Stop Crying Over the China "Trap"

No More Moralizing & Whining

Recent U.S. commentary has painted a picture of China as executing a long-harbored, calculated plan to lure foreign companies into its market only to extract their technology and spur domestic competitors – ultimately discarding the foreign firms once they’ve served their purpose. In this narrative, one American company after another falls victim to Beijing’s supposed “technology-for-market” trap: first Motorola, then Apple, now Tesla.

Two recent Wall Street Journal China newsletters (July 8 and July 15, 2025) epitomized this view, recounting how Motorola helped nurture China’s telecom industry only to be edged out, and how Tesla’s star in China has dimmed as local electric vehicle makers rise. Each newsletter led readers toward a foregone conclusion – for instance, one ended by asking, “How do you think American businesses should approach China today?”, and the next by asking, “Do you think the U.S. should further tighten its technology restrictions on China?” These loaded questions, coming on the heels of dire anecdotes, reinforce the angle that foreign firms were naïve victims and China the cunning beneficiary, rather than inviting open-ended debate.

This one-dimensional perspective gained additional traction from voices like former White House strategist Steve Bannon, who was quoted in the Financial Times this week scoffing that “American companies spent decades being made fools of, getting duped by the Chinese Communist Party, transferring the crown jewels of our technology. For that, they got nothing.” In Bannon’s telling, Western firms were essentially suckered – seduced by China’s market, plundered of know-how, and left with empty pockets. (Never mind Bannon lined his own pocket with a fugitive Chinese con man.)

Such storytelling is engaging, yes, but it’s also profoundly misleading. It rests on a moralizing and condescending tone that oversimplifies a far more complex reality. Implicit in these narratives is the presumption that the global hierarchy of technological dominance – long led by Western firms – ought to remain fixed in perpetuity. The undertone is that Western companies had a natural entitlement to their lead, and if Chinese firms catch up or surpass them, something underhanded must be at play. There’s an almost palpable sense of indignation that an “upstart” from the developing world dared to challenge the established order. This mindset treats the prior success of Western firms as rightful and the advancement of others as a violation.

Photo by Michaela St on Unsplash

It overlooks the historical reality that every major industrial power has risen by learning from others. The West itself once freely borrowed or stole technology: as one Associated Press analysis put it, “The upstart nation was a den of intellectual piracy” – in the late 18th and early 19th centuries, that “rogue nation” was the United States, whose Treasury Secretary Alexander Hamilton endorsed stealing British industrial secrets. Early Americans pirated textile machine designs and lured British artisans; indeed, the U.S. was “the China of the 19th century,” in the words of a Foreign Policy article by a winner of the Loeb award. Only after America became an industrial leader did it champion strict IP protections.

By recasting processes of industrial development and knowledge diffusion as uniquely nefarious when China does it, the current narrative conflates national advancement with illegitimacy. It confuses the loss of a Western monopoly with the loss of fairness. The moralizing tone does more than provoke intellectual skepticism – it breeds a sort of entitled resentment. It’s as if Western dominance in innovation is deemed the natural order, and any challenge to it is automatically suspect. Such narratives, cloaked in the language of justice and “cheating,” often sound like veiled laments for lost privilege. They tell readers what to think – China bad, West duped – rather than encouraging a genuine examination of how technology and power actually work in a globalized economy. The result is less journalism than ideology, fueling a kind of techno-nationalist anxiety that substitutes moral indignation for analytical clarity.

For decades, China’s industrial strategy was built on the principle of trading market access for technology—something explicitly articulated by Deng Xiaoping as early as the 1980s. Far from being a trap, this was a deliberate and transparent bargain that allowed both sides to benefit.

Take General Motors (GM) as an example. GM entered China in the 1990s via a joint venture, and by 2010, GM was selling more cars in China than in the United States. China’s demand for cars was an enormous market opportunity, and GM’s once success there became a vital part of its global business. GM’s sales in China peaked at 4 million vehicles annually in the late 2010s, making it the largest car market in the world. it was a mutually beneficial relationship—China provided access to a huge, fast-growing market, while GM gained high-volume sales and manufacturing efficiencies.

Now, consider Apple. Over the past decade, Apple earned approximately $227 billion in operating profits from China, representing more than a quarter of its total profits during that period. Apple’s profits were bolstered by assembling its iPhones in China, where labor costs were cheaper, and manufacturers like Foxconn handled the mass production. This partnership allowed Apple to achieve huge cost savings while building a world-class supply chain in China.

This is not an isolated case. In the early years of Tesla’s operation in China, the company received substantial support from the Chinese government, including the first wholly-owned foreign factory in Shanghai, which also facilitated land and loans. Tesla’s Model 3 sales skyrocketed in China, and the company became one of the top-selling electric vehicles in the country. The rise of Chinese EV makers like BYD and NIO may have eroded Tesla’s market share, but this is competition at work. China’s policy of attracting foreign players like Tesla was not about stealing Tesla’s technology but about introducing a “catfish” and creating a competitive environment that would push domestic manufacturers to innovate. Indeed, Tesla benefited greatly from its presence in China, and the local EV market exploded because of it. That’s the nature of competitive markets: new players emerge, and even dominant firms face competition, which pushes everyone to do better.

The Motorola story was also touted with a touch of nostalgia, which, for instance, gushed that “Motorola’s entry didn’t just build a market; it helped build a modern China.” This retelling, dutifully peppered with quotes from one former Motorola executive, laments how Motorola has undone itself by forced largess to China, conveniently omitting some key context. The company also fumbled away its lead through strategic missteps. It failed to anticipate the smartphone revolution and fell hopelessly behind Apple and Samsung, unable to match the iPhone’s innovation or the Android boom that followed. And for a finishing irony, consider this little-known tale: in late 2003, Huawei tried to sell itself to Motorola.

The U.S.-China business relationship was never a case of one side being duped and the other plotting a grand theft. Western companies made calculated decisions to enter China, and in exchange for market access, they shared some of their technology. The narrative that China’s rise is a “long con” ignores the legitimate and calculated trade-offs made by all parties. China didn’t “trick” these companies; it offered them access to its growing market in exchange for knowledge, which China used to build its own industrial base.

Ultimately, the story of China’s rise is about competition—just as Japan and South Korea once competed with American firms, China’s rise in technology is part of a global pattern of industrial competition. This doesn’t make China’s actions “malicious”; it’s just how the world works. The West is not entitled to eternal dominance in technology, and China’s rise should be seen not as a “theft” but as a competitive challenge that forces everyone to innovate and adapt.

Let me end this with a few excerpts from the Global Currents substack by Cambridge University’s Jostein Hauge

In fact, knowledge monopolies and protection of intellectual property among powerful transnational corporations based in high-income countries are driving intense concentration of corporate wealth and power, thereby holding back economic development in lower-income countries. A recent paper by Cedric Durand and William Milberg gets this point across forcefully. They find a tremendous increase in international income generated by intellectual property rights from the 1980s to the 2010s, going almost entirely to high-income countries (dominated by the United States). In 1980, the income generated from international payments related to the use of intellectual property was fairly equal across the world. In 2016, this income was a hundred times higher in high-income countries than in low- and middle-income countries (US$323 billion versus US$3 billion).

We should also recognize that transnational corporations in high-income countries—the main beneficiaries of patents—are completely reliant on labor and production systems in lower-income countries to generate profits. For example, the innovation and windfall profits of the US technology industry would not be possible without labor from and in countries like China and India. In fact, the above-mentioned paper by Durand and Milberg explicitly highlights that large US-based technology firms rake in massive profits primarily because they take advantage of their power in the world economy, rather than because they innovate. If anything, high-income countries owe lower-income countries massive amounts of technology due to taking advantage of their labor and skills.

And

There is a common misconception that Chinese firms are outcompeting US firms. While this is true in some sectors — and is increasingly happening —, the capitalist rise of China has actually boosted US structural power in certain ways, especially by generating more profits for US corporations. Research by Sean Starrs finds that most global industries are still dominated by US corporations, aided by China’s rise. Starrs highlights that both investments in China and imports of inputs from China have enabled US corporations to maintain their global dominance.

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China provides a welcome alternative to existing North-South relationships, which have often been (and often still are) characterised by imperial arrangements designed by the North to extract profits and resources from the South.

In conclusion, the narrative of China as a malicious "trap" for foreign companies is a facile and hypocritical moralization that ignores the complex realities of global competition and technological advancement. If we genuinely aspire to a more fair and prosperous world—an aspiration that is not universally shared, but worth striving for—the real question is why so few other countries have successfully ascended the technological ladder. Rather than being misled by Wall Street propaganda, perhaps developing countries could look to take a page out of the Chinese playbook to level the playing field — both with the rich countries and with China — in creating a more equitable global landscape.

Technology "theft" is a myth

4:30 A.M. at a day labour market in China, a drink to start a day’s toil