[jeff5may]

^ The problem with this attitude is that in reality, China is not doing the world a big favor, in fact they are positioning themselves to dominate the world in technology-rich industries. Recently, they have been effectively stripping the world of its high profit, high growth and high tech emerging technologies. They are not playing by international rules that have been established, and they don't care what the rest of the world thinks about it.

The rare earth materials industry is a prime example of this strategy. In the early 90's, I was working for a corporation that manufactured high quality, high tech magnets and magnetic material. They were fighting a legal and political battle with China over intellectual property and patent rights of neodymium rare earth magnets. The Chinese were violating patent laws in producing raw material and finished goods, using vacuum sintering methods we had developed. This was costing the company millions of dollars per month in lost revenues as well as residual IP licensing royalties. The ITC had been mediating the process, and had effectively gotten nowhere.

Eventually, the American parties involved in the ITC case and the Chinese industry counterparts had an arbitration conference. What came out of that conference seemed extremely odd at the time, but hindsight reveals that the Chinese employed the strategy with many industries with similar outcomes. A joint venture was formed, a strategic alliance between the interested grieving parties and the Chinese "ministry of magnets". The grieving parties were allowed to "buy into" the ministry, receiving executive seats that steered the ministry. An expatriated block of land was allocated for the industry to operate, conveniently located exactly where they were producing the offending products.

Contracts were negotiated, where the Chinese would provide the infrastructure, raw materials, and labor force required to operate the block. The grieving parties would provide the skill and expertise to bring the operation into modern-day technology and art. In exchange for releasing their intellectual property rights, the grieving parties would divide the profits from the operating block. The executives came home believing they had saved the industry.

Fast forward five years into the future, when the WTO imposed sanctions on China for security breaches involved in operations within the block. The member companies (mine included) had been enjoying profit margins in the order of 10000% by conducting concentrating, refining, and production operations inside the block in China. We were buying rare earth ores from China for like $3 per pound and turning them into material that sold for up to $4000 per pound, and finished goods that sold for even more. When China started refining their own ore in bulk quantities using technology gleaned from within the block, and selling these expensive materials on the open market, they effectively nuked the industry.

In response to the WTO sanctions, the Chinese government halted supply of rare earth ore to the block, as well as the rest of the world. In a matter of months, the financial strain of not operating the block had most of these corporations either on their knees or in bankruptcy. The company I worked for (Crucible Magnetics / Crumax Magnetics) was devastated by the event. As the entire industry shook down from the event, my employer was bought and sold half a dozen times, stripped of its production capacity and intellectual property, and finally landed belly up as a division of a division of a parent company.

By the time the WTO and China had worked things out, all that remained of the factory in Kentucky was the rare earth blending room (2000 square feet), half of the powder press line (1000 square feet), and the sintering furnaces (maybe another 5000 square feet). The other quarter million square feet of the plant was gutted and made into a warehouse. The plant that formerly employed 1000 people and operated around the clock now employed less than 50 people, all on one shift. Other member corporations suffered similar losses globally.