THE TTALK QUOTES
On Global Trade & Investment
Published Three Times a Week By:
The Global Business Dialogue, Inc.
Washington, DC   Tel: 202-463-5074
Email: Comments@gbdinc.org
No. 8 of 2017
FRIDAY, FEBRUARY 10, 2017
Filed from Portland, Oregon

Click  here for Tuesday's China quote from Ralph Ives. 
INFORMATION TECHNOLOGY IN CHINA - (ALL THOSE PHONES)

"By the end of 2014, there were 630 million internet users in China and 1.29 billion mobile phone users in China."

Ed Brzytwa
January 27, 2017 
CONTEXT
Ed Brzytwa is the Director for Global Policy and the Information Technology Industry Council or ITI. There a lot of household names in the roughly 60-member roster of companies that make up ITI, from Apple and Intel to Nokia, Samsung, Toshiba, and Yahoo. As Mr. Brzytwa described his members:

"They are service providers, they're manufacturers of information technology hardware, they are cloud computing companies, they are producers of ICT infrastructure. They do so many different things to innovate on a daily basis, all around the world, and they are critical to the entire economy, globally." 

These comments, like those in the last entry, were from things said at GBD's event last month on China Trade: 5 American Views. As we listened to Mr. Brzytwa then three things stood out: 1) the sheer size, and hence importance, of the Chinese market; 2) the worry that tensions between the United States and China might double the difficulty of the challenges faced by foreign firms in China; and 3) the obstacles to business inherent in certain Chinese policies. You will want to listen to the full presentation, but here is a little more from each of those baskets.

The Size of the Market. "In 2014," Mr. Brzytwa said, "the overall [global] size of the IT [information technology] market was estimated to be $404.5 billion, [with] the consumer side of that ... a little bit bigger than the business side." He commented that "Any service that you can possibly imagine that we use in the United States, the Chinese are also using those services, particularly through things like WeChat, a Chinese instant messaging service. 
 
As for China, Mr. Brzytwa said: 
 
"Spending on ICT [information, communications and technology] continues to grow in China: $126.6 billion US dollars [in 2014], and that just continues to increase. ... The Chinese government has made it a very strong policy to up its game on ICT. ...

"They realize ... this is a global sector, [that] it's a global competition. What they've said is, we want to digitize our industry, manufacturing, we want all of our manufacturing sectors, our agriculture sector, medical device I assume, to use information and communications technology. 

"... That means things like the Internet of Things will be important for China. That means e-commerce will continue to be important to China. China is very proud of its e-commerce sector, where anybody can basically buy anything in China through the Internet and ship it. Smart cities - that's a city that is basically ICT enabled-that is important for China, [as is] generally ICT infrastructure, connecting people to the Internet." 
 
The Foreign Policy Wildcard. On this front, Mr. Brzytwa said, "We do not want to experience any sort of broader trade friction because of what happens with the [Trump] Administration and the policy of trade going forward."   With apologies for mixing a bit of Comment into this Context section, we would note that the risk is not confined to trade policy issues. Consider, for example, this line from a Los Angeles Times story of last summer: 

"Just last month [July 2016] Chinese Internet users were posting pictures of their smashed iPhones to protest Washington's objections to Beijing's territorial claims in the South China sea." 

The Challenge of China's Commercial Policies. Mr. Brzytwa said he thought the biggest challenge for ITI members in China was "competition with Chinese companies...[because] the Chinese government has promoted national champions in this area." But there are other issues as well, such as China's approach to cyber security and its policies on data localization, both of which Mr. Brzytwa discussed in more detail.
COMMENT
The ITA Demonstration. While we have highlighted concerns that Mr. Brzytwa and his members have regarding certain Chinese policies, we should add that he also took note of China's contributions to the global system.  His comments on China's role in the recent ITA (Information Technology Agreement) negotiations were noteworthy in that regard. He described China's role in those talks as a clear indication of their commitment to the WTO and the global trading system, saying: 

"The Chinese did negotiate. Other big emerging markets-like India, Brazil, Russia-they weren't there. You may not like the entire product scope of the expanded ITA, but the Chinese did agree, and they are implementing. As of today, they are implementing the agreement. They are cutting tariffs. It's going to take them a little bit longer than a lot of other ITA participants, but China will get there. That's a positive sign to us, because it means they are invested in the system."

And Responses to Comments. The developments to date over China's cyber security law have been less encouraging. We'll not attempt to get into the particulars of the legislation here but will simply note that elements of it are of great concern to foreign IT companies operating in China. Before the law was passed, some 43 organizations-mainly business associations-wrote to the relevant officials of the Chinese government to express those concerns. "They didn't take into account any of our concerns," Mr. Brzytwa said.
Finally, we, like Mr. Brzytwa, would like to take note of this sentence from a recent op-ed article by Premier Li Keqiang

"At home, the government is opting for a lighter, more balanced touch while engaging the market."

It is a sentence one wants to read hopefully. Yet for non-Chinese readers there is the nagging doubt that what Premier Li meant may not be what Americans and other foreigners would like to think he meant.

***

With apologies for injecting a whimsical note into this very serious subject, we'll end with a recollection from Lewis Carroll' s Through The Looking-Glass, which followed Alice's Adventures in Wonderland. We won't try to recreate our full train of thought, but something in all of this made us think of Alice's exchange with Humpty Dumpty on the subject of words. They were talking about "un-birthdays," when the conversation took this turn: 

HUMPTY DUMPTY: "There's glory for you."

ALICE: "I don't know what you mean by 'glory'."

HUMPTY DUMPTY: "Of course you don't-till I tell you. I meant 'there's a nice knock-down argument for you!'"

ALICE: "But glory doesn't mean 'a nice knock-down argument.'"

HUMPTY DUMPTY: "When I use a word, it means just what I choose it to mean, neither more nor less."

ALICE: "The question is whether you can make words mean so many different things."

HUMPTY DUMPTY: "The question is, which is to be master-that's all."
SOURCES & LINKS
Brzytwa at GBD is a link to the MP3 audio with Ed Brzytwa's presentation on January 27, 2017.

Openness Serves Everyone takes you to the op-ed by Premier Li Keqiang of China as published by Bloomberg on January 27, 2017.

Bigger Than Anyone Realizes is an article by Daniel Burrus on the Internet of Things, as published on the Wired.com website. Ideally, we would have included here a discussion of "the internet of things," which Mr. Brzytwa mentioned briefly. It is one of those concepts where our understanding is more than a little tenuous. For any reader with the sense of a weak grasp, this article may prove helpful. Among other things, it includes the memorable assertion that "Of all the technology trends that are taking place right now, perhaps the biggest one is the Internet of Things."

A Global High Tech Letter is a link to the letter of November 11, 2016, from 43 hi-tech global associations to the Chinese Party Central Leading Group for Cyber Affairs, which we found on the website of the Trans-Atlantic Business Council. This was a letter written after the adoption of China's new Cybersecurity law but contains references to earlier comments.

U.S. Tech Companies in China is a link to the Los Angeles Times story quoted above, which ran under the headline, "Why U.S. tech companies can't figure out China."

TO GET THE TTALK DAILY QUOTE IN YOUR INBOX

Or Other GBD Notices, click below.
©2017 The Global Business Dialogue, Inc.
1717 Pennsylvania Ave., NW, Suite 1025
Washington, DC   20006
Tel: (202) 463-5074
R. K. Morris, Editor