How does the U.S. government regulate what American companies do in China?

Question

How does the U.S. government regulate what American companies do in China? China requires U.S. companies to go into a join venture with a Chinese company and thereby transfer some technologies with the Chinese companies. Seeing that some technologies have military applications, I am wondering how does the U.S. government insures that sensitives technologies are not transferred in the joint venture.

Answer 1

There are two types of trade with China about military resources:

1. the legal kind: this is completely fine, the Us government won’t do anything about these.
2. the illegal kind: TLDR; it’s not worth it to the company, more information below.

US companies would be punished for giving military goods to China (when it is illegal), and such punishments would likely be far worse than what China would offer them in return. After all, companies don’t have anything too powerful in military terms (read: nukes, bio weapons, etc.), so China won’t pay them that much, and America will probably shut down their entire business and throw them in jail. It is a simple cost-benefit analysis

Cost: thrown in jail and company shut down

Benefit: China pays you some money

Obviously, companies won’t take that risk, because it’s simply not worth it. In addition, there is a possibility (not sure how high it is) that the US government will catch your dealings with China before you make the trade, and then you get thrown in jail before even getting the money.

Alternate possibility: Let’s say somehow you make the trade to China, and escape America with all your factories and goods and employees, and place them down in China. You aren’t in jail, and your business is still running, life is good, right? Most likely not. America won’t even let you trade with them again, obviously. Then they’ll head over to all of their buddies and say something like “Hey, that company sucks, don’t do business with them.” Now that’s quite a few countries no longer willing to do business with you. However, maybe, just maybe you can do all of of your trade with China and it’s allies. If you can pull that off, it might be a good idea.

So, here’s the list of stuff you need to pull off to make this a profitable venture

1. not be caught by the US government before making the trade
2. after making the trade, get all of your factories and employees and goods out of there very fast. (This is quite difficult. Some of your employees might not want to leave, and then you don’t have enough people to man your factories. And that’s assuming you have a way to move a factory, which isn’t easy)
3. be able to have a better business in China (when most of your employees probably don’t know the language) than you would have had trading with the US and it’s allies.

This is very difficult, and most companies probably don’t think they can pull it off, or that they have a high enough reward to be worth the risk.

So the US regulates illegal trade by making it not financially worth it for the company.