US-China Relations: The Pentagon versus High Tech
By James Petras
September 19, 2015 "Information
Clearing House" -
Step by step, Washington is inexorably setting
up a major provocation against China. Until now, the Obama regime
tightened a military encirclement of China, expanding its armed
forces agreements with Japan, the Philippines and Australia. In
addition, it has promoted the Trans-Pacific Partnership Agreement (TPP),
a regional trade agreement which openly excludes China.
Obama has ordered a major naval build-up in the
South China Sea and embarked on extensive cyber-espionage of Chinese
industries and the government via major US high-tech companies, as
revealed by Edward Snowden in his release of confidential NSA
As President Xi Jinping prepares for his first US
visit as China’s leader on September 25, with the aim of extending
economic ties between Chinese and US business (especially with the
high tech corporations in Seattle and Silicon Valley), the Obama
regime has threatened to impose a series of punitive sanctions
against Chinese companies and individuals for ‘cyber-espionage’,
essentially undermining the purpose of his trip.
Characterizing the Chinese as ‘cyber-thieves’ and
imposing sanctions on Chinese businesses on the eve of Xi’s visit
will be justifiably seen as a deliberate humiliation and a
provocation, designed to treat China as a mere vassal state of
This will force the Chinese government to
retaliate on behalf of Chinese businesses, and President Xi is fully
capable of imposing retaliatory sanctions against multi-billion
dollar high tech US corporations, which had been flourishing – up to
now – in China.
Obama’s decision to provoke China on multiple
fronts reflects the overwhelming influence of the militarist power
configurations in Washington: the Pentagon, the NSA, and the
In contrast to Washington’s aggressive policy, the
major US high tech corporations are almost unanimous in their
opposition to Obama’s ‘military pivot’ and are appalled by the
threat of cyber sanctions, rightly calling them a “needless
For its part, Wall Street has taken an
intermediary position – hoping Washington will coerce China into
‘opening’ its protected financial markets to the big US banks. It
doesn’t necessarily support aggressive sanctions, which could
provoke a response from China closing off lucrative opportunities in
the world’s biggest financial market.
Background to a Momentous Confrontation
China’s growth and overseas economic expansion has
increasingly challenged US market supremacy in Asia, Africa and
China’s relationship with the US, EU and Japanese
multi-national corporations has changed due to its recent
technological advances in its manufacturing and service sectors
moving its production up the value chain. Increasingly, the Chinese
have been demanding technology transfers from their multinational
partners and an increasing use of locally manufactured parts in
their assembly plants.
China’s economic expansion and industrial
maturation has evoked divergent responses from the elites in
Washington, Silicon Valley and Wall Street.
US Elites Diverge
The Pentagon and the White House developed the
‘military pivot’ to deal with China’s ascendancy as an economic
world power. This is essentially a policy of strategic
confrontations, including military encirclement through regional
base agreements, deliberate economic exclusion through regional
trade agreements and political provocation through threatened
sanctions. US military bases have expanded and a huge naval armada
patrols China’s maritime frontier. There are US fighter planes
flying over Beijing’s reclaimed island installations while the US
State Department goads China’s neighbors to stake their own
territorial claims in the South China Sea.
The White House and its highly militarized State
Department have launched a full-scale propaganda campaign through
the US mass media, criminalizing China with unsubstantiated charges
of espionage. The range, intensity, and frequency of these
accusations indicate that this campaign is not some clever
diplomatic ploy intended to squeeze out concessions in an otherwise
peaceful relation. Rather Washington’s criminalization of China is
meant to provoke a full rupture in diplomatic, political and
economic relations and prepare for harsh military confrontations.
Washington’s campaign to criminalize China
includes the hysterical claims that China has engaged in the
long-term, large scale theft of US intellectual property rights. By
falsely attributing China’s technological advances to ‘theft’
Washington denigrates China’s endogenous scientific and
technological achievements as well as criminalizing the Beijing and
In the last few years, the US arrested several
Chinese scientists and issued warrants for others, publicly accusing
them of spying on US companies. The charges against several of the
scientists were later quietly dropped by the FBI for lack of
evidence but not before the scientists had seen their careers
destroyed. The negative propaganda impact on the US public was
successful – Chinese scholars and scientists were depicted as spies.
Whistleblower Edward Snowden’s revelations of National Security
Agency’s documents clearly show that it was the US which was engaged
in large-scale spying on Beijing, using major US IT corporations
operating in China as a principal vehicle for data theft.
The US has accused China of violating
international norms regarding the governance of the internet –
claiming that Chinese authorities exercise censorship and control
over US IT companies as well as its own citizens. In other words,
Washington denies Chinese sovereignty by claiming extra-territorial
jurisdiction over the internet! Along the same lines, Washington
asserts that China has blocked US market access by insisting that
public agencies rely on Chinese suppliers and that US firms store
their data in China. China’s new policies developed after they
discovered that US multi-national corporations were working
hand-in-glove with the NSA and other US intelligence agencies. Is it
any wonder that China sought to protect its industrial and trade
secrets, as well as national security, by limiting access for US IT
The “Financial Press”: Wars over Markets
Washington’s provocative campaign to criminalize
China and Chinese industries has been amplified in the financial
pages of the respectable US and British press. The degree to which
the leading Anglo-American financial newspapers, the Wall Street
Journal and the Financial Times, have become rabid
advocates of Obama’s militarist confrontational policy instead of
serving the business community’s market interests, evaluating the
impact of sanctions on US high tech multi-nationals, and presenting
the much more moderate position of the major high-tech
multi-nationals is striking.
The financial press’s shrill campaign is designed
to paint China as a corporate criminal and ignores major US
corporate opposition to any rash military actions. This propaganda
campaign is warning the US IT elite of an imminent barrage of
economic sanctions against China’s burgeoning cyber industries.
These sanctions could be announced prior to or even during President
Xi Jinping’s visit to the US — if the militarists have their way.
White House Sanctions: The Divergences in
Despite White House rhetoric and anti-China
hysteria, most US IT corporations have reaped huge profits from
their sales and business arrangements with the Chinese state and
Chinese businesses. According to one executive, “Apple is the
standout success story, with sales of the iPhone rising 75 percent
in China over the past year (2014)’. (Financial Times,
Senior IT executives have expressed their
willingness to accommodate China’s demands a change in the way they
do business, including technology transfers, because they see “huge
opportunities (for profit) in the near term”. The last thing Silicon
Valley wants is for Washington to provoke hostile retaliation from
China if Obama imposes sanctions: That would entail the loss of
hundreds of billions of dollars!
In the highly militarized-‘Zionized’ Obama
administration, immersed in the politics of provocation and war, the
multi-nationals do not have the final say.
China’s Maturing Capitalism: Indigenous
China’s maturing capitalism has been accompanied
by significant changes. And in 2006, the Chinese leadership
announced a new policy promoting ‘indigenous innovation’. The
purpose of the policy was two-fold: to become less dependent on
foreign technology and to combat the growing threat of Washington’s
espionage via US high tech corporations operating in China.
In line with these strategic goals, in 2009 China
ruled that only companies with locally developed technology would be
allowed to bid for public procurement contracts.
In 2010, Google’s operations in China were
shutdown when it was revealed that the company had acted as a
‘transmission belt’ transferring sensitive Chinese data to the NSA.
Washington immediately denounced China for what it termed
“censorship” of Google.
As the endogenous innovation policy gained
momentum, the US multi-national corporations’ monopoly of China’s
high tech market was undermined. The MNCs called for Washington to
intervene and force China to “open” its markets to US dominance.
In strategic terms, the tie-in between the US IT
MNCs and Washington boomeranged: While spying for NSA may have
gained short-term favors for the high tech sector, it undermined
strategic relations with China and its lucrative market. The IT
moguls re-thought the strategy and sought greater autonomy from the
NSA to regain China’s trust and re-enter its market.
High Tech Diplomacy
The high tech multinational corporations are eager
to welcome China’s President Xi on his visit, viewing it as an
opportunity to mend and expand relations. The Silicon Valley-Seattle
corporate elite oppose sanctions while the White House claim to be
acting on their behalf.
The US high tech elite are aware that American IT
companies must accommodate China’s demands to transfer and share
technology. They have adopted a realistic perspective that if they
do not share markets, technology and sales – they can lose out
Apple, IBM, CISCO, Qualcomm have declared that
they would rather cooperate with China’s indigenous innovations
policy than face big losses or total exclusion from the Chinese
Even Google, which served as the NSA’s willing
accomplice and was expelled for espionage against China, is now
seeking approval for a limited re-entry.
Wall Street Diplomacy: Pressure not
The big Wall Street bankers, on the other hand,
want the White House to pressure China to de-regulate its financial
markets. They want China to allow American hedge funds and
speculators to sell short and artificially drive down the value of
Chinese stocks, increasing volatility and discouraging investors.
It is questionable whether Wall Street’s idea of
US “pressure” extends to applying punitive economic sanctions. After
all, limited financial access under present circumstances is still
far more lucrative than total exclusion which could result from
Chinese retaliation in response to White House sanctions.
The divergent interests and approaches among US
imperial elites, between high powered IT corporate CEOs and Pentagon
and White House militarists is evident in two parallel meetings
taking place during President Xi’s visit.
During his visit to the US, Xi will stop over in
Seattle to confer with top IT executives, coinciding with the
US-China Internet Industry Forum. The timing and location (Seattle)
of the Forum is not coincidental. Its timing was planned by the
Chinese and reflects their influence and capacity to play off
powerful US economic elites against Washington’s war mongers and
The White House has been pushing for a fight with
China ever since Obama announced his so-called ‘pivot to Asia’. The
saber rattling has escalated over the past two years, aided and
abetted by an all-out propaganda campaign denigrating China’s
scientific and economic performance and exaggerating fears of its
defense modernization programs. When one reads the Wall Street
Journal or the Financial Times one would think the
Chinese economy is on the verge of collapse. They describe the drop
in China’s projected annual growth from 7.3% to 7% as
‘catastrophic’! If the EU and US grew at half that rate, the
financial scribes would claim an ‘economic miracle’!
Denigration of the Chinese economy; screeds and
characterizations of the Chinese as industrial thieves engaged in
spying and criminal behavior and the wild paranoid warnings about
the growing ‘Chinese military threat’ are part of a systematic
build-up to counter lucrative economic relations between China and
IT corporations and other leading US economic sectors.
Washington’s projected sanctions on China will be
many times more costly to US MNCs than its current sanctions on
Russia. White House sanctions on Moscow mainly damaged
European-based industries and businesses. However sanctions against
China will have a massive impact on the US economy.
The White House’s version of the “yellow peril”
has no redeeming features for any sector of the US economy. It is
the purest expression of militarism run amok. It over-rides any
rational economic interest in pursuit of unadulterated geo-political
military supremacy. Even on its own terms military supremacy is
unattainable as Washington will soon discover, as China deepens its
military ties with Russia!
If and when Washington raises the specter of
sanctions against China, (with the accompanying gratuitous insults
and unsubstantiated accusations of state sponsored “cyber theft”)
the Chinese government will respond.
President Xi will take reprisals as he has done
before, faced with lesser threats. And he will have the support of
the vast majority of Chinese from all regions and classes.
US IT corporations are aware of this potential
debacle and have openly and forcefully conveyed their views to
Washington. For them, the so-called ‘cyber theft’ is a minor issue
compared to the lucrative long term strategic opportunities in
working with China.
So far the militarists in the Obama White House
have commanded US-China policy. Up to now they have disregarded
corporate American interests; whether it is US oil interests in Iraq
and Libya, or IT corporations in China.
If Zionist officials in the Executive influence
the militarists on Middle East policy, the hard core militarists
influence the Zionists in the Far East.
If the US military-driven Middle East policy has
been a failure, a similar policy toward China will be catastrophic.
US sanctions and humiliation against China and the
consequent falling out of relations will play out in slow motion.
Beginning with the precipitous decline of joint ventures and
exports, it will lead to lifeless cranes in empty Pacific coast
ports and rusting container ships; profit losses and vacant country
clubs in Silicon Valley and lost sales for US auto companies. The
list is endless but the consequences are clear.
James Petras is a Bartle Professor (Emeritus)
of Sociology at Binghamton University, New York.