaceuticals and semi-conductors due to its large pool of engineer talent and a good domestic market, however, it still remains laggard. Despite billions being spent over the years, China is yet to come-up with an indigenous chip industry (Hu, 2018). China is considered the “world’s factory” assembling everything from laptops, cell phones and many more devices, but despite this it still imports over 90 percent of the microchips from other nations, mainly from the US. This is the reason as to why the US move to eliminate the supply of chips to ZTE acts as a harsh reminder of China’s vulnerabilities in critical technologies (Hu, 2018). While China continues to make tremendous progress on the tech-front, the US still remains the global leader in technology and science. The US is home to the top research universities and still deploys highest funding to both private and public for development and further research; offers the most advanced information, financial and business services; attracts highest venture capital and it’s the largest producer of high-tech, knowledge-intensive sectors from semi-conductors to pharmaceuticals (Hu, 2018). Conclusion China has come to be termed the “world factory”, this because as a nation China has engaged in most kinds of manufacturing including pharmaceuticals, information technology, commercial aircrafts and many more, however, China has been faced with trade conflicts with the US as discussed in the paper. The US has accused China of a number of transgression that only benefit itself. The US views China as a threat to its national security and also its international standing. The US has further accused China of mimicking its technology and using it as its own. What is clear is that the US perceives China as a threat, this is because China is able to produce goods faster than the US due to its cost effective and available labour. Imposing punitive duties on China to balance a trade deficit appears to be far from the reason as to why the US may place such measures. China can only achieve complete independence from the US and other foreign country if they manage to develop key components such as the semi-conductor, the restriction by the US to sell the microchips to ZTE would have meant immense losses for China and loss of jobs to most people. China may have a great pool of engineering talent and a large market for its product but without harnessing the talent of its people by allowing creativity and independent thinking, it may continue to be just another assembly shop at the mercy of other developed nations, predominantly the US.

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