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Some examples: China bans foreign entities from owning land, currency restrictions make it hard for companies to move funds abroad, Chinese companies are known for violating patents, and finally the government often blocks foreign operations to support domestic competition.

So why aren't Chinese companies operating in the West treated in the exact same manner? Wouldn't a quid-pro-quo approach force China to start cooperating more quickly?

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    Good question. Unfortunately in Australia it's mostly due to the lack of political forethought, a concentration on short term gain and vested interests. I mean we've given ownership of one of our largest ports to the Chinese on a 99yr lease FFS, and the only reason they don't own a majority of our Telco is the media got wind of it and ran the story and the politician who originally signed off on it realized that it's not a very smart career move that close to an election – Thomo May 1 '17 at 23:33
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    @Thomo I wouldn't really mind that if Western companies were allowed to do the same in China. But the Chinese would never allow that. – JonathanReez May 2 '17 at 6:30
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    Unfortunately for us, the Chinese are smart – Thomo May 2 '17 at 6:32
  • All land in China is publicly owned. sometimes it is leased – Colin May 2 '17 at 7:26
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    @Colin yes and until that changes it seems logical to me that Chinese companies and persons shouldn't be allowed to buy land in the West – JonathanReez May 2 '17 at 7:34
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Except to the extent that "national security interests", immigration policy, or the enforceability of tax laws are involved, a major theme of U.S. law is that the legal standing of a person should not depend on who that person is. This concept is related to the ideas of "equality under the law" and "rule of law".

This theme of U.S. law encourages people to do business in the United States. It makes it easier for people to understand the law. It also discourages corruption and other sordid practices. Except for the idea of restricting foreign ownership of land, the ideas mentioned in the original post are contrary to this theme of U.S. law.

Many countries (including Mexico today, and England when the American colonies were being founded), severely restrict foreign ownership of land. Some of these restrictions were legacies of the idea that ownership of land was tied to a feudal lord-vassal relationship. These restrictions are often tied to the idea that allowing a foreigner (who might someday be an enemy of the country's sovereign) to own land creates the risk of foreigners establishing a base in the country. Twice in its history, Mexico has witnessed the truth of this logic.

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    For those not versed in Mexican history, what does your last sentence allude to? – Fizz Jul 30 '18 at 22:46
  • Your US focused answer doesn't seem to be based on reality: economist.com/finance-and-economics/2018/06/28/… There are plenty of legislattive tools deployed in the US to prevent some types of foreign investments, CFIUS etc. They were recently deemed sufficient to deal with China as well, although the Trump administration had considered even tougher restrictions. – Fizz Jul 30 '18 at 23:04
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    @Fizz -- The two scenarios were Texan independence in the 1830s, and California's Bear Flag Republic in the 1840s. Both scenarios were important in the run-up to / course of the Mexican-American War. In both scenarios, Americans established fortifications in Mexican territory. By the end of the Mexican-American War, Mexico had lost about half of the territorial claims it inherited from Spain. – Jasper Jul 31 '18 at 0:34
  • @Fizz -- The article you cite discusses a mechanism for preventing purchases of American companies that have "national security implications". As the article mentions, it is unusual for purchases to be rejected on these grounds. I recall a 1980s deal between the French and Fairchild Semiconductor that fell through on such grounds. Foreign acquisitions of controlling interests in American airlines and merchant marine companies that operate between American ports are also heavily restricted. – Jasper Jul 31 '18 at 0:41
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These policies are examples of what the academic literature calls industrial policy. As the relevant Wikipedia article states, such policies "are interventionist measures typical of mixed economy countries." Given that China still claims to be a socialist economy and Western countries do not, it is hardly surprising that China is more willing and able to enact such policies. Quoting again from the same article:

China is one of the most prominent cases where the central and subnational governments still intervene in nearly all economic sectors and processes. Even though market mechanisms have gained in importance, the state control prevails. [emphasis added]

In recent decades, more highly interventionist industrial policies have also been typical of newly industrializing countries, especially in East Asia. Japan and South Korea are prominent examples. Based on these and other examples, we might expect that as China's economy matures, it should gradually become more open to foreign competition or face stagnation. Quoting again from Wikipedia, "contemporary industry policy generally accepts globalisation as a given, and focuses less on the decline of older industries, and more on the growth of emergent industries." In China, many basic industries are still emerging, while in the West they are already mature and competitive.

For a detailed account of how China's modern industrial policies have developed, see "The Rise of Industrial Policy in China, 1978-2012" by Sebastian Heilmann and Lea Shih.

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Here is a totally separate point, which is more directly relevant to the question, but also a bit speculative. Western countries, particularly the United States, don't seem all that interested in trying to penetrate the Chinese economy in the first place. While trade with China is important, they may not see a lot of opportunities to compete in the large and complex emerging market of China. This is most clearly reflected in China's exclusion from the TPP.

  • I'm not quite following how excluding China from TPP discussions implies that "Western countries, particularly the United States, don't seem all that interested in trying to penetrate the Chinese economy in the first place". There could be any number of other reasons for the former, like the Chinese economy being seen as too incompatible etc. – Fizz Jul 30 '18 at 22:50
  • “Not interested” basically because it was not seen as a realistically attainable goal in the short term. Obviously though a lot has changed in a year, as Trump has ditched the TPP and launched a trade war with China. – Brian Z Aug 2 '18 at 11:24
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This comes down to what's confusingly called "most favoured nation" status, which is (unlike what you'd expect from the name) the lowest rung of trade deals. See e.g. http://tech.mit.edu/V114/N27/china.27w.html for some of the history.

It also comes down to an old choice: guns or butter? Trade or war?

The US and China fought to a standstill over the Korean peninsula. That conflict ended with North Korea as a sort of human buffer zone between US forces and the Chinese mainland. There is also the frozen conflict between the "two Chinas": PRC and ROC (Taiwan). Every country is forced to pretend that one or the other does not exist.

Opening trade to China gives the West leverage, because now there is something we can take away. An option one step short of war.

You should also not assume that China would happily sit by introvertedly if not allowed to trade. The worst case would be that China spent all that manufacturing effort of the past decades on weapons rather than iPhones. It might also have pursued destabilisation of more nearby West-aligned countries.

Let's not also overlook that a lot of Westerners have benefited from China's partial

  • I'm not saying China shouldn't be allowed to trade, but for example it shouldn't be allowed to purchase land, key technologies, infrastructural companies, etc, unless Western companies are allowed to do the same in China. Full quid-pro-quo. – JonathanReez May 4 '17 at 15:12
  • Just China? i.e. is this a form of trade sanctions? – pjc50 May 4 '17 at 15:36
  • Anyone, really. But China is the most prominent example – JonathanReez May 4 '17 at 15:39

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